Buzzfeed Sells Complex for $109M + Notes on Valuation
RockWater Roundup
RockWater analysis to make you a better investor and operator. Today we discuss Buzzfeed’s $109M sale of Complex to UMG-backed NTWRK, deal value drivers, new combined growth plan, and a note on a potentially pricey valuation.
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Buzzfeed just sold Complex to NTWRK for $109M.
Let’s break it down…
🎯TARGET: Complex Networks
- Digital publisher and ecom biz focused on music, pop culture, streetwear
- Founded 2002 by Mark Ecko and Rich Antoniello
- Sold in 2016 to Verizon Hearst Media for $250-300M
- Sold again to Buzzfeeed in 2021 for $294M
- Offers branded content, licensing, events, e-commerce, and agency consulting
- TBD 2023 revenue, heard est of $100-150M
- TBD # of team members, I est 200-250
💰BUYER: NTWRK
- Social / live commerce platform for sneakers, streetwear, and collectibles
- Founded 2018 by Aaron Levan, Jamie Iovine, Gaston Dominguez-Letelier
- Has raised $60M+ from Goldman, Kering, MSA, Foot Locker, Live Nation
- Product collabs incl BLACKPINK, Post Malone, and F1’s Lewis Hamilton
- TBD revenue scale
- 100+ team members
🤝DEAL DETAILS
- $108.6M all cash purchase price
- Incl $5.7M for use of BF office space and severance
- Investors UMG, MSA, Jimmy Iovine, and Golman financed the deal
- UMG’s IGA exec John Janick joins NTWRK board
💡DEAL RATIONALE / SYNERGY
- Create nextgen content and shopping destination for superfan culture
- Gives NTWRK more audience reach in pop culture and music
- Enable new media and product experiences and collabs, direct to music fans
- Capture est $68B US live selling mkt by 2026
- NTWRK expands focus on fashion, sneakers, streetwear, pop culture
- Buzzfeed narrows focus on news, food, pop culture
💸POST-DEAL OPS
- Complex will focus on commerce, live events, and editorial, each making up ⅓ of biz
- Produce more premium content with celebs, incl UMG’s Interscope Geffen A&M labels
- Buzzfeed retains First We Feast and Hot Ones brands
- Brands of BF, FWF, Tasty, and HuffPo will all operate independently
- Buzzfeed will layoff 16% of workforce after deal, $23M in savings
- Buzzfeed will use proceeds to pay off $30.9M of 2026 conv notes and its entire $35.5M LOC, and to finance upcoming layoffs
🤔What else I find interesting about deal…
Very curious to what the revenue and EBITDA multiple was – to me this deal feels expensive without FWF and Hot Ones brands. I heard Complex revenue took a hit in 2H 2023, particularly its event biz which lost focus during deal talks.
If revenue was $100M and EBITDA margins were 10% (reminder that deal excludes First We Feast and Hot Ones, and I bet that margins came down from previous highs of 15-20%), then the implication is that the LTM EBITDA multiple was 11x…that would be very high for the current market.
If that multiple is in the ball park (reminder I’m just estimating here), it would imply NTWRK is highly confident they can substantially grow combined revenue and profit in the immediate term. While I’m rooting for them, I’m a bit dubious about the immediate revenue synergies here…though I’d like to be proven wrong, would be good to see a better datapoint in the context x commerce space!
🗒️And some other quick hits…
NTWRK CEO Aaron Levant helped launch ComplexCon in 2016. He knows the Complex team and biz well, and wants to go bigger in live events, which NTWRK has already been pursuing.
NTWRK investor Jimmy Iovine (and father of Jamie Iovine, co-founder of NTWRK) founded Interscope Records, which is now owned by UMG. Jimmy still has strong ties to exec leadership there, which likely helped in procuring the funding for the deal.
Buzzfeed just announced an MCN partnership with Culture Genesis to allow Black-owned and multicultural-targeted media networks to package up and sell ads against BuzzFeed’s multicultural content. Will help drive higher CPMs and revenue.
Buzzfeed stock price was 31 cents as of Friday close, has market cap of $46M, and has till May to get stock price to $1, otherwise risks delisting from NASDAQ.
Buzzfeed rumored to also be looking to sell Tasty brand.
Complex launched a sneaker marketplace in 2019, but its ecom focus was put on hold while it doubled down on events.
🧐In closing…
BuzzFeed said it will provide more details of its post-Complex restructuring soon (previously said Feb 28 but I haven’t seen anything). Also, when Buzzfeed releases full year 2023 earnings and 2024 guidance (which will now exclude Complex), hopefully we’ll be able to do some 10K sleuthing to break out Complex revenue and EBITDA. This will help me get a sense of what the actual valuation multiple was, and what the viability of Buzzfeed is going forward.
More analysis to come!
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I’m the founder of RockWater Industries. We do financial and strategy advisory for media, agencies, and creator economy. From M&A and fundraising to consumer research and go-to-market planning.
DM me on LinkedIn or email me chris @ wearerockwater dot com
