Complex Buys ‘Family Style’ + Valuation Estimate
RockWater Roundup
RockWater analysis to make you a better investor and operator. Today we discuss Complex’s acquisition of Family Style, the deal value prop, Complex’s new food media growth plan, and our estimated valuation.
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NTWRK-owned Complex bought food events business Family Style.
Will use the acquisition to scale chef x streetwear collabs and rebuild their food media business.
I believe the deal valuation is in the $1.5 to 3M range based on my revenue and margin estimates.
Let’s break it down…
👪‘FAMILY STYLE’ OVERVIEW
- Hosts annual Oct event in LA
- Brings chefs from trending US restaurants to one location
- Chefs collab w/ streetwear designers to create custom merch
- Attendees can eat, buy merch, enjoy programming
- Founded 2019 by Miles Canares, Ben Shenassafar, Bobby Kim
- Miles was former Complex
- Ben/Bobby founded cult streetwear brand The Hundreds
💡‘FAMILY STYLE’ PERFORMANCE HIGHLIGHTS
- 11,000 guests in 2023
- Ticket prices ranged from $50 – 200
- I est 17 sponsors, incl Starry and Stella Artois
- Also powers culinary offerings for other food festivals
- Hosts smaller events like bespoke dinner series
🤝DEAL VALUE PROP
- Anchor rebuild of new Complex food vertical
- Become “definitive voice for all things food and culture”
- Will span food events, video, editorial, and commerce
- Replaces First We Feast and Hot Ones (kept by Buzzfeed)
💪POST DEAL OPS
- Launch 2nd iteration of annual flagship FS event
- Provide food for ComplexCon (moving from Long Beach to Vegas)
- Host 6 food events per year
- Support sponsor activations at Art Basel, Coachella, others
- Increase news and content at intersection of food x culture
- Scale up chef / streetwear merch collabs
- Of 6-10 planned Complex video series, several will be FS-branded
- Miles will join Complex with 3 other FS staffters
- Ben and Kim will not have active roles, but will retain minority stakes
💰DEAL TERMS
- Undisclosed
- Founders are rolling over some equity
- Unclear if will receive equity in NTWRK parent co or just in FS – depends on if FS will have own P&L and separate ops VS full integration with parent co
📝COMPLEX BIZ NOTES
- 50% of biz comes from commerce
- Goal is to grow commerce to 66% by EOY
- Will migrate to proprietary CMS in 2H ‘24 to enable more online shopping capabilities
- Strategy post Buzzfeed spinoff = more commerce focus, expand video and events slate
🔎COMPLEX M&A HISTORY
- NTWRK bought Complex for $109M from Buzzfeed in Feb
- Buzzfeed kept Complex-built food brands FirstWeFeast and Hot Ones
- See my Buzzfeed deal analysis here: https://wearerockwater.com/buzzfeed-sells-complex/
🧐WHAT I FIND INTERESTING & DEAL INSIGHTS…
Buzzfeed keeping the Complex food brands post sale to NTWRK never made sense to me…
Buzzfeed has proven inept at building profitable and growing digital media brands over the last half decade. I’m therefore surprised the recent Complex sale didn’t include the FWF and Hot Ones media brands.
My guess is NTWRK pushed hard for the food assets to be included in the recent sale, but Buzzfeed either refused to sell them, or more likely, wanted too high a price tag. Surprising, since my estimated valuation for Complex at ~11x EBITDA (deal analysis here) is high relative to market prices, and selling the profitable food businesses would have fetched a higher overall price tag to help Buzzfeed pay down its high debt.
Now, to Buzzfeed and its shareholders’ dismay, the digital publisher has a new and well funded direct competitor to its food business, bolstered by a team with strong familiarity of the successful Complex digital media playbook and business model. Funny, in the Complex-Buzzfeed press release, it said that Complex would double down on fashion and commerce, and Buzzfeed would double down on news and food.
Oh well. Another Buzzfeed miss! 🤷♂️
Here’s how I estimate valuation…
My annual revenue estimate based on provided data and website research, and some total speculation…
Tentpole Event
- 11,000 tickets x $125 avg ticket price = $1,375,000
- 1 tentpole sponsor for Doordash = $75,000
- 17 second tier sponsors x $20,000 = $340,000 (my guess is these activations were sold between $10,000 to $30,000)
- Merch sales based on 5% of 11,000 event guests x $150 AOV = $82,500
- TOTAL = $1,872,500
Other
- Consulting services to power culinary offerings for other food festivals = $250,000
- Smaller intimate dinners from ticket sales and sponsor = $150,000
- TOTAL = $400,000
TOTAL REVENUE = $2,272,500
I assume a blended EBITDA margin across all biz lines of 20%
My margin assumption is at the lower end of events business model range since FS is a relatively newer biz that hasn’t reached scale yet. I just don’t know much about the total FT team, contractor network, and event production costs to do a more detailed estimate here.
That comes out to $455k of EBITDA. For a small scale events-focused media co, I’d estimate valuation around 1 to 1.5x revenue and 3-5X EBITDA.
Based on that, I think the valuation for this deal was in the $1.5M to 3M range. Based on press release, not all of that was paid in cash, as the founders rolled over some, if not all, of their equity. In a majority or all equity deal, I can see the valuation being at the high end of the range.
My guess is that a minority amount of consideration was paid in cash, up to 20 or 30%, and the rest was paid in equity to incent Miles and the other staffers to keep on building under new NTWRK-Complex ownership.
On investing in live events…
Expanding into live events has been part of the digital media playbook for the past decade. Of note, food media has been a particularly early mover in expanding revenue lines outside advertising and into commerce and events, which we covered extensively here.
Also worth noting that ever since this WSJ article back in April, there’s been increasing industry interest for how to service executive elites via premium event experiences. The ‘Family Style’ tentpole event is a mass B2C audience play, but I’m curious if there will be an emphasis on growing the bespoke dinner series, and catering to a more premium food executive audience.
Honestly, considering the business model and strategy mandate for the NTWRK and Complex businesses (a focus on commerce x ad sales x ticket sales), I don’t think a premium event push would make much sense.
Instead, focusing on mass audience events, and reaching more customers and getting them to spend more of their wallet share, is what will drive meaningful revenue and enterprise value growth for the NTWRK-Complex business going forward.
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Lastly, → Tomorrow (Thursday) I’m in NYC – I’ll be hosting a casual creator economy meetup from 5-7pm at Pete’s Tavern, nearby Union Square at 129 E 18th St. Comment on my LinkedIn post if you plan to stop by.
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
