Jezebel Sells to Paste Mag + Cautionary Tale of Bad Sell-Side M&A

RockWater Roundup

RockWater analysis to make you a better investor and operator. Today we discuss Jezebel finally finding a buyer in Paste Magazine after a failed M&A sales process.

Jezebel Sells to Paste Mag + Cautionary Tale of Bad Sell-Side M&A

Jezebel finally found a buyer.

It was a very wonky sales process.

And further highlights the cautionary tale of bad sell-side M&A.

Some backstory to understand the full timeline…

💡JEZEBEL BACKGROUND

• Launched 2007 by Gawker

• Feminist news and opinion site

• In 2016 Univision bought Gawker for $135M via a 9-month bankruptcy auction

• In 2019 former Forbes CEO and Great Hill Partners bought Gizmodo Media from Univision for $50M

• Rebranded to G/O Media, incl Gizmodo, The Onion, AV Club, Deadspin, The Root, Quartz

🏷 JEZEBEL SALES PROCESS

• In Aug 2023 Jezebel Editor in Chief resigned, blamed poor treatment of staff

• Parent CEO said audiences & biz model didn’t align with G/O Media network

• Designated deputy editorial director to lead Jezebel sales process

• Talked to “2 dozen buyers” in 4-6 weeks

• Nov 9th CEO announced Jezebel shutdown

• 23 staffers were laid off

• Interim editor-in-chief says “so pissed and so sad”

The sell-side M&A process was doomed from the start.

It was a failure of G/O board and ownership. Let’s break it down…

😖 PROBLEMS WITH SALES PROCESS

• Deputy editorial director likely never did M&A before. Didn’t have process experience nor broad buyer relationships. Also prob didn’t have time on top of day job

• Was reported that sales process occurred in Sep/Oct. Not enough time to prep and execute

• There were pitch emails to buyers, but unclear if formal mktg materials were prepared (e.g. CIM, financial forecast). Meant Jezebel wasn’t putting best foot forward re value prop to buyers, why unique, growth opps, path to profitability, etc

• Talked to “two dozen buyers” – that’s very low outreach, we pinged 400+ parties for recent process

But there’s a silver lining to this story, which led to Jezebel finding a new home…

📉 SALES ACTIVITY POST FAILED PROCESS

• Nov 9 shutdown prompted many Jezebel obituaries from other publishers

• Led to 4 new buyers emerging, 2 made 7-figure offers

• Final winner was Paste Media, sold to them on Nov 28

🤔 WHAT IS PASTE MAGAZINE?

• Digital mag about music, entertainment, culture, gaming, lifestyle

• Founded 1998, Atlanta-based

• 3 founders, incl editor in chief Josh Jackson

• Print mag til 2010, digital-only since 2011

• Now 100% ad-based

• Acquired in 2011 by Bill Sagan, CEO of music memorabilia co Wolfgang’s

🤝 DEAL DETAILS

• All cash

• Purchase price undisclosed (I guess $1-2M)

• Acquired Jezebel brand and content archive

• Includes transfer of political site Splinter (shut-down 2019)

🌟 PLAN

• Relaunch Jezebel quickly

• Currently staffless, talking to old staffers

• Wants to stay lean, seeks new new editor in chief

• Get back to ethos of “Sex. Celebrity. Politics. With Teeth.”

• Thinks modern advertisers will have courage to go where new audiences are

• Targeted millennials, now also wants Gen Z

My takeaways on the deal, and some other insights…

What a wonky way to run an M&A process!

My post on Jezebel’s shutdown a month ago showed how poorly Jezebel owners and G/O board ran the M&A sales process. Hiring an editorial director with no M&A experience to explore a time-crunch sale made no sense.

No surprise the process was unsuccessful.

Silver lining is that the bad PR led new buyer groups to emerge. But imagine if a proper sales process was run, where all buyer groups were bidding in a competitive auction.

Would have led to a much better financial result!

And employees would be better cared for. News of G/O’s intent to sell Jezebel was broken to site’s staff by Axios in late October. That’s terrible employee communication.

But here’s a weird angle…was this intentional?!

Jezebel’s staff was organized w/ the GMG Union, under WGA East. Purchasing an unstaffed brand could break the unit’s successorship clause. So new hires wouldn’t have to align with the union agreement, which could reduce staffing costs, and improve company viability.

So was this a genius stroke? Ah, very unlikely. Still feels like bad seller leadership and governance.

A couple last points…

The Paste founder has a note about intending to recruit courageous advertisers, who are willing to reach new audiences in editorial “with teeth”. Based on increasing demand for brand safety, and brand client fallout from the Movers+Shakers sex cult news, I’m more bearish here…

For political mag Splinter, Paste has plans to relaunch the website in 2024 for a “…very important political year”. I actually think that could be the biggest win in this deal, as we’ll see new records in political digital ad spend!

Lastly, I’m rooting for the Paste Magazine team to have a great result here. I want to see more digital publisher M&A with good outcomes!

I’m the founder of RockWater Industries. We do financial and strategy advisory for media, tech, and commerce. From M&A and fundraising to consumer research and go-to-market planning.

DM me on LinkedIn or email me chris @ wearerockwater dot com