Bluntly Media: A Private Company Valuation Harvard Case Solution & Analysis

Bluntly Media: A Private Company Valuation Case Study Solution

Bluntly Media was formed in the year 1990.It provides direct market services to various companies,in both traditional and e-marketing sectors. The main customers of Bluntly Media are in diversified sectors such as banking, retail industry and various fashion and business magazines. Since its incorporation, the company expanded extremely positively and remained quite profitable, especially in the late 1990s.

Prior to the financial crises, Bluntly Media was operating fairly profitable and smooth, after the financial crises, almost all the companies reduced the marketing expenditure in order to cope with the difficult trading conditions. This cut in marketing expenditure proved to be very negative for the company as the earnings of Bluntly depend on the marketing expenditure of other companies. The financial performance of Bluntly is poor in the recent years and also the industry’s environment is unfavorable for the company.

Paterson Publishing Company is keen to acquire Bluntly Media and are currently considering to give an offer based on either discounted cash flows, comparable analysis or precedent analysis. Paterson Publishing Company is very experienced and qualified especially in managing the operations of subsidiary as they have acquired many companies in the previous years. It is recommended that the purchase price should be based on either precedent analysis or comparable analysis as they will provide maximum premium to the shareholders of Bluntly Media.

External Size-up Analysis:

Political:

Political environment is one of the most critical success factors for any company, unfavorable political conditions often lead to the failure of organizations. The political environment seems to be very hostile for Bluntly Media and for Paterson as well, the regulatory authorities and the government of United States is finding it very difficult to manage the financial issues of the country. The Congress is not issuing additional funds, in order to manage this liquidity crunch, the government of US is curtailing the spending on major non-core and non-operational functions for the fiscal year of 2014. These decisions can lead to severe political uncertainties. The potential mergers and acquisition transactions are also expected to suffer drastically due to these uncertain political conditions.

Social:

The social environment is also very important for media agencies like Bluntly, Bluntly Media should have to ensure that their services reflect the social values and their services are not in any contradiction with the social values of the customers. The people of US might boycott the services of Bluntly if they are against their values and beliefs.This can affect the goodwill and future profitability of the company. Bluntly Media should have to ensure that their advertisement reflects the culture, values, beliefs and norms of every aspect of the society and their advertisements doesn’t become offensive for anyone. This can increase the reputation of the company which will lead to sustainable competitive advantage to the company.

Economical:

The economic conditions of US are not in the favor of either Bluntly or any other company, the main reason for these poor economic conditions is the great financial crisis of 2008-09. It can be said that this financial crisis has occurred almost four years ago but the global and US economy has not recovered from this depression completely. Furthermore, the curtailment of spending can affect the future economic conditions and the policy for not issuing any additional funds of Congress can also affect the economic and business environment of US. On the other hand, the inflation rates and value of USD is also expected to move adversely as the government of US has to repay the loans because they have reached the maximum limit.

Legal:

All the marketing and media agencies have to comply with the various strict rules and regulations that have been imposed by the government, trade unions and regulatory authorities. These rules and regulations are often very strict and complex that their compliance is very difficult to ensure. Failure to obey these stringent laws can result in significant fines and penalties which can even threaten the going concern status of the company because its license to operate can be cancelled

Environmental:

The environmental factor is not very important for the company operating in digital media marketing because of the fact that their operation have no direct impact on the environment. Had the environment been affected by the nature of products or services, it can have severe impacts on the profitability of Bluntly. However, there are some opportunities available to Bluntly Media regarding this factor. Many people are boycotting the newspapers because of the scarcity of papers and trees and they are shifting towards e-newspapers. Furthermore, the revenues and profit margins of the newspapers are also decreasing. Bluntly Media should have to abandon the publication of newspapers and should focus on e-newspapers...................

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