Bloomberg LP is arguably the second most successful media and information company in the world (after Google).Bloomberg LP is an almost unfathomably wealthy company, with $8 billion in annual revenue and, by some reports, ~$4 billion in annual cash flow.
Bloomberg LP has made entrepreneur and mayor Michael Bloomberg one of the richest men in the world, with an estimated fortune of $25 billion.
And every time a big prestigious and troubled traditional news organisation is thought to be ripe for a sale, Bloomberg LP is the first company everyone assumes will buy it.
(This is because Bloomberg recently bought what was left of BusinessWeek and then saved it.)
Right now, the New York Times reports, Bloomberg is mulling the idea of buying the Financial Times.
And Bloomberg could certainly afford it.
The Financial Times, say some (extremely optimistic) bankers, might be worth something on the order of $1 billion.
For Bloomberg LP, that’s couch change.
But some executives within the Bloomberg organisation don’t want to waste the company’s money on a dying print newspaper, the New York Times reports.
Some executives would rather buy a thriving digital business–like, say, LinkedIn.
To these executives, we have two things to say:
First, with respect to the FT, “Right on!”
Don’t get snookered by the prestige of an old brand. Your news organisation is already vastly more powerful and richer than the Financial Times. If you’re desperate to have a print newspaper, then just start printing one. And if you’re desperate to have some of the Financial Times’ excellent writers and reporters, then just hire them. This will cost you vastly less than $1 billion.
Second, “LinkedIn? Are you kidding?”
LinkedIn is currently valued at $12 billion. Given the growth of the business, as well as the likely profit margin explosion over the next few years, it’s probably worth close to that. And to wrest it from the arms of its current shareholders, you would probably have to pay a significant premium–say, 30%-50%. So, buying LinkedIn would probably cost you $16-$18 billion.
A reasonable valuation for Bloomberg LP is probably something on the order of $35 billion.
If you were to buy LinkedIn, therefore, you might have to shell out half of the value of your company.
That is one huge honking bet.
Yes, it might well be a smart bet: LinkedIn would open up a vast new source of revenue and profit for you, and it could be a hell of a distribution engine for your news.
But LinkedIn is a bet you don’t have to make. Your core business is fine. You are sitting pretty, cashing in and snickering as the rest of the news world implodes.
So you’re seriously going to go out and bet half the company and potentially become AOL-Time Warner 2?
If you do, more power to you.
But, wow, that would be a big bet.