Now that AOL stock has tanked in recent days, Bloomberg speculates that private equity firms are circling like a pack of sharks.The reason: because AOL’s subscriber business still throws off a whole lot of cash, any PE firm that bought AOL at a standard 41% premium right now would have their entire purchase paid back in EBIDTA by the end of 2013.
“Everything after that is pure profit,” Sameet Sinha, an analyst at B. Riley in San Francisco, told Bloomberg.
The problem is that $1.5 billion is just about all the access business is good for, as it remains in a very serious decline.
Between now and then, AOL or its new owners would have to figure out a new line of business that could actually generate that “pure profit” Sinha is talking about.
If they don’t pay off – “pure profit” will actually be “filthy losses.”