Mergers & Acquisitions

Legal Concerns for Catalogers ’07: Lawyers Outline Key Use-tax, Gift Card Issues
April 3, 2007

During a session at the recent NEMOA conference in Cambridge, Mass., George Isaacson and Martin Eisenstein, both attorneys from the Lewiston, Maine-based law firm Brann & Isaacson LLP, pointed out that such recent changes as the shift of power in the House and Senate to Democratic control could revive the use-tax debate. They also touched on some key legal issues involving the rapidly growing gift card market. During his presentation, Isaacson said that there are several dynamics in play this year that make the federal use-tax issue less predictable than it’s been in the past. “Every year since Quill Corp. v. North Dakota,” he said

Valuations & Acquisitions: What Acquisition Due Diligence Reviews Can Teach You
February 1, 2007

As competition among acquirers of catalog companies has increased and multiples have grown, these buyers have become more sophisticated in their acquisition due diligence reviews (DDRs). “Multiple” refers to the multiplying amount applied to the latest 12 months of EBITDA (earnings before interest, taxes, depreciation and amortization), to equal the final valuation. And this especially is true for equity house investors, all of whom have extensive fiduciary responsibilities to their sources of capital, which often are insurance companies, pension plans, banks and other institutions. In fact, even most large direct marketers don’t acquire catalogers without similar intensive DDRs. DDRs help as you do your circ

Know When to Sell
January 2, 2007

Catalog owners tend to assess their year-earlier performance while on a short break after the holiday sales period, and often come back to the office ready to change or improve their positions. Simply, they ask themselves if last year was enough; now can I/should I sell out? And if so, what the devil are the next steps?

The proper answer requires you to ask yourself a number of questions:

1. Why are you selling?
2. What growth “storyline” have you accumulated (for a good valuation)?
3. If this is, indeed, the right time to exit, should it be all-at-once, or via a phased-out program for you and your

Catalog Licensing Agreement Questions Answered
November 30, 2006

A reader of the most recent M&A:Q&A asks: “How long is the typical term of the licensing agreement in these deals? Do they go on forever, as long as either party does not breach? What’s the risk to Blue Sky of investing in these deals and then losing the license in five to seven years?” (Click here for original column)

Larry West responds:
License agreements are typically for an initial term of three to five years, with co-renewal rights. Some can be as long as 10 years. Others, similar to these, can be renewed in perpetuity.

Having said that, you’re right, the ultimate term depends on

Valuations & Acquisitions: Know What to Ask
October 1, 2006

If you work in any segment of the catalog and/or online marketing business, you’ll continuously be affected by mergers, acquisitions, growth financing, consolidations and valuations. And that’s regardless of whether you’re an equity owner or even like the subject! The reason is simple: Deals are changing the metrics, success hurtles and economies of scale in direct marketing. With the possible exceptions of increased postage rates and merchandise importing, it’s hard to think of other variables that have changed our competitive landscape so drastically in recent decades. In deal making over the past few years, acquisitions by equity house investors alone greatly have changed the competitive

Order Entry System Reduces Shipping Errors
September 1, 2006

Problem: The order entry system for My Grandma’s of New England routinely transposed data from one order to another, causing shipping errors and other assorted problems. Solution: The company implemented a new order entry system. Results: Shipping errors were virtually eliminated. My Grandma’s of New England had an order entry system (OES) that was wildly unstable, often causing data errors that resulted in shipping methods from one order being applied to another order, disappearing entirely or customer greetings placed on an order to end up on the wrong order. So last November, the company implemented Morse Data’s InOrder OES to reduce shipping errors caused by its legacy

Contributions to Profit: The 40-40-20 Rule (Extended Web-only Version)
August 1, 2006

There’s a rule in direct marketing that states: In order to positively impact the success of a direct marketing business, concentrate 40 percent of your efforts on list analysis and selection, 40 percent on offer (merchandise and promotions), and 20 percent on creative development. As it plays out in many catalog companies, there’s a disproportionate effort placed on the creative process. Obviously, your creative is the vehicle that reaches the consumer, sets the tone for your brand and your company, and drives the selling process. After all, if you have only one chance to make an impression, your creative has to be perfect,

Strategy: Exit the Stage Right
January 1, 2006

Selling a catalog business can be an emotional decision. Owners often have an inflated view of what their businesses are worth. So arriving at a realistic price tag can be difficult. The old adage “For every seller there’s a buyer” certainly holds true. But finding the right buyer for your business — someone willing to pay your asking price — isn’t always easy. While we at Lett Direct aren’t investment bankers or business brokers, I’ll share with you what we’ve learned during the years from working with catalog business owners wanting to sell their companies. Timing is Everything Knowing when to sell

Control Direct Selling Expenses
November 1, 2005

Your direct selling expense ratio is as important to track as your cost-of-goods ratio and other key metrics on your income statement. Indeed, controlling your direct selling expense ratio plays a major role in helping to improve your catalog company’s profitability. This month, I’ll focus on ways you can reduce your direct selling expense ratio. But first, let’s look at what normally comprises direct selling expenses: - catalog creative costs; - printing and paper; - ink-jet addressing and mailing expenses; - bind-in order forms and envelopes; - postage; - outside list expenses; and - merge/purge costs. Direct selling expenses

How to Comply With the New Payment Card Industry Data Security Standards
September 1, 2005

The new Payment Card Industry (PCI) standards, which recently went into effect, are meant to help merchants beef up their data-security practices to better protect their customers’ credit card information — a commendable endeavor, indeed. But figuring out how to actually comply with the standards has left many merchants scratching their heads. Following are the answers to frequently asked questions about the standards. What is PCI? It’s a new, unified set of data-security standards from Visa, MasterCard, American Express and Discover card companies. Until this year, each card company had its own data-security standards. PCI, then, is a way for merchants to complete