Industry News

Large Adult Companies = No Exit Strategy?

Drinkin’ Hard posts on JBM:

This post may not apply to everyone who reads this but I think alot of heavy hitters in this biz with very large organizations might sympathize.

Do you ever feel that due to the fact that big business doesn’t invest in adult, that the chances of you selling your business are slim to none? Being based upon the fact that few adult companies would be willing to pay what you’re looking for, nor could afford it?

I ran into quite a few company owners in Phoenix that felt that way exactly… They said they were doomed to stay in adult. I think there is a silver lining as Playboy has been buying up larger programs like ICS/Adult.com and I think more mainstream companies will follow.

Quickbuck posts:

There are maybe 10 people/programs with the $ to buy a good sized program.The real inhibitors to selling though are:
1) Buyers in this business with enough $ believe that they can just use the $ to build a new program instead and save money. My personal opinion is that it’s a crap shoot. If i give 10 program owners 2 million bucks each, half of them will still be around and thriving in 2 years, the others will likely have folded or be barely running.

2) Buyers in mainstream don’t want to own a “porn” company.

3) Buyers in video are equally convinced that they can just use the money to build instead of acquiring (see #1). The diff between video and internet guys is that I’d give video guys worse odds of succeeding.

4) There are *lots* of people out there who claim they have the money to buy multi million dollar programs but when push comes to shove they can’t really afford it which means “owner financing”…. and if you’re selling a company for a 12 month multiple but the guy needs 12 months of financing… where do you think those payments he’s making are going to come from? At that point you end up full circle saying “well i guess i’d make as much money just shutting down in a year as selling with an owner finance”

5) But don’t fret my fellow owners… there is ONE good buyer willing to pay good multiples in cash… PRIVATE EQUITY. You may not know it but the private equity guys are ACTIVELY looking to buy programs generating 10mil+ per year in revenues.

Unfortunately even the private equity guys arent interested in companies as large as AFF, but for mid cap programs you just have to be patient and I’m sure there will be buyers begging for 5 year multiples eventually.

Brad Shaw posts: “The chances of selling my biz for anything near what it is worth, is SLIM. Someone asked me the other day why I had yet to sell out. I am like, sell out to whom. I give Lens big props for his Playboy deal.”
Forsaken posts: “Big problem is that isn’t nearly impossible to secure debt financing for an adult company due to high risk, nature of the business, and lack of saleable assets. Not to mention when a program is bought out how much business walks out the door with the owner.”

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