US TV was an easy business when a few networks enjoyed an oligopoly over viewers. Measuring TV ratings was an even better proposition. Nielsen Holdings was the singular go-to choice for big companies seeking precise data on which shows to air their commercials alongside. So-called “Nielsen Families” responded to surveys and kept logs of the TV shows they watched.
Digital streaming and social media has made modern entertainment consumption much more diverse. That explains why two big alternative asset managers, Elliott Management and Brookfield, are acquiring Nielsen for an enterprise value of $16bn.
In 2021, Nielsen grew revenue five per cent with ebitda margins that exceeded 40 per cent. Yet figures like that have not dissuaded Wall Street that the company is a dinosaur.
Nielsen’s media measurement business, while still massive, is out of favour. The company’s share price has drifted down since its 2016 peak. A turnround should be easier to achieve in private hands, even though it will involve a 60 per cent share price premium and a heavy debt load.
Just 10 days ago, the Nielsen board rejected a previous Elliott bid proclaiming that it was confident in its current strategy. The group has been staking its independent future on its upcoming “Nielsen One” product — designed to comprehensively measure video viewing across video formats and devices.
A subsequent 10 per cent bid bump changed its mind.
Nielsen’s steadiness, along with its past as a private equity-held company has allowed it to maintain leverage of total debt to ebitda of 3.5 times. In the mooted buyout, Elliott and Brookfield will pay 11 times trailing ebitda while investing $5.7bn in equity. Leverage will roughly double. It is notable that even in these turbulent times, Wall Street is willing to commit the debt capital.
Elliott already owns roughly a tenth of Nielsen. In recent years it has acquired other unloved businesses like Athenahealth and Citrix where it was already a shareholder. Elliott understands the arbitrages between public and private markets. That should keep bosses of other investee companies on their toes.
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