Yell case model
Memo
To: Apax Partners and Hicks, Muse, Tate & Furst
From:
Subject: Valuing a Cross-Border LBO: Bidding on the Yell Group
Date: April 9, 2014
Yell Group, a holding company created by British Telecom (BT), has two business divisions located in two different countries: Yellow Pages business in the U.K. and Yellow Book business in the U.S. Recently, BT is under pressure to reduce heavy debt load through outright sale of directories business due to its investors’ high leverage concern and adverse condition it faced in the telecom market. This is the chance for us expand presence on the European continent via this deal.
Business Descriptions of Two Business lines:
1. BT Yellow Pages in the U.K.:
BT Yellow Pages is the market-leading classified directory business in the UK. Their advertisement revenue represented nearly 85% of the U.K. classified directories advertising revenues. Moreover, advertising expenditures are more stable and do not fluctuate widely with economic cycles as they are considered as a “must buy” by many SME since the yellow pages are their principal means of reaching customers in the United Kingdom.
For BT Yellow Pages, their future growth is mainly driven by two factors – number of ads sold in a given year and advertisement prices. Since Yellow Page advertising expenditures are considered as a “must buy” by most SME, the volume growth rate should be stable and close to the growth rate of Classified Directories Advertising Market in the U.K. Unfortunately, even though the total advertising market has seen increasing growth , the real average growth rate of Classified Directories Advertising Market has declined to 3.8% during 1996-1999 from 7% during 1985-1995 indicating a mature stage in the Classified Directories Advertising market in the U.K. The growth in the classified directories advertising market will probably continue to decline in the futures.
For advertisement
To: Apax Partners and Hicks, Muse, Tate & Furst
From:
Subject: Valuing a Cross-Border LBO: Bidding on the Yell Group
Date: April 9, 2014
Yell Group, a holding company created by British Telecom (BT), has two business divisions located in two different countries: Yellow Pages business in the U.K. and Yellow Book business in the U.S. Recently, BT is under pressure to reduce heavy debt load through outright sale of directories business due to its investors’ high leverage concern and adverse condition it faced in the telecom market. This is the chance for us expand presence on the European continent via this deal.
Business Descriptions of Two Business lines:
1. BT Yellow Pages in the U.K.:
BT Yellow Pages is the market-leading classified directory business in the UK. Their advertisement revenue represented nearly 85% of the U.K. classified directories advertising revenues. Moreover, advertising expenditures are more stable and do not fluctuate widely with economic cycles as they are considered as a “must buy” by many SME since the yellow pages are their principal means of reaching customers in the United Kingdom.
For BT Yellow Pages, their future growth is mainly driven by two factors – number of ads sold in a given year and advertisement prices. Since Yellow Page advertising expenditures are considered as a “must buy” by most SME, the volume growth rate should be stable and close to the growth rate of Classified Directories Advertising Market in the U.K. Unfortunately, even though the total advertising market has seen increasing growth , the real average growth rate of Classified Directories Advertising Market has declined to 3.8% during 1996-1999 from 7% during 1985-1995 indicating a mature stage in the Classified Directories Advertising market in the U.K. The growth in the classified directories advertising market will probably continue to decline in the futures.
For advertisement