Nielsen is reviewing “strategic alternatives” to selling its entire company, the company told investors this month. The TV ratings giant is reportedly under pressure from hedge fund Elliott Management Corp.
“All options are being weighed,” a Nielsen spokesperson told AdExchanger. “The company has hired external advisers to conduct a full review and the board is comparing all options.”
Those options include remaining public, spinning off either its Buy or Watch segments or selling the company outright.
If the board pushes for Nielsen to sell part or all of its business, who would buy it? For decades the company has acted as an impartial party in the TV ad business, providing essential household data for advertisers looking to reach people on linear TV.
The company has a few strikes against it from a would-be buyer’s perspective. The biggest is $8.3 billion in debt, according to its balance sheet. The debt is due in part to a leveraged buyout in 2006 by six private equity firms.
There’s also a question whether Nielsen has done enough to innovate both its units.
“Nielsen’s biggest challenge is that on the Buy side and on the Watch side, it’s dealing with very traditional client bases that are undergoing tremendous disruption,” an industry source familiar with Nielsen, who wished to remain anonymous due to contractual obligations, told AdExchanger. “It hasn’t done enough to innovate on the Buy side to reach out beyond its usual client bases, including direct-to-consumer brands.”
Both of Nielsen’s core units have struggled as the competitive set broadens. Its Buy division, which helps CPGs and retailers track consumer purchases, faces competition from ecommerce giants such as Amazon and the rising availability of purchase data thanks to digital transactions.
“It’s an issue of that [brick-and-mortar store] market shrinking,” Alphonso CEO Ashish Chordia told AdExchanger. “The number of customers who are buying a given product in a physical store is shrinking. New technologies are bringing new ways to measure, and that’s a challenge for Nielsen on the Buy side.”
Since Amazon notoriously operates as its own walled garden, there’s no chance it would give Nielsen access to its customer data.
Nielsen’s Watch business is in better shape, but arguably not by much. The Nielsen ratings system is still the gold standard for transacting on linear TV, making it the company’s most attractive draw for potential buyers.
“Nielsen is the referee that sits between buyers and sellers in advertising,” the source said. “Nielsen has played that role for decades and created a much more accountable television ecosystem.”
Some feel the company hasn’t invested enough in its legacy Watch infrastructure to keep innovating, though. This could be because the company hasn’t been able to reach its own revenue goals since it put itself on the New York Stock Exchange in 2011.
“Nielsen has had a problem since they went public,” Jane Clarke, CEO and managing director of the Coalition for Innovative Media Measurement, told AdExchanger. “There’s a huge focus on quarterly earnings and they haven’t done what they need to do, which is invest in their legacy business. They’re putting out press releases about news [on the Watch side] that isn’t even significant.”
Since Nielsen still has a virtual monopoly over linear TV, its data is valuable. But even Nielsen’s crown jewel has struggled, Elgin Thompson, managing director at Digital Capital Advisors LLC, told AdExchanger
“Nielsen has an entrenched yet vulnerable TV Watch business with low single-digit growth,” Thompson said. “Now you have the multiplicity of channels rendering panels less relevant and almost irrelevant than it was prior to OTT.”
Given all these limitations, if Nielsen’s review committee decides to sell part or all of the company, who would be interested?
Oracle, Salesforce and Adobe are at the top of Chordia’s short list of potential buyers.
Chordia points out Oracle has proven it is willing to spend heavily on data and measurement assets, having spent more than $2 billion cumulatively to acquire Crosswise, AddThis, BlueKai, Datalogix and Moat.
Thompson says Adobe would be a prime candidate to buy Nielsen. It would be ironic, though plausible, if Oracle bought Nielsen, he added.
“It would be an interesting end, because Oracle was always viewed as the Death Star within Nielsen,” Thompson said. “That’s who they’re most afraid of. It would be ironic that the panel business would find its way into a tech platform like Oracle Moat, but maybe that’s worth pursuing if you’re Oracle.”
Tech companies like Facebook, Google or even Amazon have the money to buy Nielsen, but probably wouldn’t.
“Google and Facebook could never buy Nielsen,” the industry source said. “They could, but then the role of the independent third party would go away. Nielsen’s core business couldn’t operate.”
A more likely outcome might be a private equity buyout. Other companies might feel the company’s net cap of $10 billion is too high, and coupled with its $8.3 billion debt it might make for a hard sell. A private equity sale would hypothetically allow for an investor to try and create more value.
But there are significant challenges even in this scenario. Private equities tend to buy opportunities that allow for cost cutting to improve the bottom line. But Nielsen has already undergone several rounds of cost cutting, between layoffs, outsourcing and losing tax breaks.
There’s always Martin Sorrell and his new firm, S4.
“Some other research vendors might make sense to do a consolidation, but Nielsen’s debt is an issue,” Clarke said. “There’s talk that Sir Martin Sorrell might buy Kantar and Nielsen.”
While Nielsen dominates market research in the US, Kantar would make for a powerful international counterpart, Clarke added.
“You never know,” Clarke said. “He’s a wild card.”
This post was syndicated from Ad Exchanger.