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BuzzFeed To Become “An M&A Machine” Says Head Of SPAC It’s Merging With – Update

Jill Goldsmith
·5 min read

UPDATED with details from press conference: Buzzfeed founder and CEO Jonah Peretti and Adam Rothstein, executive chairman of the SPAC that’s taking it public, both said they see many more acquisitions in the company’s future.

“We are hoping to really build an M&A machine,” said Rothstein of the special purpose acquisition company 890 Fifth Avenue Partners. The deal announced today included BuzzFeed’s acquisition of Complex Networks for $300 million.

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“There will be more acquisitions. There are more exciting companies out there that we want to pursue,” agreed Peretti. They spoke at a press conference announcing their merger.

Neither would comment on potential targets. “We are not going to buy Viacom, I can confirm that,” Peretti joked.

Digital publisher Group Nine formed a SPAC to hunt for companies to buy. Vice Media is said to be merging with a SPAC itself. SPACs are formed by investors and executives and go public with a so-called “blank check” to hunt for acquisitions, automatically taking their targets public in a merger. It’s faster, easier and less expensive than a traditional, solo IPO.

SPACs aren’t allowed to solicit deals before they go public and Rothstein said his SPAC had a wish list of 140 companies with BuzzFeed right at the top. He said digital media is at an inflection point right now so there’s a reason to get BuzzFeed public quickly with an infusion of cash and a currency to do deals.

BuzzFeed is currently profitable and Complex Networks is on its way. Together they will reach combined revenue of $521 million in 2021, Peretti said.

BuzzFeed launched with a single revenue stream, native content, but has expanded to three, including traditional digital advertising for its own content and commercial royalties on direct sales and licensing the brand.

But advertising makes up the bulk of revenue and Peretti was pressed on that since it’s a tough space where Google, Facebook and other big platforms suck up a huge share of digital ad dollars. He noted that popular streamers like Netflix and Disney+ are ad free and that linear television is in slow decline, which means advertisers are looking for platforms.

And Buzzfeed already has revenue sharing deals with the big platforms, which he thinks could be enhanced. That would be especially true the bigger BuzzFeed gets by rolling up other assets in a fragmented digital media space.

“I don’t think we would go to advertisers and say, ‘Don’t spend with Facebook or YouTube,’ it’s that we can have a better relationship with them” since they need premium content, Peretti said.

In 2018, Peretti suggested that in a world of giant platforms, a merger of BuzzFeed and digital media peers like Vice, Vox Media, Group Nine and Refinery could result in better ad rates.

He indicated Thursday that he doesn’t expect layoffs as a result of the Complex merger, unlike when HuffPost staff was chopped after BuzzFeed acquired the site early this year. The cuts were in part due to HuffPost’s weaker financial position and to timing as BuzzFeed like other companies looked to conserve cash during the pandemic.

PREVIOUSLY: BuzzFeed announced Thursday plans to go public in a SPAC merger expected to close in the fourth quarter in a deal that values the company at $1.5 billion as the digital media space continues to transform.

The 15-year-old digital media group founded by Jonah Peretti will also acquire digital outlet Complex Networks from Hearst and Verizon for $300 million. The SPAC, or special purpose acquisition company, called 890 Fifth Avenue Partners, holds $288 million in cash.

Group Nine Media launched its own SPAC to pursue digital deals and Vice Media is reportedly pursuing a merger and IPO with another SPAC, called 7GC & Co Holdings.

BuzzFeed has also secured approximately $150 million in convertible note financing led by Redwood Capital Management and including CrossingBridge Advisors, Cohanzick Management, and Silver Rock Financial. BuzzFeed will trade under the ticker BZFD. Management led by CEO Peretti will remain in place.

“With today’s announcement, we’re taking the next step in BuzzFeed’s evolution, bringing capital and additional experience to our business,” Peretti said in a statement.

BuzzFeed’s portfolio include BuzzFeed News and HuffPost; BuzzFeed Entertainment, and Tasty Lifestyle Brands.

Complex, co-founded by Rich Antoniello and Marc Ecko in 2002, spans digital, video, audio media, and live events with an online community that reaches a multicultural audience for its brands that include Complex (pop culture), First We Feast (food entertainment), Pigeons and Planes (music discovery), Sole Collector (sneaker news), and its festival of cultural convergence ComplexCon. Following the transaction, Complex Networks will remain editorially independent, but benefit from the application of BuzzFeed’s data science, distribution network, and lines of business – including commerce – to accelerate revenue growth.

Adam Rothstein, executive chairman of 890 Fifth Avenue Partners and Greg Coleman, an advisor to 890 Fifth Avenue Partners and former BuzzFeed President, will join BuzzFeed’s board Two additional directors will be announced in the coming months.

“We looked at many different media businesses but none had the kind of brands, digital assets or business model that BuzzFeed does and which we believe can achieve the kind of meaningful growth and returns for our investors. Jonah and his team have built an incredible business. They are resilient, smart, and innovative which will be important as we move ahead,” Rothstein said.

BuzzFeed and other digital media outlets have struggled financially in recent years and the company announced waves of layoffs in 2019 and 2020 as well as cutting nearly 50 HuffPost staffers after it acquired the outlet early this year. But the company today noted “accelerating sustainable and profitable growth,” positive net earnings and a projected compound annual growth rate of 26%.

Group Nine Media, owner of TheDodo, NowThis, Thrillist, Seeker and PopSugar, launched its own SPAC and went public earlier this year to hunt for a digital media business to buy.

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