Episode 21 Inside the M&A Press with Bloomberg's Alex Sherman

In episode 21 of Acquired, hosts Ben Gilbert and David Rosenthal, along with guest Alex Sherman from Bloomberg, delve into the intricacies of media coverage in mergers and acquisitions. They discuss the evolution of media companies like Bloomberg, which began as a technology company and now thrives on a subscription model for its terminals, contrasting with the ad-supported models of many media firms. The episode also touches on the role of reporters in breaking M&A news, the coded language indicating sources in articles, and the potential impact of late-breaking stories on market movement. They explore the delicate balance between providing timely, market-moving information and responsibly reporting nuanced stories. The conversation further covers the dynamics of media in politics, particularly in the context of late-night talk shows and their political leanings.

• Pilot is a comprehensive accounting firm for startups and growth companies.
• It offers services including accounting, tax, bookkeeping, and CFO services like investor reporting.
• Pilot is now the largest startup-focused accounting firm in the U.S.
• It is backed by prominent investors like Sequoia, Index, Stripe, and Jeff Bezos.
• The firm's philosophy aligns with Jeff Bezos' axiom that startups should focus on their unique value propositions and outsource non-core activities like accounting.
• Pilot is experienced with a variety of companies, from startups to e-commerce, and offers scalable services.

"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs, and in fact now is the largest startup focused accounting firm in the US."

This quote emphasizes Pilot's role as an all-encompassing accounting firm tailored for startups and growth companies, highlighting its position as the largest in its sector within the U.S.

"Every company needs it. It needs to be done by a professional. You don't want to take any risk of anything going wrong, but at the same time, it has zero impact on your product or customers, things you do uniquely well."

The quote outlines the necessity of professional accounting for every company while stressing that it does not directly affect the product or customer experience, which are the core focus areas for a startup.

"Pilot takes care of all that. And they've been doing this now for years across thousands of startups in Silicon Valley and beyond. And there's nobody better who you can trust to both get your finance right and make it easy and painless for you and your company."

This quote conveys Pilot's expertise and trustworthiness in managing finances for startups, making the process straightforward and stress-free for companies.

• The episode features Alex Sherman from Bloomberg, offering insight into the press perspective on mergers and acquisitions.
• The discussion includes the role of media in covering deals, the business model of Bloomberg, and how it relates to technology and acquisitions.
• Alex Sherman has a background in various roles at Bloomberg and hosts the "Deal of the Week" podcast.
• The episode aims to educate listeners on the news cycle of mergers and acquisitions.

"Today is a special episode where we yet again break the mold and do a little bit of experimenting of our own. Here at Acquired, we are covering the press perspective of mergers and acquisitions."

This quote sets the stage for the episode's unique focus on the press perspective of M&A, indicating a departure from the podcast's usual format.

"He started at Bloomberg in 2008 as an intern out of graduate school and has worked in a variety of roles and covered a number of beats since then."

The quote provides background information on Alex Sherman, highlighting his long-term association with Bloomberg and his progression within the company.

• Bloomberg was founded in 1981 by Michael Bloomberg and started as Innovative Market Systems.
• It is a technology company at heart, with a core product known as Bloomberg Terminals, used by finance professionals.
• Bloomberg Terminals serve as a communication platform and provide data analytics for traders.
• The company has diversified into media, including radio, TV, and podcasts, but the terminal business remains the core revenue source.
• Bloomberg Media has over 2,000 editors and reporters, and terminal subscribers pay around $25,000 per year.
• The company's business model is unique in the media industry, as it does not primarily rely on ad revenue.

"Bloomberg actually, I think, might be like the largest technology company that nobody really thinks about or talks about too much because people think about it as a media company, but it actually is at its heart and its origins a technology company."

This quote highlights the misconception of Bloomberg as solely a media company, whereas it is fundamentally a technology company due to its Bloomberg Terminals.

"When you're selling to clients that have a lot of money, they're willing to pay a lot."

The quote explains the high cost of Bloomberg Terminals, justified by the financial capacity of its clients who are willing to invest in essential trading tools.

• Bloomberg journalists prioritize accuracy and responsible reporting over sensationalism.
• The company uses a 15-minute delay for terminal subscribers to access news before the public.
• Social media and TV have eroded the exclusivity of the 15-minute delay, but it remains a part of Bloomberg's model.
• Bloomberg Terminal customers get news first, which can be crucial for traders making instant decisions based on market-moving information.
• The company is conscious of the impact of headlines and uses "redheading" to signal major stories, influencing market reactions.
• Journalists at Bloomberg focus on providing value to both terminal and general users by covering market-moving M&A stories.

"Bloomberg is in better financial shape than all of our competitors. So it has been hard for me to rationalize why I would go work at, say, a newspaper which really struggles financially and lives on advertisement when our entire operation is, you could say, subsidized by the Bloomberg terminal business."

This quote explains the financial stability of Bloomberg compared to other media outlets, emphasizing the advantage of being supported by the lucrative terminal business rather than relying on advertisement revenue.

"If we can break a deal, if we can say this company is in talks to buy company x, is in talks to buy company Y, the stocks and bonds are going to move for those companies, the prices are going to move, and it therefore makes it worthwhile for you to spend $25,000 a year to buy a Bloomberg terminal if you're trading on this information."

The quote illustrates the value of Bloomberg's timely and accurate reporting on M&A deals, which can significantly impact markets and justify the cost of a Bloomberg Terminal subscription for traders.

"The 15 minutes delay has eroded because of social media and, in essence, tv. So what has happened is you still don't get the story first, but as soon as we hit headlines, it goes on Bloomberg TV."

This quote discusses the challenge of maintaining the exclusivity of news in the age of social media and instant broadcasting, which has affected the traditional 15-minute delay advantage for terminal subscribers.

• Journalistic integrity requires verifying stories with sources from both sides of a deal.
• Bloomberg has a strict policy of sourcing from both sides before running a story.
• Direct involvement of sources in the reported process adds to the credibility of the information.
• It is common for journalists to receive criticism or skepticism regarding the accuracy of their reports, especially when the story is exclusive.
• Journalists must explain to the public the rigorous process of sourcing to maintain trust.

"And I was the only one that reported it. For whatever reason, no one matched this story. But I knew who my sources were, and they're directly, intimately involved in the process from both sides, not just one side."

The quote emphasizes the importance of having reliable sources directly involved in the story's subject matter. It also highlights the uniqueness of the report due to the lack of matching stories from other outlets.

• The industry standard requires journalists to have direct sources from both sides of a deal for a balanced report.
• In high-competition scenarios, if one source is exceptionally credible, such as a CEO, the story may run with less input from the other side.
• Anonymously sourced information is common, but it relies on strong existing relationships.
• Providing the other side a chance to comment, even briefly, is part of ethical journalism.

"So this can be, in general, that is the standard. There can be exceptions."

This quote acknowledges that while having both sides' input is standard, there are exceptions based on the situation's urgency and the reliability of the sources.

• The language in articles contains coded information about the origins of the story.
• The order of bylines can indicate the primary source of information.
• Understanding the roles of reporters can provide insight into where information is coming from.
• Not all leaks are strategic; timing can often be coincidental based on the reporter's schedule.

"You can sometimes glean where the information is coming from based on who the reporter is."

This quote explains how the identity of the reporter can be a clue to the source of the information in a news story.

• CEOs and board members may not understand the nuances of media relations.
• Companies often hire external PR firms with journalism experience to manage information during M&A deals.
• PR firms play a critical role in shaping the narrative and interacting with reporters.
• The sophistication of a company's approach to PR can vary greatly.

"So your general CEO or CFO or board member has no idea by and large. So they rely on their own internal media relations."

This quote highlights the knowledge gap among high-level executives regarding media relations, necessitating reliance on internal or external PR experts.

• Reporters typically write a few stories per week without a strict quota.
• A "chase list" of tips and leads guides reporters on what stories to pursue.
• The significance of a story, based on company size or name recognition, influences a reporter's focus.
• Reporters prioritize breaking news on large deals or high-profile companies.

"So on a given week, I'd say I probably write two to three stories on average."

This quote gives insight into the typical workload of a reporter and the lack of a fixed requirement for story output.

• Comprehensive analysis of acquisitions is challenging and less common in reporting.
• Reporters must weigh the effort against other priorities like breaking news.
• Bloomberg's focus is on market-moving information, which influences reporting choices.
• Retrospective analysis is less actionable for traders, leading to less coverage in that area.

"So one of the reasons is it's much harder, it's much harder to write a good, comprehensive story on that."

This quote explains the difficulty and lower priority of writing in-depth analyses of completed acquisitions compared to breaking news stories.

• The general public often seeks only headline information and moves on quickly.
• Trade publications cater to a more specialized audience interested in detailed analysis.
• Reporters and podcasters consider how to expand their audience beyond industry insiders.

"The general public really just wants to know the headline information."

This quote reflects on the broader public's consumption habits, which tend to focus on the immediate impact of news rather than in-depth follow-up.

• Business podcasts can attract listeners beyond their target audience due to storytelling.
• Episodes with dramatic history or interesting narratives can engage even those not initially interested in the subject matter.
• The balance between news, stories, and analysis is crucial for engaging listeners.

"I actually am not that interested in M A, but I listened to that episode specifically because my friend told me it was interesting and I loved hearing that story."

The quote emphasizes the power of storytelling in making business topics accessible and enjoyable to a wider audience. It highlights that even those not interested in mergers and acquisitions (M&A) can be drawn to an episode due to a compelling narrative.

• Episodes on current, relevant topics can spike in popularity.
• The LinkedIn episode's timing with the news cycle contributed to its success.
• Snapchat's persistent downloads suggest a fascination with the platform and speculative scenarios.

"So I think it was a lot of people asking their friends, what do you think of this LinkedIn thing? And we had already put up an episode so people could say, you really should listen to that, this podcast episode."

This quote explains that timely podcast episodes, which coincide with trending topics, can become popular as they provide immediate insights into current events, leading to recommendations among listeners.

• Messaging platforms in Asia, like Line, have evolved into ecosystems for various services.
• Snapchat and Facebook Messenger are developing towards a similar model.
• The integration of app stores into messaging platforms like iMessage indicates a trend.

"So online you can order, you order your meals through line. So all of these other independent apps in this country are sort of housed within one ecosystem with line."

This quote illustrates the concept of messaging platforms as ecosystems where users can access a variety of services in one place, which is a trend that might influence Western platforms.

• The valuation of tech media companies has traditionally been based on user growth.
• Companies like Twitter face challenges when user growth stalls and need to explore new revenue models.
• The transition of traditional media to subscription models raises questions about whether social media will follow.

"But at some point, and we're already seeing it with some like, let's say Twitter, the growth stalls, but there's still value to these products."

This quote reflects on the challenge that social media companies face when their user growth plateaus, prompting the need to find alternative revenue streams beyond advertising.

• Network effects are critical for social media platforms but not for traditional media.
• Paywalls can work for traditional media but might be detrimental to social media due to the loss of network effects.

"And let's say Twitter, for example. Absolutely does. And as soon as my sources are no longer on Twitter, like the people that I want to be following because they decided not to subscribe, it's less valuable for me."

This quote discusses the reliance of social media platforms on network effects and the potential negative impact of introducing a subscription model that could reduce user engagement.

• Micro payments and subscriptions could be a way forward for platforms with indispensable services.
• WhatsApp's model of a minimal annual fee after a free first year is an example.
• The challenge lies in creating a value proposition that convinces users to pay.

"If you present people with the option of having to pay some sort of really small micro payment, which you can then slowly move up over time, that people wouldn't just drop out if you had to pay a penny to stay on Facebook, would you do that?"

The quote suggests that users might accept small payments for services they consider essential, like Facebook, indicating a potential revenue model for social media platforms.

• Social media platforms could monetize the aggregate data generated by their users.
• Traditional media companies pay for content creation, while social media relies on user-generated content.
• YouTube's model of paying content creators and offering subscription services is a potential middle ground.

"What is the data that in aggregate is generated from Twitter, from the firehose, quote unquote, that is very valuable to there."

This quote points to the untapped potential of monetizing user-generated data on social media platforms, which could be a valuable asset to both the platform and third-party companies.

• Social media has changed the dynamics of news reporting and market influence.
• Reporters with established reputations can move markets without the need for traditional media infrastructure.
• The immediacy of Twitter presents challenges and opportunities for reporters in breaking news.

"Twitter has sort of upended this. I don't need Bloomberg anymore. I could have broke this thing on my own."

The quote captures the transformative effect of social media on journalism, where reporters can directly influence markets and break news without relying on traditional media channels.

• The media industry is grappling with evolving business models, including subscriptions and paywalls.
• The sustainability of media companies may depend on finding a balance between user growth and revenue generation.
• The integration of traditional and new media business models remains a topic of discussion.

"So is it just a matter of time before this sort of traditional media that has gone online meets the new media that has not done this?"

This quote raises the question of whether traditional media's move to online subscription models will be adopted by new media companies as a solution to the challenges they face with user growth and monetization.

• Building relationships with the press is important for startups.
• Startups should understand the interests and coverage areas of journalists to foster productive interactions.
• The press can be a valuable channel for startups to gain visibility and credibility.

"Well, you absolutely should try to build a relationship, but the way you should try to build a relationship is to know what o"

This incomplete quote suggests that startups should be strategic in building relationships with the press, tailoring their approach to the specific interests and coverage areas of journalists.

• Different media outlets have varying focus areas, impacting their coverage decisions.
• Bloomberg tends to cover larger companies and significant financial events, not early-stage startups.
• Building a relationship with reporters is beneficial for future coverage when a startup grows in significance.
• Reporters seek exclusive information; offering this can lead to coverage.
• Entrepreneurs should understand what specific reporters and their outlets value to tailor their approach.
• The type of exclusive information varies by outlet; some may prefer deals, others interviews.

So certain outlets are going to cover startups much more closely than, you know, Bloomberg plays in sort of the big game land where we're going to write a lot of stories about Uber, but we're not going to write any stories about your know, million dollar valuation startup at this point.

This quote emphasizes the importance of recognizing the focus of different media outlets when seeking coverage. Bloomberg is highlighted as an outlet that prioritizes larger, more established companies.

If you give us the information exclusively, if this is a Bloomberg scoop, we'll cover it.

Exclusive information is key to getting coverage from Bloomberg, as indicated by this quote. Startups should offer exclusives if they want to be featured.

• Exclusive information is a key factor in media coverage and varies by outlet.
• Media outlets are more inclined to cover a story if they receive exclusive rights.
• Startups can distribute different exclusive pieces to various outlets to maximize coverage.
• The nature of the exclusive content should align with what is considered valuable by the media outlet.

Ask the reporter what matters to them and then figure out a way that you can give the reporter what matters to them.

Understanding what reporters value is crucial for startups looking to build a relationship with the press, as this quote advises entrepreneurs to inquire directly about a reporter's interests.

• Late night talk shows have become more politically left-leaning compared to previous eras.
• This shift contrasts with a significant portion of the American population that votes Republican or is centrist.
• The divergence between entertainment culture and political leanings could foreshadow a cultural-political disconnect similar to past decades.

Clinton's Samantha B. Problem. And it talks about how late night talk show hosts have sort of vehemently swung to the left in this particular election

The quote discusses the observation of a political shift in late night television, which could signal a broader cultural shift that may not align with the political views of the entire American electorate.

• Instagram's advertising base has grown significantly, reflecting its value proposition to marketers.
• The integration of advertising tools with Facebook has facilitated this growth.
• The increase in active advertisers from 200,000 to over 500,000 in a short span demonstrates Instagram's expanding influence.

They announced this week that they have more than 500,000 active advertisers. So separate advertisers organizations buying ads on Instagram. Over 500,000. That's up from 200,000 in February.

This quote highlights Instagram's rapid growth in the number of active advertisers, which is a testament to its success as a platform for businesses to reach consumers.

• Amazon's share price and influence in Seattle have seen remarkable growth.
• The company's expansion has had significant economic and property value impacts on the Seattle region.
• Amazon's business strategy and acquisitions are closely watched by investors and the media.

Share price hit $800 a share. Benny, you're trying to time the market on buying Amazon... Property values in Seattle are now at an all-time high.

The quote reflects on Amazon's financial success and its transformative effect on Seattle's economy and real estate market, illustrating the company's far-reaching impact.

• Ford's purchase of Chariot, a subscription-based shuttle service, is part of the evolving transportation industry.
• The acquisition's strategic significance is unclear, with more transformative alternatives potentially available.
• Comparisons are made to GM's acquisition of Cruise, which is seen as a more game-changing move in the self-driving car space.

Chariot is basically the public bus system, but better and with fewer stops and subscription based.

This quote describes Chariot's business model, which Ford has acquired, indicating the company's interest in innovative transportation solutions.

• Yahoo's data breach disclosure could affect its sale to Verizon.
• Speculation exists about the possibility of Verizon seeking to alter the deal price due to the breach.
• The situation underscores the importance of cybersecurity and its potential to influence major corporate transactions.

I'm curious to see, sweet, what happens with the Yahoo sale to Verizon now that Yahoo has said that 500 million of their users were breached in this big data breach.

The quote raises concerns about the potential repercussions of Yahoo's data breach on its acquisition by Verizon, highlighting the significance of cybersecurity issues in mergers and acquisitions.

• The hosts and guests share personal recommendations for books, articles, and media content.
• Topics range from algorithms applied to daily life to cultural commentary and visual art.
• These recommendations provide insights into the interests and intellectual pursuits of the speakers.

New book that came out recently that I read called algorithms to live by by Brian Christian and Tom Griffiths.

The quote is a recommendation for a book that explores the practical application of computer science algorithms in everyday life, demonstrating the intersection of technology and practical decision-making.