The Business: Tired of all those corporate lone riders whose toughest challenge is lassoing up a raise? Then saddle up this pony: a sports-event marketing company whose focus--top-quality rodeos--has won it a strong following, primarily in major Midwestern cities. With 16 stops on its tour last year, this company earns revenues from ticket and merchandise sales tied to two types of shows: a one-night mini-rodeo, perfect for TV coverage, and a traditional multiday, six-event rodeo. The biggest asset of this 20-year-old company? Solid-gold relationships with its long-term corporate sponsors, as well as close ties to both the owners of major sports arenas and the 250 or so cowboys who compete in its events. The current owner, a onetime rodeo cowboy himself, is ready to stay on for the duration of the show, along with five full-time staffers.

Price: $1 million

The Outlook: Yee-hah! Rodeos are roping in more sports-loving Americans: attendance at pro rodeo events was up to 23 million last year, prize money totaled $28 million, and the events receive (fairly) regular coverage by ESPN and local TV stations. A new owner could whip growth along by adding new cities to this company's tour. One caveat: in this business, more rodeos don't necessarily add up to more profits, unless dates have been carefully chosen to minimize competition from other local entertainment events. That's why 1997, with its reported gross profit margin of 42%, was a better year for this business than 1996, even though there were two more events--and higher revenues--that year.

Price Rationale: Valuing a company like this one, whose chief assets are intangibles such as goodwill, is tougher than, well, an evening of bronco busting. For lack of any comparable industry guidelines, rely on the current market range of one to three times discretionary (or recast) earnings. Figure that a bid on the lower end, somewhere around $310,000, wouldn't even get you out of the starting gate. But it's also worth keeping in mind that the closer you get to the upper limit of $930,000, the tougher a time you'll have both servicing your debt and paying yourself a salary. What about the $1-million price tag? Popular wisdom has it that buyers can't cover financing costs at a multiple of higher than three, but if you're already in the sports or entertainment business, savings resulting from increased efficiency and synergies between the enterprises involved could justify a pricier deal. If you bid high, try to negotiate for extra goodies, such as the right to include cash and accounts receivable, minus payables outstanding.

Pros: Between the cowboys, the corporate sponsors, and all those cities waiting to be gripped by rodeo fever, there's got to be a way to push growth. Ride it, cowboy!

Cons: Pay too much for this deal and you'll wind up one very sorry cowpoke. --Jill Andresky Fraser

Gross Revenues Recast Earnings*
1995 $2,671,000 $245,000
1996 $3,543,000 $375,000
1997 $2,717,000 $310,000

*Before interest, taxes, depreciation, and owner's compensation.

Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Jim Zipursky at Corporate Finance Associates, 402-330-2160.

Published on: Nov 1, 1998