A purchase price of 35 times annual profits looks generous for the Financial Times Group.
And while that £844m deal looks like great news for Pearson shareholders, it may be a cause of concern for FT Group staff.
It exceeds even the £650m which was paid by the Barclay brothers in 2005 for Telegraph Media Group at what turned out to be the high-water mark for national newspaper profitability in the UK.
Nikkei is going to need to dramatically improve on last year’s adjusted operating profit for FT Group of £24m if it is going to recoup its investment in a reasonable time-frame.
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The FT has shown solid growth in recent years, with total print/digital circulation said to be up 30 per cent in five years. But even in the financial sector, the media business remains an uncertain one which is constantly buffeted by technological change.
In one sense that high purchase price is a huge vote of confidence in a great British journalism brand. But it could turn out to be a millstone around the neck of staff.
As Telegraph journalists have found out under the Barclays, with a high price comes a heavy responsibility to provide a return on investment.
For the Telegraph the Barclays purchase ushered in an era of ruthless cost-cutting with hundreds made redundant in order to keep profit margins up.
Pearson has been a relatively benign owner of the FT for the last 58 years, with the compulsory redundancies seen at other titles largely avoided.
The FT’s 500 journalists must be wondering whether that will continue under a new owner with a huge investment to recoup.
But they can perhaps take solace from the fact that this is far from being a purely financial investment. The new owner must see the FT as a strategic building block towards growing from its Far East base into becoming a more global media brand. That aim won’t be achieved by cost-cutting, but by investment.
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