Apprise's Charlie McCurdy Talks About the Decision to Sell Canon
Several weeks ago, Apprise Media Chairman and CEO Charles G. McCurdy and his company were the focus of dozens of industry headlines with the news of its impending sale of Canon Communications to United Business Media Ltd. (UBM) for $287 million. Canon Communications is a b-to-b media and events company in the advanced manufacturing sector, which Apprise and its financial partner Spectrum Equity Investors purchased five years ago for $200 million.
Canon's senior operational management team is expected to remain with the business, which will be renamed UBM Canon, and McCurdy will become a consultant to UBM/Canon upon the closing of the transaction, expected to occur before the end of this month.
Part of the reason for the brouhaha surrounding the sale is Canon's size and position in the industry. The Los Angeles-based company produces 24 magazines, 41 trade shows, 45 websites and more than 100 e-mail newsletters, as well as webcasts and online video production. It employs 343 staff members worldwide.
But the other reason is the significant growth Apprise Media was able to achieve, especially in light of the economic storm battering the industry the past two years.
Apprise has some expertise in this area; it specializes in acquiring and growing media companies, and then selling them for a profit (essentially "company flipping," though perhaps a significantly slower pace than a typical "house flipper"). The company's principals have acquired more than 20 companies, completed more than 200 follow-on acquisitions, and raised more than $9 billion in debt and equity financing in just seven years at Apprise and during McCurdy 's time as co-founder and president of Primedia Inc., where he employed acquisition as part of the company's overall growth strategy.
Here, McCurdy, who founded Apprise Media in January 2004 with Michael Behringer, shares his insights into the Canon sale as well as its timing, and the strategies employed to grow Canon Communications significantly—in essence to achieve what all media companies today are striving for: significant growth in digital revenue and diversified products.
The Canon Picture
Skodzinski: What was behind the decision to sell Canon? And why now, for a 7.8 transaction multiple—when we are just starting to see signs of economic recovery in some media companies, and a year from now, with recovery kicking in, the multiple would likely increase, in other words generating potentially millions more in profit?
Charlie McCurdy: What we do at Apprise Media is—working with investors—acquire, develop and grow niche media companies. The Canon team did a very good job in expanding the business digitally and globally, and there are many irons in the fire for future expansion.
The strategic fit with UBM is compelling. The price they are paying includes enough of the upside that, from an investment standpoint, it's a good time to sell and move on to the next project. We'll see what that turns out to be over the coming months.
It's anybody's guess where multiples are over the next year or two, and while optimism suggests they may rise, there are plenty of pressures going forward that could keep them quite stable.
Skodzinski: You obtained somewhere around a 35 percent EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) margin overall, up significantly from when you bought Canon, and a remarkable achievement, especially considering the timing of the economic storm battering the industry. The million-dollar question: How did you do that?
McCurdy: We started with a 28 percent EBITDA margin in 2005 and grew it to 35 percent this year. Note that about half the revenue and more than half the operating profit comes from trade shows, which have a higher profit margin than the publishing division—that helps drive the relatively high margin at Canon.
Still, publishing at Canon is very profitable because of the full suite of offerings across print and digital, and synergies with the trade show group. Our digital business is very profitable because of the value we deliver to marketers.
Skodzinski: What were the day-to-day metrics and goals you adhered to in order to be able to produce those margins?
McCurdy: Total focus on audience engagement on the one hand, and value to marketers on the other. The company-wide single-sector [advanced manufacturing] strategy helped a lot in this regard.
On the day-to-day level, nothing particularly unique as to metrics–the standard metrics for trade shows, publications, e-newsletters, websites, etc. But we track them very closely, and have a constant view as to the revenue outlook.
Skodzinski: Apprise expanded Canon's trade show business from two countries to eight, and grew the company's U.S. events business as well, through a time when the majority of events businesses were struggling through the recession. Can you explain how this was done?
McCurdy: One of the three expansion dimensions we identified for Canon at the outset was geographic—moving from a U.S.-centric business to a global business. The advanced manufacturing and design engineering sector tends to source globally and distribute globally. So we worked with our exhibitors to prioritize regions within the U.S. and around the world where Canon could be helpful. Note that Canon's trade show positioning tends to be very regional in nature—i.e., we try to bring the exhibitors to [regions where] the design engineers and manufacturing managers ... tend to be concentrated.
Skodzinski: Apprise grew revenue from digital and data products from 9 percent to 40 percent of publishing revenues. What percentage was from digital and what percentage from data?
McCurdy: A large majority of this activity is digital. Data is growing, but has a great deal of upside, which I think UBM is well positioned to support.
Skodzinski: You attribute the growth in data to the "Master Audience File." How was this created, how is it used and how does it generate revenue?
McCurdy: Three years ago, Canon had something like 74 discrete audience files—trade show pre-reg and verified attendee files, publication circ files, e-newsletter lists, website registrants, etc. All of these individuals are on the buy-side in advanced manufacturing—design engineers, managers, executives. We now have one Master Audience File with 1.5 million names.
This captures all the data from each of these sources, plus in-house and third-party overlays. We're able to segment our audience data to target very specific areas of the advanced manufacturing sector for the benefit of our customers in a way our competition cannot.
This week, at our Midwest manufacturing MD&M Minneapolis/Midpack collocated event, we are debuting our new "Canon Data Mine" product which helps trade show exhibitors qualify their leads and prioritize them through the various dimensions of data Canon can offer them.
Skodzinski: Can you talk about Canon's proprietary Qmed lead-generation product, how it works and what impact it has had on the business?
McCurdy: Qmed has caught on very well. It is positioned to draw off of customers' search budgets (think Google, GlobalSpec, ThomasNet) rather than ad budgets. It's the successor product to Canon's DeviceLink.com product, which was a first-generation online supplier resource for medical device design engineers.
Qmed is a powerful search tool that narrows down suppliers to those who are proven to be qualified (thus the "Q") suppliers in the medical sector. It also provides highly qualified (Q again) leads to the suppliers.
Financially, we took a substantial, established product and grew it 33 percent this year through the Qmed revamp. Operationally, we have a vertical search/lead-generation framework we're applying to other areas, with a nutritional-ingredients "Q" product launching last week.
Skodzinski: What about the digital revenue? Growing digital revenue is the goal of most publishers right now. What primarily drove that growth?
McCurdy: It's not so much about growing digital revenues, as expanding digital services—for users as well as marketers. With the right content, the right audience slices and the right marketer tools, these services can be very profitable.
Skodzinski: Canon publishes 24 print publications, with a total circulation of more than 325,000, in advanced manufacturing. What percentage do print publications contribute to the company's overall publishing revenue? Has this grown or declined since Apprise purchased Canon? If it declined, do you see it coming back? If it has grown, by how much, and to what do you attribute that?
McCurdy: Print currently provides about 60 percent of the revenues of the Publishing Division. This was about 95 percent of publishing revenue in 2005 when Apprise got involved with Canon.
It's interesting—we do extensive audience research regarding where people go to get various kinds of information, everything from search through live events. In our sectors, print magazines continue to be very important for a large majority of design engineers and manufacturing managers to track developments. (Our pubs tend to be very technical, rather than newsy.) Our revenue mix has caught up to the content-consumption mix, and will continue to evolve with it.
Skodzinski: Did custom publishing contribute to Canon's growth? If so, how significantly and in what ways?
McCurdy: We've seen custom spend overall shift sharply to digital from print post-recession. This is partly driven by the targeting capabilities of Canon's Master Audience File, in digitally delivered products.
Surrounding the Strategy
Skodzinski: Where/how do you see print publications fitting in to today's (and tomorrow's) successful publishing companies?
McCurdy: As previously mentioned, print can and does have a roll in providing know-how to our audiences in ways that other media don't. Audience research helps us tailor this.
Skodzinski: You have a history of successfully growing media properties. What is the first thing you look at when evaluating a company for growth potential?
McCurdy: Market served, market position, untapped potential, management team. Well, that's four things.
Skodzinski: Once you acquire a company or product, you employ what you refer to as a "surround-the-market" strategy. Can you explain this, and how and why it works?
McCurdy: It's all about helping suppliers reach customers and prospects—looking at reaching the market the way marketers look at their markets, and providing opportunities.
Skodzinski: Can you offer any words of advice to other executives who might read this and aim to employ this strategy? What should they look for and/or of what should they be cautious?
McCurdy: Your audiences and customers have all the answers—or more to the point, they have all the right questions.
Skodzinski: What are some other growth areas that generated significant return on investment (ROI) for Canon or that tend to generate the biggest ROI for media companies in general?
McCurdy: Audience targeting and segmentation is central. This permits high ROI for marketer spend, and a competitive edge for both you and your customer.
Skodzinski: What now? Where is Apprise Media investing or looking to invest?
McCurdy: We're just assessing the terrain now.
Skodzinski: What does the M&A market look like from your perspective right now as compared to six months ago? What do you expect six months from now?
McCurdy: There are many owners in our sector that never intended to be owners. That is not a long-term solution and should lead to turnover in the medium-term horizon.
Skodzinski: What are the company's biggest challenges?
McCurdy: It's hard to turn a company around while transforming it simultaneously. That presents investment challenges, since there are a lot of companies with both imperatives.
Skodzinski: Do you think the iPad is the answer to mobile magazines ... and/or that mobile/digital magazines are the future of the industry?
McCurdy: I just (finally) spent $900 for an iPad (including case) plus a monthly contract. That's a long way from the price point that drives the ubiquity of basic mobile phones. That said, it's a better interface than a print magazine, as it should be for $900 more than the cost of a trade publication!
Skodzinski: Are you looking at media products with significant opportunity in the mobile space? If so, can you give a couple of examples of where you see opportunity?
McCurdy: Mobile utility is going to be a function of the market served. Healthcare providers, for example, are seeing tremendous benefits of mobile content services in many areas.
Skodzinski: You've mentioned that you believe the future of business-to-business media is in targeting global audiences in new ways. In what ways, and why globally?
McCurdy: Certain industries define themselves globally, others don't. The opportunity is a function of this.
Even More Interesting Stuff
Skodzinski: What is something you did right to enable Canon to survive through difficult economic times?
McCurdy: We kept going with our plans to launch trade shows and digital products (profitably) through the downturn, and to lay the groundwork for more in the future. That helped a lot.
Skodzinski: What are you most excited about this year?
McCurdy: I think it's great that a "new normal" is settling into our business, and we can all focus on making progress. Customers are focused again on supporting their businesses rather than deferring decisions; that said, the focus is on ROI through all marketing channels seems to be very ingrained now.
Skodzinski: What is the best business decision you have made during the past year or two?
McCurdy: We held to the execution of our strategy at Canon during the recession, and that has positioned the company well.
Skodzinski: What keeps you awake at night?
McCurdy: Dealing with leverage constraints during the downturn wasn't exactly a hot toddy every night. The truth is though, now, I sleep pretty well. Canon has a great team that really cares about what they do for their markets, and that helps a lot.