Tips for Evaluating and Profiting From Acquistions
Last month, Hanley Wood acquired Alexander and Edwards (A&E),
a San Francisco-based publisher of two housing finance magazines (see news brief on p. 25). The purchase rounds out Hanley Wood’s portfolio of housing publications and conferences. Hanley Wood Magazines President Peter Goldstone discussed the deal with Publishing Executive and shared his philosophies on acquisitions within the publishing industry.
Publishing Executive: Peter, can you describe what goes into the acquisition process from your company’s end as the buyer?
Peter Goldstone: First and foremost, [you ask]: is [the company] a strategic fit? Does the entity we’re pursuing help us fulfill a strategic imperative that the company would have for growth?
For example, we dominate the residential construction space through Hanley Wood. However, a few years ago, we identified that we really didn’t have a media platform for the multi-family market. Most of our publications, conferences and Web sites address the single-family market, both new construction and remodeling. But we had a gap in the multi-family space. … So it was imperative that we look for a media entity that would fulfill that strategic imperative, so we went out and bought Multifamily Executive a few years back.
Once we had that platform, we looked at ways to expand it and came across these Alexander and Edwards properties, which serve the information requirements for people interested in housing finance, particularly on the multi-family side. This was a natural extension of that multi-family platform.
So first and foremost, does it fill a strategic imperative? Secondly, are the media platforms representative of the type of quality standards that we have here at Hanley Wood? Do they have dominant share of mind? If they do, that’s great. If they don’t, do we feel that we can enhance those properties to get them to a representative place?
PE: How long does the entire acquisition process typically take, star t to finish?
Goldstone: We always have an ongoing list of acquisition targets in the pipeline. We have close to 100 that we’re working on constantly, so a lot of the due diligence happens before we even approach a prospect. So it could take a couple of months, [or] it could take a couple of years. Once we’ve made contact, and we think that they’re a viable company to be acquired, then we go into full-bore due diligence where we really try to verify and validate our assumptions of fulfilling that criteria: Does it really fit a strategic imperative and is it a cultural fit as well, in terms of the quality proposition?
... [the acquisition of A&E] was a quick one. It only took a month and a half to two months. They were represented by a broker, and there were a number of companies involved in the mix for a limited auction. So that was a more formal process. Typically, most of our acquisitions in the past five years—and I think we’ve done 15—have not gone to an auction process. They’ve come from our ability to identify, connect and contact prospects, and get them to consider a possible transaction.
PE: AdMedia Partners represented Alexander and Edwards in the deal, but does Hanley Wood seek input or representation from any acquisition firms or specialists on its side?
Goldstone: We always find that it’s better if the prospective seller has M&A consultation and representation that facilitates the whole process. We’ve had a lot of success working with the major M&A firms in the media space. They know us, and they know that when we come to a deal we’re serious about, we can make it happen. And they bring a professional consultation process to the seller that helps facilitate everything. They’re working in the best interests of the seller, but they also help facilitate the process to a better end result.
PE: Upon acquiring another publisher, how do you determine which resources (e.g., publishers, salespeople, production, technology, editorial staff) to keep in tact from the acquired company?
Goldstone: What I always say is, “The easy part of doing the deal is writing the check. The toughest part is integrating the business effectively.” So once we have agreed on a contract, then we go into full-fledged due diligence, where we assess all of the key employees that they have. We determine what the cultural fit would be with their employee base. The thing that we’re most concerned about is not compromising the customer relationships, whether that be on the editorial side or on the sales side. So, given the fact that we’re paying fair market price for a business, we don’t want to hurt our investment in any way by … not assessing the key people accurately enough. So we spend a lot of time in each of the functional areas identifying the strengths and weaknesses of the seller’s operation. And then we make a determination about who’s necessary to keep and what job functions we can fulfill from our standpoint.
PE: What one piece of advice would you offer to other B-to-B publishers on the lookout for acquisitions for their own companies?
Goldstone: I think the best advice would be to always look for properties that not only deliver the type of financial results you’re looking for, but also have the dominant share-of-mind proposition you’re looking for. Meaning, if you’re going to buy a company, it’s probably because you want to jump into a market … and you want to make sure that you’re acquiring a leading brand in that arena that has dominant share of mind and the right kind of credibility.