Private Equity Firms Taking Over B2B Media
Private Equity firms are now the dominant players in B2B publishing. They probably own less than half of all B2B media properties, but we've passed the tipping point.
M&A deal value in B2B media increased more than 600% from 2013 to 2014 -- from $452 million to $3.2 billion -- according to the Jordan Edmiston Group, an investment bank specializing in such deals. Not all of the money involved was from private equity (PE) firms, but that has been the driver.
This is the natural progression of maturing industries: having bigger money come in attracted by the potential. Hey, wait a minute! Potential? Our business is more than 100 years old -- we ain't no start-ups.
To PE investors' credit, significant money started moving into B2B publishing even while the unfashionable print business dominated many of the acquired companies. You know there are countless investors who are repulsed by the word "paper." The increased liquidity came to our industry at the perfect time, while it was being rocked by both the Great Recession and the digital revolution.
Matt Kinsman, VP of content & programming for ABM/SIIA, believes "the majority of large companies who are ABM members ($50 million-plus sales) are PE-owned. The renewed interest in PE companies is based on the emerging value that B2B information companies are not just media, but combine data, information services, paid content, and events."
A week ago was an example of how this helps the industry. The last titles and trade shows of Cygnus Business Media were sold. At one point the Ft. Atkinson, Wis. company had magazines in industries such as firefighting, airports, lawn care, and accounting. As D.B. Hubbard reports in Talking New Media, the company had a variety of investors since 1997 and a bankruptcy in 2009.
The old publisher in me appreciated how the sale was managed. Most Cygnus properties will still exist. Editors and writers still have jobs, sales teams still have ads to sell, and industries still have information resources. PE investments allowed for a soft landing that probably would not have been accomplished otherwise. Paul Caplan, a former group publisher at Cygnus, commented, "It ended about as well as any divestiture I have seen on my 30-plus years in the B2B business."
This week ALM, purchased back by Wasserstein & Co. last June for $417 million, spent $40 million to acquire Summit Professional Networks from Apax Partners. Summit, not to be confused with Summit Media Group, covers the insurance, financial, and tax businesses. They also have properties in the law firm space, ALM's mainstay.
Anecdotal indications are many PE firms are smart enough to let their publishing management continue running the show, with guidance rather than interference. Those firms seeking or accepting new ownership have the motivation to want an investor who brings expertise along with capital. Of course, in some cases cashing out is incentive enough. Is selling to PE investors the new "going public?"
The New B2B Publishing Summit
This past November SIIA, ABM, and SIPA held the Business Information & Media Summit (BIMS). It is sure to become an annual event, based on the quality of the content, location like the Fountainbleu in Miami, and especially the crowd. Many B2B publishers launch events using the word "summit" with their fingers crossed, hoping reality will match the marketing. I sure have. In this case, BIMS did attract a very high-level, CEO audience. In some ways BIMS was a celebration of the PE transformation that has occurred. Nobody thought of it as such -- but upon reflection, it was so.
The opening keynote was given by David Kieselstein, CEO of Penton, who announced a rebranding from a publishing company to an information services business. The $360 million, New York-based company is owned by two PE firms, MidOcean Partners and Wasserstein & Co. Markets they cover include transportation, natural products, design and manufacturing. Kieselstein showed how Penton is creating data-rich business tools which reach into the enterprise of their readers. He gave an idea-provoking presentation which felt like a glimpse into the future of B2B publishing, er, information delivery.
"Minutes of the day are what we compete for," said Kieselstein. "Your distraction is in your hand" and Penton is committed to "stealing share from all the other distractions" in readers' lives. Obviously technology is needed to accomplish this, and Kieselstein pointed out talented developers are hard to hire now. Penton made the strategic decision to use IT staff for more cutting edge products. "We know how to build products; we shouldn't be focused on platforms." When it comes to platforms, "why build it when you can rent it?"
The other keynote was presented by Brent Reilly, president of 80-year-old, Tuscaloosa, Ala.-based Randall Reilly. They had taken on a PE investor in 2008, just before the recession hit full force. All of a sudden "your reason for being, your business model was being called into question...I believe the economic recession masked the technological revolution for a time," he added. Reilly credited Investcorp, their PE partners, for support every step of the way.
Reilly gave a funny and inspiring presentation, sharing his company's pain and success going through a difficult transformation of their product mix and approach. They created products that are "multi-platform data and analytic tools." Of note, in 2007 56% of their revenue was from print. Today, with total sales far greater than '07, just 18% of revenue is from "traditional print."
It will be interesting to see how the new financial backing PE-owned publishers enjoy is countered by independently owned publishers.
Andy Kowl is a journalist and entrepreneurial publisher with more than 30 years developing, marketing and growing publishing companies. He is senior vice president of publishing strategy for ePublishing Inc., the leading enterprise publishing system (EPS) provider which manages content, audience data, workflow, newsletters and e-commerce for hundreds B2B online publications. He helps publishers increase reader engagement and response by integrating behavioral data with contextual content, and shows them direct ways to monetize the results. Andy writes the B2B Beat blog for Publishing Executive magazine. His background in B2B includes publishing, editing and/or owning magazines and information products covering specialty retail, horse breeding, real estate, credit unions, Wall Street compliance and wireless technology.