Clarity Partners/Modern Luxury
FOLIO:'s Top Deals of 2007.
BUYER: Clarity Partners
SELLER: Modern Luxury
PRICE: $250 million (est.)
TAKEAWAY: Clarity bought into the hot concept of regional luxury magazine markets for a hefty price, from a private equity fund that built the media company up and sold out for an estimated revenue multiple of 3.5x.
In late May 2007, private equity firm Clarity Partners paid an estimated $250 million for a controlling stake in regional publisher Modern Luxury Media-a whopping figure that points to, as one FOLIO: source said at the time, "how hot" the regional luxury market is.
The stake was bought from Roy E. Disney-founded Shamrock Capital Partners, which invested $50 million in the company in 2004. Between 2004 and 2007, Modern Luxury expanded from three to 10 markets, and revenues nearly quadrupled to $70 million, according to the Dow Jones LBO Wire. For Shamrock, that led to an estimated revenue multiple of 3.5-x.
Lehman Brothers joined Clarity in the deal as a co-investor, with debt financing from Credit Suisse and New-Star Financial.
Josh Gutfreund, a general partner at Clarity who currently serves on the Modern Luxury Media board, stated at the time, "Modern Luxury is the only magazine publisher in America that can reach affluent readers with a luxury, localized magazine at the same time that it offers advertisers complete national coverage of every major market in the country."
Michael Kong, founder and CEO of Modern Luxury, said, "We are quite pleased with the outcome of this process, which resulted in a valuation for the company that exceeded Shamrock's original investment by several times, and a partner that will help us continue to grow at a rapid pace both organically and through acquisitions."
Modern Luxury's magazines include CS (Chicago), Riviera (Newport Beach and San Diego), The Atlantan (Atlanta), and Angeleno (Los Angeles).
In October, about five months after the sale, Modern Luxury launched Miami magazine, expanding the company's reach into its thirteenth market.
COMMENT: "This was a good sale for Shamrock and Modern Luxury. At the time Shamrock acquired them, the company was much smaller and it was in the earlier stages of the whole luxury magazine concept. Michael [Kong, Modern Luxury founder] was one of the leading publishers on the concept of luxury magazines with similar templates from market to market. The opportunity was greater at the time. Clarity paid a very full price for the business and will have to work very hard to realize the return they no doubt anticipate."