Cygnus Deal May Not Cover What It Paid For Company and Subsequent Add-ons
"I think they’ll make some money but it won’t be a big success," says one source. "Cygnus got caught in the B2B downturn after it was acquired and although management did a good job, they lost about three years of time to make progress."
ABRY and Cygnus CEO Paul Mackler formed Commerce Connect and paid $275 million to acquire Cygnus, then an $81 million company, in the Summer of 2000. Although the company does not publicly disclose its earnings, a back-of-envelope calculation on its revenues at an estimated 25 percent profit margin yields about $30 million in annual earnings. At a not unreasonable 10-times EBITDA multiple, the company could get $300 million in a sale. Only if Cygnus paid less than $25 million for the acquisitions of some 49 magazines, Web sites and trade shows, will it get back the money it invested in Cygnus insiders say.
Much of Cygnus’ woes can be traced back to the 2001 recession. Mackler said in a 2004 interview with Folio:. "Certainly we didn’t anticipate the severity or the length of this recessionary period," Mackler said. "There was not enough cushion without taking a series of steps and corrective measures. I don’t think any of us was convinced what was ahead: Two wars, Sept. 11, a recession, SARS outbreak. Three consecutive years of down."
In all, Cygnus has made some 15 acquisitions over six years and has experienced growth in products, services and revenue. Its magazine holdings have grow to 65, from 48 in 2000, and it’s added some 75 Web sites and 45 events to its roster. Annual revenue is about $117 million. Mackler was named to 2005’s Folio: 40 for his work bringing the company back from recession and for growing the company’s revenue some 42 percent over a five-year period.
Although some industry sources are discounting ABRY’s ability to find a private equity buyer (See Industry Sources Say Cygnus on the Block), others haven’t ruled out a private equity deal. ABRY also is looking for a buyer for Penton Media (see, Penton Media Up for Sale).
Cygnus Acquisition History
Other Cygnus acquisitions: Cornerstone Expositions, 11 regional trade shows serving the construction industry Asphalt Contractor Professional Tool and Equipment News Inc., magazines for the automotive aftermarket. Modern Woodworking, bought from Business News Publishing Modern Reprographics from Marion Street Press The CPA Software News from The Software News Inc.