buyer: ABRY Partners | seller: F+W Publications | price: $500 million| date: August
takeaway: By going to court and seeking to rescind the deal in November, ABRY risks a long and potentially embarrassing public ordeal.
As far as $500 million publishing deals go, the sale of F+W was a relatively quiet one. Not anymore. When the 92-year-old Cincinnati-based enthusiast publisher was sold to private-equity fund ABRY Partners in August, many media outlets did not report it for weeks. The Boston-based firm, with $7 billion under management, appointed ex-Martha Stewart Living Omnimedia COO David Stewart as William Reilly, the ex-Primedia exec who had teamed with Providence Equity Partners to develop F+W, cashed out, and it appeared all was quiet on the Midwestern front.
But in November, ABRY shocked many in the M&A community by filing suit against Providence, alleging it had presented misleading financials. ABRY sought to rescind the deal, charging that F+W artificially inflated its revenue for the six-month period prior to the sale. According to the complaint, ABRY alleged F+W employed a scheme involving "channel stuffing" where ABRY claimed F+W offered "unprecedented and grossly abnormal discounts" to retailers who sell F+W’s books. Another alleged irregularity involved an employee in F+W’s magazine division keeping a "second set of financials that reflect "a more realistic accounting" of newsstand revenues.
It was a rare public breakdown for an M&A player in an industry that often thinks of itself as operating with calculated precision. And ABRY, in going to court, was putting its reputation on the line and, in some ways, the M&A community as a whole. "This is going to Defcon 3," said one industry source. "It’s bad for the industry, it’s bad for Providence, it’s not good for ABRY. You don’t get to this point unless things are really bad." Just how bad things got was not clear at presstime, but the specter of the deal’s backstory unfolding in a public court looms large.
Royce Yudkoff, ABRY’s co-founder, and managing partner Peggy Koenig declined to comment on the case. Representatives for Providence Equity Partners did not return calls seeking comment.
"The whole thing is surprising," said another source familiar the M&A process. "You have a large deal that’s gone bad;that creates concerns and red flags for the entire industry."
comments: F+W is another great platform from which to add special-interest consumer magazines through acquisition and startup. . .Strong titles in solid niches. We love the hobby market. Question begs;were the books cooked?
http://www.abry.com/ | http://www.fwpublications.com/ |