Henry Kravis: Chairman, KOHLBERG, KRAVIS, ROBERTS
Say what you want about his ownership style (and there’s plenty to say), he crafted the model for the leveraged buildup.
Primedia has dominated the magazine industry since it was founded 17 years ago by Bill Reilly, Beverly Chell and Charles McCurdy, three former Macmillan executives, in association with the leveraged-buyout firm Kohlberg, Kravis, Roberts & Co.
In that time, Primedia acquired dozens of magazine companies with hundreds of magazines in deals worth billions of dollars. It invented a new model for growth through acquisition called the leveraged buildup, where acquisitions are run in a decentralized manner and their cashflow is used to both pay down their debt and to make additional acquisitions. Managers are granted equity, thus tying them to the company’s performance: If they miss numbers, including debt obligations, their equity is devalued. (The downside is that debt-laden executives manage to costs, rather than create strategic growth.)
Primedia grew over time from its first acquisition in 1989 to become a massive, far-flung empire, hitting revenue of about $1.7 billion in the early years of this decade. Kravis gets acknowledgement not for creating a great company, but for enabling a model for private-equity investors and for serving as a farm team for magazine-industry talent.
In the end, neither the leveraged build up nor KKR’s investment in Primedia worked out. The company is laden with about $1.4 billion in debt, its stock is trading around $2 and it is in the process of breaking itself apart.
But the acquisitions in the nineties and divestments in the last five years have contributed to a robust M&A climate, creating opportunities galore for established competitors and entrepreneurs alike. What’s more, Primedia has contributed several of the industry’s top CEOs and scores of other top executives. They include: Cam Bishop of Ascend Media; Dan McCarthy of Network Communications; McCurdy of Apprise Media; Doug Manoni of Wicks Business Information; Peter Goldstone of Hanley Wood; and Reilly himself. Primedia owns a minority stake in Red 7 Media, publisher of Folio:.
VITAL STATS: In the last three years, Primedia has divested more than $1 billion worth of properties.