The Top Deals of 2010
The seven most transformative deals of the past year.
The definition of “media deal” is changing. Lines are overlapping between traditional media, digital media and the marketing services world (the largest acquisition of the year by a “traditional media” company was Hearst’s $325 million purchase of digital agency iCrossing—although Hearst kicked off 2011 with an $889 million bid for Lagarde’s international publishing operation, including Hachette titles in the U.S.).
Deals over the past year tended to fall into two categories: “distressed”—snapping up struggling products for a deep discount; or “transformative”—deals designed to take companies in new directions. Here, Folio: looks at the seven publishing deals with the most ramifications for the industry.
Buyer: Quad Graphics
Date: January 2010
Price: $1.4 billion (estimated)
Takeaway: The largest deal of the year didn’t involve publishers, but further consolidation of the printing industry.
Somehow it’s fitting that the largest publishing-related deal of the year didn’t involve an actual publishing company. In January 2010, Quad Graphics, the number-three printer, announced its intention to buy the number-two printer, Worldcolor (formerly Quebecor World), for an estimated $1.4 billion.
Printer R.R. Donnelley had been in hot pursuit of Worldcolor (then Quebecor) in 2009, attempting to buy it for $1.8 billion. Quebecor rejected the offer, believing would trigger a lengthy antitrust review.
The new company took the Quad name and reported $4.8 billion in pro forma unaudited revenues for the fiscal year ended March 31. Today, Quad has roughly 28,000 employees at more than 80 facilities worldwide.
Seller: iCrossing, Goldman Sachs, Oak Investment
Date: June 2010
Price: $325 million
Takeaway: Acquisition of digital marketing agency showed larger publishers are looking for transformative bolt-ons.
Hearst’s acquisition of iCrossing was one of the most important media deals of the year for a “traditional” publishing company. First, at a whopping $325 million, it was the largest. It was also transformative, as Hearst followed the model developed by Meredith Corp. of buying up small technology and digital-advertising companies to create a new set of services. Hearst created a new division—Hearst Marketing Services—with digital as the focus to start.
Hearst originally approached iCrossing in 2009 but was rebuffed by the agency, which started canvassing for buyers. According to Hearst, the acquisition of iCrossing gave it “extensive global marketing capabilities,” including paid search, Web development, search engine optimization, data analytics and mobile/social marketing.
“We chose digital marketing services to focus on after an exploration of a number of marketing services because we felt it had the highest growth potential,” says Hearst magazines senior vp Matthew Petersen. “The relationship may start where you’re doing one or two of those services then expand, but more and more we’re being invited into digital agency of record assignments in an RFP situation or proactive basis.”
Property: Canon Communications
Seller: Apprise Media, Spectrum Equity Investors.
Date: September 2010
Price: $287 million
Takeaway: Valuations may have slipped for events, but they were the key to the largest b-to-b deal of the year.
In the largest deal of the year for both b-to-b publishing and the tradeshow industry, United Business Media acquired medical industry publisher and events producer Canon Communications for $287 million.
Canon’s principal focus is on the medical device design and manufacturing and electronics engineering markets, which combined make up more than 65 percent of its overall revenues. The company, which generated $106 million in fiscal 2010, publishes 24 industry magazines, which represent about 35 percent of its annual sales. Nearly half (48 percent) of its revenues come from the more than 40 tradeshows it produces each year in the U.S., Asia and Europe. The tradeshows were of the biggest interest to UBM, which plans to leverage the shows to break into “fast growth markets” like China, India and Brazil.
UBM initially merged the electronics brands acquired from Canon Communications with its existing EE Times Group but in December reversed course and decided to detach the units, creating two new groups instead: The UBM Canon Group and the UBM Electronics Group. The former Reed Business Information electronics products, acquired in February 2010 by Canon, were separated from other Canon businesses and merged with the EE Times Group to form the UBM Electronics division.
Property: Nation’s Restaurant News/Dowden Health Media
Buyer: Penton Media/High Road Capital Partners
Date: December 2010
Takeaway: Lebhar-Friedman was forced to sell off its flagship magazine as well as the remnants of a group it bought for $40 million to square itself with bankers.
Lebhar-Friedman, long considered to be one the best-run independent trade publishers, typified the trouble so many publishers got themselves into in recent years by making acquisitions that overextended themselves with bankers and saddled them with covenants that proved unmanageable when the economy turned. In back-to-back deals in December, LF sold its flagship magazine, Nation’s Restaurant News, to Penton Media—which created a Restaurant Group along with existing magazines Restaurant Hospitality and Food Management—as well as its Dowden Health Media unit to private equity firm High Road Capital Partners. Dowden Health Media generates about $20 million, while Nation’s Restaurant News does $15 million in revenue.
With the sale, Lebhar-Friedman is now clear of debt and has concluded its relationship with GE Capital, which financed Lebhar’s estimated $40 million acquisition of Dowden Health Media in 2005 (at the time, some private equity bankers told Folio: “We understand LF’s desire to grow beyond the core base, but question this type of move. They paid a large premium to acquire a relatively small player and one that appears off-base in its launch of new regional titles.”)
With the sale of NRN, Lebhar-Friedman retains four retail-focused publications: Home Channel News, Chain Store Age, Retailing Today and Drug Store News. “I would have still bought Dowden,” CEO Roger Friedman told Folio:. “It was a good company. But I would have sold off a major piece of it earlier to make the debt go down earlier. So even if there was a downturn, we would have been okay.”
Buyer: Sidney Harman
Seller: Washington Post Co.
Date: September 2010
Price: $1, plus assumption of $47 million in liabilities
Takeaway: Struggling Newsweek finds new life with an unlikely owner and a joint venture with a dotcom.
In 2008, TV Guide sold for $1, plus assumption of debt. In 2010, Newsweek (which lost $30 million in 2009) sold to audio entrepreneur Sidney Harman for $1 plus assumption of $47 million. A number of Newsweek’s top editors—including editor Jon Meacham, Newsweek International editor Fareed Zakaria and longtime correspondent Howard Fineman—left voluntarily shortly after the deal.
In November, Newsweek and The Daily Beast announced a 50/50 joint venture. The new company, called The Newsweek Daily Beast Company, is led by four directors: Harman as executive chairman, Daily Beast owner Barry Diller and two others—one appointed from each side. Tina Brown assumed the role of editor-in-chief of both properties while Stephen Colvin, who served as president of The Daily Beast, oversees the combined venture as CEO.
Buyer: Forbes Media
Date: May 2010
Takeaway: The acquisition of a dotcom triggers major edit changes at Forbes.
With Forbes’ acquisition of online news and community network True/Slant, founder Lewis Dvorkin took the position of chief product officer with responsibility over all of Forbes’ editorial products.
The connections between Forbes and True/Slant, are well established. Dvorkin was executive editor of the magazine from 1996 to 2000; Forbes had an investment in his startup; and Dvorkin was hired in April as a consultant.
True/Slant was brought in-house with the intention of revamping much of Forbes’ approach to content. While Forbes president and COO Tim Forbes said in a statement that the “Forbes’ mission and message will not change,” under Dvorkin’s leadership, Forbes.com will be re-architected and the magazine will be redesigned. Of the more than 300 contributors that True/Slant relies on for content, some will continue within Forbes.
Dvorkin, in his own statement on the deal, said: “The small True/Slant team, with more than 100 years of Web, publishing and TV experience, will now be working side-by-side with talented and dedicated journalists at Forbes Media. The goal: to work together to further develop a mindset around the power of the Web and traditional news values. With hard work, we can implement new blogging platforms and more efficient digital, print and video content creation models; we can find better ways for audiences to engage with news and information; and we can pursue new integrative approaches for marketers and advertisers.”
Property: Publishing arms of Nielsen, RBI
Sellers: Reed Business Information, Nielsen Business Media
Takeaway: The dismantling of the publishing arms of Nielsen and RBI accounted for much of the M&A in 2010 and gave some employees the chance to start over.
In 2008, both Nielsen Business Media and Reed Business Information announced they would be selling off the majority of their magazine publishing units (and related digital properties).
By April 2010, the RBI titles that were sold made up approximately two thirds of the revenue of the portfolio it was attempting to divest, leaving the company with 23 magazines it said it would fold (although the company continued to do scattered deals with the former publishers and editors of those titles). Reed kept Variety, Marketcast and 411 Publishing, Reed Construction Data and the Buyerzone lead generation business.
Buyers included an assortment of strategics and even former RBI employees, such as Peerless Media, a new company formed by former employees at RBI’s Supply Chain Group, which bought back four titles within that group—Logistics Management, Modern Materials Handling, Supply Chain Management Review and Material Handling Product News—which were scheduled to be folded, with backing from EH Publishing. Canon Communications acquired the global assets of RBI’s Electronic Design News, Design News, and Packaging Digest.
Nielsen sold eight entertainment and media brands—including The Hollywood Reporter and Billboard—to e5 Global Media in December 2009. In March, Nielsen sold the five brands that made up its travel group to Northstar Travel Media and its four food group brands to Stagnito Media.