Like many technology media companies, 101communcations, which publishes Federal Computer Week, was pushed to the brink of failure in 2002 after the Internet bubble burst and the terrorist attacks of Sept. 11, 2001. But now Frontenac Co., the investment firm that owns 101communications, believes the media company has recovered enough to be put up for sale.
Rod Goldstein, a managing director at Frontenac, explained that the firm had held 101communications for seven years, a traditional time frame for private equity investors to hold on to a media property. "There are no crises or challenges facing the business," he said. "We are moving forward at our own pace."
The current hot mergers and acquisitions market for b-to-b media companies probably didn't serve to dissuade Frontenac from making the decision to place 101communications on the block. Investment bank Jordan, Edmiston Group is handling the process for Frontenac.
The M&A market has been so strong that even less than stalwart properties, such as Primedia's b-to-b unit, have commanded double-digit EBITDA multiples. "A lot of it is that it's just a good time [to sell]," said Tom O'Connor, managing director at communications industry investment bank Berkery, Noyes & Co.
Some industry observers, however, are uncertain how well 101communications will do at auction, particularly because of the market it serves. "The hard part is that it's in the tech sector, and that's been hammered," said one investment banker, who spoke on condition of anonymity. "The turnaround hasn't occurred yet. The challenge will be to get a high valuation for a company in that sector."
This observer added that there did not appear to be any obvious buyers. Other tech media companies, such as CMP Media and Ziff Davis Media, have recently made acquisitions of small online companies, but don't appear to be interested in acquiring a company that would add more tech-focused print properties to their stable. Most observers predict that Frontenac will likely flip 101communications to another financial player.
"These days the financial players are pretty aggressive," said Robert Crosland, managing director at AdMedia Partners. He surmised that 101communications' presence in the tech sector would not put off potential suitors. "It's a good company," he said. "It's been well run. It's well constructed. I suspect that it's going to receive a premium price."
101communications has shown that it can move quickly, as it did in the wake of the downturn. Working with Frotenac, Jeffery Klein, CEO of 101communications, implemented a three-part plan to revive the business. First, the company slashed staff in recognition that a different revenue reality had descended on the b-to-b media industry. "All of a sudden we have revenue declines in some of our properties of more than 50%," Klein said.
Frontenac also led an effort to restructure 101communications' capital structure and strengthen its balance sheet. Additionally, Klein instituted a culture emphasizing growth at the company, with a particular focus on the Internet.
One example is 101communications' experiment with fee-based membership organizations on the Web. The company started the Data Warehousing Institute, which provides data warehousing professionals access to in-depth information in exchange for a membership fee.
Additionally, 101communications has overhauled a handful of its publications with positive results. It changed Syllabus magazine to Campus Technology. In addition to changing the name, it changed the magazine's circulation by including fewer teachers and more of the IT people who make purchasing decisions on college campuses. The magazine's ad pages have increased by almost 50% year-to-date, according to IMS-The Auditor.
101communications also changed Microsoft Certified Professional to Redmond, providing broader coverage of Microsoft Corp. According to IMS data, the result has been stronger performance against its chief rival in this arena, Penton Media's Windows IT Pro (formerly Windows & .Net magazine).
Klein said he hopes to stay at the helm of 101communications even after an ownership change. "It's a great company to work for," he said, "and a great company to own."