By Mike Wood
Though a genuine admirer of Rance Crain, I take exception to one of the points he made in a recent column in BtoB ("Trade press still fills need in digital age," June 13, p. 40) in which he expressed concern about private equity ownership of b-to-b media franchises. Here’s the sentence I most disagree with: "Emphasis is on improving the bottom line, and it’s difficult to take a long-term view of business cycles when your company will be on the block again in a few years."
Rance Crain isn’t the only person wondering if all this private equity money is good in the long term for b-to-b media. So let me address his concerns, starting with an accurate picture of today’s private equity firm. Many people’s image of such firms is still defined by the role played by Michael Douglas in the 1980s movie "Wall Street." That image was never entirely right, and it’s an anachronism today. Some of the best minds in the media world are in private equity: Jerry Hobbs (Boston Ventures), Charlie McCurdy (Spectrum) and Tom Kemp (Veronis Suhler Stevenson). I have yet to see anyone resembling Michael Douglas in the halls at VSS.
When the economy cycled down in 2002, our private equity owners were constructive and helpful. During the recession, VSS’ focus in board meetings was not on slashing and burning but remained tied to our long-term goals: growing the company and building its value. In fact when the recession hit, most VSS energy went toward helping us locate a new source of financing so we could sustain the acquisition program while prices were low. The decisions we made that year allowed Hanley Wood to come roaring out of the recession with revenue growing 16% per year since 2002, with an EBITDA of 25%.
Rather than pressure to improve the bottom line, building value was the true North that guided Hanley Wood for the past six years. A clear sense of purpose is something private equity owners bring to an organization, something that influences behavior positively. No one wasted time worrying about what Mike liked or Frank didn’t like, or what John Suhler did at CBS Publishing 25 years ago. Instead, the management team focused on a single question: "If we do this, will it help us grow and build value?" While VSS examined our budgets and asked hard questions to be sure, the emphasis has always been on the longer-term objective.
So not only is there no bad news from my recession experience, there is plenty of benefit that comes from working with private equity. It’s exciting to be exposed to the kind of strategic thinking I’ve encountered. It’s satisfying to break down a magazine or trade show opportunity, figure out how to make it better, build a detailed five-year plan and do it all in three weeks. I don’t see decisions getting made this quickly outside the private equity world.
One final point: Our management team thrived under private equity ownership. These owners don’t tell you how to write headlines or compensate salespeople. What they do bring to the table is an equity participation plan that allows members of the management team to earn a share of the equity profit created by the success of the company. Fifteen Hanley Wood publishers, editors and show directors will get a check for more than $150,000 when the sale to JPMorgan closes Aug. 1, and a few will get quite a bit more than that. When JPMorgan decides to sell the company or take it public in five to seven years, similar equity participation checks will be cut.
In short, I’ve had a very positive experience with private equity. I’ve worked with smart people to create a fast-growing, industry-leading company where big decisions get made quickly, great media products are produced and people feel excited and rewarded for their efforts.
Business media is content that brings buyers and sellers together, whether it’s an article in a magazine, the exhibit floor at a trade show or a Web site. Hanley Wood’s ability to provide quality content is stronger than ever today after six years of private equity ownership.
Mike Wood is co-founder of Hanley Wood. After JPMorgan Partners’ acquisition of the company closes Aug. 1, he will be a member of the board of managers. He can be reached at email@example.com.