DLJ Merchant Banking Partners officially closed its $900 million purchase of Advanstar Inc. in mid-October--just as the stock market went into a tailspin, pulling the economy down with it.
But while many of Advanstar’s trade publishing rivals—-particularly those in the computer and technology sector—-have felt the effects of a weak ad market, Advanstar has been left relatively unscathed and continues to aggressively cut deals to strengthen one of the most diverse portfolios in the business.
Advanstar’s titles span 19 markets, including fashion and apparel, telecommunications, art, beauty and motor sports; its 108 exhibitions and conferences represent 50% of the company’s annual revenue and 60% of its cash flow.
Money to expand
The Boston-based publishing company was already known as an aggressive buyer under previous owner Hellman & Friedman Capital Partners III L.P. Now, it has access to a $5 billion pool DLJ set up last summer for its various subsidiaries to dip into to expand their businesses.
"They’ve got deep pockets behind them," said Reed Phillips III, managing partner of the New York-based media investment banking firm DeSilva & Phillips. "If [the company] decides to be aggressive on a large transaction, they can be—more so than the previous ownership."
Indeed, Advanstar Chairman-CEO Bob Krakoff said the company is currently negotiating another acquisition in the automotive market, although he would not provide details. Regarding long-term strategy, Krakoff said the company needs to convince more institutional investors they’ll do "just fine" putting their money into a diversified media company.
Advanstar has already made several moves since the sale went through to bolster its position:
In March, it acquired Automotive Body Repair News and Motor Age from Cahners Business Information. It also bought Automotive Marketing and folded it into Aftermarket Business. The acquisitions—said to total about $20 million—will enable Advanstar to compete more formidably with Babcock Publishing Co., a major player in the automotive aftermarket.
In May, Advanstar formed a partnership with Tarsus Group plc to create trade shows, publications and Web sites to serve the French call center and CRM markets.
In June, the company announced a strategic partnership with MediaBrains in which MediaBrains will build up to 15 electronic directories that will be combined with Advanstar’s market focus sites.
In August, Advanstar will launch PharmaGenomics, a 40,000 circulation monthly focusing on genomic science and drug discovery research in an effort to expand the company’s existing portfolio of pharmaceutical and scientific products, including Pharmaceutical Technology, Pharmaceutical Executive and Applied Clinical Trials.
Diversity a safety net
Carolyn Riby, VP-communications for Saatchi & Saatchi Rowland, a Rochester, N.Y.-based advertising agency, said Advanstar is especially strong in some markets, such as travel, but needs to step up its efforts in other ones, such as telecommunications. "Diversity is a safety net in this marketplace," she said.
Advanstar posted $128.6 million in revenue for the first quarter, compared with $133.1 million a year earlier. Earnings before interest, taxes, depreciation and amortization totaled $44.8 million, up from $43.8 million a year earlier.
Through May, ad pages were up just a fraction for several of Advanstar’s print titles, such as Customer Interface and E-learning, according to AdScope Inc., which tracks several of the companies titles. Ad revenues, meanwhile, were up 3% during the same period for the titles AdScope follows.
Like many traditional publishers, Advanstar is taking a conservative approach to the Internet, integrating the sales, marketing and technology functions of Advanstar.com into Advanstar Communications. "There’s no reason why people who work on print, events or sales can’t do the same work for the Web," Krakoff said. "It’s a question of efficiency."