Cygnus also announced today that it has emerged from Chapter 11 bankruptcy protection. With the debt-for-equity swap officially completed as part of its bankruptcy agreement, Cygnus, which publishes Firehouse and Kitchen & Bath Design News, is now owned in part by GE Commercial Lending.
French succeeds Charles Carnaval, an executive at interim management firm Zolfo Cooper, who had been overseeing Cygnus.
The restructuring values Cygnus at about $105 million. CommerceConnect, backed by ABRY Partners, acquired the company in 2000 for $275 million. The restructuring has reduced Cygnus' debt from about 180 million to about $60 million.
In an exclusive interview with BtoB, French said he was attracted to Cygnus, because it was a company with powerful brands that was simply saddled with too much debt. In this Q&A, French discussed his confidence in b-to-b media as a whole, his hopes for Cygnus in particular and his belief that the naming of a CEO provides “clarity” for the company's employees and its future.
BtoB: There are a lot of doubts circulating about Cygnus and b-to-b media in general. Why did you want to run this company?
French: I looked at the company a couple of years ago when it was for sale and I was with Prism. It was a great opportunity to really go under the hood and understand the business. It became clear to me that it was a good company with a balance-sheet problem. The company was in good shape, and the brands were in good shape. The problem was some bad press, being too overleveraged.
BtoB: After Cygnus' emergence from bankruptcy, will the company's debt be manageable?
French: The answer is yes. That's the best part of this whole thing. That's the big attraction for me. Plus it's a small company, and I like that. I managed two of the biggest companies in b-to-b media (Primedia Business Magazines & Media/Prism Business Media and Penton Media) and put them together. It was fun and I enjoyed it, but what I missed was being involved with the brands on a day-to-day basis. What I really love about this business is getting in a room with a team for a magazine for a couple of days and coming up with some ideas with the team and then 60 to 90 days later seeing the numbers improve. I've been missing that.
BtoB: What did you learn from your experience as CEO of Prism and Penton?
French:I think the biggest thing I learned is to understand the inner workings of a company from the ground up. What I learned from integrating Prism and Penton is you have to be aware of what the culture is in a company and to understand it.
Bringing together Penton and Prism, you had two very, very good companies; but you had to have a sense of the IT operations and the cultures at the two companies. I've been learning that at Cygnus over the past several months as I've worked there as a consultant. I've been able to meet people (at Cygnus) in a much less formal manner. I've been able to ease into this, and it's been great. When I hit the ground running (today), I will have done more due diligence and have more knowledge of the inner guts of the company than (most) CEOs when they take over. The deeper I get, the more I'm convinced that this is going to be a positive experience.
BtoB: What do you see in Cygnus that is attractive?
French: It's very similar to the situation when I got to Primedia Business Magazines & Media in 2002. I told them—like I'm going to tell the employees at Cygnus—when you view this company from the outside, it's getting a lot of bad press. The people who work there are just getting beat up, but when they go to work at Cygnus' Kitchen & Bath Design News or at the aviation titles or Firehouse, those people know their brands have a huge presence in their market and the reality doesn't match up when they're saying there's a lot of bad stuff circulating about the company I work for, but I know the stuff I work on is in great shape.
The people at Cygnus are looking for a leader certainly, but they're looking for positive leadership. And that positive message about Cygnus is what they're going to get from me in my message that's going out to them (today). It's a lot like it was at Prism and at Penton. I want to get the Cygnus people to say I'm really proud to work at Cygnus Business Media. The big issues facing Cygnus were balance sheet issues, and Chapter 11 wasn't really necessary—it's just that one lender wouldn't agree to the restructuring, but 23 of the 24 lenders were willing to fund this company moving ahead.
BtoB: Can you be more specific about what you're going to say to the employees?
French: (Today) is a day that a lot of people at Cygnus have been looking forward to for a long time, and that day is clarity. The company has been for sale on and off for two or three years. They've had an interim CEO—who did a good job, by the way—since January. The company just emerged from bankruptcy. A number of employees didn't know whether the company was going to be sold or their magazine shut down. Every day they lived with this. Now it's time to get back to work and to have a clear vision about the future of this company. That's a big message.
BtoB: Are there plans for further magazine closures or additional job cuts?
French: There's nothing planned. Like any CEO, I can't say that things might not change if conditions change, but is there anything pending or anything planned? No.
BtoB: With print ad pages down about 30%, b-to-b media as a whole has struggled this past year. How confident are you that the industry can bounce back?
French: I have great confidence in b-to-b in the next several years. People in any industry need to keep up to date on that industry.
When friends of mine ask me, “What is b-to-b? What do you do again?” I ask them, “What industry are you in?” I know most of the trade publications out there, because I've either worked for the companies that owned them or tried to buy them. So I can tell them, “Oh, you're a farmer. You've probably heard of National Hog Farmer.”
Or if they're in kitchen remodeling, they read K&BDN, and they'll say, “I love that.” The need for people to learn about their industry hasn't changed. What has changed is that we need to deliver that information in every form—in print, online, at events and in data products. We're going to have more data products at Cygnus. We're going to work hard to launch those.
B-to-b companies have to help marketers mine new customers.
Marketers can reach customers directly these days. We have to make sure they can't bypass us to get to new customers.
BtoB: How are you going to make sure Cygnus Business Media's products are indispensable in their industries?
French: One of the ways you can do that is if you look at b-to-b editors as content creators. They're creating useful content for informing and educating in their market, regardless of the platform. On the other side, I wouldn't call the salespeople “salespeople”; I'd call them “marketing consultants” They should be able to walk into meetings with a full array of products to match it to the marketer's needs.
BtoB: How did the relationship begin between you and GE Commercial Lending?
French: They approached me.
BtoB: What was your reaction?
French: I was immediately interested. It's kind of funny. I looked at the business in 2006. I looked at it a little later, too. When friends of mine in the industry heard I was going to take over at Cygnus, a lot of them called me and asked, “What, are you crazy?” I told them what I'm going to tell the employees. I want to be here. At this point in my career, I have choices. I love the company and its potential. I want to be here.