Through its flagship, The Wall Street Journal, Dow Jones & Co. covers primarily public companies and the public markets.
Now the company wants to expand its coverage of the private equity and venture capital sectors. Last month, Dow Jones agreed to acquire Alternative Investor Group, a producer of databases, newsletters and events for those sectors. Wicks Business Information, owned by the Wicks Group of Cos., a private equity firm, sold Alternative Investor Group for $85 million in cash.
The deal was Dow Jonesâ second in six months in the venture capital and private equity arena. In September, it acquired Technologic Partners, publisher of the VentureWire newswires.
"Now we will also be a leader in news and information on private companies and private markets," said L. Gordon Crovitz, president of Dow Jones electronic publishing.
Strong profit margin
In 2003, Alternative Investor generated $23.1 million in revenue and $9.5 million in pro-forma earnings before interest, taxes, depreciation and amortization (EBITDA). The business had a profit margin of about 40%, Crovitz said.
"For Dow Jones, it provides them with a very profitable, high-margin business that owns the private investment category, and it gives them market leadership in a business that should have significant growth going forward," said Scott Peters, managing director of investment banking firm Jordan, Edmiston Group, which represented Wicks in the transaction.
Alternative Investor produces five databases, including Venture Source, which provides information on venture capital deals and companies. Alternative Investor also publishes four publications, including the "Private Equity Analyst" newsletter. Additionally, the acquisition brings eight conferences into the Dow Jones fold.
Like Technologic Partners before it, Alternative Investor will operate as part of Dow Jones Newswires in the companyâs electronic publishing unit. With the addition of Alternative Investor, Dow Jones will now publish 24 newsletters, most of which are electronic products.
Alternative Investor grew during the difficult past few years, and with the financial sector picking up, Jordan, Edmistonâs Peters said he expects the business to continue to grow under Dow Jones. "Alternative Investor provided a very steady cash flow throughout a down market," he said. "It really should provide a very strong growth engine to the business."
Dow Jonesâ electronic publishing revenue increased from $309.5 million to $332.0 million between 2002 and 2003. Beyond revenue, the unit also provided profits. "In 2003, electronic publishing was responsible for almost 40% of the companyâs profitâ37% in 2003 versus 9% in 2000," Crovitz said.
During that same period, Dow Jonesâ overall revenue contracted by nearly 30%, falling from $2.20 billion in 2000 to $1.55 billion last year. U.S. print ad revenue dropped 48%, from $1.1 billion to $570.4 million, between 2000 and 2003.
Industry observers say that Dow Jonesâ recent acquisitions make clear the companyâs strategy is now focused on bolstering its position in information products. "It looks like theyâve clarified their mission and they know what direction theyâre going in," said Reed Phillips, managing partner at media investment bank DeSilva & Phillips.
"I think weâre very open to looking at more acquisitions," said Crovitz. "Weâre always receptive to high-quality content."
In addition to revealing something of Dow Jonesâ strategic direction, the Alternative Investor deal is another in a series of signs that the mergers and acquisitions market is bouncing back in the b-to-b arena. Wicks tried to sell all of Wicks Business Information in 2002 but took the unit off the market when the financial services sector sputtered. Two years later, Wicks hasnât sold the entire business but it has parted with a significant piece of it for what Wilma Jordan, Jordan, Edmistonâs CEO, called " a very good return."
And while Dow Jones said it might be interested in further deals, Wicks Business Informationâs CEO Doug Manoni said heâd like to add on to the remaining pieces of his business, which ironically include Investment Advisor magazine, which Dow Jones sold to Wicks in 2000.