In a deal that took several months to hammer out, ALM is now 51% owned by funds advised by Apex Partners and 49% by Royal Bank of Scotland, which swapped a portion of its ALM debt for equity. Apex, which previously owned 71% of ALM, also pumped $15 million into ALM as part of the restructuring.
“This was in no way an operating issue between [Incisive and ALM],” said Pollak, who served as president-CEO of ALM prior to its sale to London-based Incisive in August 2007. “This is entirely about capital structure and the best way for the companies to be organized to pay down debt.”
Pollak said it was critical “to impress upon the bankers—who want to get every penny to pay back the debt—the need to have cash available for putting into the business. In today's media environment, standing still is akin to going backwards.”
Michael Parker, managing director of AdMedia Partners, observed that a deal like this one is “pretty unusual.” However, with the current “lack of financing, cost of financing and lack of potential buyers, this has become more of a solution than it was in the past,” he said.
As to whether other media companies are poised to go through a similar restructuring, Parker said, “I don't think you can generalize. It's going to be case by case, depending on the level of debt, the leverage, the financial markets and all the economic factors that are affecting everyone.”
ALM developed a detailed five-year plan to give investors “a sense of where the business is going and how we intend to take it there,” Pollak said. “We are really focused right now on building products that are end-user or subscriber funded. We love newspapers, and magazines and Web sites that carry advertising, and we will continue to be there; but we believe our future is in developing research products, competitive intelligence products and business information products our markets will value and ultimately pay for.”
ALM's second priority is “revamping all of our Web sites to move from Web 1.0 to Web 2.0,” Pollak said. “We need to upgrade all of our sites across the board so that our whole network is up-to-date.”
Both of these initiatives will require sizable investments in technology, Pollak said.
In a research note issued last Thursday, two days after the announcement of the split was made, David Curle, director and lead analyst for Outsell, wrote, “The rewon independence of ALM is a testament to the resiliency of ALM's portfolio of properties in the face of a deadly b-to-b media market. … ALM has a strong mix of ‘business of law' offerings that are all about helping players in the legal services industry run their businesses, but it also has a growing ‘substantive law' array of legal research-oriented offerings that is set to grow in importance in coming years.”