Krakoff's resignation takes analysts by surprise

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Longtime Advanstar chairman cites lack of activity on the acquisitions front

Robert L. Krakoff stunned many observers in the b-to-b media world when he announced his retirement, effective July 31, as chairman of Advanstar Communications.

"I think everybody was surprised," said Reed Phillips, managing partner of media investment bank DeSilva & Phillips.

For a number of reasons, most observers expected Krakoff to stay on at Advanstar after relinquishing the CEO title to Joseph Loggia on Jan. 1. First, Krakoff was said to be helping the company search for acquisitions. Second, as an experienced manager, he was also seen as a sounding board for Loggia, who is relatively inexperienced as a CEO.

"Bob Krakoff is without question the smartest operator in b-to-b [media]," said Robert Crosland, managing director at media investment bank AdMedia Partners. "All you have to do is take a look at how he led Advanstar through the recent recession and compare Advanstar's performance with other b-to-b companies."

Third, Krakoff was viewed as a good asset if Credit Suisse First Boston's DLJ Merchant Banking Partners III, the private equity firm that owns Advanstar, decided to take the company public. And, finally, Krakoff, who joined Advanstar in 1996, owns a significant number of shares in the company and analysts expected him to remain in a position to give his input on its strategy.

But all of those reasons were not enough to keep Advanstar and Krakoff together.

"Joe Loggia now has the reins," said Richard Mead, managing director of media investment bank Jordan, Edmiston Group. "Why have anybody looking over your shoulder?"

A host of observers, all of whom declined to be identified, speculated that Krakoff's abrupt departure had to do with internal friction at the company. "It's well known that Bob and Joe don't get along," said one observer. There are differences in the backgrounds of the men: Krakoff is a Harvard M.B.A.; Loggia is a former police officer.

Trouble with CSFB?

Others said there was trouble between Krakoff and CSFB, which acquired Advanstar for more than $900 million at the height of the market in October 2000. After a media recession stretching nearly four years, the firm now holds a company with a value estimated generously at about $827 million, calculated at 10 times 2003's earnings before interest, taxes, depreciation and amortization of $82.7 million.

Krakoff said there was no trouble with CSFB and no personal animosity between him and Loggia. He said that CSFB has had some turnover in its private equity unit recently. "Who would I get in a fight with?" he said. "There's almost nobody in the room to get in a fight with."

As for his relationship with Loggia, Krakoff said, "To have two CEOs-one ex-CEO and a current CEO-both on board, both involved, just doesn't work. ... Joe just wanted to row his own boat."

Krakoff also said there wasn't much action on the acquisitions front, which he was supposed to oversee as chairman. "Nothing exciting seems to be happening in terms of major acquisitions at Advanstar," he said. Others said that Advanstar was having difficulty integrating its acquisition of Thomson's health care properties and would make no further major deals until that $125 million purchase was fully integrated.

Loggia said there was nothing to rumors that he and Krakoff clashed personally and that the retirement should surprise no one. "It's not a big event," he said. "We had planned for this transition for quite some time." He added, "I have a different strategic vision for the company, both in terms of direction and operationally, but it's not something that we haven't been working toward for a while."

Most companies Advanstar's size are adding subscription information products to traditional publishing and trade show management, and industry observers expect those kinds of moves from the company.

Krakoff said he will remain active on the boards of Freedom Communications and American Business Media. "Depending on how the cards are played, I could get on a couple of b-to-b boards or other kinds of boards," he said. "I could get involved as a senior advisor for a private equity group that is interested in b-to-b. I could get involved as the chairman or CEO of a b-to-b company."

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