VSS seeks buyer for Hanley Wood

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Industry observers confirmed late last month that Veronis Suhler Stevenson has formally placed construction media company Hanley Wood on the block.

"It's no great secret in the industry that Hanley Wood has been available for some time at the right price," said Robert Crosland, managing director of media investment bank AdMedia Partners.

The right price may be an impressive one, industry observers say.

VS&A Communications Partners III, the private equity affiliate of media industry merchant bank Veronis Suhler Stevenson, acquired Hanley Wood in 1999 for a reported $260 million. At the time, Hanley Wood had $100 million in annual revenue. Now, it generates about $200 million a year.

Strong margins

Insiders say Hanley Wood runs its business with 25% margins, which would place its EBITDA (earnings before interest, taxes, depreciation and amortization) at about $50 million. Estimates for 2005 EBITDA fall in the range of $55 million to $60 million. If current EBITDA multiples for large-scale deals hold true, the multiple will likely be in the 11-to-12-times range, potentially bringing a $700 million deal.

Hanley Wood has five divisions: magazines, exhibitions, e-media, market intelligence and marketing. Since its acquisition by VSS, the company has doubled in size through a combination of acquisitions and organic growth. It has acquired properties in a variety of media: trade shows (the Surfaces Show), magazines (Public Works Journal Corp.) and data providers (Meyers Group, renamed Hanley Wood Market Intelligence). The company has said it expects its information business to more than double to $50 million in the next five years.

Led by CEO Michael Wood, Hanley Wood has also maintained an aggressive entrepreneurial culture. Overall, industry observers say Hanley Wood is an unusually strong business with an enviable mix of advertising revenue and subscription revenue.

While other industries such as technology suffered severe downturns in the early part of the decade, Hanley Wood serves a strong industry, residential construction, which remained essentially untouched. However, a dark cloud surfaced recently when in January new home sales fell 9.2%, but analysts blamed bad weather rather than weakness in the market for that.

The strength of the current mergers and acquisitions market in b-to-b media appears to make the present an opportune time for VSS to sell Hanley Wood.

The right time to sell

Kathleen Thomas, managing director of communications industry investment bank Berkery, Noyes & Co., said, "They've [owned] it since 1999. It's the right time horizon, and the M&A market is so strong. The multiples being paid are so strong, and the auctions are all extremely active."

VSS is also preparing to sell Canon Communications, a company that operates medical, plastics and other b-to-b media properties. Although lost in the shadow of Hanley Wood, the business is a strong one that may draw bids between $175 million and $200 million, observers said.

The reason for the timing of the Canon sale is clear, said Reed Phillips, managing partner of media investment bank DeSilva & Phillips. "The market is good, and the market is good," he said. M

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