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Private equity players are poised to reignite their hot pursuit of business-to-business print media companies.

Acquisition activity slackened last year, media bankers say, because questions about the economic and ad recovery caused uncertainty about how to value b-to-b properties put up for sale. Now the eyes of private equity companies are on one of their own, Wicks Group of Cos., which is selling its Wicks Business Information financial publishing unit, itself built from various b-to-b properties that Wicks acquired. Once potential players see how the Wicks properties are valued, they'll have a jumping off point for another round of acquisitions, and the buying spree could resume.

Among those who will be looking for properties to purchase is the Kelso & Co.-backed team of Blair Schmidt-Fellner and Gerry Hogan, known for their role in the turnaround of Cygnus Business Media. Also on the prowl for acquisitions is Jim Dunning, the ousted chairman-CEO of embattled Ziff Davis Media.

The tales of Ziff Davis and Primedia alone are enough to give pause to private equity companies. Ziff Davis, hurt by the tech publishing collapse, is faced with declines in revenue approaching 50% and is struggling to make bond payments. A private equity fund run by Willis Stein & Partners, Chicago, acquired Ziff Davis in 2000 for $780 million. Primedia has seen its share price plunge more than 90% since March 2000, and last week reported a 34.1% drop in first-quarter earnings before interest, taxes, depreciation and amortization, vs. a year ago. Leveraged-buyout company Kohlberg Kravis Roberts & Co., New York, is the largest shareholder of Primedia.

Despite such cautionary tales, interest remains high in b-to-b media companies. Ad revenue in b-to-b print media may have fallen 21.7% last year, according to American Business Media, but the total still hit an eye-catching $8.4 billion.

"The number of deals gone right outweighs those that go wrong," says Reed Phillips, managing partner of investment bank DeSilva & Phillips.


B-to-b publishers "will be poised for growth when the advertising markets rebound," asserts Peggy Koenig, partner at ABRY Partners, Boston. In the last year, ABRY spent $40 million to become a major investor in Penton Media when the publisher of Internet World had trouble meeting its debt obligations.

The involvement of private equity funds in b-to-b media is now commonplace. ABRY also owns Cygnus Business Media via ABRY's CommerceConnect Media. A $1 billion fund operated by Veronis Suhler Stevenson Partners owns Hanley-Wood. On the other hand, Goldman Sachs Group earlier this year reportedly was set to launch a fund focused on b-to-b media but later denied such a move. Ten years ago, only a handful of private equity funds focused on b-to-b media, but today there are at least 60, Mr. Phillips says.

Financial players continue to invest in b-to-b media because of the high cash flows, which can be used to pay down debt or fund acquisitions. The industry also is highly fragmented so a large, integrated company with voluminous cash flows can be built.

"The b-to-b media world is ripe for aggregation and consolidation," says Michael Wood, CEO of Hanley-Wood, which publishes Builder. "There are thousands of small business-to-business magazines and hundreds of small business-to-business trade shows."

The story of Cygnus is celebrated as a textbook example of how to build a b-to-b media company and then "flip" it for a hefty profit. Kelso acquired PTN, publisher of Firehouse, in 1997 for about $90 million. It renamed the company Cygnus and installed a management team led by Messrs. Schmidt-Fellner and Hogan.

The pair began upgrading editorial, and divested weaker properties and acquired others. Three years later, Kelso sold Cygnus to ABRY's CommerceConnect for $275 million.

Now Messrs. Schmidt-Fellner and Hogan are looking to acquire another media company. "It's a great time to buy," Mr. Hogan says, "when prices are down."

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