Easy Money for Private Equity in Business Media
The Times has been reporting that private equity is circling Informa. As a result the share price jumped. The speculation is that Informa could be merged with UBM. No doubt somone in hedge funds made some money today but an interesting trend is developing. Emap Business is now in private equity hands, so is TES, so is Incisive, so will be Reed Business Information. Now we are told that the same could happen for UBM and Informa. What is it that private equity investors see in business media companies that the City doesn't in the same companies on the public market?
Two theories. Either the PEs are mad or they see lumbering companies with heavy management costs and too little innovation. Running a PE backed company is a very focussed job. The CEO and the management know they have to drive shareholder value in a predicatable time period (3 to 7 years). In a public company most executives are working to not be fired, not take too many risks, not make a mistake, never see the consequences of their mistakes. PE is oft criticised for their slash and burn approach, but there are few media PE deals that have gone horribly wrong in business media.
Get the right management (not necesarily the incumbent) and there is still value to be extracted. Incumbent management take note, as the man from Hanley Wood said, you risk as being, perceived, perhaps rightly, as not competent to take our industry forward.