Architect of EMAP and Incisive deals pays the price
The departure of Stephen Grabiner from APAX is hardly a surprise. Bright, able and very ambitious, notwithstanding when your job is to make money from media investments and you lose most of it the axe is bound to fall. Apax bought both Incisive Media and EMAP (the latter in partnership with GMG). Both businesses, although horribly damaged by the economy and an overdependence on print, remain profitable but neither have been able to climb the mountain of debt that was used to fund their purchase.
Emap is arguably stronger than Incisive. It has a much bigger events business, is the more profitable and although the value of shareholder equity has been largely written off, has not had to give control to the banks.
With Carolyn McCall leaving GMG to join Easyjet, Grabiner exiting APAX there is hardly anyone left who can remember what the rationale for these deals was. Emap was supposed to be geting a cash injection to fund acquisistions. With large losses at GMG and no Grabiner at APAX how likely is that to happen?
To grow out of the problem requires great bravery. Will we see Emap and Incisive reviewing their assets, closing some and selling others? Or will both businesses struggle manfully under the debt but never really get anywhere.
GMG are reported to be prepared in principle to inject more money into EMAP. EMAP is at real risk of breaching its banking covenants so although GMG are signalling their intent to stump up cash is for acquisitions, more cash may be needed to prop up the balance sheet and avoid an expensive renogotiation of banking agreements (which GMG are reported to have rejected as an option.) Elswhere there have been rumours that GMG will sell recently acquired PAid Content to raise cash. SO GMG has yet to make clear what ots own future strategy looks like and that means it is unlikely there will be any quick decisions about the future funding of EMAP. Potentially that is serious as in todays market delay in strategy clarity brings the day of reckoning closer. So there is a big difference between an "in principle" offer of cash and any cash being available. What EMAP has yet to demonstrate is that it has a compelling plan to build value in its business. It has and continues to take costs out. It has flip flopped on paid content strategy and there is little evidence that its current pay wall strategy is radical enough or innovative enough to crack the problem.
GMG are committed to paying down debt before taking any profits and will have to take a very long view. They have yet to right off their equity stake in EMAP (as APAX has already done) but they will surely have to.
Emap could consider selling off assets and hunkering around construction where they have a good data business and there may well be interestingfuture acquisition opportunities, and fashion, where they own WGSN and a selection of trade shows. This would make a manageable platform around which to build. Be brave, be brave.
Meanwhile Centaur reports its revenues have slumped and its share price slumps in harmony to an all time low of 46p - less than half its float price five years ago.
Everybody is now rushing around like headless chickens trying to make it right. But why, we are entitled to ask as shareholders and employees, has it taken so long to wake up and smell the coffee. I have been accused by some correspondents and readers of this blog of being a pessimist. Actually I am not. It just makes me mad as hell that we have left this all so late. We loyal readers of BMB, have seen it coming for two years. But it is not too late. Radical and innovative steps will still pay off. But please don't do the obvious. There was a story yesterday (forgive me I have lost the link) saying that Conde Naste were cutting digital costs to defend print. Duh!
If anybody in B2B thinks thats a good idea send out for the club revolver and do the honourable thing.
Business to business commentary for a 21st century media world. Analysis of business magazines and business media, the impact of search, the web and the digital economy.
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=be66204d-b5f0-48bc-b754-f6f252b2943f)
![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=7292c5e1-159d-4c99-b6ee-3046ab8a5878)
