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Wednesday, September 16, 2009
PE bumped out - good or bad?
Interesting comment here from Whitestone Communications latest media M&A update:
"July 6, 2009
United Business Media LTD bought the 48% of RISI Inc., the other portion of a joint venture it owned and operated with Pegasus Partners II LP, in a $14.3 million cash deal, bringing the target wholly under UBM’s control and ownership. RISI is an online and print publication that covers pricing, news and analytical reports on the forest products industry. The company employs a staff of 125, based in Bedford, Massachusetts and also has an office in Shanghai as it attempts to collaborate with China’s growing forest products industry. Last year, the company in full generated revenues of £14.4 million.
Lately, joint ventures have been increasingly rearranged as financially hobbled co-sponsors want to dump the asset, even at a substantial discount, to the other entity that supported the company’s structure and development rather than risk failure, or, in some cases, having to re-infuse that company with additional capital to buoy operations. Dealmakers in the space have said that, more often than not, private equity institutions like Pegasus Partners are the sellers, leaving the businesses with which they spent years preparing a new entity for exit or spinoff positioned to take control of a potentially viable entity.
"July 6, 2009
United Business Media LTD bought the 48% of RISI Inc., the other portion of a joint venture it owned and operated with Pegasus Partners II LP, in a $14.3 million cash deal, bringing the target wholly under UBM’s control and ownership. RISI is an online and print publication that covers pricing, news and analytical reports on the forest products industry. The company employs a staff of 125, based in Bedford, Massachusetts and also has an office in Shanghai as it attempts to collaborate with China’s growing forest products industry. Last year, the company in full generated revenues of £14.4 million.
Lately, joint ventures have been increasingly rearranged as financially hobbled co-sponsors want to dump the asset, even at a substantial discount, to the other entity that supported the company’s structure and development rather than risk failure, or, in some cases, having to re-infuse that company with additional capital to buoy operations. Dealmakers in the space have said that, more often than not, private equity institutions like Pegasus Partners are the sellers, leaving the businesses with which they spent years preparing a new entity for exit or spinoff positioned to take control of a potentially viable entity.
For example, Tata Steel just bought out Ryerson Tulls’ 50% stake in Tata Ryerson, a steel processing joint venture, for $49 million. In April, Toshiba said it would spend about $20 million to buy out Panasonic’s 40% stake in their shared LCD venture, called Toshiba Matsushita Display Technology. And, prior to either of these, a far broader joint venture was announced to be heading to a one-sided ownership system, with Fujitsu buying Siemens’ 50% stake in the Fujitsu Siemens Computers for $450 million.
Wholly buying out a JV brings with it the potential to shift strategy; UBM did just that, appointing Mike Coffey as RISI’s chief executive, succeeding John Day, who was appointed as CEO of UBM Global Trade in May."
There aren't too many PE/PLC JV's in events anyway, but if the principles hold true, maybe we'll start to see PE houses take a back seat in M&A? But with finance still tight, the end result may well be that we see more PLC-PLC JV's formed as they are forced to work together to share risk and cobble together funding to take on acquisitions, even if the multiples fall as PE money drops out of the equation?
However a PLC/PE deal has many attractions - one provides funding, the other provides expertise, and there is a clear timetable for PE exit, and a clear understanding of what each side is looking for.
But with a PLC-PLC JV neither party starts with a clear exit timetable and they can both change their strategies over time - with a high probability of creating a recipe for trouble a few years down the line.
Maybe then what this tells us is that its a good time to invest in law firms specialising in unpicking media company contract disputes!
Labels: MandA PE
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