'Buy Whales That Will Eat the Minnows'

Folio: The Magazine for Magazine Management, July 1, 1999

When you think about growing by acquisition, you have to decide whether you want to buy "whales" or "minnows," according to Daniel McCarthy, CEO of Primedia's Special Interest Publications. The whales are platform acquisitions; the minnows are smaller, individual properties related to the whales that, when aggregated, create efficiencies and scale.

"When you see the remarkable multiples paid for certain kinds of companies that have an infrastructure, a staff in place, and enough scale to support the addition of other businesses, you are looking at platforms," McCarthy explained at a FOLIO: conference. "Anybody who has been shopping for a platform knows that there aren't many of them--and that when they come up you run for them as fast as you can, cross your fingers, and hope you can pay for it. If you don't get it, you kick yourself and you mope because you have to wait another year before another one comes up. Once you have a platform--business you can drive more business into-that's when the whale opens its mouth and starts eating all the minnows. As many as you can digest, you take." McCarthy shared an important lesson "learned through hard experience." Generating efficiencies means not adding to overhead. "One big seduction in making acquisitions is thinking that you need more people to handle things," he said. "But the more you can do with fewer resources, the better it will be for everybody in the company because you are not going to be under cost pressures."