Hanley-Wood Seeks a Buyer

Folio: The Magazine for Magazine Management, July 1, 1999 by Mary Harvey, Jennifer Owens

Observers: Top bids most likely to come from financial bidders.

Hanley-Wood Inc., the Washington, D.C.-based publisher of 26 construction titles, has put itself up for sale as the result of company chairman Michael Hanley's decision to retire and sell his ownership stake. Analysts predict that the 22-yearold company, founded by Hanley and Michael Wood, is likely to attract bids from both strategic and financial buyers willing to pay as much as eight to 11 times the company's earnings. However, most industry experts anticipate that players from the financial ranks will lead the bidding process.

The company's vertical markets may be attractive to strategic buyers, says Clay Hall, president of Denver-based Hallmark Ventures, a magazine publishing industry investment banker. "But the company has enough scale to attract financial buyers looking for a platform."

"There's a group of financial buyers whose funds are reasonably funded who need to put capital to work," says Jon Slabaugh, managing director of Arlington, Virginia-based MCG Credit Corp. "The industry has attracted private equity firms that seek to deploy capital in this market. There are 20 firms that could legitimately be financial buyers, before you even get into the strategic buyers."

Baran Rosen, president of Whitestone Communications Inc., agrees. "The venture funds have definitely seen the money that has been made in trade magazine investments, and there's more interest than ever before. They've seen what their brethren can do and they think they can do it, too." On the financial side, Rosen listed Pfingsten Publishing LLC and Media Network International as possible candidates. Strategic players such as Cahners Business Information, Miller Freeman and Primedia Inc. are also likely to be interested, he adds.

Robert Crosland, a managing director at AdMedia Partners, says the company could possibly generate one of the highest multiples of the year. "Every one of the big players will bid on this. Most will be horribly outbid by someone who wants it so badly they can't stand it," he says.

Hanley-Wood, which began as a custom publisher with a single title in 1977, has grown rapidly since 1995--from six titles and $25 million in revenue to 26 titles and $106 million in revenue in 1999. Most recently, the company acquired Custom Builder, its main rival in the custom home market, which it plans to close, merging its 30,000 subscribers with its own 40,000-circulation title, Custom Home.

But the company has also diversified beyond print, building online, CD-ROM and event properties into its portfolio. Such diversification has reduced the company's reliance on print advertising to 46 percent of total revenues, down from 85 percent in 1996.

Hanley-Wood's online properties add a lot of value, notes Crosland. And the sale, which is being handled by the New York investment firm Morgan Stanley Dean Witter, is very likely to move quickly, he predicts.

Company Capsule

Henley-Wood Inc.

Chairman: Mike Hanley

Washington, D.C.

CEO: Mike Wood

President: Frank Anton

No. of Employees: 400

Annual Sales: $106 million

1999 Highlights

February; HW sold U.S. Housing Markets to The Meyers Group of Irvine, California.

March: Builder Online, Custom Home and Remodeling all won Jesse H. Neal Awards.

April: HW bought its top rival in the custom home market, Miller Freeman's Custom Builder, merging its 30,000 circulation. into HW's own 40,000-circulation title custom Home."

Henley-Wood Properties

* HW publishes 26 titles, including 10 In its magazine division--including Builder and Remodeling, which are targeted to the home building and remodeling industry. HW also publishes nine house-plan magazines through Home Planners in Tucson, Arizona.

* HW produces several conferences and seminars, including the World of Concrete Exposition through The Aberdeen Group, which the company acquired in October 1998. The Aberdeen group also publishers several titles, including Concrete Construction.