Skip Zimbalist: Enthusiast

Folio: The Magazine for Magazine Management, Sept 1, 2004 by Geoff Lewis

Byline: GEOFF LEWIS

Efrem "Skip" Zimbalist III knows about enthusiast-magazine publishing. For years, he ran Times Mirror's magazine group, which included brands such as Field & Stream, Ski and Transworld Skateboarding. After Times Mirror sold its magazines to Time (creating Time4 Media) and then merged with the Tribune Corp., Zimbalist was out of a job. He took a year off to travel with his family, but he soon returned to the magazine business, forming Active Interest Media. Zimbalist closed his first deal, the purchase of Sabot Publishing (Vegetarian Times, Black Belt, Better Nutrition and Southwest Art) last October and in February, he snapped up Home Buyer Publications, which has two magazines and a consumer show for buyers and owners of log homes. With $100 million in backing (and two or three times that available from West Point Partners for the right deal, Zimbalist says), Active Interest is prepared to do two deals a year in the next four years. His goal is to build an enthusiast portfolio in three core areas: home and art, healthy lifestyle, and enthusiast sports.

Folio: How is the deal environment?

Zimbalist: The good news is that the business is coming back. EBITDAs are rising and more sellers should be coming into the market. But they're not.

Folio: Why is that?

Zimbalist: There haven't been many strategic buyers. And to the extent that it's mostly private-equity buyers, the prices can't go too high. Financial buyers like us have to live within certain requirements for our investor's so we can't bid too high. Strategic buyers can pay more.

Folio: How much is your strategy based on the classic rollup pattern - acquiring properties, then cutting costs to improve cash flow and increase valuation?

Zimbalist: I think that's probably half of our strategy. It's consolidating the back offices with H.R., production, circulation, legal. But the other half is growing the individual franchises, like we're doing with Vegetarian Times (see p. 10). With Black Belt, we're planning a martial arts film festival, with an awards dinner and a consumer trade show in the first quarter of next year. You get a one-time pop from consolidating, but what we love to build the franchises.

Folio: Is there a certain size deal you look for?

Zimbalist: We're at about $7 million or $8 million, unless it's a real bolt-on, where it's directly related to something we're doing. My ideal size is in the $15 million to $25 million range. It takes as much time and effort to do a deal with a smaller company, so we're not looking at a lot of $2 million, $3 million and $4 million deals.

Folio: Time4 took your old magazines and has been spiffing them up. But Time took some flak for trying to get too mass-market - like when editors at TransWorld Skateboarding objected to an ad.

Zimbalist: You really do that at your peril. What you have to do is to protect the culture of the magazine so it reflects the culture of the audience, both the advertisers and the readers. You have to be really careful not to, in the name of efficiency or growth, get too broad. I call that brandwidth. I think with these niche magazines, narrower is usually better.

Folio: Clearly there are a lot of people looking for whatever enthusiast deals do come up. How do you win?

Zimbalist: You have to be good at what you do. You have to react quickly and have good people to do due diligence. When Sabot came up for sale, I would wager we knew almost as much about their business as they did and asked some questions they hadn't heard before. That says we're serious. When we are serious about something we move quickly. With Homebuyer, from the time we heard about it until we had the letter of intent was about 24 hours.