Reasons to remain independent

Folio: The Magazine for Magazine Management, Oct, 1987 by Gerard G. Leeds

The key is that you have to look at the rationale behind the sale and see if it really meets your own long term financial and emotional objectives. Even if it does, you might still look for ways to avoid selling, because selling a company is seldom what it's cracked up to be--especially if you are thinking of staying with the acquired company. There are very few acquisitions in which the people who have sold their company remain as happy members of the new organization.

Today, after we bought a small West Coast-based publication with the absolute intention to retain staff and use it as a nucleus for a new publishing group, not a single member of the original small staff is still with the company, and the operation has since moved to the East. Hardly any senior management is left from the acquisition of United Technical Publishing (UTP) by Cox, and later by Hearst. The sale of Technical Publishing (Chicago) to Dun & Bradstreet initially brought fewer changes--until D&B sold the group to Cahners. Now there have been major changes.

So, one reason not to sell might be that selling usually, though not always, causes a tremendous upheaval for the staffs of the acquired publication.

If the sale is made to become liquid, the question may be "to whom?' Surprisingly enough, very few publishing companies today seem to make use of the leveraged buy out--a technique that doesn't cause such enormous upheaval. Perhaps the reason is that publishing companies have relatively few physical assets. They value of the company lies in the ongoing business--in the titles, the circulation, the advertisers' and readers' loyalty. And that may be difficult to finance.

Not long ago, a substantial publishing company was for sale by its owners. The employees in a leveraged buy out offered about $45 million. Another company, so I am told, offered $48 million and has become the new owner. It would seem that employees who have built a business should have some kind of preference in acquiring the company, as long as the discrepancy between their offer and another is not excessive.

I always like to think of a million dollars as 10,000 pairs of skis. If you already have a pair of skis, the other 9,999 may not be very important, Similarly, the difference between $45 million and $48 million may not be enough to justify selling the company to an outsider.

Before you decide to sell, consider a couple of alternatives. If your desire, for example, is to become liquid, you may want to consider selling some stock in the company to a private investor. There are a lot of U. S. and international people who would like to get their hands on 20 percent or so of a successful publishing company. The result could be cash for you and/or cash for the company. It might not be a bad way to meet your objectives.

You might take the approach of selling one or more publications and concentrate on the remainder; or, if you have several, you might sell all publications except one and make that the flagship for a new enterprise.