Chalk up another scuttled deal to the credit crisis.
In July, Irvine-based business magazine publisher Entrepreneur Media Inc. pulled out of a roughly $200 million sale of the company to private equity investors after financing and other issues made the deal unworkable.
Texas-based Austin Ventures and Boston-based Castanea Partners Inc. had sought to acquire Entrepreneur, which puts out Entrepreneur magazine, books and runs a Web site focused on small-business owners.
A deal for Entrepreneur was struck in March, before financing terms became more expensive and ultimately killed it.
“It’s a very difficult market for buyout funds to raise debt financing at a reasonable multiple and percentage rate,” said Peter Shea, Entrepreneur Media’s owner, chairman and chief executive.
Shea said he had sought to sell the company so he could retire after buying the magazine 22 years ago.
He said he called off the deal when the private equity firms asked for more time after they weren’t able to get the financing they wanted.
There were “no hard feelings,” Shea said. “It was mostly a timing issue. They are very good funds and good people.”
Now Shea plans to put off retirement and keep running the company, despite getting other offers before and after the deal with the private equity firms fell through.
“I’m not ready to retire,” Shea said, “I’m perfectly content to stay where I’m at now.”
The proposed sale of Entrepreneur Media came about because of an initially good offer, according to Shea. The company isn’t in need of a buyer, he said.
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Shea: “The whole due diligence process is tiring and disrupting to the company” |
Yearly Revenue
Entrepreneur Media has yearly revenue of about $60 million and has been debt free for the past six years, Shea said.
He said he spurned subsequent interest from two other companies that bid and lost out to Austin and Castanea.
“I turned them both down,” Shea said. “I was through with it because the whole due diligence process is tiring and disrupting to the company.”
The sale to Austin and Castanea also was hampered because it was the firms’ first deal together, Shea said.
“You had two independent groups of financial guys trying to figure out how to do business together,” he said.
Bidding for the company started early in the year. Reports of interest from News Corp.’s Dow Jones & Co., Gannett Co.’s USA Today and R.H. Donnelley Corp. were incorrect, according to Shea.
The deal with Austin and Castanea broke down after the firms couldn’t get the financing they wanted.
The buyers got financing equal to about four times Entrepreneur Media’s earnings before interest, taxes, depreciation and amortization, down dramatically from what they could have gotten a year and a half ago, according to Shea.
“The way these funds work, the more leverage they can get on something the better off they like it,” Shea said.
Now Shea said he’s focused on changes playing out at Entrepreneur Media.
The company has made several shifts in its print editorial department in the past few months with changes planned for its online operation.
The company is working on a redesign for the January issue that Shea called “modern and hip.”
The company also has magazines in other countries, including Mexico, China, Russia and Saudi Arabia.
In the U.S., the company is focusing on its Web site for the next six to nine months, Shea said.
“I personally think any (media organization) that isn’t really going hard at the Internet is going to be in a world of hurt,” he said.
Shea said he doesn’t see a slump in print advertising for national business magazines lifting before the second quarter.
“This will be the first year in gross sales that we’ve done more Internet advertising sales than we did in print,” he said.
The company, known for suing others for what it sees as infringement of its Entrepreneur trademark, recently filed for a temporary restraining order against San Francisco’s Allbusiness.com Inc.
Entrepreneur Media is seeking to keep the small-business Web site from publishing its Annual Franchise 300 Ranking, which is at the center of a trade secret dispute.
Entrepreneur Media alleges former vice president and editorial director Rieva Lesonsky stole Entrepreneur Media’s confidential formulas, databases and contact lists used for its own Franchise 500 rankings.
Allbusiness.com, part of Dun & Bradstreet Co., and former Entrepreneur Media employee Maria Anton also are named in the lawsuit filed last month.
