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Perhaps it's appropriate that Penton Media acquired a digital content company called Nine Lives Media in August. Like a cat, the b2b media company has shown a knack for landing on its feet in recent years, even when facing the scariest of predicaments.
In 2002, Penton suffered a debt crisis in the wake of an acquisition spree. Private equity firm ABRY Partners invested $40 million in the then-publicly traded Penton, an investment that quickly became endangered. Royce Yudkoff, president of ABRY, once described the investment as a “near death experience”; but ultimately Penton turned its performance around, and ABRY's investment turned positive.
More recently, the financial crisis of 2008 led to a financial restructuring for Penton, which is now owned by private equity funds MidOcean Partners and U.S. Equity Partners II, an investment fund sponsored by Wasserstein & Co. Penton entered bankruptcy protection in 2010 and succeeded in cutting its long-term debt by about $270 million.
Now, about 18 months after it exited Chapter 11, Penton is showing unmistakable signs of health. “Penton's cash flow is very strong,” said Warren Bimblick, Penton's senior VP-strategy and development.
Penton is implementing CEO Sharon Rowlands' plan to remake the company. Like most b2b media companies, it aims to rely less on print advertising and to build its digital, events and marketing services businesses.
“They're doing what you have to do,” said Ed Fitzelle, managing director at Whitestone Communications. “Like everyone else, they're trying a very grand experiment and doing it in a very tough time.”
August was a particularly active month in Penton's remaking; the changes included an acquisition, a divestment and brand closures.
Penton acquired Nine Lives Media—producer of online destinations MSPmentor, Talkin' Cloud and the VAR Guy—for an undisclosed sum. Founded in 2009, Nine Lives is now part of Penton's Technology Group and expands its coverage beyond IT professionals to the channel.
Bimblick said Penton's cash flow, despite the company's long-term debt that was north of $600 million when it exited bankruptcy, is adequate to fund acquisitions.
“Having that amount of debt over your head is something that's a constant concern, as it would be for any company,” said Mike Parker, managing director at AdMedia Partners. “Apparently, they're able to handle it, and the private equity backers are showing a high degree of confidence in what the company is doing, despite the debt.”
However, another industry observer, who spoke on condition of anonymity, was skeptical of Penton's ability to make a parade of transformative deals. “It seems like they have an uphill battle on the debt, given the way the economy is going,” this observer said.
Penton's divestment in August was the sale of the American Printer brand to OutputLinks Communications Group in Houston. The sale was made after Penton announced the closure of the publication and related properties. Penton also closed Paper, Film & Foil Convertor.
Penton abandoned these brands, Bimblick said, because they were “not able to achieve scale or profitability to remain in the portfolio. Companies like Penton start and shutter units every day. We have also several products to launch in the next few months. It is completely a balancing act of where are the opportunities and what is the best use of capital and manpower.”
Earlier this year, Penton acquired digital agency Eye Traffic. Rowlands called Eye Traffic the “cornerstone” of Penton's efforts to establish more robust marketing services offerings—particularly in the digital arena—for its advertising clients.
“The marketing services acquisition of Eye Traffic is also consistent in that we have said repeatedly that we needed a strong beachhead into marketing services that could scale across Penton,” Bimblick said. “Just a couple of months in, it shows that the business is scalable.”