Tuesday, August 09, 2005

Primedia Business sold to Wasserstein

It's over.
And yet little has changed.
Primedia Business has been sold to yet another New York-based buyout firm. The seller, of course, was KKR. When I was an executive at Primedia Business, it was the folks at KKR who were in charge. And I found them to be -- almost entirely -- a repulsive group. KKR's chosen would gather in the executive dining room and complain whenever Primedia Business' workforce seemed unwilling to sacrifice more wages and time to further enrich KKR's investors. My time at Primedia Business was an endless series of meetings with people who genuinely disliked each other. And it was clear to me that KKR set that contemptuous tone.
Primedia Business' new owner is Wasserstein & Co., a private equity firm that also owns "The Deal." I know nothing about Wasserstein. And I would urge everyone at Primedia Business to try and maintain a positive attitude during these next few weeks. Perhaps Wasserstein will turn out to be a more skilled leader than KKR.
But I'll confess that I have little faith. Readers of this blog know that I dislike the management style of Wall Street. And I am saddened each time a B2B publisher is purchased by a private equity fund or leveraged buyout firm.
I prefer a different style of owner -- dedicated more to the product, the workers and the customers than to money.
It was years ago that I first came across the work of management guru W. Edwards Deming. Deming believed the purpose of a business isn't to make money. Rather, the purpose of a business is to stay in business so it can provide jobs. In Deming's model, profit is an intermediate goal, not a final purpose. In other words, Deming believed a company owed more to its stakeholders than to its shareholders. Deming's work has fallen from favor in recent years -- pushed to the side by stock booms, junk bonds, IPOs, LBOs and EBITDA.
I'd like to think that Wasserstein sees more in Primedia Business than cash flow. But a look at Wasserstein's Web site does little to encourage me. There's not a word about employees; there's no mention of products; there's no discussion about running a business. But there's plenty of talk about managing investments.
FULL DISCLOSURE: I'm the former vice president for online content at Primedia Business. Also, during this past weekend I took on a small, short-term consulting arrangement with Primedia Business.

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  1. Actually, I'd disagree with Deming and say that the purpose of a business is to provide a product or service that people want. I guess that would go without saying. But if you aren't interested in serving a need, why bother?

  2. Have you noticed that Folio's web site is not functioning today? Wonder if that's related to the Primedia sale, or just technical difficulties.

  3. Hi Martha,
    I hadn't noticed the problem with Folio magazine's site. Things were working fine earlier today. But you're right, the site is down now.
    I can't imagine that has anything to do with the sale. Red7 runs Folio now, although Primedia Business has a stake in the operation.
    But I suppose anything is possible.

  4. Paul,

    Without disagreeing that KKR made a hash of Primedia Business, I don't believe it is fair to trash all private equity firms.

    With 35 years in B-to-B media, I have been a partner in a privately held, family-controlled company, a partner in a privately held company with both family and non-family partners, a partner in a private-equity-controlled company, and an employee of two publicly traded, European-based companies. I have also competed against, and bought magazines from and sold magazines to companies with all varieties of ownership.

    There's nothing inherently good or bad about any form of ownership.

    For every KKR/Primedia, you can find a private equity success story, most recently Hanley-Wood and VSS, as well as our more modest success (see disclosure below), where service to industries and values of properties were increased and key employees were rewarded.

    For every successful family empire (Crain, for example, as well as many smaller companies), you can find examples of family-owned or privately owned publishing businesses that destroyed value by failing to serve their industries well, whether because of incompetence (especially sluggish response to changing market conditions), complacency, or lack of investment capital to take necessary steps to remain competitive.

    As you, I know nothing about how Wasserstein operates, but I do know that there are private equity operators who back sound management and try to stay out of the way of that management, while bringing to the table enhanced financial controls and resources, and advice and deal flow to help grow the business.

    I would agree with Martha that a business has to provide products and services that people want to buy, and add that customers must find enough value in them to buy them at a price that provides a profit for the seller.

    A business can't be dedicated to the product, the workers, or the customers for very long if it can't produce a profit for itself and its shareholders, be they family members, managers, employees or outside investors. A good private equity firm can help a company pursue profit and growth while maintaining its dedication to its constituents.

    Disclosure: The family company I grew up in, Communication Channels, after several transitions in ownership, became the core of Primedia Business's Atlanta office. The company of which I was co-CEO, Shore-Varrone, became a portfolio company of Boston Ventures, and was sold after three years to VNU, with a substantial increase in value, a substantial part of which was shared with key managers. Some of those managers have become senior managers at VNU, while others have taken leadership roles at other publishing companies, or have gone the entrepreneurial route and started their own successful businesses. I continue to be a limited partner in a Boston Ventures fund.

  5. Hi Doug,
    Thanks for your comments.
    I don't mean to trash ALL private equity firms. Although I suppose that's exactly what I did.
    My bias is pretty strong here. And that's a function of my time at KKR-run Primedia.
    What I like to see in a company is an interest in the employees and other stakeholders. And I've seen so little of that in the new breed of investors.
    Perhaps Wasserstein will turn out to be something quite different from KKR. I hope so. I know a lot of people at Primedia Business, and I'd like to think that their lives will get better.

  6. Hey Paul,

    Wasserstein has a history with Kravis from back in his CSFB days. You might be more right than you know when all is said and done. Initially, I was reminded of the lyrics from the Who who sang "meet the new boss... same as the old boss."

    On a more positive note, however, it can't get much worse for PBI...I think Wasserstein has made a good investment at a good price. And the key here is that the b-to-b unit will now be free from the rest of Primedia. They will not have to worry about cramming its b-to-b assets with commercial assets, as Primedia tried to do for years. Investors didn't buy it.

    Perhaps on its own it will be able to refocus on developing core business, both in traditional and new media revenues.

    Of course, Wasserstein may have other things in mind.

    DISCLOSURE: I previously worked at Primedia.

  7. Hi Cole,
    Thanks for your comments.
    And thanks for the info about the connection between Wasserstein and Kravis. I had no idea that these two guys knew each other, although I have worried greatly that they may be cut from the same greedy, vulgar cloth.
    I do truly hope I'm wrong.

  8. Actually I think a better representation of what Deming believed is: "The aim proposed here for any organization is for everybody to gain - stockholders, employees, suppliers, customers, community, the environment - over the long term." From page 51 of the 2nd Edition.

    Deming certainly did not believe the only purpose was to make money, even though that seems to have become a common belief in the last part of 20th century.

    I maintain Curious Cat Deming Connections which has more on his ideas.

    John Hunter

  9. I pretty much agree with everything Doug Shore says. He's a stand-up guy, and I was the editor of a magazine at his father's company, Communication Channels (CCI) in the early 80s.

    However, I was corporate editorial director of Argus in Atlanta (which grew out of CCI) when Intertec (Primedia) bought us in 1996. We had approx 50 titles and they promptly sold or folded half of them and let half the staff go. I gave them a half dozen proposals of other things I could do there. They just wanted to get rid of my salary, paltry as it was in comparison. Or a Groucho said, "What's a thousand dollars? A poultry matter. Mere chicken feed."

    And some editors said Argus was bad. Then they had Primedia. Today, there are only about 5 or 6 magazines in that Atlanta office. A travesty!

    To me, the point is that business is supposed to make money to provide livelihoods for people. Otherwise, without employment, the economy tanks and people despair.

    Why is it that the top brass so often seems to forget there's more to it than making LOTs and LOTs of money, when making just LOTS of money would do the trick and could bring happiness and a more entrepreneural spirit to more people in the company.

    As far as I knew, Primedia never had a clue. But what do I know?

  10. Hi Robin,
    Thanks for your comments.
    I think most folks would agree with you that "Primedia never had a clue." Here's hoping that the new owners bring something other than grandiosity, pretension and greed to the table.

  11. I know I'm late on this one but I recently had run ins with Primedia. I'm trying to obatin a job there and learned of the acquisition. Should I have concerns? Would you recommend looking elsewhere?

  12. Hi Anonymous,
    I think it's too early to tell whether the new Primedia Business will be a better place to work than the old Primedia Business.
    I'm consulting with the company now. And much of what I have seen in the past few weeks pleases me. On the other hand, there is still much about the place that is frustrating and disappointing.
    Many of the more talented people in the company had have left in recent years. But some have stayed. At the same time, some of the least talented people I ever knew worked at Primedia. And many of them have remained and even prospered.
    If you're comfortable with it, drop an email to me at correspond at paulconley.com. Tell me what publication you're interested in joining. Perhaps I can give you a more detailed response in an email.