Blog 2 minute read
Last week's purchase of Gorkana Group by GTCR sees the US private equity firm’s spending on PR service providers accumulate to nearly $1 billion.
Here is a list of those deals that have taken place over the past 6 months:
Gorkana Group: Just north of $250m (say sources close to the deal)
Visable Technologies: Circa $200m
Add that all up and you get circa $930m.
That’s a lot of money in anyone's book. If a private equity firm spends $1 billion they are going to want a serious return on their investment. Some market observers I have spoken to are scratching their heads – asking what GTCR have seen, that they may have missed!
The media measurement and media database market is a solid market but bearing in mind the difficult market trends that publishers and journalists the world over are working in it seems a punchy move to spend so much on this market.
In addition, if anything, the impact of digital and social media has seen PR people’s priorities move away from the media. Media relations remain a core offer of all public relations people, but no longer are journalists and the media the raison d’etre of public relations professionals.
GTCR’s return on investment
If you spent $1b how much would you want back? GTCR will be looking at $1.5 billion exit value surely? But who is going to buy it? Its current value would seem to exclude a trade buyer from purchasing the group in 3-5 years’ time – they are simply too big. And a private equity firm purchase would require serious revenue and profit growth for the exit value to be agreeable to GTCR.
How this revenue growth will be achieved remains to be seen. Clearly it’s very early days. They could increase prices and potentially increase the consultative services they offer.
Alternatively Cision (the name of the new group) could take the high volume route by commoditising the product to reduce costs and increase volumes. They will probably also look to diversify products geographically into Asia and Australia. This will put them into competition with big players in those markets such as Australian measurement firm iSentia, who floated earlier this year.
Either way, the challenges of integrating these four companies, and the services that they offer, are significant. And the challenge of creating enough revenue growth to enable GTCR to gain a significant return on its investment is probably even greater.
Bearing all this in mind the amount of money GTCR has spent on this deal, an IPO may appear to be the most likely exit strategy.