REV: JANUARY 17, 2008
NABIL N. EL-HAGE CHRISTOPHER E. J. PAYTON
ABRY Partners and F+W Publications
The Monday morning partners meetings at ABRY Partners, a media-focused private equity firm, were typically upbeat events that provided an opportunity to discuss current investment prospects and to review the progress of existing portfolio companies. However, during the last meeting of October 2005 the group faced a difficult situation. Two months earlier, ABRY had acquired F+W Publications from Providence Equity Partners for total consideration of $500 million. Soon after taking control of the company, ABRY had become increasingly convinced that they had been deceived by the sellers about the profitability of the company. ABRY now had to determine if they had been deliberately misled, and if so, what courses of action were available to them and which one they should ultimately pursue.
F+W Publications was a special interest publisher of periodicals and books in a variety of consumer enthusiast categories. Publications included titles such as Writer’s Digest, Popular Woodworking, Horticulture Magazine, and Gun List.1 In addition, the company operated book clubs, conferences, trade shows, websites and educational programs targeting the same specialized audiences as the magazines and book publishing programs. Providence Equity Partners, together with former Primedia CEO William Reilly, acquired the business in 2002 from Citicorp Venture Capital for approximately $130 million. At the time of the transaction the company was said to have approximately $106 million in revenue.2 Under the ownership of Providence, and with additional injections of equity capital, F+W expanded rapidly through a series of strategic acquisitions, growing the business to approximately $250 million in revenue in 2004. By this time, Providence had invested a total of approximately $150 million in the business.3
* Casewriter note: For expositional...