…in fifteen years. Now, settle down around the tree, children, for here is a Christmas tale to gladden your hearts. In which everyone is a hero, there is no recognizable Scrooge (like the recent BBC Dickensian production) – and Bob Cratchit aka the internet investor stands to make great rewards – in the Future. Our tale begins just before the millennium when the present writer first beheld the warehouse-like offices of Durrants of Banner Lane, London. This part of the City was full of low-rent offices of proto-information companies in the 1990s so I was not too surprized by what I found, but the dialogue in Reception was not encouraging, as I stood behind a long line of elderly ladies waiting to sign in. “It’s getting colder outside” I ventured to one. “Why do you think we come ‘ere – just to clip papers?” replied a voice from the queue, preparing me in mood if not in vision for the long office with desks covered in marked up newspapers being clipped into articles and gummed to headers which indicated the story and the company or product featured and the PR agency to whom the clippings should go. The rasp of the shears, the gossip of the shearers, the huddle of messengers on bikes – all this seemed the antithesis of the digital world I knew was coming. Surely this was typical of what was doomed? Or damned? Or both? In the 1990s I knew clearly, so I thought, where the digital future lay… and this was most certainly not it, even if it provided warmth and piece work on a cold day.
Today that same company lies at the very heart of a combination which City cognoscenti tell me is likely to seek a valuation of well over $2 billion after it does a further deal and comes to a public offering in 2016. So what happened in the meanwhile to transform its fortunes, and then it’s sector? In the 1990s this was a deeply unfashionable spot in the information marketplace, effectively doing the washing up after PR and advertising had finished dinner, a low margin service industry that measured the impact of PR campaigns by checking where they had achieved notice in the media, and recorded the fact that an advertisement, once booked, had actually appeared. Two operators sifted the industry waste in the UK – Durrants and Romeike, the latter being part of Observer Group, a Scandinavian-based roll-up which had emerged as a quoted company. The former had just been purchased by a private equity player and I had turned up to see the incoming CEO – and find out how on earth such a strange decision had been made.
The new man was an old friend, fresh from running Thomson’s global law enterprises outside the US. (Amazingly, Observer were soon to be run by an ex-Lexis chief – I feel there is a PhD thesis lurking on “The influence of law publishers on the development of online marketplaces 1975-2000!”). He explained what I rationally knew – there was huge potential in automating work processes in high cost service verticals. He then explained what he would do about it, starting with the search for scanning and coding systems that would automate the shears and remove the need for the bikes. In short he initiated the Productivity Revolution that is such a marked episode of every successful online business venture of the past 25 years. But it was only the first of at least five discernible phases.
Making the outcomes of PR activity machine -readable almost immediately triggered the second. Typically, the first PE investor was able to pick up the results of Rev 1, but then fund Rev 2 in order to get out himself. And the Analytical Revolution came in on time to allow this to happen. Old Durrants was still needed to fuel the engine, but two software acquisitions to provide the data analytics that helped to persuade the clients of PR agencies that the agency contract was really worthwhile – or how the technology enabled you to succeed without them – changed the name of the company to the name of one of the purchases – Gorkana.
And what, you eagerly ask, had Observer Group been doing all the while during this Revolutionary Age? Well, very much the same. Selling out its old clippings business in the UK to Durrants helped concentrate the market there, while giving them the ability to concentrate on dominating North American markets. In the failing days of newspapers, print managers stopping seeing both companies as a threat and instead began to appreciate them as a revenue source. In turn both companies began to monitor all media and not just newsprint. And then the Observer Group morphed into Cision and bought Vocus. And then the merged company bought Gorkana, mid-way through 2015. Sell off a few trifles to satisfy the regulator and then you have a really powerful, unavoidable dominant player across North America and Europe. The network tends to monopoly despite the regulator: you don’t really need two. Game set and match, said the commentators in the press box. Vertical integration in the recording and analysis of PR and advertising impact brings frenetic change to an end in a typical frenzy of M&A.
But that judgement is too hasty. We have come through three Revolutionary stages in fifteen years, yet we still have two more to go. The first began a week ago when new Cision with added Gorkana successfully bought UBM’s PR Newswire business. At the time of the Gorkana sale I felt this was becoming the imperative step: bringing together the whole cycle of PR activity from the cradle of the news release to the grave of the newspaper morgue. And it gives Cision a customer base of corporate users, vital as more companies decide that they want to buy creative inputs while being able to manage their own PR in the network with the help of Cision to manage the process and measure the results. Let’s call this the Process Integration Revolution.
Only one to go then. And the word on the street is that the next deal is the Global Integration Revolution. The final touch required to make this work is AsiaPacific, so predictably the next target will be iSentia, Australasia’s version of Cision. Tuck this one away and begin on the integration of global marketplaces in a very threatening manner, and then plan the IPO for late 2016. The integration of all of these rapid acquisitions is a nightmare prospect, so go to market as soon as possible. If ebitda is in the $250m zone, as looks possible, then a valuation of up to $3 billion could on the cards. Or is the strategic threat great enough to turn an IPO into a menu for Sir Martin and WPP? In either event, IPO or acquisition, competitive pressures will not harm valuations. And when it is all over, the revolutionary disruption of a service sub-sector will have irreparably changed the industry it once served. These five revolutionary steps are widely applicable: you have this from a man who had the Jeremy Corbyn Colouring Book for Christmas and has been busy with his red pen ever since!
With all best wishes for 2016 to every one who gets this far!keep looking »