Sometimes it takes a really big event to remind us of underlying changes that we should have recognized more prominently at the time. With BNA, The Bureau of National Affairs Inc, in Washington DC (and seldom is a location so important as this one) being acquired by Bloomberg a real shift is recognized. It is not solely or only the case that Bloomberg want to move closer to law practises in the US and around the world, or that many of those practises might at some future point become Bloomberg terminal users rather than Thomson Reuters WestlawNext users. It is that law and regulation pervades every branch of business, from finance outwards, and that the idea that paralegal or quasi-legal had fundamentally different needs from “qualified ” legal are gone. My colleague at Outsell, David Curle, has been particularly good at pointing out this democratization of the law and the wide and free availability of primary legal content. BNA built a very successful company around the idea that lawyers and others should have a closer view of how law was being created in Congress, and how embryonic law might affect the interests of their clients and their companies.

First, the details. Bloomberg have apparently offered $990m for BNA, which is around 2.25 X the current stock price, 3 X current revenues of $331 m and about 13 X EBITDA. This is a very good price at this time, though a pre-recession valuation might have been a shade higher. BNA was an employee-owned company with an eighty year history of democratic process (to attend an AGM, with its board election involving some 1500 shareholders, was always an impressive demonstration of this). Its founders, New Deal lawyers, all shared a principled view of the importance of participation and the sharing of information. Now it joins another (intensely) private company, younger by 50 years but also founded on the idea that content should and could be shared more effectively.

So what does all of this do to the balance of power? For Thomson Reuters, comparatively little, given that it has moved decisively (through its GRC developments) into that wider view of legal and regulatory relevance stated above. BNA’s two great assets would be its brand, forever associated with the reporting of embryonic law in committee in DC, but actually much wider in content and significance, and its tax services, a market leader in conjunction with CCH (Wolters Kluwer) and Thomson Reuters Tax (RIA). It is notable that Thomson, Reed Elsevier (Lexis), and CCH all license content from BNA for access online. This will presumably end after current contracts expire. Thomson will be hurt least by this. But note how important contextualised news is now to everyone: BNA gives this to Bloomberg in a way which helps to neutralize the Reuters/West advantage.

But both Lexis and CCH will suffer collateral damage. The loss of the tax content will cause real hurt to both, and the wider impact of the loss of the BNA brand and full content set will be hard for Lexis in particular. BNA content was important in that context in particular, since previous attempts to absorb and use highly branded legal content (Matthew Bender) seem to have petered out in terms of user recognition. Given that private equity was unable to enter the contest at these valuations, Lexis would have been the obvious candidate as a counter bidder, and the fact that it felt unable to match a high but not astronomic bid points to possible future environments. It may be that Reed Elsevier see their future with Lexis in risk management rather than in legal as such, and if that were the case then we could well, in the next five years, see a new order of things, with Thomson Reuters and Bloomberg dominating legal and regulatory marketplaces, and CCH and Lexis forming a sort of second division in positions increasingly hard to maintain outside of specialist niches. There is only one shoe left to drop in US legal marketplaces. Analysts will now look closely at whether ALM (owned by Apax) will be the last major play.

Bloomberg appear to be indicating that they will hold BNA as a separate wholly-owned subsidiary in the first instance. This makes sense: they have distinctive cultures and need time to get to know each other. It is however interesting to think where the optimum first linkages will take place. Certainly management in the nascent Bloomberg Government unit will be salivating: they will rightly see the congressional law reporting as a key element in bringing more widespread usage in government at all levels. And everyone involved in the business of proliferating Bloomberg terminals more widely in the tax advisory marketplace will be exultant, since this is a real game changer for them. If the claim that we are all moving to workflow is correct, then BNA is vital to Bloomberg in its wish to move into adjoining, content – related markets like legal and paralegal.

And a final and personal note on culture. As an advisory director to BNA’s international marketing (Bloomberg will transform that with their global coverage) I have, for almost 25 years, worked with quite the most civilized publisher on the Planet. The values of the founders were exemplified by their successors, and while employee ownership sometimes caused problems of its own, those who worked there were embued well beyond the normal with a sense of purpose, and indeed, a lifetime commitment, to what they were doing, and a belief that their purpose was part of the public good. This cannot be bottled, so Bloomberg must be careful to preserve it. Having tried to enter security law in the early years of this century, and made very slow progress, they should know how difficult it is to get very high level editorial intervention and commentary to work properly. The biggest property they have so far bought is BusinessWeek, which was not strictly comparable. BNA is different, and to get the real value they will need to treat it very differently.


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4 Comments so far

  1. Andrea Naylor on August 26, 2011 15:54

    Great post, David.

  2. FredMark on August 26, 2011 21:46

    You do work for Outsell “David now co-chairs and manages Outsell’s Executive Programs” and ALM Media is a client of Outsell so if you are going to tout a potential sale of ALM “Analysts will now look closely at whether ALM (owned by Apax) will be the last major play.” at least disclose your relationship. ALM hasn’t shown any aptitude for selling their content for a profit other than their licensing deals with West (and now) Lexis. ALM has two other revenue streams. 1.) Public Notices in print newspapers 2.) The rest of the company.
    Public notices account for virtually all of ALM’s profit that does not come from Lexis. Public Notices in print at some point soon will leave the printed publication and migrate on line similar to the migration of classified ads to Craig’s List and This blog covers that migration well . Without the public notices and the lexis revenue the company is a break even business. Let’s give the benefit of the doubt and add another $10 million in EBITDA So what would you pay for this? Well Lexis probably ponied up 10-20 million per year for the content. So multiply that by 10 and you get $200 million. Add a premium ($100 million) for stale brand names. Add a 10X multiple ($100 million) for the other $10 million of EBITDA. So maybe you get $400 million from a drunken sailor. APAX paid $630 million and Royal Bank of Scotland loaned over $400 million. David, please tell us who would be silly enough to pony up enough money to make those two parties happy? Lexis getting all of the content.

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