Foreign Buyers: Can U.S. Publishers Compete? the Favorable Currency Exchange Rate Isn't the Only Factor That Makes Foreign Publishers Aggressive Competitors
Howland, Jennifer, Folio: the Magazine for Magazine Management
Foreign buyers: Can U.S. publishers compete? It's 200 some odd years later, but the cry is still ringing among publishing patriots--"The Redcoats are coming!"
Today, the Redcoats, in the eyes of publishing nationalists, are any foreign buyer of a domestic publishing operation. And with an admitted surge of buying interest on the part of foreign companies--dramatically demonstrated in August by Murdoch's purchase of Triangle Publications Inc.--questions are being raised by industry professionals.
* Can domestic companies compete in the acquisition arena with cashrich, currency favored, aggressive foreign media conglomerates?
* Does increasing foreign ownership of media interests in this country pose a threat to the national interest in a free press?
* Are foreigners, specifically Europeans, actually dominating the bidding for publishers, or is that more perception than reality?
The answers to these questions depend, in part, on who you ask. David Orlow, a publishing consultant, says "factually, much more foreign ownership has occurred than people realize--they own billions of dollars worth of U.S. publishing." Yet others speak of the growing internationalization of publishing, and indeed business in general. "Publishing is worldwide now, especially in the business press," says Paul Beatty, vice president, marketing, International Thomson Retail Press. "It's rare to find a publishing company without an international operation." Still other analysts, like Tom Kenney of Thomas Kenney & Co., special media advisers with First Boston, question the premise that Americans aren't competing. Kenney notes that while European companies have been active in the United States, they have not been dominant, and that, in fact, American companies are actively buying other American companies. And there is the reverse example of U.K.-owned Argus, which put its American publishing properties on the auction block last spring.
What really is going on? On one point there is no disagreement: There are many more foreign companies with holdings in the United States publishing industry today than 10 years ago. By various estimates, the number is between 15 and 25, compared with one or two. And a host of factors--not the least of them the currency advantage enjoyed by foreign buyers in this country--make foreign publishers eager and aggressive investors in America. In fact, once you begin lining up the reasons foreigners want to buy into America, it's no wonder questions arise as to the willingness of domestic buyers to compete against them.
That's what Dave Charleson thinks. Having sold Charleson Publishing in 1983 to an investment group composed of Keeley Management Company and Dillon Read, he watched it sold, in turn, as U.S. Business Press (USBP), in part to Elsevier, a Dutch company active in acquisitions in the United States today. Then, in 1986, USBP sold all its assets to International Thomson, another aggressive acquirer of U.S. publishing properties, and CBS, after which USBP went out of business. Charleson has just bought back Food & Beverage Marketing, a magazine he started in 1981, from Thomson, and is hot on the acquisition trail.
"I've been approached by banks that want to finance me," he says, but he's having difficulty finding a property to buy. "There are a great many European companies that are very cash rich. With the exchange rate so good they can afford to pay higher multiples, and they can also borrow locally more easily and for less interest than a U.S. company can. As a U.S. purchaser, I've found buying a profitable company almost impossible. The Europeans will grab it up and pay a higher price," Charleson states.
Financial considerations, such as the currency advantage and the access to cheaper capital, are just the beginning of the list of reasons foreigners buy in the United States. The currency issue is often cited as a reason foreigners can pay more for U. …