The Globe and Mail interviews ORCHANGO’s Edmond Mellina for an article on mergers and acquisitions.
Source: The Globe and Mail
Report on Business | STRATEGY – Mergers & Acquisitions
MEDIA IMPRESARIO PUTS FAITH IN ACQUISITIONS
Moses Znaimer’s purchase of VisionTV will help him complete a multimedia empire aimed at baby boomers. He’s just one of many leaders building their businesses through M&As.
VIRGINIA GALT | Thursday, December 9, 2010
For Canadian broadcasting trailblazer Moses Znaimer, the acquisition of VisionTV earlier this year was the culmination of his plan to create a company focusing on the 45-plus demographic.
The purchase catapulted his multimedia startup, ZoomerMedia Ltd., to its first profitable quarter. It also expanded its reach.
“I already had the radio in hand. I worked hard to secure and transform the magazine [now called Zoomer]. I had linked up with a company that controlled a 50-plus website. I then set my sights on the last piece of the puzzle, which was television,” said Mr. Znaimer, the company’s president and chief executive officer, who set out about three years ago to capitalize on the boomer niche.
Recent acquisitions have positioned the company to ride a surging demographic wave of affluent 45-plus consumers who have largely been neglected by marketers, he said. (The company reported revenue of $14.5-million and profit of $232,736 for the three-month period ended Sept. 30, compared with revenue of $2.1-million and a net loss of $1-million in the corresponding year-ago period.)
Now Mr. Znaimer, renowned founder of Citytv and MuchMusic, has set about adding a little zip to Vision, which specializes in multi-faith programming. The faith focus remains, but it has been supplemented by more news and public affairs programming to broaden the channel’s appeal.
As the economic recovery gains traction, more Canadian companies are seeking to outpace the competition through a strategy of growth by acquisition, according to a recent report by PricewaterhouseCoopers Canada LLP.
“Well executed, a merger or acquisition is a powerful means to set a company – large or small – on a rapid path to building value and critical mass,” PwC said in its report. Of 200 business leaders surveyed by the firm this past summer, 34 per cent said mergers and acquisitions would be part of their growth strategies, up from 28 per cent in 2009.
“Well-capitalized companies that have navigated well through the downturn are in a sweet spot,” the firm said. “They can shop around now while interest rates and prices remain low and enter a rebounding economy with a much larger share of the market.”
It will be interesting to see ZoomerMedia’s strategy play out, said Brooke Valentine, managing director for corporate finance at PwC Canada. “Moses Znaimer has been such an icon in the Canadian media sector.”
Mr. Znaimer insists his firm has no direct competition. His company is the only one in English Canada to offer all-classical music radio programming, for instance. “We’re happy to step into that void,” he said, adding that older consumers have been ill-served by the “youth obsessed” national television networks.
The company’s multiple-media approach lends itself to cross promotion, the company said in announcing its acquisition of VisionTV.
One of the best ways to create value through a purchase is by acquiring a way to cross-sell products or services, Mr. Valentine said.
A strategy of growth through merger or acquisition makes a lot of sense – conceptually at least, said Edmond Mellina, president of the Toronto-based change management firm Orchango.
“It is an exciting avenue because it looks like a shortcut and an easy way to get growth,” Mr. Mellina said.
“But you have to pull it off properly, otherwise you can really lose the conceptual value you are trying to get out of the acquisition or merger. And you have to be careful not to jeopardize what you do well today, which is your core business.”
Deloitte LLP cautioned in a recent report that while M&A activity is on the rise again, companies on the hunt should not lose sight of the need for due diligence. Studies have shown that about 70 per cent of all M&As “fail to create meaningful shareholder value” for a variety of reasons, including tight timelines, inadequate access to information or insufficient investigation of potential liabilities such as underfunded defined-benefit pension plans, the firm said.
PwC’s report said acquiring companies should have a post-transaction plan in place in advance of a deal. “What will your new organization structure look like? How will you integrate business operations? These are the questions you have to address when you’re thinking of acquiring business.”
Mr. Znaimer said ZoomerMedia’s acquisitions have been carefully considered.
“I chose Vision because it was widely distributed, but also because – perhaps mostly because – the nature of its programming had, over the years, given it a predominantly older audience,” he said.
“I could see value in the older viewer in the same way I could see value in the older listener or the older reader.”
EAT OR BE EATEN
Strategies for growth through M&As:
Watch your back
“What are you going to do to outwit, outpace, outperform your competition?” Tahir Ayub, private company services leader for PricewaterhouseCoopers Canada, said in presenting results of the firm’s 2010 business insights survey.
M&As are “a particularly attractive option for mature companies that have limited ability to grow organically and that have come through the downturn well-capitalized and able to buy up good businesses with high debt loads,” the company said.
But don’t alienate the talent
A lot of companies are not so much buying products or services as they are buying the people behind them. “If you don’t have a good strategy to keep the brains behind the company you are buying, then you basically lose everything,” said Edmond Mellina, president of Toronto-based change management firm Orchango.
Mr. Mellina has seen a number of cases of culture clash, particularly when small, entrepreneurial companies have been bought by larger companies. “At the end of the day, you are dealing with the emotions of an entrepreneur who has been on his own for years, is having a hard time adjusting to the bureaucracy, and is not making the money he thought he was going to make,” Mr. Mellina said.