The Television Consultancy secures a three-year growth plan with the backing of private equity. Mark Dunne Reports.
Sir Richard Branson knows a good business when he sees one. While the Virgin tycoon was giving a press conference on his mobile phone business five years ago, he was impressed with what he saw. But it wasn’t his own company that caught his attention that day, but the smooth running of the event.
The press conference was organised by Elaine Stern, chief executive of broadcast and digital PR company the Television Consultancy (TVC), who provided the press with additional footage to ensure maximum publicity for the event. He was so impressed with the company’s work that he commissioned it to support Virgin Atlantic.
Winning a contract from one of Britain’s most prominent entrepreneurs boosted TVC’s reputation, but will have less of an impact on the media business than a deal Stern and her team closed in July.
The company’s shareholders realised £10 million of their interest in the business when ISIS Equity Partners agreed to back its management’s growth plans. The private equity firm invested £5 million, alongside the same value in debt arranged by Lloyds TSB, to enable Stern’s team to grow its television and radio operations as well as to expand its online and digital offering.
Stern was relieved when she won ISIS’s support as it made the management team feel more secure. “When three of you have grown the company into a £5 million-turnover business, it’s hard to understand how to grow that to £10 million. We needed professional help.”
The chief executive co-founded TVC with Marc de Leuw in 1998 to provide content, production facilities and media relations. Nicky Minter-Green joined as managing director soon after.
Stern decided to start the business after spending five years helping to build PR firm London Bureau. As she was coming to the end of her maternity leave, the company was being sold to Media Link and she was forced to rethink her future.
“My first child was six months old, and I had to make a decision about returning to the London Bureau or set up on my own. I saw an opportunity to benefit from the sale of London Bureau by taking some of its clients,” she says.
The decision to break away proved to be the right one as Media Link eventually closed the London operations. TVC has since built up an impressive client list, which includes BT, Tesco, Coca-Cola, Vodafone, Nestlé, Visa and AOL. The Girls Aloud Kit Kat launch and London’s recent Olympic handover are just two of the projects it has worked on.
Despite the robust client roster, Stern realises that more funding is needed to go further. “We are not at the crest of our wave,” she says. “The London Olympics are giving us a massive opportunity because we are in with many of the key sponsors and are levering their brands up to 2012.”
Her first step was to approach Richard Fetterman and Daniel Domberger at investment banking boutique Livingstone Partners to discuss the management team’s options for securing the funds needed to support the company’s organic growth.
“We had good offers from two big agencies last year, but needed hand-holding throughout the process,” Stern says.
TVC’s shareholders decided against a trade sale, believing that the company could lose work by aligning itself with one particular PR agency or group, many of which it works for.
They opted instead for an equity buy-in to retain control of the business. Livingstone started promoting the company and soon there were 11 offers on the table.
Stern explained that TVC generated a large amount of interest due to its TV, radio and Internet PR offering rather than just print. “We are in an era of 24-hour news and dwindling resources. Regional newsrooms have no overnight crews, but have to fill those breakfast bulletins, so we are providing them with content.”
The management team decided to go with ISIS, which Livingstone had worked with recently on the buy-out of car hire broker Travel Jigsaw. The firm’s investment was arranged by Paul Morris and Benoit Broch and after six months of due diligence it took 45 per cent of the business. Management hold a controlling stake following the deal, with Stern owning 13.5 per cent of the company.
“I found ISIS to be the most dynamic of the private equity houses,” Stern says. “They came in right from the beginning and got their heads around the business and where we are positioned in the market. We also researched several private equity houses and felt that they worked well with younger companies.”
Morris said the deal was the right size for ISIS and it has backed a strong management team to exploit its niche to grow the business.
“Media has been a sub-sector of ours for the best part of a decade,” he says. “We are always trying to find an interesting area of media to make an investment. Through our work in that space broadcast PR indicated that it is an interesting and fast-growing niche.”
Morris claims he is confident with the management team he has backed, but is currently strengthening its board by introducing a new chairman and FD.
The chairman is yet to be appointed, but Samir Shah is the new FD. He came from ISIS’s network and has a media background with time spent at Virgin and a publishing business on his CV. “He has good credentials. I introduced him, the team loved him – deal done.”
Morris adds that TVC had a strong team, but needed help if management was to double, or even treble the size of the business. “They couldn’t continue to run at the same pace, so we are redeveloping the organisational structure to facilitate growth.”
In the first 12 to 18 months, he plans to review internal structures to increase its revenues before looking for an exit.
“A trade buyer will be the obvious route, but no trade buyer would be stupid enough to say: ‘You built the overhead and we are prepared to pay you for it’. I believe we are looking at a minimum of three years.”
Stern adds the deal has “invigorated” the management team. “We are in an exciting position as a growth company.