The pioneering Euromoney magazine was launched in 1969 by the Daily Mail’s financial editor Patrick Sergeant with £6,000 of the paper’s cash. It was an almost immediate success and quickly embarrassed the founder of investment bank Warburg’s who had passed up the investment opportunity, saying it would never work because he already had too much to read.
It was a game changer.
Euromoney became a financial publishing powerhouse by championing the rapid growth of the Eurobond market. It helped to reinvent financial journalism in the UK and became the leading magazine of wholesale finance. It spawned a range of increasingly international information services, conferences, training courses and exhibitions – and has consistently been one of the UK’s most profitable B2B information companies, once worth £2bn.
It built a formidable reputation through its ability to crank out long-term growth from diversification into events, tight cost control, and highly-successful M&A. It was also very good at selling high-priced advertorials in its publications and soponsorship of its conferences – decades before “content marketing” became pervasive.
But its impact on the Daily Mail Group (DMGT) was greater still. It represented the family-controlled company’s first major push into the B2B media which would come to dominate its profits – and compensate for the digital disruption of its legacy newspapers. DMGT’s light-touch, hands-off venturing also helped to establish a pattern for its investment in a whole string of lucrative startups including RMS, Zoopla, and Cazoo.
Euromoney also became known for its super-generous senior executive salaries. Decades ago, the annual remuneration of the chairman and CEO of this medium-sized listed company was millions of pounds as a result of a “secret” bonus scheme paying 1% of profits and 5% of profit growth. This lucrative scheme was also shared with a slice of middle management, as was the Capital Appreciation Plan, a five-year plan, based on getting the company’s profits to £100mn. It paid out over three years and enriched executives, some of whom might have played tricks with M&A to ensure their lucrative bonuses. This was a company whose cash-generation thrilled its management (and its majority shareholder) for decades. It didn’t seem like a public company at all.
But, in 2019, it all changed.
DMGT sold its remaining 49% shareholding. The divestment proved to be characteristically great timing by the cashed-up newspaper group because it was ahead of Euromoney’s abortive and protracted attempt to sell its asset management division (which still accounted for more than 30% of group revenue) – and the pandemic.
But, although Covid almost halved Euromoney profits in 2020, the company remained a star performer almost to the very point at which DMGT separately sold-off much of its B2B portfolio, essentially to fund the 2022 de-listing by its founding family. In 2018 – the year before selling its stake – DMGT’s £56mn share of Euromoney Institutional Investor Plc profit had accounted for one-third of the news group total.
That was almost the high-water mark for Euromoney.
After two years of “independence” and persistent rumours of an impending MBO, the once golden publisher was snapped up jointly by two private equity firms. The price owed less to Euromoney’s glorious 55 years than to its confused strategy and slow recovery from the pandemic: 2022 EBITDA was forecast at £80mn – almost 30% below 2019.
It had taken the London-based Epiris and Astorg, of Luxembourg, five bids and £1.6bn (24% higher than the first offer) to get Euromoney shareholder approval. Euromoney was de-listed from the stock exchange in November and the two owners are now hard at work dividing the business between the Fastmarkets ‘price reporting agency’ (25% of revenue and 45% of EBITDA) and rest of the assets including Euromoney magazine, now under the name of Delinian. The total price – believed to be divided equally between the two pe firms – is some 20x EBITDA, but 16x the pro forma for 2023. A reflection of the fact that two-thirds of revenue is from subscriptions.
The formal separation of the two companies is expected to complete during April, but Fastmarkets (owned by Astorg) is expected to continue to buy “transitional services” from Delinian (owned by Epiris) – including its London premises – for up to 12 months. But, even though the fast-growing PRA business has hit the ground running and recently lost out to Mintec in the bidding for the AgriBriefing business, we might expect a frenzy of M&A activity from both parts of the former Euromoney.
Fastmarkets is one of the five leading PRAs with aggregate revenue of some $1.5bn but it is the only not to provide price benchmarks in the the oil, chemicals and energy markets. It had grown out of Metal Bulletin (acquired by Euromoney for £200m in 2006), a PRA pioneer launched in 1913 as a spin-off from The Ironmonger magazine, using prices from the London Metal Exchange. Some 80% of Fastmarkets revenue now comes from subscriptions.
PRAs are highly attractive to information providers because they are the “official” prices which govern trading in the world’s commodity markets. They are the exclusive information sources which facilitate transactions, consultancy, high-value research and events.
Despite the moves away from hydrocarbons in most developed economies, oil demand is still growing worldwide and may not peak until 2030; even then, the actual decline is expected to be slow. It means that oil – currently 70% of total PRA business – may continue to dominate the largest PRAs, S&P Global (Platts) and Argus Media, for many decades yet. But that may create the opportunity for the developing PRAs to dominate the new, growing markets. Like that for lithium, cobalt and nickel – key ingredients of the booming battery market for electric vehicles – in which Fastmarkets has become a leader alongside its price reporting, consultancy, research and events in agriculture, forest products, metals and mining.
CEO Raju Daswani has been an executive successively with Metal Bulletin and Fastmarkets for 28 years. Having failed to capture AgriBriefing (which might have been a perfect fit for Fastmarkets), he may now want to acquire another longtime Euromoney target, the privately-owned CRU Group (formerly Commodities Research Unit). The £50m-revenue London-based company has PRAs in mining, metals and fertilisers. Its 280 employees include analysts and price assessors in London, Pittsburgh, Santiago, Delhi, Mumbai, Shanghai, Beijing and Sydney. Euromoney and CRU are known to have had abortive “collaboration” discussions in the past. Perhaps the soaring value of PRAs (Fastmarkets and AgriBriefing have both been valued at more than 20x EBITDA and 8x revenue) will encourage CRU’s owner Robert Perlman to consider an offer which could now be some £300m+.
Fastmarkets may also be interested in the $150mn-revenue ICIS, RELX’s distinctly non-core but market-leading chemicals PRA.
On a broader scale, Astorg must be pondering an eventual sale to, or combination with, either the $300m-revenue Argus Media (owned 50:50 by its CEO and private equity) or News Corp’s Oil Price Information Service, acquired last year from IHS Markit for $1.2bn (18x EBITDA).
Despite the continuing growth in revenue, profit and margin, Delinian is almost the definition of why Euromoney has been discounted by investors in recent years. For a start, its most profitable division is the £45mn-revenue Institutional Investor asset management business that Euromoney had wanted to divest.
The newly-branded company has other portfolio gems including: the Altrata databases on 100mn business people and high net worth individuals, 4mn companies and 4bn “connections”; major events in telecomms, real estate and finance; information brands in infrastructure and aircraft finance; and Euromoney itself.
Delinian is some 2,000 people and revenue is 50% from outside the UK. We might assume that the recent appointment as CEO of longtime investment banker Andrew Pinder signals an intention to return the focus to “finance”. If so, Epiris may just be planning a lucrative sell-off of Altrata and perhaps the events too.
Its likely acquisition targets might include: PEI Group, the £35mn-revenue private equity information publisher which happens to have been a spin-off from Euromoney and, coincidentally, shares a chair (Henry Elkington) with Delinian; and the £40mn-revenue With Intelligence (formerly Pageant Media), another company which has profitably acquired under-wanted businesses from Euromoney.
The Rashbass legacy
Andrew Rashbass, the former executive of The Economist and Reuters, who had been CEO of Euromoney Institutional Investor Plc for its last seven years as a listed business, may feel cheated by not having been able to maximise the opportunity of the company’s independence from DMGT before the pandemic struck. But his achievements and disappointments are equally visible in the strategies of Fastmarkets and Delinian.
Positively, he invested in Fastmarkets with determination, targeted acquisitions and increased operational independence which now makes its separation and continuing development easier. His creation of Delinian’s fast-growingAltrata people intelligence grouping is another key achievement. But it’s all overshadowed by the fiasco of the Asset Management sell-off that never happened. To say, Rashbass was embarrassed to be forced to withdraw the division from sale and then to (sort of) pretend it had again become a “core” business would not be the half of it. Imagine how it was for the teams who had laboured under a “for sale” notice, only to realise that they had generated an estimated 50% of the whole company’s profit in 2022.
Euromoney had long since lost the cohesion and “purpose” that had made it a pioneer; it had become a conglomerate. We might say that this is proved by the ease with which the two private equity owners have divided up the spoils. But it’s only Fastmarkets that is a specialist, pureplay operation ready to conquer the world or be acquired expensively by one of its bigger rivals. By contrast, Delinian is a self-described collection of 20 information, research, consulting and events businesses in the “financial, professional services and asset management industries”. The breadth almost implies a potential breakup value substantially more than the £800m now paid for them.
That’s the point. Euromoney – as a listed company – had seemingly ignored investor appetites for focused, specialist businesses. As a result, it had become a classic private equity opportunity: a conglomerate of good assets. And its £125mn peak profit was a whole decade ago.
The total £1.6bn buyout price was a 34% premium to Euromoney’s recent stockmarket valuations – but still substantially below the heyday. Insiders expect to save up to 50% of the £40mn of its central costs in the carve-up – effectively an increase of 25% in last year’s £80mn EBITDA. Just like that.
The numbers seem to tell the story of a company that never really recovered from the loss of its co-founder and longtime chair Padraic Fallon, who died in 2012, and his protege CEO Richard Ensor whose 40-year career ended just three years later. Maybe DMGT had been part of the magic too.