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What will Informa do next?

It’s not just media companies that can be frustrated by listed company investors. But, as Ascential completed its B2B reorganisation sell-off that more than doubled the total value that investors had long ascribed to it, fellow UK-based group Informa Plc reported its 2023 financials. It had cheery like-for-like revenue growth of 30% and better-than-forecast operating profit, cashflow and debt levels. Total revenue was ahead of pre-pandemic 2019 for the first time, marking the complete rebound of its world-beating £1.75bn trade show portfolio. But the stockmarket was underwhelmed. Although the Informa share price is some 10% up in a year, it is 4% down this month, despite forecasts of 6-9% profit growth for 2024.

Investors may have been slow to appreciate Informa’s latest dealmaking surprise, a smart move to combine its InformaTech portfolio (Industry Dive, Information Week, Light Reading and AI Business; research firms Omdia and Canalys; and lead gen platform NetLine) with the US listed TechTarget, including more than 150 websites, research firm Enterprise Strategy Group and video platform BrightTALK.

MarTech explained: “As the value of audience data increased and B2B marketers in the tech sector, in particular, emphasized ‘buyer intent’ data, both TechTarget and Informa Tech responded accordingly. TechTarget offers a buyer intent platform called Priority Engine that gives marketers access to data about prospects actively researching tech solutions. Informa Tech created IIRIS, a B2B customer data platform that collates, standardizes and analyzes all of the first-party data generated by its portfolio.”

The combined, listed company (in which Informa will have a 57% shareholding) will produce an estimated $500mn revenue (31% EBITDA margin) in 2024. It aims to become the market leader in enterprise tech “intent-led sales/ marketing services”.

In addition to injecting its own business (12% of its total revenue last year), Informa will be paying $350mn in cash for existing TechTarget shareholders which will own 43% of the enlarged company. Given Informa’s inclusion of the Industry Dive newsletters (acquired for some $525mn in 2022) there are inevitable questions whether it is paying too high a price for its 57% stake in the “new” TechTarget because:

On the basis of 2023 earnings of $100mn, InformaTech may be “worth” $1.3bn (ie 2x Industry Dive) so Informa is – with the cash component – spending $1.7bn for its 57% of the enlarged TechTarget whose enterprise value will be about $2.6bn (ie the current $1.3bn + InformaTech’s own $1.3bn valuation). It seems as if Informa is paying a premium of some $200m.

However, it is possible that the distinctive Industry Dive has been included in the deal primarily because it is managed as part of InformaTech and is US-based. So it may simply not be valued by TechTarget at the 15x EBITDA / 5x 2022 revenue that Informa paid for it less than two years ago. Further, it seems likely that those B2B newsletters generated $40-45mn or 50% of InformaTech’s profit  in 2023.

The Industry Dive acquisition had always seemed a high multiple for a fine business but one that derives almost all its revenue not from readers but from advertisers. The 15x EBITDA has become a widely-accepted multiple for paid subscription media, but even the upfront cash payment was higher than many had predicted as a total price. Perhaps that’s why Informa self-consciously explained, at the time, that Industry Dive had 2.5mn “active subscribers” – even though subscribers to Informa’s other information businesses really do pay. Whether or not Industry Dive generated 50% of InformaTech’s profit in 2023, it might inevitably have “disrupted” the valuation of InformaTech in its match-up with TechTarget.

That may be why Informa is having to pay the premium price for its majority share in the “new” TechTarget. The question of whether Industry Dive really fits in the strategy of TechTarget is for another day: even the cash that Informa is paying to TechTarget may be lost in the rounding if NASDAQ investors become bullish about the company’s prospects. There may be a lot of upside in Informa’s exposure to US investors.

Given the opportunity for enhanced stockmarket values (compared with London) and the potential (after a two-year standstill) for Informa to sell-down or even divest their stake in TechTarget, investors are unlikely to be disappointed by the eventual outcome – although you can see how the intricacies might have worried them.

For Informa, it’s just the latest in a line of smart deals by CEO Stephen Carter which include its retention of prized 7-20% stakes in the pharma, finance and maritime intelligence businesses it sold for premium prices in its post-pandemic reorganisation. Slightly surprising, neatly-structured deals have become the hallmark of Informa’s path to profit growth and especially to simplifying what has, at times, seemed a complex group.

Although investors might not always give Informa the credit for a creative corporate strategy, the TechTarget deal will get them thinking again about the yet bigger gains that could come from any decision….to divest the £600mn-revenue Taylor & Francis. With 35% margins and a low-churn subscriptions base, the highly-rated academic publisher at the heart of Informa may be worth – at the very least – £2bn (10x EBITDA) – almost 20% of the company’s current enterprise value.

But it gets better.

If you assume that the much larger trade show division, Informa Markets, might be worth at least 15x EBITDA, its own valuation may be £10bn or more. Add that to Taylor & Francis and you may already have more than Informa’s current £11bn enterprise value – without counting operations (including InformaTech) which last year accounted for 30% of Informa revenue and 21% of profit. You can almost hear the sharpening of pencils.

What will Informa do next?

Informa Plc
Share of total revenue
   Tech—-  9%12%13%
   Tech Target12%  3%—-—-
TOTAL REVENUE3,8983,4883,1662,389
Share of total profit
   Tech—-  7%  8%11%
   Tech Target  6%  2%—-—-
TOTAL EBITA1,076958846535
Enterprise value £11.0bn £11.5bn £11.7bn £11.0bn
*Numis estimates **Excludes divested Informa Intelligence