When it was just six months old, Imagine seized the chance to buy part of Highbury Entertainment. Is the sky now the limit for this fast-growing Bournemouth publishing house?
Words by Fiona Walsh
It was when Highbury Entertainment cancelled its Christmas party last year that Damian Butt, managing director of ambitious local rival Imagine
Publishing, realised he might be able to strike a spectacular deal.
Having left Highbury just six months earlier to set up on his own, Butt kept a close eye on its fortunes. Both businesses are based in Bournemouth and there was plenty of local gossip. “We began to hear things as soon as Highbury started unravelling,” he says. “There were little telltale signs.”
Highbury, briefly headed by former editor of The Sun, Kelvin MacKenzie, was faced with difficulties as a consequence of its high debt levels from previous acquisitions. Attempts by the Highbury management team to sell the company to Future Publishing were wrecked by a decision to refer a deal to the Competition Commission. A break-up was, in reality,
only a matter of time.
This acted as a catalyst for a combined effort by Imagine and August Equity to examine the structuring of a potential deal in double-quick time. It took just ten working days from Highbury and Imagine opening discussions to a financed offer being agreed with the receiver of Highbury. Imagine purchased a portfolio of 24 consumer magazines in the fast-growing videogames, computing and digital photography markets, and within a matter of months it was number- two games publisher in the UK market.
Backed by a £7m investment from August Equity managed funds, the deal saw Imagine triple its existing magazine portfolio at a stroke. It also marked a reunion for the Imagine team with titles that were formerly run by them when they were working at Paragon Publishing, before it was sold
to Highbury for £32m in 2003.
“It’s an absolute dream,” says Butt. “We never thought that within six months of forming our own company we’d get such an opportunity. For a modest sum, we’ve got a business that went for £32m two years ago.”
Butt founded Imagine with fellow former Paragon directors Mark Kendrick and Steven Boyd, who together have launched over 60 magazine titles in the past ten years. They already had close links with August Equity’s managing director Andrew Hartley and colleague Steven Clarke, both of whom used to work at 3i, which provided development capital for Paragon in its early years.
When the Imagine team was starting up, it visited August Equity during the summer of 2005 to present its business plan to obtain funding. “We don’t back start-ups but we were very, very impressed with their business plan,” says Clarke. “We gave them a very clear message that when they wanted backing for acquisitions, we would be there for them.”
By staying in touch with the Imagine team during its formative months, and by keeping a keen watch on developments in the media sector, August Equity manufactured an opportunity that no other firm in the private equity industry could have completed so quickly.
“The genesis of the deal was the long-term relationship we built up with the management team and our commitment to the sector,” says Clarke. “That’s really why we were in the position to mobilise resources and do a deal in a very short time frame, and still be very comfortable about the risk we were taking.”
Butt clearly agrees. “When this deal arose we were able to move fast because we knew each other,” he says. “They had faith in us. When we talked to August Equity it was a case of, ‘OK guys, you’ve got the money, we’ve got the talent and experience, let’s do it!’”
Going forward, Butt and his team are keen to capitalise on August Equity’s expertise. “They will give a guiding hand and will also help us with contacts,” he says. “We are based in Bournemouth and, although we come to London a lot, it will be good to have August Equity there picking up the whisperings in the corridors of power.”
Although still only 33, Butt is already an industry veteran of 14 years and, post-Highbury, has ambitious plans. The deal takes Imagine to where it had expected to be in three years – never mind one – under its original business plan. But there is no doubt that, as well as more magazine launches, further deals are likely to occur.
Of the 24 Highbury titles, around 13 will be retained. “Some have been damaged irreparably, and our philosophy is to focus on fewer titles,” says Butt. “Once they are consolidated, the group will then look ahead to the possibility of launching new titles.” One rumoured area might be a new publication focused on fast cars, an area for which the youthful Butt has a keen passion. Nearly as much as he likes fast deals.
Media – spanning publishing, music, multimedia, radio and TV, as well as marketing and information services – is one of August Equity’s specialist sectors.
The firm’s portfolio of investments includes Discovery Group, which owns the highly regarded Durrants Press Cuttings business, founded in 1880. The August Equity team backed the near-£15m MBI of Discovery Group in 2000 and is currently examining the exit options. August Equity’s Steven Clarke believes there will be a “strong appetite” for the business.
Also in 2000, Andrew Hartley, joint managing director of August Equity, led the MBO of Video Arts, the video-based learning group set up in the early 1970s by a group of television professionals including actor and comedian John Cleese.
In 2003, Hartley led a replacement capital deal to take a 45% stake in Hat Trick, a leading UK independent television production company, specialising in comedy and light entertainment.
Past investments include Incisive Media, which was successfully floated in December 2000. Incisive Media was formed through the merger of two of the firm’s portfolio companies, Timothy Benn Publishing and City Financial Communications. The flotation valued Incisive Media at £71m. August Equity no longer has a stake in the business.
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