Every cloud has a silver lining, the saying goes. But that wasn't on the minds of Stephen White and the team at August Equity when they went out for dinner to commiserate losing out on an MBI of media monitoring company Romeike.
However, the Swedish trade buyer that outbid them only put a brief dent in the pairing's plans. Andrew Hartley, managing director at August Equity, explains: "After a lot of time and effort working on the bid we were understandably disappointed, so we went out for dinner to conduct a 'wake'. During the meal, conversation turned to a similar company, Durrants, that we'd uncovered during due diligence. Six months later we'd done a deal."
It turned out to be some silver lining. Having backed White, a publishing and press cuttings veteran, in the £14m MBI of press cuttings agency Durrants in April 2000, August Equity sold the company to Exponent Private Equity in April for £82m - an increase in value that represented a cash return of six times the initial investment cost.
Durrants also benefited. Revenue grew from £7m to £20m, and profits soared from £1m to £7m during the six years it was backed by August Equity.
Hartley is quick in his praise for White and his team: "We supported Steve in putting together a management team - including finance and technology directors - which we thought could grow the business. But he also recognised that the digital revolution was coming to the traditional press cuttings agency and had the vision and courage to drive a small business through a complete technological change. The team's execution was exemplary," he says.
Durrants, or The Press Cuttings Agency as it was then known, was founded in 1880 - ironically enough, by William Durrant and Henry Romeike. At the time, it provided a bespoke newspaper and magazines cuttings service - mainly to actors and politicians - couriering hard copies of relevant cuttings to its clients.
Over a century later, the industry had moved on little in terms of process. But as soon as the ink was dry on the Durrants deal, White set about computerizing the entire process and revolutionising the company. "We bought the company in April 2000 and went live with a new 'all-singing' technology platform in July 2001. Processes had been almost entirely manual and very labour-intensive. I saw enormous potential for changing all the work flows and processes using computer-based equipment," explains White.
The platform, which included an Oracle database and a search engine, brought about a sea change in process. Rather than using a large number of agents on a daily basis to search publications for stories against a huge list of keywords for different clients - then cutting them out and delivering them - every story could be scanned into the database and searched electronically by keyword. "It significantly increased productivity throughout the company but, more importantly, it improved the quality of output for our clients," explains White.
But that was just the first phase. It was followed by a platform upgrade in 2002 and the introduction of a web-based service option for clients in 2003. This option, which enabled clients to tailor the search results themselves, was unique to the industry at the time.
"Once we'd captured the content digitally, we were able to present it in different ways. Up until then, it was always delivered as hard copy, or by fax and email. Today we offer email links, a web service that will source stories on behalf of clients, and even alerts to mobile phones. It's completely opened up the process of distribution and sourcing," says White.
Durrants can also now offer evaluation and PR services to clients. "We can monitor whether client press coverage is positive or negative, or how it differs between the national, regional or technical press," adds White. "That's why we bought the company in the first place: to fundamentally change the technology. It has allowed us to diversify enormously."
While such a technological transformation was, unsurprisingly, not without minor hiccups, White believes that August Equity's unwavering support - "where other private equity firms might have lost their heads" - was essential in securing Durrants' current success. He adds that August's role in the next phase of Durrants' growth - the acquisition of rival Xtreme Information Services' news subsidiary - was a "key moment".
The £17.5m deal in July 2004 propelled Durrants from number two in the UK to being the top-placed press cuttings agency, with over 300 employees, a total revenue in excess of £18m (at the time) and over 3,000 customers. White explains that August Equity's role was fundamental. "The acquisition of Xtreme's news subsidiary was a consolidation play to take advantage of our technology platform and to add new customers.
We had a number of other options about who to buy, but August Equity took a leading role in clarifying which deal made the most financial sense," says White.
August's Hartley is equally lavish with his praise for White and the Durrants' management team: "Execution was everything. What looked simple was, in fact, a long grind and involved a lot of detail, including the integration of Xtreme throughout 2005. Our job was to support Steve and the management team in this process and provide assistance where we could. We provided our expertise of arranging finance and dealing with the vendor, but there's no substitute for how the whole of the Durrants team executed on the vision." While the reins are now passed onto Exponent, White - who has become the executive chairman in charge of strategic vision - does not intend to rest on his laurels. "Through the sensible use of technology we'll continue to increase efficiency," he says. "We're also interested in more acquisitions. Part of my new role is to find the right targets for our continued growth."
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