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Monday, March 25, 2013

BEGGING LETTER PRODUCES ANOTHER $500,000

Returning from Germany, I couldn't wait to find out what progress had been made in our quest to acquire Technical Publishing. Jack Abely called to ask me to make an appearance in his office. To my surprise, he wanted copies of the letters we had written over the past couple of years asking readers to pay a share of our rising printing and postage costs. He told me Dun & Bradstreet wanted another half million dollars on the bottom line and wanted me to direct that effort with most of the other publications with controlled circulation. The publishers weren't happy, but they had no say in the matter. I assumed that Jack's year-end bonus was based on bottom line results, and despite the attempt to spin off the company, he was anxious to achieve that goal in what could be his last year in the job. Over the next couple of months we met the goal.  And including not GAM's $125,000 contribution,, we added more than $500,000 to our coffers.

The consortium met for the first time. I had previewed our financials.  Without Dun's Business Month our revenues of $120 million generated income of $25 million. If we cut expenses in several areas, we could return another couple percentage points more. If you'll remember, the U.S. economy over the previous years had rapid expansion, but things had slowed down. Economists referred to it as a  "soft landing." We had participated in that growth, but I was concerned about the slow down. As a group we agreed on an initial offer of $120 million, close to five times earnings. We didn't expect it to fly, but it was a start. We learned there were other companies bidding, and one of them was Cahners Publishing, located in Newton, Massachusetts. It had been acquired by Reed, a major publisher in the U.K, in 1979.  Though I had never directly competed with Cahners, other publishers had, and that company was labeled "the enemy." To get to the point, they continually outbid us. When we escalated our bid to $131 million, I announced I was dropping out of the group. I din't think we could handle the debt service on that large an amount. Tim Burkholder, the publisher of Industrial Research & Development agreed with me and also withdrew. The consortium was down to six. There was no question in my mind that it would be outbid, and my tour at Technical was ending.

As far as I could tell the negotiations were a tightly kept secret. Other than my staff and the other publishers, my only friend at Technical was Stan Cohen, the editor of Consulting Engineering. We had similar backgrounds. We both had journalism degrees and had been sports writers.  In fact, Stan had written the definitive book of the college basketball scandal in the early 1950's. Titled, "The Game They Played", it's the best book on the subject I've ever read. (An interview with Stan can be found on YouTube.) He came into my office, closed the door to make sure we couldn't be overheard. He told me he had been hearing rumors about our being sold, and was looking for verification. Of course I had been sworn to secrecy, but as an ex-member of the consortium, I decide I no longer had to abide by my pledge. Obviously word had leaked out, though we couldn't pinpoint the source.

A couple of days later I had a phone call from Ray Luca, a friend who headed ATF Davidson, a manufacturer of small printing presses in New England. He was looking for a recommendation for Beth Hogan-Scott (Beth had married Jim Scott and purchased a home in Northern Connecticut and was looking for work closer to home.) "Hire her", I said simply. She came into my office to thank me, and revealed she had heard the same rumor Stan had reported. You can image how quickly it spread throughout the office. Glen Usdin, who had been the publisher of Fire Engineering, had also heard the rumors and left to launch his own company, refurbishing used fire truck and reselling them. Things were in a state of flux.  (The saga continues in tomorrow's post.)