Our private equity partner, GMT Communication Partners, has been a regular investor in out of home media. Digital is not cannibalising the traditional outdoor market in the way online publications have cannibalised newspapers and magazines. and the established market retains its hold.
As a license-driven business with owned space in the sector, Primesight was an attractive proposition. Similarly, private equity companies are investors in four of the top five out of home media companies in the UK.
What matters to private equity firms, and their ambitious partners, is growth. Primesight was originally part of the Scottish Media Group, but the group was very Scotland-centric and we were a relatively small part of the business. We met with several companies which might help us expand, and GMT was one. We liked the GMT team immediately, they were open and willing to talk about investment and the role management would play, as well as the likely terms of the agreement. We bashed out a contract in one long evening in 2007 and haven’t needed to consult it since.
One major shift following the agreement was the speed at which we made decisions. Big organisations are often slow moving, bureaucratic and beset with red tape; decision making tends to be committee based and require consensus. With GMT we make quick decisions. As a result, we did away with the long investment papers, committees and endless debate and now have quick and efficient board meetings. We get things done by having concise conversation, being open and transparent, reaching agreement and moving forward at speed.
Another change was that the business model shifted from being simply focussed on profit, to a focus on cash generation as well as profit, so that cash can be reinvested back into the business to enable further growth. When you are a division of a big company you don’t normally focus on cash, as it’s often controlled at the top. Private equity firms are not cashpoints and you need to manage the business within its cash limits.
Importantly for us, and contrary to what most people expect, GMT’s focus isn’t short term. They enabled us to fund our Titan billboard buyout in 2009 when the market was struggling. Titan’s revenue was down 40 per cent, but it was clear that after the recession the likes of car manufacturers and banks would want to advertise again and the company’s services would be back in demand.
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Granted GMT doesn’t have a ten-year timeline, but a lot of businesses are now managed and judged on a quarter’s performance, whereas with GMT we could take a more medium-term approach to investment.
The period between 2008 and 2013 was a difficult one, the market was very flat, but private equity backing meant we continued to acquire. There was a lot of pressure to grow, but we didn’t know when the markets would improve; a traditional corporate company would be reticent at a time like that. Although we felt pressure from GMT, we also felt in control. As I said, decisions in a corporate company are made by consensus, which can be very limiting.
A nice analogy might be that in larger organisations the group CEO may lay the train track, while the division CEO drives the train; but they can’t steer the train, the only control they have is to slow down or speed up. However our partnership with GMT means that decisions about how to grow were and are more in our control and are made in a more efficient way.
GMT is not a stereotypically hard-nosed private equity company; they are firm and expect us to drive the business hard and outperform the market, but they equally take a more pragmatic view when it comes to factors impacting the business that are outside our control. We have a good relationship that has been built on trust, openness and a culture of “no surprises”.
We have monthly board meetings and, although GMT are involved in decision making on strategic and important matters, they do not get involved in running the business. It is up to the management to come up with a plan and then execute it. Private equity should never run the company and GMT are firm believers in this.
Naren Patel is CEO at London-headquartered Primesight.
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