Tuesday's announcement that Erich Linker is leaving Impremedia is a good occasion to reflect on the past, present and future of the largest company in the Hispanic newspaper publishing industry.
Linker, a general market newspaper executive, joined Impremedia in 2004 to help grow what was then a private equity backed company with two newspapers (El Diario La Prensa in New York and La Opinion in Los Angeles). Over time Impremedia grew into a national newspaper chain owning pproperties such as Chicago’s La Raza, San Francisco’s El Mensajero, Orlando’s La Prensa and Rumbo in Texas, as well as the national magazine Vista.
What does Linker’s exit and before him John Paton’s (CEO) and Arturo Duran’s (Head of Digital) departures imply? Does it mean that their work has been done or that what they intended to do did not work out? As is frequently the case, it is neither one or the other.
Impremedia’s expansion in the Hispanic newspaper market coincided with the most difficult period in the U.S. newspaper industry's history: advertisers and readers moved from print to digital vehicles at a very fast pace. This structural change, which is still taking place albeit at a slower pace, was pronounced by the recession of 2008 and 2009.
In such a challenging environment, the main objective for U.S. newspaper executives, not just Impremedia’s, was to save costs. In addition, to become a multiplatform media company became a priority. In fact, Impremedia expects 25% of total profits from non-print in 2011 and 50% by 2012. As its former CEO John Paton said at an industry event at the end of 2009: "Today, with 42% fewer employees the company produces more than 97 products on seven robust platforms of web, widgets, mobile, TV/video, audio, social media and print. Let me clarify, that by a factor of 2 to 1 our cuts came from areas other than editorial staffing."
The Valuation blues…
One thing is clear; Impremedia’s valuation today is much lower than what Impremedia investors had hoped it to be by now. When they started buying up Hispanic newspapers in July 2003 newspaper valuations were much higher than today. Particularly for community newspapers, to which according to some financial analysts, Hispanic newspapers belong to.
Impremedia private equity backers Clarity Partners, Halyard Capital Fund, ACON Investments and Knight Paton Media (later Goldman Sachs provided a loan) started buying up Hispanic media properties during the boom (bubble?) days of Hispanic print. Many general market newspaper chains were acquiring Hispanic newspapers and some publications even were being financed from scratch by ambitious venture capitalists (Rumbo being the most ambitious and emblematic project of that “age”). General market newspaper valuations fell heavily since, allthough they have recovered somewhat during the last year.
In 2008 Daniel Jinich, Managing Partner at Acon Investment told Portada: “We don’t expect to exit our Impremedia investment for another 2-3 years.” Well, we now are in 2011 and the desired exit date is near. Last but not least, to dispense of leading executives such as Linker, Duran and Paton is also a way of reducing the company's costs to make it more attractive to a potential suitor.