New Private Equity Player Enters in Ohio
Versa Capital Management entered the newspaper industry with its May acquisition of Ohio Community Media, the newspaper group formerly owned by Brown Publishing. Versa is a private equity firm based in Philadelphia, Pennsylvania with additional offices in New York and Chicago.
Versa focuses on control investments in distressed companies or ‘special situations’ in the North American middle market. The company invests in all aspects of the capital structure, with a focus on immediate or eventual control. Versa is currently investing its second fund, a $650 million vehicle raised in 2009. Versa’s first fund of $300 million was raised in 2006.
DV&M recently spoke with Gregory Segall, Chairman, President and CEO of Versa, about their acquisition. Mr. Segall has overall responsibility for Versa Capital Management and its investment strategies including leadership and supervision of the investment and portfolio management activities of the firm and its affiliated investment funds. He has led Versa and its predecessors since their founding in 1992.
With investments as varied as Allen-Vanguard, a global leader in the development of defense systems and IED countermeasures,and Polartec®, a producer of branded high-performance fabrics, how did you first get interested in exploring acquisitions in the newspaper industry?
We are attracted to assets or businesses that are undergoing recapitalization, divestiture, or other transition. The newspaper industry has had its share of difficulties, some driven by cyclical issues (such as the economic downturn and overleverage) and structural issues (such as changing readership habits and increased competition for advertising dollars). We have looked at every major newspaper chain that went through a bankruptcy in the last few years.
What attracted you in particular to the former Brown Publishing newspapers in Ohio?
Brown was one of several community newspaper chains investment opportunities we looked at in 2010. The company filed in April and emerged from bankruptcy in September, with its former lenders as its new owners. Buying assets or companies from somewhat unnatural owners is an investment theme of ours, and this opportunity morphed into that theme. We partnered with industry veteran Scott Champion, who was installed as President and CEO effective with our ownership in May 2011.
What is your strategy for adding value to this newspaper company? What are the biggest opportunities that you see?
Brown Publishing struggled with many of the structural and cyclical issues that its industry faced, with the additional burden of a bankruptcy. When the lenders came to own the company, their focus (rightly) was transitioning to the next owner, which turned out to be us. The new company, renamed OCM, LLC, is well-capitalized and has the right management team in place to achieve its goal of serving its core base of readers and advertisers in northern and western Ohio.
Will your near term acquisition strategy focus on improving the Ohio clusters, or will you consider additional platforms in other parts of the country?
We don’t see it as an either/or proposition. We remain attracted to the newspaper industry and continue to actively seek investment opportunities in the space. We will consider tuck-in acquisitions into the Ohio cluster as well as metro and community newspaper chains in other North American geographies.
The newspaper industry had a difficult first quarter in 2011. When do you think the industry can turn the corner and begin to grow revenue again? Does it take a change in business strategy?
We are bullish on the long term prospects of the industry. We have seen many times in other industries that difficult times produce more capable managers. We don’t think the industry is going away, and we think the community newspapers always had a key element of success: an emphasis on local content. We are focusing on our little part of it by setting up the proper capital, management and ownership structure to give OCM the best opportunity to serve its core base of readers and advertisers.