The Readers Digest is the latest media deal struck at the peak of the credit fuelled buy-out market to head into bankruptcy.
Launched in 1921 the Readers Digest is one of the world's largest publishers with 94 titles and a claimed global readership of 130m in 78 countries.
Private Equity investors led by Ripplewood Holding loses their entire $600m investment. Ouch
So what went wrong?
Ad recession didn't help - revenues had fallen 18.4% last year and a further 7% in the first six months of this year. But the business had stabilised since with Group revenues down just 2% this year.
But the real killer was the weight of debt, a wopping $2.2bn taken on by the private equity buyers to make the acquisition and as cash flows came in less than they forecasted it struggled to meet its $27m interest payment.
We look forward to the Reader Digest emerging from its voluntary bankruptcy stronger and better able to deal with the new economic reality. We hopeso as we know and like this business. Interestingly the RD is one of the pioneers of direct marketing, a big believer in market research to shape content that readers want and it from the beginning it understood what other publishers are only now beginning to get their arms around namely the value of reader relationships.
Here in the UK the magazine was for awhile edited by our friend Sarah Sands (now Deputy Ed at the Evening Standard).
Get the debt under control and get back to publishing a great read that is beloved by many millions across the Globe.
Director | Market Evolution Ltd
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