The entry of Getty Images and Corbis (100% owned by Bill Gates) into the photography business in the mid-90s set us on a fairly inevitable course of a trade sale. Getting venture capital and angel finance on board at the end of the 1990s also dictated this route.
It was a testing process. From 1997 we always had a corporate finance adviser (expert in selling businesses) in our team. Firstly, the excellent Chad Murrin from 3i – and for the last 5 years Colin Scotland (one of the best in the business). Chad and Colin become two of the most valuable mentors in my life. I owe a lot to them – and they gave me a love of business that I am always eager to pass on to others.
Back in 1997, I remember asking Chad what EMPICS might be worth to a buyer. He said “possibly £1m”. I told my accountant – and he said “take it and run!” I thought there was more to it – and another 7 years passed before the business was sold.
EMPICS had a few levels of complication. There were a number of components that were very hard to value. For example, you could understand the value of the photo archives we had acquired, but it was difficult to place a value on the photography we had produced since 1985. This had always proved difficult – banks were reluctant to attach any value to our photography archive as an asset. We also ended up creating a good profit – but then reinvesting heavily in new technology, such as ShootLive (our real-time process for delivering instant sports photography to web and mobile).
Along the way, we often struggled. Cash got very tight – and at one point 3i tried to attract a sale of the business without our permission (they were minority shareholders).
We also got serious approaches to buy the company. One of the regular knocks on the door was, of course, from Getty Images. You had to be very careful not to waste too much time when these came along. With Getty this was relatively easy – we knew that they would just buy our business and close it down. They wanted an annoying competitor out of the market. With over 60 dedicated staff at that stage, this was not an option.
However, we knew that we were a large medium-sized business (the world’s largest independent in sports photography – but still medium-sized in photo licensing). Being in the mid-ground is never good for a business. We needed a “big buddy” to work with.
By the early 2000s, we had built an interesting strategic position by advising sports rights holders and building an innovative technology platform for new media, ShootLive. We also realised that access to sports data (the text and timely information to go with our pics) was going to be important. We were approached by the Press Association (the UK’s National News Agency – and at that time the leading provider of sports data) and decided to explore whether they would be a good partner/potential acquirer. We invited them to a demonstration of ShootLive at Sandown Racecourse, to see the service in action. The night before we had won the CBI/Real Business Award – so that was on the table to show our guest too. The process was started – and EMPICS was en route to becoming a Press Association company.
Colin helped to guide me through the process. We worked closely with our corporate lawyer, Katy Jones of Farrer & Co – and the deal was signed off in spring 2004. In the end, the calculation of price was relatively simple. We took the profit we were making, added back the research costs from ShootLive to calculate our earnings, then agreed a multiple that was acceptable to both parties – but relatively high because of the innovative technology.
I’d been a member of TEC International (now Vistage) which was a chief executives’ group. We had regular discussions about selling businesses – and many members and speakers said that it can damage a lot of relationships when you sell. Some of this comes through jealousy or envy, some through colleagues feeling that they have been sold out or not got their just rewards. Talking does not prepare you for this and on the whole we had a pleasant and fair reaction from colleagues, but I did lose one very good friend during the process.
As with many of these trade sale transactions, there was an earn out period. An earn out is when part of the business sale price is linked to the management team reaching certain financial targets over a defined period. I’d been advised against this – but it was essential to get the best price for the business. Everyone said that “earn outs never work”. Well, “everyone” was right. Our earn out was planned to be just under 4 years – and we parted after 2 years. It was a little fraught at the end – but I believe we and the acquirer got a fair deal. It was interesting to be “sprung out” of EMPICS – my baby – after 20 years. But it felt like a good, clean break.
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