Strictly management buy-out

Posted: November 4, 2010

Strictly Broadband has become an independent business again after splitting from its majority-stake-owning parent firm in October. Strictly Broadband MD Jerry Barnett explained: “The deal is that we and The Sport had both been struggling with the problems within our own markets – The Sport didn’t really have the interest or the energy to manage the diverse businesses they took on when they were expanding and acquiring, a couple of years ago. They wanted to refocus on their core business; newspapers. They needed to get that as strong as possible. At the same time Strictly had been suffering from the downturn in the porn market and The Sport didn’t need to be ‘fire-fighting’ on multiple fronts at once.”

Barnett continued: “It was felt best all round that Strictly Broadband go back to being independent and use fresh energy to turn the situation around the best we can in the current climate. Obviously the scenario is the porn industry’s been in a big slump for the past two to three years so we came to an agreement with The Sport. They owed us some money – they did our credit-card transactions and there was cross charging between the businesses for services we provided each other – and we agreed to trade back the shares in Strictly that they acquired in exchange for that debt. Simply, they saw a benefit in retaining that cash and after negotiation on the value of the shares they’ve come back for less than they were sold for in the first place. When that original deal was struck they could see the year-on-year growth of the business. I don’t think anyone saw the contraction in the market over the last few years coming – at least not to the extent that it’s shrunk.”

“People put a gloss on the situation- a brave face,” the Strictly boss continued. “Strictly deals with pretty much every studio in the country and beyond and I know the industry’s been devastated by both the global recession and Tube sites. I’ve heard a figure of 80% as the size of the downturn since the peak of about three years ago. That said, the market had been growing well for donkey’s years so in some ways it was a bubble waiting to burst. However, I don’t think I’ve seen any industry go through such a severe downturn. But those of us still trading are mopping up business from those who’ve pulled out of the market so there’s still viable business there.”

Clarifying the nature of his buy-out, Barnett added: “I’ve gone back to being the majority shareholder in Strictly. As MD I was always in control of the business but there have always been other minority shareholders. Before their bigger buy-in The Sport had been one of them, since the beginning, so they went from a minority to a majority shareholder. The deal done means they’ve completely exited now so I’ve personally got a higher percentage of the business than I did in the first place.”

Looking forward, Barnett concluded: “I’ll be passing through Erotica but we’ve decided not to take a stand there this year. Cost cutting means the priority has to be ensuring the business is profitable and as solidly so as possible. The main focus for the next few months is launching new platforms. The iPad launch has gone fairly well but more significantly we’re now going to exploit the mobile market. It’s an area we still anticipate significant growth in. We’ve a lot of potential for that platform but we’ve yet to do much with it.”

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