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Yell’s looking to buy and build

Now that BT has agreed to sell its telephone directory business to them, the deal’s private equity backers are keen to see what else they can buy.

Hicks Muse Tate & Furst and Apax Partners, who backed the £2.14 bn buyout that was agreed last month, are reported to be eager to add other directories businesses to Yell.

Both firms see the directories sector in the US and Europe as being ripe for consolidation. And both firms are ready proponents of the buy-and-build approach that sees an inaugural investee company provide the bridgehead within a sector and which then has other companies from the sector acquired and folded into it.

Not only does this help maximise revenues as the combined entity grows but also significant cost savings derive from commingling the operations of each company [whilst – and this has proved vital in past buy-and-builds – protecting each company’s brands and franchises].

Not only debt-burdened telecomm companies, such as Dutch carrier KPN who signalled its readiness to sell its directories business last week, but also major publishers with significant directories operations are likely to be targeted. With publishers such as EMAP and IPC both struggling to bolster profitability, analysts are predicting that there could be some significant deals to be done as vendors embrace a quick cash deal.

The Financial Times today reported that Dutch publishing Group VNU had already been approached by the Yell team about a possible acquisition of its VNU World Directories business. In the meantime, trade-purchasers are finding it tough to succeed when saddled with a falling share price: the recent bid by Italy's Seat Pagine Gialle for the Swedish directories company Eniro was rejected by Eniro's majority shareholder Telia as the stock component of the bid declined in value.