Monday, July 11, 2005

VNU: The New Face Of Trade Publishing

The news that VNU is acquiring IMS, the global provider of pharmaceutical market intelligence, for close to $7 billion is not only news in the publishing sector, but the scale of this deal gives the story top billing in the Wall St. Journal and other prominent business publications. With a multiple of 12-12.5 times EBITDA, the sales price is on the high side; however, IMS is a very profitable business and the healthcare/pharmaceutical sector is a high growth sector.

This is more than a diversification move by VNU into the health sector. In fact, one could characterize it as a bold move to solidify the transformation of VNU from a traditional trade publisher to a new-era publisher that focuses on the intersection of content, technology, and business processes--what we define as vContent, and which so neatly fits with this company's name. In the world of vContent, trade publishers move from providing product information to consumers and businesses to providing customized information about customer needs, competitors, and detailed product and pricing data. In its presentation to analysts in London this morning, VNU gave the example of a pharmaceutical brand executive as a target customer for the combined company. With its Nielsen market research unit and IMS, VNU can provide an "integrated view of patient and physician dynamics" to help brand executives "successfully launch prescription products" according to one slide in the presentation.

But, VNU's sights are set beyond the health care sector. Further justification for the huge acquisition is based on creating a global infrastructure with information systems and processes that produce efficiencies that allow VNU to "build repeatable consulting and services capabilities" and "deliver revenue and cost synergies" across all units. The importance of mastering the use of IT in the mix of competencies for 21st century publishers is clear. As VNU is demonstrating with this acquisition, for continued success, publishers should also develop capabilities to mine the mix of data it assembles from its customer base and its sector coverage in order to provide high value add content-related products and services that support premium pricing. The new model in trade publishing centers on a mix of analytical research, consulting services, and conferences with traditional publishing products like research reports and periodicals included in the mix, but not playing the starring role.
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