Business transformation sounds like a no brainer. Either you adapt to the technologies that have been reshaping whole sectors for a generation now at ever increasing pace, or you face up to your own corporate mortality. But deciding to go digital is only half the battle: execution counts, as print publishing company St Ives (now Kin + Carta) found out.
The firm was founded in the mid-1960s, went public in 1985 and over the next three decades built a print portfolio stretching from books and magazines to consumer marketing and direct mail. By 2009, however, it was clear to the board that a change of direction was required.
Kin + Carta (formerly St Ives) In Brief
Turnover: £178.4 million
That year, the company turned over £362 million, but its profit margins were falling, reaching four percent in 2010. St Ives’ revenue came entirely from the print industry, which was starting to suffer amid growing disruption from digital technology. It was painfully clear that unless the company could diversify its revenue streams, profits would continue slump.
The repositioning strategy would be twofold. The first step involved the acquisition of a number of digital marketing businesses, with a focus on data and digital services. This would be funded through increased investment and the divestment of some of the group’s existing print portfolio.
The aim was that the over the next decade the business would slowly be able to reposition itself as a marketing services company - but this would only happen if it successfully managed the acquisition process.
‘If we had tried to make the leap from a pure print business into digital marketing services at a significant scale, the potential businesses that we had been looking to acquire would not necessarily see us as the best home for them’, explains former CEO Matt Armitage, adding that they also had to be mindful of how customers and investors would see such a sudden shift.
Instead the group would have to ‘build credibility’ over an extended period of time by initially targeting only those digital businesses that were closely aligned with its print operations - for example data services had strong affinities with St Ives’ consumer marketing print division.
As his company’s remit widened with each new acquisition, Armitage was able to target businesses that now aligned with the wider portfolio, rather than the just the legacy businesses.
Over the next six years nearly £300 million was spent on the acquisition of 14 digital agencies, data companies and app services.
Armitage reveals that the speed of the acquisitions left the company with a rather delicate management problem. It essentially now had a portfolio of two very different types of business: its growing, high-margin set of acquisitions and its lower margin legacy operations that continued to decline.
'It was necessary to apply trench warfare (restructuring and cost cutting) on one hand and growth tactics on the other,' says Armitage. ‘We had to manage the people within the legacy businesses with sensitivity and honesty. We were very clear with them that we supported their businesses but the hard facts of the matter were that the markets themselves were very pressured.’
In 2016, the decision was made to sell the remaining print businesses, following a significant downturn in the market.
Kin + Carta
Armitage stepped down as CEO in July 2018, after the company had fully divested its legacy portfolio. He was succeeded by J Schwan, who joined the company when St Ives purchased his US founded digital consultancy Solstice.
Schwan has overseen a period of restructuring to fully integrate all of the acquisitions into a ‘holistic offering’. The newly renamed Kin + Carta has operations in data services, digital marketing, communication and consultancy that stretch across four continents. It may be a smaller business – turnover is just under £180 million – but it is a more profitable and sustainable one, with margins of 12%.
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