Cannella Response Gets A Response
PE firms like ZM Capital and Palladium Equity Partners continue to chase after the infomercial segment, even as ad revenues decline.
June 19, 2009
Despite a glut in television advertising revenue, infomercial companies continue to attracted strong interest from private equity investors, as evidenced by a series of investment into the space.
Most recently, ZM Capital and Palladium Equity Partners made an investment into Cannella Response Television, a Burlington infomercials brokerage company. Terms of the transaction were not disclosed.
In speaking with MergersUnleashed, Robert Medved, chief executive of Cannella said he was interested in “finding a partner who could help us expand.” Specifically, the infomercials broker is looking to acquire a company that focuses on the short-form play segment.
According to ZM Capital partner Andrew Vogel, Canella is “one of the dominant players in the long-form play,” 30 or 90 minute-long infomercials, as opposed to shorter segments. In speaking with MergersUnleashed, he said the long-form segment of infomercials is attractive “because there are so many more barriers to entry, and it’s a bit more defensible from a competitive point of view.”
“We have a short list of targets that we’re looking at right now,” Medved said. He declined to comment on whether ZM Capital and Palladium’s investment is a control stake.
In 2003, ZelnickMedia Corp., the parent company of ZM Capital, and Ripplewood Holdings LLC acquired Time Life, the infomercial marketing unit of Time Warner's Time Inc. “We cut our teeth on Time Life,” Vogel said. He noted that the infomercial sector is a profitable business “because there is a measurable advertising medium.” Comparing the advertising model to internet advertising, he said, “It is what makes the internet so powerful, but the internet is very fragmented.”
In August 2007, Marlin Equity Partners LLC, a El Segundo, California-based private equity firm bought Ronco Corp., a marketer of kitchen and household products that are sold primarily through infomercial channels, for $6.5 million.
In 2003, Quadrangle Group invested in GT Brands, an infomercial marketer of fitness videos. The portfolio company, which was formerly known as Good Times Entertainment, filed for bankruptcy protection in 2006. GT Brands was the entity behind Quadrangle’s controversial pay-to-play scandal. Alledgedly, Quadrangle paid $88,841 for the DVD distribution rights to the film.
Gary Nusbaum, a managing director at Palladium Equity, responded by email that the firm "is excited to support a team of direct response industry leaders."
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