January 31, 2024

Craig Fuller’s Firecrown Acquires FreightWaves Media

FreightWaves, the supply chain media & data company, announced today that it was splitting into two entities: the media division, which will continue operating under the FreightWaves name, and the SaaS division, which will operate under the name SONAR. However, what sets this deal apart is that the FreightWaves media business will be acquired by founder & CEO Craig Fuller himself, who has recently rebranded his media holding company from Flying Media Group to Firecrown.

It might seem confusing at first, but it also makes a lot of sense. FreightWaves has been a shining example of what I like to call the SaaSification of media—where media companies build software businesses on top of their media operation. And this strategy worked. In an interview with Fuller, he explained that:

We proved it works. We took a media business to build top of funnel to create scale for a software business. It’s not a failure. It’s exactly the opposite. We were able to build up a SaaS business—it’ll do $30 million this year—really built on the back of our media operation.

However, it’s important to understand two things here. First, what prospective buyers are looking for and, second, the timing of when a sale of SONAR may, hypothetically, get done.

Regarding the former, Fuller explained that the universe of strategic or private equity buyers interested in a co-mingled media and data business is small. “It’s not non-existent, but it’s small,” he said. “Ultimately, the reality is that what a buyer wants is a pure-play business that they can benchmark to other businesses.”

This, then, brings up the discussion of timing. According to Fuller, the earliest VC investment into FreightWaves came in 2017. That would make this a seven year investment, which he referred to as “middle age.” And so, early investors are starting to consider what an exit might look like. While Fuller said that there is no immediate plan to sell the company, he did say that, “if you want to sell in two years, you want to have a couple of years of clean reporting so you can benchmark against other SaaS businesses.”

In some respects, FreightWaves was being held back by what’s known as a conglomerate discount. Because there are various assets that carry different valuation methods, it’s hard for prospective buyers to put a true price tag. FreightWaves is not the only media company that suffers from this. If you look at the much larger News Corp, it also suffers from a conglomerate discount, something I’ve written about before:

What we have here is a narrative problem. Investors look at News Corp, with its high-quality business publication, legacy book publishing, video assets, and other newspapers, and don’t know how to value it.

This is the downside of these sorts of media conglomerates. For example, is a book publisher’s revenue equal to a subscription video service? Or, is Dow Jones’ revenue similar to News Media, with its more sensational newspaper brands?

And herein lies the problem. When investors are confused, they undervalue an asset. News Corp struggles from this blended revenue scenario where it’s hard to glean where the strengths exist.

That is why you do this sort of a deal. The media and SONAR businesses can continue to grow on their own without any of the confusion that comes from the vastly different business models. And it’s not like they’re fully divorced from each other. Fuller explained that he was remaining CEO of both brands and, in a tweet, said “I retain 100% of my ownership in SONAR. I have never sold a share. I will continue to serve as CEO.”

Additionally, there is a long-term licensing deal between the two brands whereby FreightWaves will pay for data from SONAR. In return, SONAR continues to benefit from the top of funnel nature of the FreightWaves business without the media business holding back SONAR’s valuation. Fuller compared it to the 30 year long deal that Thomson Reuters signed with Refinitiv when it sold those assets to Blackstone back in 2018. That deal won’t end until 2048.

So, what comes next?

For SONAR, it’s very much a “land and expand” strategy. “We believe we are in the single digits of total market penetration of that business,” Fuller explained. “It’s $30 million in revenue today. Could this business get to $1 billion? Maybe in a decade or so down the road.” And that becomes much more straightforward to accomplish because there is a more targeted management team not having to juggle two different business models.

As for FreightWaves Media and the broader Firecrown holding company? Fuller has clearly been on an acquisition tear over the last few years. He bought Flying Magazine back in 2021 and since then has acquired 25 other brands related to aviation. Then in October 2023, he announced the acquisition of all the marine-related assets from Bonnier. With the aviation and marine assets combined, Firecrown generated $30 million in revenue. When combined with FreightWaves, Firecrown is now a $50m+ revenue business.

And Firecrown expects to continue growing now that it has a B2B platform to build off of. “Aviation is clearly an obvious area for us,” he said. “We’re not in the b2b aviation world.” While Fuller wouldn’t talk about any other deals he has on the horizon, if history is any indication of the future, I suspect the Firecrown team will be looking to buy or media properties.

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