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In May 2022, media company Recurrent Ventures announced that it had raised $300 million from private equity firm Blackstone to finance the expansion of its editorial portfolio. But in the nearly two years since, it has only shed properties, eliminated staff and churned through executive leadership.
The equity investment aimed to supercharge Recurrent Ventures’ commercial model, which relies on acquiring distressed publishers and modernizing their affiliate revenue operations. Instead, it has derailed the strategy, according to interviews with more than one-dozen former staff, executives and people familiar with the matter.
“On the editorial side, we were initially excited about the investment,” said one former staffer. “As time went on, it became clear that this was one private equity company being swallowed by another.”
Before the Blackstone financing, Recurrent Ventures scooped up more than 24 editorial properties in just over three years. Since the investment, it has made only one acquisition—Dwell, in September 2022.
In that same period, Recurrent Ventures offloaded three of its properties—Mel Magazine, Saveur and Field & Stream—while laying off almost 100 employees and cycling through three chief executives. The sale of Field & Stream, in December, has not been previously reported, and the publisher is set to relaunch this week under new ownership.
Recurrent Ventures has struggled because the $300 million investment was not structured as a lump sum, but as a callable preferred equity financing that it could draw down to fund acquisitions, according to four people familiar with its finances.
But as the economy began to deteriorate that summer, interest rates increased and Recurrent Ventures’ business declined, according to four sources. The shift triggered a series of events, including the restructuring of the two parties’ financial agreement, leaving Recurrent Ventures without functional access to capital.
The abrupt reversal of fortune reflects the challenges media companies face when raising financing, particularly in the mercurial business of advertising.
It also offers an example of the less visible ways in which the economic downturn of the past two years has shaped the media landscape, as companies have found themselves burdened by commitments they made under markedly different market conditions.
“Blackstone’s financing was always intended specifically for acquisition opportunities, targeting larger deals than we had pursued in the past,” Recurrent Ventures director of communications Cathy Hebert said in a statement.
“Shortly after the announcement, the economy and the M&A market changed dramatically,” the statement continued. “Since Recurrent already had scale in our core verticals, we were disciplined in evaluating new opportunities. Together, we have consistently assessed properties in the market, but since the announcement, Dwell was the only brand that we believed was additive to Recurrent’s portfolio.”
Hebert went on to add that the company had to adjust its business to align with post-Covid traffic trends and the volatile advertising market, and that “decisions [to divest brands] were not driven by necessity, but by careful consideration.”
Blackstone did not respond to a request for comment.
A raise goes wrong
In 2022, Recurrent Ventures was coming off a banner year.
Its portfolio included publishers like Bob Vila and Outdoor Life that catered to enthusiasts in the home renovation and outdoor communities—categories that housebound Americans spent heavily on in 2020 and 2021.
As quarantined consumers logged long hours online, shopping for ways to spend their stimulus checks, the company saw record web traffic, advertising revenues and affiliate business. In 2021, it generated around $15 million in EBITDA (earnings before interest, taxes, debt and amortization) on $50 million in revenue, according to two sources.
In early 2022, as the economy began to falter, Recurrent Ventures saw an opportunity. If it could raise capital from a deep-pocketed financial partner, the media company could spend through the coming down market, snapping up undervalued properties at bargain prices, according to three sources.
Around the same time, Blackstone began more seriously investing in the streaming and media businesses, bankrolling the acquisition of production companies Hello Sunshine and Moonbug Entertainment and spending nearly $4 billion on the effort.
By spring 2022, the two groups had reached a deal: Recurrent Ventures would gain access to a $300 million line of credit to finance its acquisition of editorial titles, and Blackstone would gain a foothold in the digital media business.
According to the terms of the initial agreement, Recurrent Ventures could draw down funds to make acquisitions with minimal scrutiny if the price was below a certain threshold, according to two sources familiar with the deal structure. If the transaction was above that threshold, the process would be more onerous.
A new market, a new contract structure
Two months after announcing the deal, however, it had begun to fall apart.
By July 2022, the economic downturn had impacted Recurrent Ventures’ business, exposing its weaknesses and causing it to fall short of its projections, according to three people familiar with the matter. Interest rates had also risen substantially from the beginning of the year, making it more costly to lend capital.
That month, it shuttered Mel Magazine and mandated a round of layoffs.
“Mel Magazine ended up being the canary in the coal mine, rather than an outlier,” said one source. “It became incredibly clear that Blackstone was going to run the company.”
By that fall, Blackstone had deployed between $10 million and $20 million in Recurrent Ventures. But, pointing to Recurrent Ventures’ weak commercial performance, it refused to provide it with further funds, according to four sources.
Recurrent Ventures’ leadership initially protested and considered taking legal recourse against Blackstone. No lawsuit materialized, and by the end of the year, the two parties had restructured the deal, according to two people familiar with the matter.
A spokesperson for Recurrent Ventures disputes that it considered legal action.
“It’s ultimately Blackstone’s prerogative whether to fund or not,” said one source. “If they feel like the performance of the underlying business is poor, they will do what they need to do.”
Under the new arrangement, Blackstone gained more control over the disbursement of funds. Going forward, it would have to approve any acquisition Recurrent Ventures sought to make, no matter the size, according to two sources.
As a result, Recurrent Ventures can still technically access the Blackstone capital, but only if the private equity firm greenlights the purchase. For the past 16 months, no such deals have materialized.
“We believe that Recurrent should run profitably—independently of outside financing—and are committed to utilizing that capital for its intended purpose,” Recurrent Ventures’ said in a statement. “Remaining disciplined on our operating costs, running profitably and leveraging the funds when there’s an opportunity to exponentially scale our business sets Recurrent up for success in the short term and long term.”
Outside of an impossibly compelling opportunity, Blackstone is unlikely to deploy more capital into Recurrent Ventures until the media company strengthens its business, according to three people familiar with its strategy.
Until then, Blackstone has little need to move urgently, as it will eventually recoup its investment—plus interest—through a liquidity event, according to three people familiar with the deal structure.
The development has left Recurrent Ventures in a state of limbo, unable to take advantage of a down market flush with potential purchases.
It has also had to eliminate broad swaths of its workforce. Since announcing the $300 million investment, Recurrent Ventures has laid off at least 80 full-time staff.