CFO Brings ‘New Thinking’ to Private Equity Portfolio Firm

Thirteen-year-old company must start making decisions with a larger-company mentality, says the new finance chief, a private equity veteran.
David McCannJanuary 31, 2017
CFO Brings ‘New Thinking’ to Private Equity Portfolio Firm

Just hired for the fourth time to be the CFO of a private equity-owned portfolio company, Andy Goldstein’s mission is to guide his new employer through its next stage of growth.

Andy Goldstein

Andy Goldstein Private equity

The 13-year-old company, Purch (formerly TechMediaNetwork), is “not a startup anymore” and thus has new financial priorities and strategic decisions to make, Goldstein says.

Purch is a digital publisher, running 25 science and technology-related websites that provide product reviews in a wide assortment of categories, all built on a single technology platform designed to optimize the user experience.

The 7 Habits of Highly Effective CFOs

The 7 Habits of Highly Effective CFOs

Download our whitepaper to discover the technical and behavioral skills needed to lead your business forward.

That optimization is partly about navigability, and partly about automating the placement and presentation of advertising in a way that’s meant to let users view the content without distraction and keep scrolling down the page and clicking on reviews until they’re ready to make a purchase decision.

The company enjoys high renewal rates with its 7,000-plus marketing customers, so revenue is fairly predictable, according to Goldstein. The websites — Tom’s Guide and Top Ten Reviews are best-known — are raking in more than 100 million unique visitors and 2 billion impressions per month.

“There’s no web editor or product person manually looking to optimize any one web page,” says Goldstein. “It’s all based on a technology platform.”

Revenue streams include a percentage of sales made through Purch’s websites, sponsorships, and the licensing of data, content, and the technology platform (which is being marketed to other digital publishers). The company’s annual top line is well north of $100 million, according to Goldstein. Its compound annual growth rate is currently at 33%, he says.

Hired in December, he’s going through a familiar drill of executing on a 90-day action plan, assessing processes, data, people, and reporting. But the heart of his role will be strategic.

“Purch had evolved to the point where it was time for some new thinking,” he says. “We need to make decisions based on a larger-company mentality. I’m here to help carve out more levels of transparency, get us smarter, maybe redesign the financial structure of the business, and look at the positioning of the company.”

One element of the “new thinking” has to do with cash generation. “Stakeholders at companies this size tend to talk about revenue and EBITDA,” he says. “I talk about free cash flow and working capital, and I want to enable the stakeholders to speak in those terms as well and teach them how to generate more cash.”

He says it’s a good idea for portfolio companies at Purch’s state of maturity to begin managing working capital metrics more proactively than they have previously. “You’ll see people saying wow, we could secure an incremental seven figures of cash just by watching those metrics and be able to go buy a company without the need for debt.”

Improving cash flow, as well as getting a better sense of liquidity needs, is what a private-equity firm — or more specifically in the case of Purch owner ABS Capital Partners, a “growth equity” firm — wants to see, Goldstein says.

“There’s a negative stigma [pertaining to] private equity that it’s about cost cuts, debt covenants, and unachievable sales quotas,” he says. “And don’t get me wrong, I’ve lived through that in the past. But that’s not what I do or why I was hired here. It’s about presenting scenarios to your board or sponsor that say, ‘this is a better use of capital.’ ”

One potential use of capital that Goldstein will be keeping an eye out for is acquisitions; the company has made four of them in the last year. But for now, that’s not the primary focus vis-à-vis growth.

“We’re still on the acquisition trail, but we are scaling very rapidly and organic growth will be significant this year and next year,” he says.

A Better Model

Making strategic decisions at a growing company is exciting, but Goldstein’s immediate prior CFO job wasn’t lacking for that either.

For two years he was finance chief of the Philadelphia 76ers National Basketball League team, the New Jersey Devils National Hockey League team, and the Prudential Center Arena, where the Devils play. The entities had been purchased by Joshua Harris, senior managing director of investment firm Apollo Global Management, and David Blitzer, a senior executive at The Blackstone Group.

“It was a new ownership group, and they hired me to create core finance competencies,” Goldstein says. “I really had to roll up my sleeves to figure out CFO best practices for the teams.” It was a “very exciting place to be,” he notes, especially since his previous employer, InterMedia Outdoors, had been in contraction mode, while the teams were experiencing solid growth in season-ticket sales and other revenue streams.

Why, then, would he leave the exciting world of sports to return to publishing, where he started his career back in 1992 at Times Mirror Magazines and later left for an opportunity to get into the television business with Sesame Street?

“When you compare the business models, with the predictable-revenue model at Purch vs. that of sports teams, where the performance of the teams is something you can’t control, Purch’s model is just better for me as a CFO,” Goldstein says.

Further, Purch is simply a more sophisticated business. “It has many qualities that attracted me — great content, commitment to users, scale — but none more appealing than its unique and progressive publishing model, underpinned by its ambitious outlook on the future of content and commerce,” he says.