Moulton shows the way in business turnarounds

Jon Moulton, of private equity and business turnaround firm Better Capital, is looking forward to a strong deal flow this year as he expects many more distressed business to come to market.

Moulton, a respected figure in the private equity world, says that the inevitable rise in interest rates will cause banks to call in less than secure business loans. The result will be more indebted firms collapsing, unable to cope with the loss of liquidity. For Moulton, who has already reaped benefits from his strategies (see below) at Reader’s Digest UK, bought out of administration last year, this represents a great opportunity.

Audited circulation figures of Reader’s Digest UK have increased by 8 per cent over the last six months, with trading ‘marginally ahead of expectations’, according to new owner Jon Moulton of Better Capital.

Moulton’s company, Better Capital picked up Reader’s Digest UK out of administration early 2010. The company collapsed after talks over its £125m pension deficit broke down between the UK Pensions Regulator and the publisher’s US parent.

Reader’s Digest commenced publishing in the UK in 1938, and at the time of its collapse had 500,000 subscribers – down from around 2m in its mid-90’s heyday. In recent times the publication was struggling to shake off its image as something read by older people or in the waiting rooms of doctors and dentists. This was in fact probably true. Readers were literally dying off. An attempt to broaden the readership by stuffing the publication full of prize draws merely brought the Reader’s Digest more downmarket and alienated many of its established subscribers.

A key strategy at Reader’s Digest UK was to analyse, tidy up and increase the size of its customer database. This then enabled more effective cross-selling opportunities for CDs, DVDs and books, mainly through direct mail.

Moulton, who has worked in private equity for 30 years, slashed the company’s rent costs by shifting out of sizable offices in Canary Wharf and into more compact quarters in Edgware Road. He is also restructuring other aspects of the business that he says will deliver more savings over the coming year.

This year Moulton will be busier than ever poring over the balance sheets of companies with underperforming assets and companies falling over through lack of working capital. Says Moulton, "In turnarounds, you take dramatic actions that can have an immediate effect, and when the impact is positive that is extremely satisfying."

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