In December 2017, Bowmark Capital sold Law Business Research, a leading provider of research, news and data on international business law and legal markets, thereby realising its third successful investment in the B2B information space. Despite high valuations, the sector still represents an attractive and diverse market, where digitalisation offers considerable opportunities, writes Julian Masters, senior partner at Bowmark.
For the first time in ten years, Bowmark does not currently have a B2B information business in its portfolio. Having successfully exited Law Business Research – which followed our investments in Autodata, serving the automotive industry, and Data Explorers, serving the financial services sector – we are actively seeking new opportunities in an area we consider highly attractive for investment.
Over the past ten years, the adoption of digital distribution has led to a fundamental reshaping of the B2B information sector. It is increasingly evident which businesses have benefited from this evolution: the successful players are those that have been able to generate real value for their customers through better insights into their needs and usage, and by enabling workflow management – which, in turn, has led to higher valuations.
Bowmark’s investments in the sector have delivered significant returns for management and shareholders. So what have we learned?
Under Bowmark's ownership, the annual profit growth of its B2B information businesses has exceeded 30%.
There are few providers of truly proprietary data anymore. However, the aggregation, systematisation and enhancement of non-proprietary data can provide huge value to customers if the end-product is sufficiently differentiated. Most providers aggregate data or information from a variety of sources that could feasibly be accessed by their customers. However, by focusing on standardisation, usability and customer needs, they can introduce efficiencies and add significant value to the dataset.
Autodata, for example, aggregates, standardises and repurposes technical information on approximately 40,000 vehicle models from 136 manufacturers. This is used by workshops across Europe and Australia as they carry out service and repair work. While workshops could access this information directly from the motor manufacturers, it would be inefficient to compile, inconsistent in format and costly to process. As a result, Autodata benefits from subscription retention rates above 90%. At the time of our exit, the company’s latest online product attracted over 840,000 page views per day, providing an essential workflow tool to over 120,000 automotive technicians, enabling them to conduct their day-to-day activities efficiently and effectively.
If, however, the end-product is not differentiated, digital disruption represents a major threat – enabling new entrants to disseminate content at a lower cost and disrupt customer relationships.
“Great content can only be consumed efficiently if the digital platform enables fast and effective access tailored to the needs of the user.”
Great content can only be consumed efficiently if the digital platform enables fast and effective access tailored to the needs of the user.
When assessing acquisitions in the B2B information sector, we have often identified investment in the digital platform as the key driver of sustainable growth. Investment in the user interface and in the functionality of the underlying datasets allows usage tracking, flexibility of content and even bespoke delivery. Without this insight into customer usage and trends, management lacks the necessary toolkit to make effective strategic decisions as the business expands. This is akin to a magazine publisher that lacks data on who its readers are or what they want to know.
Under Bowmark’s ownership, Law Business Research invested significantly in its user interface and content management system, while a fully integrated CRM system was implemented to help management understand customer usage profiles, and to enable the editorial team to assess what information drove the highest customer interaction. This allowed the content to be tailored to discrete user groups to deliver maximum value for the customer.
Once the right digital platform is in place, the insights available from analysing usage are compelling: the company can see who is accessing what information, how and when they are using it, and through which platforms. Capitalising on this is crucial, as the management can then make better decisions on how to prioritise investment, develop new products and tailor pricing.
Our pre-investment work on Autodata suggested there was scope to enhance pricing by improving the functionality of the product, given that its data was critical to workshops’ workflow. But to justify any price increase, the customer must have real value-for-money. In this case, the management team introduced several new Application Programming Interfaces (API), enabling workshops to integrate the technical information into their own systems – thereby adding significant value for the customer, which in turn translated into enhanced pricing for the product.
Once the digital platform is in place, the sales and marketing function may also need augmenting. Sales of complex embedded data products require a more informed, consultative sales approach than those of standardised datasets or information. In all of our investments, evolving the culture and incentives of the sales team, while respecting the integrity of the product and the sophistication of the customer, has required reshaping and rethinking the approach to sales and marketing.
At Law Business Research, we invested in the sales and account management functions, introduced new incentive schemes and implemented a more progressive digital sales strategy – which led to an increase in new business, higher average revenue per subscriber and improved retention.
“Once the patterns of client usage are fully understood, the business can build on these and evolve usage into workflow management.”
Once the patterns of client usage are fully understood, the business can build on these and evolve usage into workflow management. As usage moves from once a day towards multiple interactions, the platform becomes embedded across the customer’s operation and the value of the proposition is transformed. As a result, price becomes less elastic, renewals trend towards 100% and valuations climb.
Provided investors focus on high quality assets and manage the digital journey in the right way, B2B information companies can present highly rewarding opportunities for investors.Back to News