Firecrown Acquires Multiple Brands From Kalmbach Media

In what has become one of its largest M&A deals to date, Firecrown Media announced today that it had acquired the railroad and space brands owned by Kalmbach Media. Brands include Trains, Model Railroader, Astronomy, and more.

While Firecrown wouldn’t reveal what they paid, CEO Craig Fuller said that the business generated more than $20m in revenue and that “3-5x EBITDA is my typical range” when acquiring brands. He told AMO that the deal was funded with “personally guaranteed bank debt at a 7.25% interest rate.”

What started with the acquisition of Flying Magazine in 2021 has quickly expanded with additional flight-related acquisitions, the marine portfolio from Bonnier in October 2023, the FreightWaves media assets in January, and now Kalmbach.

But it’s an ironic decision, considering so many in media have run away from print magazines. As Fuller explained in an X thread about the state of the portfolio:

The problem is that most magazine publishers continued to subsidize subscriptions [with ads] yet made little investment in digital to fend off the inevitable deterioration in their business.

Investors became smart about the issue and shunned magazine M&A. Valuations collapsed and investments dried up. This create da death spiral for many of the magazine publishers. Capital-starved magazine publishers started to cut investments in areas that matter.

This is the opportunity the team sees because “magazines have an amazing connection with their audiences, especially the ones that have been around for decades. The audience deeply cares about the content.”

Kalmbach’s portfolio is also very complimentary to Firecrown’s. He explained that 90% of the Kalmbach magazine revenue comes from subscriptions, which differs from Firecrown’s. “They have high-80, 90% retention. For consumer media, it’s really impressive retention metrics,” he said. “Unusually high. They’re doing a much better job managing subscriptions than we are.” In the inverse, they only had one salesperson and one ad ops person. So, both sides help each other scale.

What helps the economics of these deals is that Firecrown isn’t planning to stop at subscriptions and advertising as revenue streams. The team is prioritizing introducing new, down-funnel opportunities with higher revenue potential. Take its Flying portfolio. It has launched a lending broker that connects people who want to buy planes with lenders. Then, it takes a 1-3% fee on that loan, which can generate 5-6 figures in revenue per loan.

While it seems unlikely that the Kalmbach portfolio will have a finance arm, there are substantial e-commerce opportunities. MyScienceShop is Kalmbach’s space-related e-commerce business, which Firecrown is acquiring. In February, Firecrown acquired The Space Store, which sells NASA collectibles. In a blog post, Fuller wrote:

MyScienceShop has focused on products that enable space enthusiasts to explore and express their curiosity about the science and love of space. In contrast, the Space Store provides high-quality collectibles for the NASA and space mission community. By merging two properties and products into a single entity, the Space Store will have the largest selection of space-focused products anywhere in the universe.

The theory behind the deals makes sense. But it’s one thing to buy a business; it’s entirely different to operationalize it.

Fuller said, “The Bonnier transaction [back in October] has been insanely profitable for us. We were able to cut a lot of the overhead when you started to bring these brands together. We were able to optimize the cost of their business and ours across the whole infrastructure. It gave us sufficient scale.” Suffice it to say, this deal adds even more of that scale.

The company will now have 250 full-time employees that operate in a matrix organization. In other words, the sales teams across the portfolio report to a head of sales; the subscription folks report up to a head of subscriptions, etc.

“Then the brands themselves have a group leader, who is responsible for the brand,” Fuller said. “They don’t have anyone reporting to them. Their job is to think about product and strategy for each brand.” If the salespeople are thinking about the next day or the next 30 days, Fuller wants the group leader to think about the next 6-12 months.

While Fuller wouldn’t speak to any future M&A plans, he did say that they are looking at assets across the enthusiast category. In particular, they’re looking for brands that have various seasonality. “We’re looking at brands that have a winter orientation because that’s the weakest part of the portfolio,” he said. Using marine as an example, “revenue drops in half in Q4 because nobody is advertising boats in the winter.” Kalmbach, in part, helps that because it generates much more around the holidays.

What started as a single magazine has grown into a robust media portfolio. In the X thread, Fuller projects Q4 revenue of over $15 million with 18% EBITDA margins today.

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