"HGGC Explores $4 Billion Sale of Typeface Firm Monotype"

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Dave Crossland
Dave Crossland Posts: 1,411
edited September 2023 in Type Business
https://www.bnnbloomberg.ca/hggc-explores-4-billion-sale-of-typeface-firm-monotype-1.1977866 - bold emphasis mine:

HGGC Explores $4 Billion Sale of Typeface Firm Monotype

by Ryan Gould and Gillian Tan, Bloomberg News

(Bloomberg) -- Buyout firm HGGC is exploring a sale of Monotype Imaging Holdings Inc. that could value the typeface firm at more than $4 billion, including debt, according to people familiar with the matter.

HGGC is working with a financial adviser to gauge takeover interest in the Woburn, Massachusetts-based company and is expected to launch a formal auction process in the coming weeks, said the people, who asked not to be identified because the matter isn’t public.

No final decision has been made and HGGC could opt to keep Monotype, the people added.

A representative for HGGC declined to comment, while Monotype didn’t immediately respond to a request for comment.

Monotype, which was taken private by HGGC in a $825 million deal four years ago, will be pitched to industry players and other private equity firms, according to the people. The company generates annual earnings before interest, tax, depreciation and amortization of more than $200 million, they said. 

Monotype has been acquisitive under HGGC’s ownership. In 2021, it acquired Hoefler&Co, whose typefaces include the Gotham font. In March, Monotype formed a partnership with design platform Canva, and in July it struck a deal to buy Tokyo-based Fontworks, a provider of Japanese type design, from SB Technology. 

With more than 40,000 fonts, Monotype Fonts is the industry’s leading font management platform, according to its website. The subscription-based service includes typefaces such as Helvetica, Univers and Frutiger.

Related:

https://pluralistic.net/2023/01/21/potemkin-ai/


"Maybe Toys R Us would have had a better chance at adapting if it hadn’t been saddled with private equity-induced debt. But of course, we’ll never know." – https://www.vox.com/the-goods/2020/1/6/21024740/private-equity-taylor-swift-toys-r-us-elizabeth-warren

https://typo.social/@litherland/111149294103406401 + replies

https://typo.social/@letterror/111149640427929541 points to https://www.asimplemodel.com/insights/private-equity-roll-up 
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Comments

  • André Simard
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    I wonder if this happens, how the fontes sales industry will react and what kind of reaction it might cause. Any thoughts?
  • George Thomas
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    I wonder how much of that $4 Billion will be from organized crime's money laundry?
  • Diego Aravena
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    What really strikes me is how insignificant this news would be if Monotype weren’t a monopoly controlling such an important part of the market... Is there a solution to this phenomenon, or do we just sit back and watch how it develops?
  • Mark Simonson
    Mark Simonson Posts: 1,686
    edited September 2023
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    They have a big marketshare and control a lot of valuable font IP, but not all of it. There is still Adobe (not ideal in many ways but better for now), and there are many foundries doing well without MT, or Adobe in some cases.
  • Diego Aravena
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    Thanks for the response; I appreciate it. I'm just curious about what the future holds for the industry. Maybe, after the Monotype situation, other companies will have to be more open, like Adobe (it's hard to get there). Or perhaps a new distributor will step in to even the playing field. It's something I find interesting. I imagine foundries can thrive without Monotype or another intermediary because they have established clients. I honestly believe that in the developing world, this might not be as feasible, or perhaps there aren't as many people willing to pay for type services.

  • Christopher Slye
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    What do you mean by “other companies will have to be more open”? You mean other distributors will need to be more permissive in who they accept?
  • Dave Crossland
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    Ahahah John. Me too, me too. 
  • Enrico Sogari
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    So, because of this news, let’s assume that whatever Monotype has done, said, promised in the past two years was aimed to achieve this.
  • Diego Aravena
    Diego Aravena Posts: 10
    edited September 2023
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    What do you mean by “other companies will have to be more open”? You mean other distributors will need to be more permissive in who they accept?
    Yeah, do you think that's a good idea?

    Before 2018, MF accepted everyone regardless of their quality. If you wanted to compete with others, you could, no matter your location. You could live in a place with a weak creative industry and no social capital, with a laptop and internet, you could actually make a living. There was freedom. Additionally, MF used to create value around quality, with initiatives like the Creative Characters book and the monthly newsletter. However, everything changed for the worse after 2018. There was no more focus on quality, no more filtered products—just competing for a few crumbs.
  • Dave Crossland
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    Rather than auctioning the company, I think it would be more interesting—and way more fun!—if Monotype’s owners were to auction the font IP, family-by-family, in random order. Let’s find out what’s actually worth what. There are things I would bid on. 
    Some independent type people I was chatting with noted: It's possible though that the "business value" on offer here is not the typefaces themselves, but the half cornered marketplace. And even that may not be the marketplace of typefaces, but the marketplace of foundries ;)
  • Igor Petrovic
    Igor Petrovic Posts: 271
    edited September 2023
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    Agree with Patrick. 4B divided by 40k is 100k. Even if 40k fonts means families and not styles, it sounds strange. Given those numbers are the only tangible argument in the text, if they are not justification then anything else can be, and I am surprised it is not 8B or 12B, etc.

    As George said this looks pretty shady to me. But it's their business and we should take care of ours. This might be the point to raise the question is it really that one can't easily remove the font from MyFonts, but has to hide it? Is it a legal behavior from them?
  • Stephen Coles
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    In a Mastodon post, @Erik van Blokand enlightened us with the concept of the private equity roll up.
  • Marc Oxborrow
    Marc Oxborrow Posts: 220
    edited September 2023
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    $200M net sounds artificially inflated. But even if it is real, after TDA it would be about $100M, and after salaries and expenses it would be even less. 
    Point of clarification: EBITDA (earnings before interest, taxes and amortization)  includes salaries and expenses.
  • Grzegorz Luk (gluk)
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    big fish eat the small fishes and then comes ...



  • Patrick Griffin
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    Marc Oxborrow said: EBITDA (earnings before interest, taxes and amortization)  includes salaries and expenses.
    Yep, my bad. Thanks for the correction. Still a 40x multiple, though. This is the kind of figure tech companies were using to value themselves during the pandemic. Proponents of such high valuations were claiming endless potential growth because internet/data/AI/etc. Would be interesting to see what kind of debate class acrobatics it would take to classify Monotype as a tech company with a limitless ceiling.
  • Diego Aravena
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    Sorry for the minor diversion…
    Before 2018, MF accepted everyone regardless of their quality.
    That’s not quite true. There was a foundry review board for around 5 years, roughly 2013–2018. At ATypI 2015, Jan Middendorp revealed that the board rejected 60% of submissions since its founding (in late 2012 or early 2013, I believe).
    Yeah you're right. Sorry about that. I should have said that it's easier to sell your fonts there than other more exclusive intermediaries. It's what I have experienced during my years as a typeface designer. 
  • Diego Aravena
    Diego Aravena Posts: 10
    edited October 2023
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    I don't mean to change the topic, but if we agree that the current value is partially justified because of data. A theoretical solution could be Web 3.0 (just an idea before tech-savvy individuals criticise everything about it). If this theory proves successful, it could potentially reduce the value of these big companies, and we can turn a bloated whale into a healthy fish.
  • Patrick Griffin
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    Nadine Chahine said: So the valuation is not about the fonts, but how much money can be extracted via these fonts.
    Exactly. But the projection has to at least make some kind of sense, dunnit? Through which business model would one be able to extract a bare minimum of $4.x billion in 4-6 years from the fonts currently owned by Monotype? An army of lawyers hounding people for inadvertent infringement? Policies that squeeze suppliers out of the platforms that supposedly promote them? These are their practices right now, and they're supposedly getting them $200M/year. That makes for quite a long time to recoup a $4B investment.

    I've been around the block a few times and have seen this kind of thing many times over in type and other industries. This time, though, it's particularly egregious because the contractual terms these PEs have been normalizing on their way up the valuation ladder end up making everyone's fonts look scary to most potential users — which feeds right into the protective inclination to avoid that whole rabbit hole and opt for the overhead-free font instead. We're about to enter a world in which the moment you mention that you make fonts you will perceived as a greedy troll.