With Kasey Grelle at the helm of digital media company Gateway Blend — which owns and operates a portfolio of more than 14 websites that each month reach more than 120 million users — the company has a CEO ready to roll up her sleeves when it comes to acquisitions.
Originally a broadcast journalist, Grelle got into the acquisition business via Cultivation Capital. There, her responsibility was due diligence and investor relations. Because she was on the ground floor at the fledgling firm, she experienced many aspects of dealmaking, but she didn’t get to stay with a deal post acquisition and help the acquired company reach the potential she saw it in.
“When I was looking at these companies doing diligence at Cultivation, you get so deep in the diligence and you see all these opportunities and all these things that you could pursue that could help grow the company,” says Grelle. “You see all these things that you’d like to work with the management team in doing, but that wasn't really part of the investment process. It was more, evaluate it, see where we see the company going, recommend whether we invest or not and then move on to the next. I missed the opportunity to get my hands dirty and really dig in.”
Today, at Gateway, she does it all, running the search, doing the diligence, then executing on the ideas that make the asset grow.
“That's really rewarding, taking a company and being able to triple its revenue in the first couple months, which we've done with a couple of the smaller acquisitions that we've done because that's what we thought the model would show,” she says. “And when you get in there and you actually tinker and you're able to do that, that's really rewarding. I get kind of a buzz from doing that. I really like the hands-on opportunity of bringing those companies into the fold here.”
Grelle spoke with Dealmakers about what Gateway Blend has been up to acquisition-wise and her approach to M&A.
60 to 100
For Grelle, there’s something to be said about being the right business at the right time. However, neither timing nor type are the most important factors. Instead, for Grelle and Gateway, management is the focus.
“You can't fake the management team,” Grelle says. “If the management team has the hunger and the drive to be successful, then they will be most times. And we've seen in some investments that we've done, where it was a good idea, it could have been really great, but the management team wasn't there and the idea fell apart. And in some cases, the idea wasn't the best thing in the world but the management team was so incredible. They had the right framework in place to accelerate the idea so that it was a lot more successful than, seeing it on paper, you might have thought it should have been.”
While enjoying the opportunity to see investments grow and thrive, Grelle acknowledges that there’s an opportunity cost to everything a business does, and that factors into the company’s M&A strategy. So, through the lens of Gateway’s core capabilities, the question of whether to buy an existing asset or build a capability from scratch is among those asked when considering an opportunity.
“Can we see better growth by plugging in our skill sets to companies that we buy? Or should we build those from scratch?” Grelle says. “What we’ve found is that we’re better at taking companies from 60 to 100 than from zero to 60. What's exciting for me with M&A is that there’s the opportunity to take something that's good and make it really great by plugging it in to what you already know.”
Tuck-ins, rollups
The acquisition work at Gateway has kept Grelle busy since she started with the media company. She worked on the July 2015 Cinema Blend acquisition, a movie and TV news site, two months after arriving. It was bought because it had a good audience and a good brand, but limited digital reach and poor monetization — two skill sets Gateway possessed.
“It really fit into the investment thesis that we had here,” Grelle says. “It was a single owner — a pretty easy management transition.”
She calls the next acquisition “more of an equi-hire” — an opportunity to get a foothold in Toronto and tap into the talent pool there. She says with the acquisition of Tickld.com, Gateway was buying part of a business model that it rolled into its St. Louis operations, then spun down the Toronto office.
Grelle and Gateway completed two more acquisition in Q3 of 2019, buying a company called Gossip Cop, a site for celebrity news that Gateway tucked in with Cinema Blend, and Olio City, a site highlighting tourist activities, which Gateway tucked into one of its travel sites, Travel Awaits.
Given the state of the M&A environment today across the media landscape, Grelle sees lots of opportunity to continue to build on the 14-site platform.
“In the media space, it's definitely a buyer’s market,” Grelle says. “There are a lot of businesses out there that have not been as diligent about putting together a sound business plan or really focusing on building a good culture, a good company, and making money. A lot of people went after venture money a couple of years ago and then built big teams with really expensive operations, but they didn't focus as much on making money. We've always been focused on making money from the beginning and so, as a result, some of those companies, when the VC money dried up in the media space, are having trouble. It’s actually a buyer’s market for us right now, and you're seeing a lot of companies going out there and doing roll-ups. We see a lot of opportunity to do the same and plug them in to where we think we can have a strategic advantage.”
