HM Capital Takes Directories Biz Into Social Media

Target: GigPark

Price: Undisclosed

Sponsor: HM Capital

Seller: Noah Godfrey and Pema Hegan

Legal Adviser: Sponsor: Ogilvy Renault

Telephone directories were once among the most sought after targets of buyout shops before the Internet became the tool of choice to search for people, places and businesses. Executives at HM Capital are trying to keep one of their portfolio companies, Canadian yellow pages company Canpages Inc., ahead of the curve with its latest add-on acquisition.

Canpages on August 25 announced it had expanded into social media with the acquisition of GigPark, a Web site where friends recommend businesses to one another, from its founders Noah Godfrey and Pema Hegan.

The deal is the latest move by the Dallas-based buyout shop to position Canpages as more of an online play than a basic print directory. Though GigPark marks Canpages’s first investment in social media, it is the company’s third Internet-related add-on and its seventh add-on overall, Peter Brodsky, a partner at HM, told Buyouts. “As is well established, online search is becoming more and more popular and we view Canpages not just as a directory but [also] as an online search company,” Brodsky said. “And more and more users of online search engines have an experience of some kind of peer reference, which is very linked in with social media. GigPark would allow us to integrate that online capability with social media applications.”

GigPark, which is free, allows friends to recommend everything from real estate agents to family doctors, event planners to graphic designers. There is also a separate service for businesses. Central to its goal is avoiding planted recommendations from anonymous people who may be affiliated with the particular person or business. “The idea is that if you know the person you’re recommending to or who recommended something there’s a higher propensity to be honest,” Brodsky said.

Brodsky declined to discuss how much the acquisition cost, other than to say it was funded entirely by Canpages and did not involve any debt financing.

HM first invested an undisclosed amount in the company in December 2005. Since that time, the company’s revenue has quadrupled to $100 million, Brodsky said. About 3.5 million unique visitors visit the site every month, and the company has about 700 employees. The firm is no rush to exit the company, given the lack of financing that has curbed deal-making, Brodsky said. HM is also researching further add-ons in social media or, if possible, it could have Canpages look to create novel social media applications of its own.

To date HM has invested about half of its most recent fund, the $830 million Sector Performance Fund LP, which closed in 2008 and is the shop’s first since transitioning out of Hicks, Muse, Tate & Furst Inc.