Management steps in with buy-out for troubled media firm

MEDIA Square, the Aim-quoted marketing services company behind PR firm Smarts in Scotland, was acquired in a management buy-out yesterday.

The move came just hours after shares were suspended and administrators were appointed to the firm whose bankers had turned down a request for extra funding.

The group has been acquired by MSQ Partners, an employee-owned company which will be led by former Johnston Press chairman Roger Parry and chief executive Peter Reid who held the same posts at Media Square.

Reid described the deal, which will see the group’s debts significantly reduced, as an “extremely positive development” for staff, clients and suppliers.

“The debt burden of Media Square was holding back the businesses and as part of the transaction a much more appropriate and sustainable financial structure has been implemented,” he said.

Earlier this month, Media Square had warned it was at risk of breaching covenants on £25.8 million of borrowings unless it received extra financing.

The company, the UK’s fifth-largest quoted marketing business, said it needed the short-term funds as it entered its “seasonal peak in working capital requirements”.

Its financial position had been exacerbated by a bad debt after the collapse of US brokerage firm MF Global which was a client.

Media Square, whose Smarts’ Edinburgh and Glasgow offices work with clients including Brewin Dolphin and the Scottish Government, had asked for its shares to be suspended yesterday pending further clarification of its financial position.

Shares in the firm, whose Gate Worldwide advertising business also has an office in Edinburgh, had fallen from a high of 6.5p earlier this year to just 0.8p when they were suspended, valuing the company at just £290,000.