Dolan seeks to build firm, not cash out

Jim Dolan, architect of Minnesota's biggest initial public offering of the last few years, dropped some jaws at a seminar last week when he said he likely will never sell any of his stake in 16-year-old Dolan Media.

"Why would I sell the best investment of my life?" Dolan told several hundred financiers, lawyers and entrepreneurs at the annual "Going Public" seminar of the Collaborative. "That will be my estate's problem."

And a happy day for all those charities and scholarship students who will benefit from some of Dolan's 1.3 million shares of Dolan Media (ticker: DM).

Big shareholders in companies that go public often sell some of their stake into the offering or shortly thereafter in order to take some winnings in cash. But Dolan likes to emphasize the long view in what he calls "a nation of flippers and traders."

Dolan, who owns or has options on about $24 million worth of stock, didn't liquidate anything. And he bought another $1 million worth of Dolan Media after the August 2007 initial public offering.

Mining niche publications

Dolan, 58, a former newspaper executive and Wall Street investment banker, bought Minneapolis-based Finance and Commerce with partner Cherry Tree Ventures in 1992. Dolan Media since has assembled a stable of five dozen business services, publications and websites for the legal, financial and real estate trade in the Twin Cities and about 20 other regional markets, including Boston, Baltimore, Milwaukee and Charlotte, N.C.

"But my intention is that this is a rest-of-my-life-deal," the trim, courtly Dolan said. "I find it disingenuous to pitch investors and then sell [stock] out the back door. That would also be stupid. This is a great investment."

Of course, many executives take advantage of regular stock sales to help them diversify their holdings; also known as cashing out. Dolan, who was paid nearly $1 million in salary and bonus last year, is having none of that.

"I'm not doing this for the money," he said. "I'm not underpaid. I've got everything I could want. The satisfaction is growing the business. It's about satisfying clients and employees. The unhappiest people I know are entrepreneurs who sold their businesses and are sitting on a pile of money."

Dolan, who owns about 5 percent of the company, has put together a multistate network of law-and-finance publications that offer a nice stream of repeat revenue. It includes Minnesota Lawyer and a well-designed, well-written makeover of once-staid Finance and Commerce.

The publications generate about two-thirds of what analysts expected to be 2008 revenue of about $178 million, which should yield adjusted earnings before interest and taxes of about $50 million, and improved 2008 earnings of about 72 cents per share.

Dolan calls the economical acquisition "just plain luck." He didn't foresee the magnitude of the 2007-08 mortgage market bust that would lead to a boom in the foreclosure business.

Dolan went public at $14.50 per share, raising $225 million last August. The stock rose to a high of $30.84 in late December amid the mortgage market meltdown.

It reported fourth quarter earnings earlier this year that were up about 25 percent, but a little less than Wall Street anticipated. It closed Monday at $18.66. That's still nearly 30 percent higher than its IPO price. The company boasts a market value of nearly $500 million.

Each of the company's nearly 1,500 employees got at least 100 shares of stock in the offering. Many own much more.

Growing organically

"We try to absorb the good things from each acquisition," Dolan said. "We throw a party the first night we own a publication for employees and families. But the deal is only half done when we close on the sale. We spend some time on computers and technology and financial integration. And the rest is people-oriented. We want to learn. And we pull people in as ambassadors to help those people learn about us.

"We don't want to miss on the quarterly numbers. But we try to think of how to grow the company long term. We talk about 25 years out."