Primedia buys Federal Sources

New York-based publishing giant Primedia Inc. on Friday acquired information technology consulting firm Federal Sources Inc., McLean, Va., for an undisclosed sum.

Federal Sources will be part of a publishing conglomerate that includes magazines such as Chicago, Modern Bride, New York, Seventeen and Soap Opera Digest, as well as magazines for information products such as databases and directories for the transportation, credit and construction industries.

Primedia's acquisition of Federal Sources will not result in any leadership changes at the McLean company, said Federal Sources senior vice president Bob Dornan, who will keep his title and responsibilities after the purchase. Dornan, who co-founded Federal Sources with chief executive officer Tom Hewitt, said he and Hewitt were the primary shareholders of Federal Sources.

One Primedia insider termed the purchase a "minnow" acquisition for the company. For Primedia, minnow purchases— smaller acquisitions— typically weigh in above $20 million, he said. "It's a relatively small acquisition for us, but it does get us into the federal arena," he said.

David Adler, a Primedia spokesman, described the acquisition as one that will help the company tap into the federal IT arena, which company officials perceive as a growing market. "We think [the Federal Sources acquisition] is a great platform for us," Adler said.

The marriage of the two companies adds about 75 employees to Primedia's 7,000-plus work force. Dornan and Adler declined to disclose Federal Sources' annual revenue. Publicly traded Primedia reported to the Securities and Exchange Commission that it lost $20.8 million on revenues of more than $1.4 billion in 1997.

For Federal Sources, joining the Primedia family should provide access to resources to help the company expand its current markets while exploring new markets.

"[The acquisition] is going to give us the ability to grow our company a lot faster than we could do it ourselves," Hewitt said.

Dornan said the company has been "growing nicely at about 25 percent per year, and we see bigger opportunities on the horizon." He added that the company has considered entering the arena of international IT consulting and marketplace analysis.

Dornan said Federal Sources has about 600 clients, who subscribe to company services and products ranging from consulting services to IT acquisition databases to in-depth public-sector IT reports.

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