For Broadcast May 14, 2008

A trickle of independent production companies looking to take themselves off the public market could be set to turn into a rout.

Tinopolis' £44.7m deal with private equity company Vitruvian follows a potential management-led buyout of RDF Media. Others, such as Shed, Ten Alps and DCD Media, could follow. Indeed, the public market is not a particularly friendly place for any small cap stock. Add to that the question marks raised across the sector by the Queengate affair and the PRTS scandals and the light at the end of the public market tunnel looks dim. According to Tinopolis chief executive Ron Jones, it will likely take "a new generation of fund managers" before small caps are back in vogue.

Ironically, Jones would not have been able to create the Tinopolis of today without the public market to help him. In 2006 he used a shell company in a hostile bid for TV Corp, owner of Mentorn and Sunset & Vine. The talk then was of an upstart Welshman who did not understand the competitive nature of TV. Since then, Tinopolis, which is still based in Wales, has built its business and grown profits despite losing the BBC Jam contract (when the BBC was ordered out of the business) and with Mentorn still in the red.

It's been a good run for Jones and co, but as one equity analyst put it: "What was given to indies through statutory decree in the 2003 Communications Act, the public market has clawed back." Tinopolis has seen its shares glide as low as 23p in the past year. At that level, raising new money would have been too dilutive for existing investors even to contemplate. If Tinopolis, with its blue-chip list of funders including Schroder, Black Rock and M&G, couldn't access public capital at a reasonable cost, who could?

New Tinopolis backer Vitruvian Partners is a bit of an unknown, being a new fund set up by exiles of much bigger VCs including Apax. But clearly they are in it for growth. Jones will relish this, given that he had to pass on certain investments he might have made in the past year. The newly funded Tinopolis might look at Boomerang, the Welsh indie that listed on AIM late last year and which in March pulled out of a merger with DCD Media.

But my betting is that Jones also looks for acquisitions that are a bit outside the box. Jones points to a future where indies will be increasingly working for "brands rather than broadcasters". Tinopolis is only the second investment by Vitruvian. Tellingly, perhaps, its first was in Latitude Group, an internet search engine marketing company.