Editor's note:
We don't plan to make a habit of writing about ourselves. In fact, when G+J announced in May that it was putting Inc. (and sister magazine Fast Company) up for sale, it never occurred to us that we might end up writing a story about our auction. Obviously, we can't be as dispassionate about our own business as we try to be with others, but it's rare that we have ringside seats for such an interesting process and we learned so much that we decided to share it with you. We hope you'll find it worthwhile.
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The Anatomy of a Sale--Ours
Magazines know how to go after a story, but this one came to us. Inc. was recently the focus of a business drama with valuable lessons about what a company is worth--in the marketplace and to the people who work for it.
Published September 2005
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COMMENT ON THIS ARTICLEThere is a moment when it hits you, when you suddenly realize just how high the stakes are now that your company has been put up for sale.
John Koten
Editor in Chief, Inc.
For Inc.'s editor in chief John Koten, that moment came on Wednesday morning, May 25. He and I were planning to attend a meeting to discuss the impending auction of Inc. and Fast Company, which had been announced the day before by their owner, Gruner + Jahr AG. When I arrived at Koten's Manhattan home, he was on the telephone with an old friend: John Huey, editorial director of Time Inc.'s 200-plus magazines. Koten wasn't saying much, but he had a serious look on his face, and I could tell he wasn't thrilled with what he was hearing. Before hanging up, he thanked Huey for speaking frankly.
"What did he say?" I asked.
"He said Time Inc. has been talking with G+J for months about buying Inc. He said, ‘You don't want us to buy you because if we do, we'll lay off all of your employees.' He told me I should go write a book."
"So what do you think?" I asked.
"I think that's his perspective, not mine."
Several weeks later, Koten reflected back on how important that conversation with Huey had been. "It really galvanized my thinking that I had to take an active role in the auction process," he said. "I realized that unless I worked hard to get people interested in buying Inc. and bidding up the price, Time Inc. might win it.
"If it did, that would be the end of Inc. as we know it, and we'd all be screwed."
Everything Must Go
The first inkling I had that Inc. was on the block had come from Koten in mid-May. I had asked him when he expected to hear back about a request he'd made on my behalf to Gruner + Jahr USA. "Everything is on hold," he said. "Something's up."
By then, in fact, he already had a good idea of what was up. Tipped off by a consultant whose high-priority project had been halted abruptly, he had begun snooping around, calling friends in the industry and networking with editors of other G+J publications. Eventually, he and they had put it all together: Gruner + Jahr AG, the German parent company (which is 75% owned by Bertelsmann AG), was pulling out of the U.S. magazine market. Unbeknownst to the senior executives of the American division, the Germans had been negotiating for several months to sell G+J USA's four women's magazines (Parents, Child, Fitness, and Family Circle) to the Meredith Corp., publisher of Ladies' Home Journal and Better Homes and Gardens, among other titles. But Meredith had no interest in the two business magazines, Inc. and Fast Company, and so G+J had been trying—thus far unsuccessfully—to negotiate their sale to Time Inc. or CurtCo Media Labs, a publisher based in Malibu, Calif.
John Byrne
Editor in Chief,
Fast Company
On May 23, J. Russell Denson, the CEO of G+J USA, met with Koten and Fast Company editor in chief John Byrne, confirming what they already suspected and adding a few tidbits. The Meredith deal was done, he told them, and would be announced the following day, with the closing scheduled for June 30. G+J would have until then to find a buyer for Inc. and Fast Company. If it failed, Meredith would acquire them for an undisclosed sum (the actual figure was $15 million). Meredith would then unload the two magazines as quickly as possible. That evening, Koten passed along what he'd learned in an e-mail to Inc.'s employees.
Bernie Goldhirsh
Founder, Inc.
The staff responded to the news with emotions ranging from acute anxiety to outright panic. Some staffers had previously worked at magazines that had closed, and word of the sale of Inc. immediately triggered painful memories. I had deep feelings of my own because of my long history with Inc. I've been here for almost 23 years now, as senior editor, executive editor, and editor-at-large. When I arrived at the magazine, Microsoft had not yet made the Inc. 500 list of fastest-growing private companies; IBM's new PC was just beginning to catch on; and AT&T was still Ma Bell, the great U.S. telephone monopoly. From our offices on Commercial Wharf in Boston, I not only watched but participated in the entrepreneurial revolution of the 1980s, as both the magazine and the business founded by Bernie Goldhirsh carved out places for themselves in the media landscape. Although I cut back a bit in the 1990s to pursue special projects with entrepreneurs Jack Stack, Anita Roddick, and Norm Brodsky, I was still around in 2001 when Bernie, having fallen victim to brain cancer, sold the business to Gruner + Jahr for $200 million. After G+J named Koten editor in chief of Inc. in 2002 and moved it to Manhattan, I did what I could to help him rebuild the magazine with an almost entirely new staff.
Along the way, I developed a strong emotional attachment to Inc., which made it difficult for me to get too upset about G+J's decision to sell the magazine. After four years of declining ad sales, shrinking budgets, multiple reorganizations, and the decimation of Inc.'s conference business, it had become clear that being owned by the subsidiary of a subsidiary of a German conglomerate was not what this entrepreneurial magazine needed. Its sale, I figured, might well turn out to be a blessing for all concerned. On the other hand, there was also a chance that the sale could prove to be a one-way ticket to magazine oblivion.
In four weeks, we gained years' worth of insight into Inc., into our market, and into opportunities we might pursue. Going through the sale process draws out information you probably can't get any other way.
