The Anatomy of a Sale--Ours

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The next day, the discussion continued at the Inc. offices and became heated at times. At one point, Koten was sitting in Jones's office when Sussman came in. Sussman let them know how upset he was about not being included the night before and made it clear that he wanted a piece of the action. Koten said nobody was cutting him out of anything, and he should start thinking about people besides himself and his Web group. Sussman responded that Koten was overlooking the strategic value of the websites. Later, the group from the previous evening reconvened in Koten's office, joined by Sussman and Barba. Denson asked for operating numbers from the various participants and did some quick calculations aloud, again concluding that Fast Company needed a new business model. Byrne sat there silently. Barba was quiet as well and left early. Before the meeting broke up, Byrne indicated that he would not play an active role in any management buyout effort. Denson advised the other participants regarding the numbers, projections, and plans that a potential buyer would want. Then people went their separate ways. That group never got back together, though, following their argument, Koten and Sussman agreed to stay in daily contact to coordinate their efforts.

Rising Star

Joe Mansueto
Founder,
Morningstar

Joe Mansueto, founder and CEO of Morningstar Inc., the Chicago-based investment research firm well known for its rankings of mutual funds, first learned of the planned sale of Fast Company and Inc. from an e-mail message on the morning of Wednesday, May 25. The message was from Paul Sturm, a writer for SmartMoney magazine and a member of Morningstar's board. Sturm had attended a dinner the night before honoring BusinessWeek's outgoing editor in chief, Stephen Shepard. There, Sturm had run into John Byrne, who'd spent 18 years at BusinessWeek before joining Fast Company, and they had talked about G+J's announcement that morning. In his e-mail, Sturm suggested there might be an opportunity here for Mansueto, who was looking for investments and was interested in magazines. If he wanted to pursue the matter, Sturm said, he should get in touch with Byrne.

At about the same time, Mansueto also received a voice mail message from Mark Edmiston, an investment banker who had brokered a deal the previous year that made Mansueto a 50% owner of TimeOut Chicago, an entertainment listings magazine. Edmiston said that his firm, AdMedia Partners, was representing G+J in the sale of Inc. and Fast Company and wondered if Mansueto was interested. Mansueto called back and asked Edmiston to send him the deal book as soon as it was available.

The book arrived at Mansueto's vacation home in Michigan on the Saturday morning of Memorial Day weekend, and he could see at a glance that it was rather skimpy—a reflection, he assumed, of the haste with which it had been assembled. Of the 28 pages of information, 20 concerned Inc. alone, three covered both publications, and just five were devoted to Fast Company. The entire discussion of Fast Company's potential consisted of five sentences, four of which reflected negatively on the magazine's value. Nevertheless, Mansueto was intrigued. He'd read both magazines since they'd first appeared. Indeed, Morningstar was a five-time Inc. 500 company, and Mansueto himself had been featured on the magazine's cover. "I thought that these were two very powerful brands, icons in their respective areas," he says. "And I'm a big believer in the power of brands and the power of high-quality editorial content."

"When I heard about it, I thought it was perfect for Joe," says Don Phillips, managing director of Morningstar, who has worked with Mansueto for almost 20 years. "Here you had great products in an industry that had fallen from grace. It was a classic value opportunity, and Joe is very good at making decisions. He doesn't waffle."

When John Byrne got ahold of the deal book, his initial reaction was shock, which quickly gave way to rage. He showed it to an investment banker friend who said, "John, I've just read your death warrant."

Byrne, meanwhile, was also looking through the deal book for the first time that morning. Koten had urged him to get a copy as quickly as possible, adding: "You're not going to believe how much it undersells our magazines." Byrne's initial reaction was shock, which quickly gave way to rage. The book did a poor job presenting Inc.'s prospects, he felt, but its discussion of Fast Company was appalling. He later showed the book to an investment banker friend who said, after reading it, "John, I've just read your death warrant." Byrne and Mansueto had scheduled their first telephone call for that afternoon, but Byrne wasn't going to wait. He sat down and in an hour and a half pounded out a 13-page, single-spaced memorandum making the case for Fast Company and fired it off to Mansueto by e-mail.

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Bo Burlingham

Burlingham joined Inc. in 1983. An editor at large, he is the author of Small Giants: Companies That Choose to Be Great Instead of Big. The book was a finalist for the Financial Times/Goldman Sachs Business Book of the Year Award in 2006. Burlingham is also the co-author with Norm Brodsky of The Knack; and the co-author with Jack Stack of The Great Game of Business and A Stake in the Outcome.

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