The Anatomy of a Sale--Ours

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Byrne and Mansueto finally connected by phone at about 2 p.m. and talked for an hour or so. Byrne explained the history of Fast Company and discussed his vision for the magazine—what he was trying to do with it. Mansueto was impressed. "I have a full-time job at Morningstar," he says. "For me to get involved, I have to be sure that there's a highly motivated, enthusiastic team of talented people who are going to pull this off. And I got the sense from talking to John Byrne that that was the case."

Unlike some of the other bidders, Mansueto wouldn't have to achieve a specific rate of return to satisfy investors, and he had no board to go to or shareholders to worry about. The money he'd be spending would be his own.

Mansueto thought he might have an advantage because G+J was in such a hurry. Unlike some of the other likely bidders, moreover, he wouldn't have to achieve a specific rate of return in a certain time frame in order to satisfy investors, and he had no board to go to or shareholders to worry about. The money he'd be spending would be his own, not Morningstar's. Mansueto had taken Morningstar public in May, and his holdings in the company were worth more than $800 million. So he could move fast. Given G+J's obvious sense of urgency, he thought he might even be able to put in a preemptive bid and stop the auction.

First, of course, he had to settle on a number, which he says wasn't all that hard, despite the sketchiness of the financials in the deal book. "Remember, I was a stock analyst, and I have a background in analyzing financial statements. I can look at Inc. and put a value on it, look at Fast Company and put a value on it, look at the websites and put a value on that. I wind up with a number that gets me to what I should bid, leaving some margin of safety in case I want to increase it."

On Tuesday, May 31, Mansueto e-mailed Edmiston an offer: He was willing to pay $28 million for the magazines and websites if G+J halted the auction. A few days later, Edmiston reported back that the amount wasn't enough to shut down the auction. Preliminary bids were due that Monday, June 6. "I decided to let my offer stand as a preliminary bid," Mansueto says. "After the other bids came in on Monday, I was told I was in the middle but toward the front of the pack. When I heard that, I thought maybe my financial analysis was not too far off."

The Suitors

By the time Mansueto put in his bid, it was clear to everyone involved that there was more interest in Inc., if not Fast Company, than Axel Ganz and the G+J crew had anticipated—which made me think that Inc.'s German owners had never really understood the value, and potential, of what they had. Fast Company was a harder sell, partly because of its association with the 1990s economic bubble. Of course, Inc.'s managers were partially responsible for the interest in their magazine. They were reaching out to everybody they could think of—or at least everybody who might let them keep their jobs. Lee Jones was calling friends at CMP Media, a publisher of trade magazines, and at Wasserstein & Co., which owns The American Lawyer magazine and New York magazine. Koten was trying to contact Pat McGovern, founder of International Data Group. Ed Sussman was in touch with Reuters and talking to a friend at ACON Investments, a Washington, D.C.-based private equity firm. ACON, in turn, was exploring the possibility of partnering with media and real estate mogul Mort Zuckerman—the person who'd sold Fast Company to G+J for $350 million in 2001. Russell Denson was calling someone he knew at Abry Partners, a Boston private equity firm that specializes in media deals. And Byrne, for his part, was trying to stir up interest in Fast Company. He made a pitch to people at McGraw-Hill, owner of his previous employer, BusinessWeek. They weren't interested in the magazine, but BusinessWeek was interested in Byrne. Shortly after the initial announcement of the sale, it had inquired about whether he might want to return. He had said he couldn't do anything until Fast Company's fate was resolved.

Aside from the potential bidders being contacted by the managers, there were some heavy hitters who needed no prodding from anyone. Foremost among them was The Economist Group, which had long coveted Inc. The London-based company, publisher of The Economist, had sent out numerous feelers over the years about the magazine's availability. As soon as the auction was announced, the group's head of U.S. operations, Martin Giles, was on the phone, laying the groundwork for a serious bid. As he told one person close to the magazine, "How often does a really good magazine come on the market—in your niche, with a solid brand?"

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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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