The Anatomy of a Sale--Ours

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Ray Shaw
Founder, American City
Business Journals

Advance Publications was another contender. In addition to Condé Nast, publisher of The New Yorker, Vanity Fair, and other consumer magazines, Advance owns American City Business Journals, based in Charlotte, N.C., which has a network of 41 business newspapers serving on a local level an audience that is similar to the one Inc. addresses on a national level. ACBJ's founder, Ray Shaw, a former president of Dow Jones, still runs the operation and recognized instantly how well Inc. might fit into it. He lost no time making his interest known.

The ultimate heavy hitter was Time Inc., but its intentions were a huge question mark. As Koten had learned from John Huey, Time had been talking secretly with G+J for months about buying the business magazines, apparently with the intention of shutting them down and putting Inc.'s name on either Business 2.0 or Fortune Small Business. According to one executive at Time Inc., G+J had originally approached it with an offer to sell them for $75 million. That was far more than Time Inc. was willing to pay, but it had continued to discuss a possible deal right up until the auction process began. So would Time Inc. now submit a bid? Nobody seemed to know.

And those were just the players we were aware of. In the end, AdMedia sent out between 25 and 30 copies of the deal book over Memorial Day weekend. The following Tuesday, just one week after the announcement of the sale, the due diligence process got under way. One after another, potential buyers began doing their interviews, and we began to see the many ways people were thinking about taking advantage of the opportunity presented by G+J's decision to sell Inc. As for Fast Company, John Byrne canceled a business trip so that he'd be available to answer any questions the bidders might have about the magazine. Other than Mansueto, none of them called.

Round One

Martin Giles
Managing Directtor,
North America, The
Economist Group

While Koten, Sussman, and Jones were busy meeting with prospective buyers, the Inc. editorial staff spent the next two weeks trying to focus on putting out a magazine. Koten gave us periodic updates, but that didn't keep us from speculating. Rumors swirled. Although we all had contingency plans in case things didn't go our way, we really didn't want to have to use them. Indeed, no member of the editorial or Inc.com staff left during this period, though several people received job offers. (The business side wasn't so fortunate. It lost three of its marketing people.)

On June 6, 10 first-round bids were submitted to AdMedia Partners, which winnowed out those it knew would not make the final cut. Some bids were simply too low. Others were high enough but the bidders lacked sufficient financial muscle to assure G+J that they could deliver if they won the second round. That left five finalists: The Economist Group, Advance Publications, Abry Partners, another private equity firm called Alta Communications, and Joe Mansueto. Time Inc. chose not to participate in the first round but stayed ready to pounce.

By then, Koten, Jones, and Sussman thought they knew, or could guess, the intentions of all the bidders except Alta, about which they had almost no information. They'd met or been in touch with the people from The Economist Group, Advance's Ray Shaw, and Joe Mansueto, while Russell Denson had been talking to Abry. Based on those contacts, the managers had some sense of whom they should be rooting for—and whom they might want to root against.

The people from The Economist Group, for example, gave every indication that they liked the magazine as it was and wouldn't make major changes, at least not in the editorial and Internet operations. Martin Giles had a due diligence meeting with Jones and Sussman and later told Koten that he hadn't been included because the editorial content of the magazine wasn't a concern. Both Koten and Sussman had numerous other discussions with Giles and his colleagues, who seemed to feel that any problems Inc. had were on the business side, and that The Economist Group could fix them by applying its own publishing expertise, bringing in new resources, and making Inc. a platform for a host of profitable ventures, just as it had done with its other magazines.

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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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