That said, strategic bidders don't necessarily enjoy competing against financial bidders. With Alta, for example, there was the possibility that, by building massive cost-cutting into its plan, it could project enough future cash flow to justify a much higher bid than the strategic bidders would offer. As for Abry Partners, it had actually been the high bidder in the first round—a fact that led at least one of the other bidders to cry foul.
Self-dealing?
The controversy arose after the Boston Herald and the MediaWeek website reported that Abry represented Denson, Koten, Jones, and Sussman, suggesting that it was part of a management buyout attempt. Like much of the reporting about the sale, that wasn't exactly true. The New York Times, for example, had run a column by David Carr based on a misreading of a press release. The release had said that, should Meredith wind up buying and reselling the business magazines, the net impact would not be "material to the overall purchase price" of the women's magazines. Carr wrote that that meant Inc. and Fast Company had no value, which came as a surprise to the people getting ready to bid. Of course, the statement actually meant that Inc. and Fast Company had no value to Meredith, which planned to buy and sell them for the same price. Mansueto later said he felt like sending Carr a thank-you note for dampening interest in the sale.
The real story on Abry was that Denson knew one of the firm's partners, Peggy Koenig, and—after the sale was announced—called her up to see if Abry was interested in bidding. She indicated that the firm would be interested if Denson would stay and run the business. He said he'd be open to discussing a role later on if Abry won the auction, but he made no commitments.
Denson did, however, help Abry get the information it needed to prepare its initial bid. When Axel Ganz got wind of that, he called Denson on his cell phone and chewed him out. Didn't he realize how that would look to the other bidders? Didn't he understand his contractual obligations to G+J? To avoid even the appearance of a conflict, Denson told AdMedia not to share bid information with him in the future and made it clear to everyone that he would have no part of any management buyout attempt.
Martin Giles was furious: Here he was about to bring The Economist Group's CEO in from London. Was G+J wasting their time? Did one of the bidders have access to information that other bidders lacked? What was going on?
But the word was already out, and the management buyout stories soon appeared. Martin Giles of The Economist Group, in particular, was furious and raised strong objections with AdMedia. After all, here he was, about to bring the CEO of The Economist Group, Helen Alexander, and other top executives in from London, and a bunch of management insiders were apparently trying to buy the magazines themselves. Was G+J wasting his and his boss's time? Did Abry have access to information that other bidders lacked? What was going on?
AdMedia's Edmiston spoke to Denson, who responded with an e-mail to all the bidders saying that he would be happy to assist any of them, but that, to that point, only Abry had asked to speak with him. That didn't satisfy Giles. He confronted Koten, who assured him that the auction was on the up and up. Koten didn't deny, however, that he would like to do a management buyout if it were possible. "This is an entrepreneurial magazine," he said. "We are all very interested in business. You'd have to wonder what was wrong with us if we weren't trying to buy this thing." Although Giles seemed to accept that explanation, he was still upset.
It all became moot shortly thereafter, however, when Abry dropped out of the auction. That took us down to four bidders. Meanwhile, although it had not bid in the first round, Time Inc. was still circling like the great white shark in Jaws. Koten soon learned from a source at G+J that Time Inc. was preparing a serious bid, which made all of us nervous. In the spirit of leaving no stone unturned, Koten came up with a scheme to have Time Inc. buy Inc. and set it up as an independent business that would be run by Time Inc.'s outgoing editor in chief, Norman Pearlstine, who had been Koten's boss at the Wall Street Journal many years before. The new business would be a sort of retirement gift to Pearlstine, but Time Inc. would own it and therefore have an interest in keeping Inc. alive. Pearlstine aside, that would be an ideal outcome for Koten, who could thus manage to eat his cake and have it too. He walked over to the Time-Life Building to make his proposal directly to Pearlstine, who said he found it intriguing, though he doubted it was a practical possibility so late in the game. Koten asked him to think about it and returned to Inc. If nothing else, he hoped he'd planted the seed that Time Inc. could buy Inc. with the intention of operating it as an ongoing business—and not just taking the title and slapping it on an existing Time Inc. publication.
