Tuesday, September 06, 2005

The Art of the Deal

Fabulous “insider” story in the September issue of Inc. Magazine on its sale – along with sister magazine Fast Company – to Chicago entrepreneur Joe Mansueto.

The sale was well publicized because of the tremendous difference between the price that former owner Gruner + Jahr AG received for the magazines ($33 million U.S.) and the price G+J paid for them just a few years ago – in the hundreds of millions. (Now that’s value destruction!)

But this story goes into the minutiae of the sale, from valuing the two properties to exploring the different motives of each bidder. It even examines management’s conflicting role: working enthusiastically to attract more bidders while also considering a bid of their own.

One significant takeaway from story is seeing the advantages that an independent entrepreneur enjoyed as the bidding process became more complicated. Only he – free from the oversight and control of higher levels of risk-averse management – could bid from the heart. And only he could respond flexibly and sensitively to the changing (and often absurd) demands of the sellers.

It’s also interesting to follow the rivalry of the two magazines. Fast Company was loud, splashy and hopelessly naïve, a visually exciting magazine that sprang from the hyped-up Internet craze. Inc., 25 years old, was the older, more staid chronicler of the rise of small business in the 1980s, easily overshadowed by brash newcomers like FC. The story makes it clear that Fast Company was seen by almost everyone to be without value – a last smack in the face to the Internet bubble economy.

Sure, it’s 9,000 words. But worth your time, especially with writing like this…

[Fast Company editor John] Byrne, meanwhile, was looking through the deal book for the first time that morning. [Inc. editor John] 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."

Read the whole story here.

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