Industry Observers: IDG Sale Attracted a Premium Price
Positive reaction to a transaction worth reportedly less than $1 billion.
Reaction to the sale of International Data Group to Chinese investors for a reported sum of less than $1 billion has been generally positive, with observers noting the robust price and that it isn't surprising the new owners are from China given recent media investments from that country and IDG’s long history there.
The transaction, announced last week, came after the privately owned tech-media giant spent a year seeking a new owner since chairman and co-founder Patrick McGovern passed away in 2014.
While precise terms of the deal were not disclosed, IDG and the new owner, China Oceanwide, said in a joint statement that China Oceanwide will become the controlling shareholder of IDG’s operating businesses, including International Data Corporation and IDG Communications. IDG Communications runs several marquee media brands, such as Computerworld, Macworld, and PCWorld.
IDG Capital — an independent venture capital firm in China with limited partners including IDG — will become the controlling shareholder of a third unit, IDG Ventures. IDG headquarters will stay in Boston, and the company will continue to be managed by its current leadership, including IDC president and CEO Kirk Campbell, and IDG Communications CEO Michael Friedenberg.
The company doesn’t officially disclose its revenue, but various estimates peg IDG revenue at upwards of $3 billion, making a sale price of under $1 billion seem low at face value, especially in comparison to the sale of Penton, a smaller company, to Informa for $1.6 billion in September.
However, it’s difficult to extrapolate a revenue multiple from the company announcement, and the full extent of what the “controlling shareholder” actually owns is unclear. One observer, a B2B industry executive who asked not to be named, suggested that published estimates of IDG revenue have been overstated, and that core operations of the company are likely more in the $1 billion range.
"The good news is that a complicated, global information and research company was sold for about $1.0 billion, which sounds about right to me for the actual financial performance of the business,” the executive said. "Do not believe the $4.0 billion number. It is an 'alternative fact.’"
Other observers said it’s not surprising that the buyers came from China, given the recent pattern of Chinese acquisitions in media and ad tech — including the $900 million acquisition of Media.net by a Chinese consortium last August, and the 2014 sale of Forbes to a group based in Hong Kong. Indeed, said Reed Phillips, CEO of deal brokerage firm DeSilva + Phillips, the price IDG sold for was attractive, in part because it was sold to Chinese buyers who have recently been outbidding American and European buyers.
And Greg Mason, CEO of the digital content and commerce company company Purch — and a former publisher at IDG — said he’s had outreach from brokers representing Chinese buyers inquiring whether Purch would be interested in selling.
Interestingly, Mason said IDG’s famous decentralized management model (eliminated to some extent last year) might have worked against an even higher sale price. “There was no meaningful way to leverage the collective power of the organization to benefit an individual market,” Mason said about IDG’s small corporate team. “That was fine in the days when the markets were very individual, but as technology has become a much bigger factor in the development of a media and publishing business, that has come to be more of a constraint.”