The long-anticipated sale of tech publishing giant IDG may be near, with a Chinese investment group in talks to purchase the company for more than $1 billion, according to Reuters. (Disclosure: I worked as a journalist at IDG for seven years, covering the enterprise software market). Here are the key details from the news wire's report:
The privately held company had been seeking a valuation of $500 million to $1 billion, according to the people, who did not want to be named because the matter is private.
While the parties are in advanced discussions, no deal is finalized and talks could fall apart at any time, the people cautioned.
IDG has traditionally pursued a licensing model in which overseas publishing partners have broad latitude in what type of content they produce. That, in addition to IDG's focus on business rather than politics, helped the company get an early foothold in China and steer clear of press restrictions.
But the sale of the company could face regulatory troubles. The Chinese buyout group will likely need to seek approval from the U.S. Committee on Foreign Investment (CFIUS), the government panel that scrutinizes deals over national security concerns before finalizing any deal, according to the sources.
One area regulators may dissect is the role of IDC, the market research division of the company that consults many U.S. technology companies on IT spending and business strategy and also keeps track of product shipments, the sources added.
Reuters noted it could not learn the exact size of the deal, and given other factors, key questions remain about it. For one thing, privately held IDG has listed its annual revenue at close to $4 billion, making the reported $1 billion price tag a bit puzzling. One explanation is that only IDG's tech publishing arm is in play, and not other divisions such as its research and advisory arm, IDC.
The Chinese group is led by Hugo Shong, chairman of IDG of Greater China. Shong has a long history with IDG's late founder, Patrick McGovern, having launched a Chinese venture capital firm in 1993 with McGovern's help. McGovern was one of the United States' earliest movers in China, forming a joint venture with a company there all the way back in 1980.
IDG includes some of tech media's most prominent brands, including Computerworld, PC World and CIO. It was quicker than other media companies to adapt to the online publishing revenue model, winding down its print publications. in 2009, McGovern said nearly half of IDG"s revenue was already from online. (However, a big focus of IDG's online strategy has been lead generation, in contrast to advertising.)
After McGovern's death in 2014, a sale was widely expected. But IDG only made its plans public in January, saying it had obtained the services of Goldman Sachs to "explore strategic options." Since then, very little has emerged about potential suitors, although recent chatter among insiders suggested a deal would be complete by the end of this year.
If Shong' reported bid is successful, IDG employees may have less to fear about the future compared to other buyers. Shong is a well-regarded figure within the company and seen as someone who would look to bolster investment rather than squeeze out cost savings. IDG has been hit with repeated layoffs in recent years, with the editorial staff taking a considerable hit.
What happens next should prove interesting, in any case.
"The market for enterprise media and research services has shifted," says Constellation Research founder and CEO R "Ray" Wang. "IDG's value has come from its ability to deliver cost-effective market research, community, and news. However as markets specialize, there will be a need for more specialty capabilities. It will be interesting what areas the new owner invests in over the other parts of the portfolio. Differentiation will be key to their success."
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