Sunday, July 20, 2014

Forbes, "The Capitalist Tool, Falls to Capitalism

Forbes Magazine bills itself as “The Capitalist Tool” Capitalism is unforgiving to businesses that cannot compete, that cannot change with the times. Forbes Magazine is 97 years old. The privately owned American publication is being sold to a Hong Kong based investment group. Forbes is best known for its 400 Richest Americans and World’s Billionaires annual issues, but it built its reputation and circulation on incisive, hardhitting reports. No company or financier was immune from a Forbes investigation. The magazine fell victim to the general decline in traditional media publications. Forbes’ circulation has held up, unlike many periodicals, but advertising revenue is plummeting, down 11% in 2013. The magazine fell victim to the third generation. Third generation management is often fatal to family owned businesses: “From shirtsleeves to shirtsleeves in three generations” is often heard. A less common saying is “”The first generation starts a business. The second generation runs it. And the third generation ruins it.” That’s the obit for the Forbes family. B.C. Forbes started the magazine in 1917. His two sons, Bruce Charles Forbes and Malcolm Forbes, successively expanded the magazine. Steve Forbes, Malcolm’s son, succeeded Malcolm in 1990 upon Malcolm’s death. Steve Forbes represents the third generation of the Forbes Magazine. One third generation problem is that many of the grandchildren lack loyalty to the family business, but love cash flow from it, such as in dividends. They can spend, but not create. Malcolm Forbes was a builder and collector. He collected Faberge, amassing the largest private collection of nine Faberge Eggs. Steve Forbes sold them to a Russian oligarch in 2004 for over $100 million. The Forbes family was not satisfied. 45% of the company was sold in 2006 for $264 million to Elevation Partners LLC, one of whose investors is Bono. Forbes sold its Manhattan headquarters in January 2010 to NYU with plans to move to Jersey City in 2016. The Forbes cashflow was shrinking with the changing dynamic in advertising. The EBITDA (earnings before interest, taxes, depreciation, and amortization) dropped to $15 million in 2013. The family put Forbes Media LLC, the business, up for sale in November 2013. Several interested parties dropped out of the bidding after comparing the financials to Forbes asking price. Forbes announced two days ago that a majority interest (believed to be 80%) in the company is being sold to Integrated Whale Investments, a Hong Kong based investment company. The price is undisclosed, but believed to be over $300 million. Since Elevation Partners is being bought out at a profit, not much will go to the Forbes family. Steve Forbes says he’ll remain as Chairman and Editor-in-Chief and Mike Perlis as Chief Operating Officer. We’ll see. Steve Forbes broadened the company over two decades, but lacked the imagination to respond to the changing media paradigm. He also engaged in quixotic runs for the Republican nomination for President in 1996 and 2000. R.I.P Forbes. Join the Chandlers, Bancrofts, Grahams, Binghams, De Youngs, Ziffs, Hoiles, and Pulitzers.

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