J-M&A Watch: Quartz Bought by Uzabase
Originally Published on 7/9/2018
What an exciting week last week was! We started with the announcement that Japanese financial media company Uzabase, operator of popular news aggregator and original content provider NewsPicks, has agreed to acquire US business media arm Quartz from Atlantic Media. Quartz will be bought for between $75 million and $110 million depending on Quartz hitting its business goals, and Uzabase plans to complete the deal within 30 days of the announcement. This is one of the latest US expansion for a Japanese company, following Recruit Holdings’ acquisition of popular US jobs site Glassdoor in May.
As part of the deal, Quartz will keep its name, brand, and editorial employees, with current editor-in-chief Kevin J. Delaney and publisher Jay Lauf continuing as co-CEOs. Uzabase will send managing director Tomoyuki Ota as Quartz’ new CFO.
“Since its launch in 2013, NewsPicks has gained a reputation as an innovative news site. It has convinced 64,000 users to buy subscriptions with its mix of aggregated stories and, increasingly, original content, such as in-depth stories on firms such as Uber Technologies Inc and Mercari Inc.”
— Reuters: Japan’s Uzabase buys U.S. biz news site Quartz in overseas push
How we got here
Uzabase representative Yusuke Umeda recounted in a live stream how this deal came to be, starting with cold emailing Quartz last August. It was only in November that they were able to get a meeting with Quartz co-CEOs Delaney and Lauf, and the plan for this meeting was not to discuss an acquisition, but a potential partnership between the two companies. The two parties soon realized how closely aligned they were in their vision for this new partnership as well as the future of their respective companies, and realized that the partnership structure may be getting in the way of fully achieving what they set out to do. Delaney and Lauf introduced Umeda to Michael Flannagan, President of Quartz owner Atlantic Media, to float the idea of an acquisition. After a few backs and forths, Flannagan ended up setting up a conversation over dinner between Umeda and David Bradley, owner of Atlantic Media.
Bradley, a 65-year old founder of the Corporate Executive Board and Advisory Board Company, both prominent and publicly traded research firms, was eyeing to sell off a few Atlantic Media properties before his planned retirement at 70. Umeda caught on to this, and asked Bradley if he could take his load off by NewsPicks operating Quartz, taking both companies to new heights unimaginable with a simple partnership. Bradley was cautious, while admitting his attraction to Umeda’s ambition and vision, stating his desire to focus on successfully launching a partnership first.
Delaney and Lauf, convinced of Umeda’s vision, discussed the opportunity with Bradley and shared their excitement for the future of Quartz under NewsPicks’ umbrella. Hearing more from Bradley, Flannagan picked up the phone to call Umeda. Flannagan understood the synergies between the companies, and had bought into the idea of the acquisition on paper. However, Quartz was on the verge of launching a new paid subscription service that would’ve brought the company closer to profitability, and Bradley had five years until his retirement to make a move. Umeda disagreed; it was precisely because of the timing of Quartz’s new pivot to paid content, and NewsPicks’ US growth plans that he wanted to push through with an acquisition with the next few years of growth in mind.
Flannagan called back again in January. This time, he wanted to know how serious Umeda was about his idea given Uzabase’s relatively modest revenue in 2017 (a little over $40mm). Umeda and team sent their first Letter of Intent to Atlantic Media, officially kicking off talks between Atlantic Media and Uzabase of a future acquisition.
The Long Game
When NewPicks began its US operations in partnership with Dow Jones, it viewed its service through three pillars — platform, community, and media. It initially focused on establishing the first two before entering the original content arena, as it had done in Japan. This, it turns out, was the right approach. Within 8 months of launching in the US, NewsPicks grew faster than it had in Japan — twice as many daily active users at the 8-month mark, and user retention rates for the US app surpassed that of Japan.
Acquiring Quartz will allow NewsPicks to fill its hole in the media pillar with a fledgling group of business journalists (“best and brightest in the field” according to Umeda) already successful in creating gripping economic and social content for their readers. It also pushes NewsPicks into the global spotlight, with 40% of Quartz readers living outside of the US.
In addition, Quartz has five thematic strengths Uzabase valued according to Umeda:
- Readers are 25–44 year old, next-generation business leaders
- The ability to report from 115 countries, and support interviews in 19 languages
- World class economic journalists and writers
- Simple, mobile-first design
- High quality brand content across over 320 clients including Intel, Deloitte, MasteCard, Visa, Boeing, and Exxon.
It will be interesting to see how this new media triumvirate tries to turn itself into the “most influential media service” in the next five years. By 2023, Umeda and team aim to grow the service to 1,000,000 paying users and 10,000,000 monthly active users, reaching far and wide beyond its home territory to create a new Japanese media empire.
