Case Study: IGN Entertainment
Explore this investment
- Contrarian Investment
- Sourced Strategic Acquisition
- Innovative Financing
- Negotiated Strategic Sale
Mark Jung, CEO of IGN Entertainment, was a serial entrepreneur. When Great Hill Partners reached out to him in 2002, he was at the helm of an exciting, but underfunded, opportunity. His company – IGN.com – was a still nascent survivor of the Internet bubble, offering an online destination of information and entertainment for video game enthusiasts. His goal was to become the dominant player in the segment, but he was hamstrung by the difficult online ad market that left him with a market cap under $15 million, down from $1 billion post-IPO.
Having thoroughly researched the sector, we believed in the long-term value of IGN’s franchise, and worked with Mark and the special committee of the board to engineer an all-equity go-private transaction in the summer of 2003.
As part of our sector research, GHP had also been in contact with the CEO and owner of one of IGN’s primary competitors – GameSpy Industries. Upon closing the initial IGN transaction, GHP then positioned IGN as the acquirer of GameSpy and underwrote the transaction fully to allow IGN to prevail over a well-capitalized, strategic competitor.
Mark elaborated on GHP’s contributions by saying, “They delivered exactly as promised in the go-private transaction, and their industry knowledge and financial support put us in the position to win the GameSpy deal in a highly competitive process – they understood and embraced our vision of the combined companies, despite what looked like a steep price at the time.”
GHP also arranged an innovative structured financing to close the GameSpy deal. We surpassed Mark’s expectations, and he said, “As a West Coast entrepreneur, I was not familiar with the creative use of debt financing. I expected at least 30% dilution to finance the deal, but GHP’s expertise and relationships allowed us to source incredibly attractive debt and mezzanine capital to get the deal done while maintaining maximum ownership for existing investors and management.”
In partnership with Mark, our efforts were rewarded in 2005 when News Corporation preempted an imminent public offering with a heavily negotiated cash transaction that resulted from a personal contact GHP had within the News Corporation organization. The $650 million sale resulted in over $500 million of value creation in just 24 months.
Mark commented on the sale process, “We were ready to call it a day with another buyer when GHP contacted someone inside News Corp. and turned it into a last-minute bidding war. Their knowledge of the strategic players was invaluable… and they were very helpful during the negotiation process of retention packages for management and employees.”