June 21st, 2007 05:30 EST
The Decade's Biggest Opportunity For Speakers & Bureaus
There’s a trend underway that has the potential to affect nearly every investor, business owner, and worker in the U.S. Its hoof prints are all over the front page of The Wall Street Journal, and it’s the buzz among the folks in high finance, but so far, many of the people it’s likely to affect have no idea what’s coming.
What am I talking about? The massive move toward the privatization (i.e. taking a company off the stock market and putting it into private hands) of major U.S. Corporations is potentially the most profound economic shift in the U.S. in the last 10 years.There will be winners, and there will be losers. My goal is to make sure that there will be many more winners than losers – and both speakers and bureaus will play a big role in helping as many people as possible come out on top.
I don’t want there to be any misunderstanding. I am a fiscal conservative and as a successful long time entrepreneur, I am a capitalist. But I also feel an obligation to help the people who are going to be hurt by this business trend. Speakers and bureaus need to work together with their clients who will clamor for assistance as this issue heats up. The changes will be big and they’ll be real, and everyone will want to know what they need to do if the seismic waves of privatization rock their companies.How It Works – And Why It’s HappeningThe private equity community has found a new way to make massive amounts of money – and that’s by privatizing underperforming, undervalued companies. This trend is much talked about among the money people with whom I work every day. Money folks eat, breathe, and sleep deals like this. Recently, giant entities such as Chrysler, Bausch & Lomb, Alltel, and Sallie Mae have all been acquired by private money.
But these purchases are just the tip of the iceberg.
While profitability is the goal of any company, it will be the sole focus of the new management teams. The private equity funds that have bought these companies want profits. And they do a darn good job of generating huge returns for their investors.What’s The Impact – And Why Is This Happening Now?Thanks in large part to Sarbanes-Oxley, the benefits of being a public company have decreased so much that the people who run these companies – and the major investment blocks who own them – are re-evaluating their options. Privatization is looking pretty good to many of them.
Sarbanes-Oxley As A Driver
Like clockwork, Congress reacted to the abuses at Enron, Tyco, WorldCom, and others by passing the Sarbanes-Oxley Act in 2002. Sarbanes-Oxley was designed to regulate the information that public entities must share with the holders of their companies’ stocks. The rules are onerous, and the penalties are devastating when senior corporate officers violate the rules.
But for every action, there is an equal and opposite reaction.
Predictably, Corporate America and the big money managers came up with their own response to these rules: privatization. The private sector is pooling capital to purchase outstanding shares of undervalued public companies. And as companies are acquired, minority stockholders are required to surrender their shares to the private equity interests.Some CEOs love privatization because they are in a position to negotiate significant upsides for themselves if they can make the profits that the private equity interests expect – and there’s invariably enough fat in these companies so that their success is almost guaranteed. Many CEOs would much prefer to work for hardcore private equity owners who demand financial performance without the game playing that can accompany public ownership. The CEOs who are capable of squeezing the juice out of these companies and moving them from mediocre to massively profitable will make tens – if not hundreds – of millions of dollars.
What’s The Impact for the Players?
As you can imagine, the investment bankers, executives, and hedge fund investors who get involved in these transactions are making billions of dollars. It’s all good for them. And that’s why the money managers and other money people I hang with are so excited about this.
But those inhabiting the middle and lower rungs in these companies may not fare so well. The huge profits that will be made from the privatization of these companies will come in large part from significant reductions in benefits for the companies’ employees. Pension funds may be reduced, health benefits will almost certainly be reduced, and layers of management will be trimmed back.
Thus, the implications of taking Fortune 1,000 companies private are devastating for many of these companies’ workers.It's a topic that’s going to be on the tip of the tongue of every association executive and meeting planner – and certainly every senior management team. Speakers and bureaus should expect that, as this trend progresses, people will become nervous as they see the changes around them. Associations and other organizations will be clamoring for speakers who can address this Brave New World. Not only will audiences want to know why this is happening, they’ll want to know how to come through it successfully. Bureaus that can place speakers on these topics will benefit monetarily, too.
Recent privatizations are just another iteration in the evolution of Corporate America. Now, I’m all in favor of "survival of the fittest" but I also believe that if you know that a giant boulder is sitting at the top of a hill, ready to roll down, we have an obligation to tell the people who are at the bottom to get out of the way before they get smashed.
Employees must be re-educated regarding how they think about their jobs, their money, and their futures, and they’ll be looking for information.
If Corporate America isn’t going to take care of them, they’ll have to take care of themselves.
They’ll have to learn about self-reliance. And they might want to learn about entrepreneurship, which is all about self-reliance.
What Actions Should Employees and Associations Take?
Employment in Corporate America is the opposite of self-reliance. Companies want employees to need them. They promote dependence. They want obedient employees who will come to work for a paycheck week after week. But Corporate America doesn’t want to take care of employees over the long term.
Any person in the U.S. who works for a company that employs more than 50 people works for a company that could be bought by a private equity fund. So millions of people are potentially at risk. And millions of people are going to be seeking help from the organizations that rely on speakers and bureaus.
Associations need to educate their members. They must proactively provide the information that company employees need to protect themselves.
Employees need to:
1. Learn financial planning strategies, including tax-oriented strategies, to plan for their own futures.
2. Plan for their healthcare. This is one thing they won’t be able to do alone, though. New systems must be developed to provide for these people.3. Look for new employment – because after privatization, many jobs won’t be available to them anymore, or at least not in the areas where they live.
Look for many of the people who have been adversely affected by privatization to move into entrepreneurship on the expectation that they can be self-reliant as entrepreneurs.
As a successful long time entrepreneur, it's my goal to encourage people to become self-reliant. And, if they have the ability, they can learn how to succeed as entrepreneurs.
As the fat is cut, many people will face reduced benefits, job loss, and the need to adopt self-reliant strategies. It behooves us as speakers and bureaus to ease the way for them so they aren’t crushed under the boulder that’s poised at the top of the hill. Self-reliance is the watch-word for the 21st Century, and encouraging entrepreneurship among those who are able will add to a robust economic future. Speakers and bureaus that help their clients’ audiences move in these important directions will fare well, too.
About Joel G. Block, President of Growth-Logic, Inc.
Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenue and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker and advisor. To bring Joel into your company, please visit www.joelblock.com or www.growth-logic.com. To discuss this issue or others, feel free to call Joel directly at (818) 597-2990.