Saving the Company by Buying It Back
By Harper Willis
Kal Leibowitz started KSL Media as an independent media services company in 1981. Now it is the second largest company of its kind in the United States, with offices in New York and Los Angeles. Their clients include Office Depot, Bacardi, and Eddie Bauer, and they post more than $500 million in annual revenues.
The Problem: Liebowitz made the mistake of selling his independent media company in the late '90s to a large holding firm, on the basis of empty promises. It almost destroyed his brand.
The Background: With the advent of cable television in the 1990s, marketing became more complex. As a result, plenty of smaller, independent companies in the industry were eager to get incorporated into larger conglomerates. KSL Media was no exception.
In 1999, True North, a large advertising and media agency, offered to buy KSL. It promised new overseas accounts and more sophisticated computer systems. Liebowitz agreed to the buyout.
But True North didn't follow through on any of its promises. Worse yet, True North was a financial drain on the smaller company: Twenty percent of KSL's profits went to its parent company, while KSL wound up responsible for some of True North's overhead costs due to pooled accounting practices.
"Our creativity and our attentiveness to clients were an asset to True North, but we weren't getting anything in return," says Liebowitz. "By the time we gave True North their cut, we had no money left over to spend on our clients."
The Solution: It was Liebowitz's professionalism and tact that wound up saving his company.
Instead of blaming David Bell, CEO of True North -- who would have been an easy scapegoat -- he fostered friendly relations and acted in good faith to uphold his part of the bargain. "I made sure our company maintained its dedication to client service and advocacy even if it helped True North more than us," says Liebowitz.
As frustrated as he was, Liebowitz knew that in his delicate position it was better to make friends than burn bridges. At some point Bell might be in a position to help him. Besides, Liebowitz isn't the type to hold personal grudges. "David never intended for it to go so badly for us," says Liebowitz.
On the other hand, Liebowitz had no intention of keeping his concerns to himself. He took every opportunity to express his frustration with the situation to Bell, and made clear his desire to take his company independent again. While Bell recognized that the deal hadn't gone well for Liebowitz's company, he said there was little he could do.
"He felt badly about it," says Liebowitz, who decided that biding his time and gaining a powerful ally in the parent company was more valuable in the long run. And then opportunity came knocking.
A few years later, an even larger firm, IPG, bought True North. At first, Liebowitz saw it as terrible news. "I worried our brand was going to get lost in the shuffle," he says.
But there was a silver lining: Bell was transferred to a management position at IPG and quickly worked his way up to a prominent position in the large company. It suddenly became within Bell's power to make the offer Liebowitz had been waiting all these years for.
In October 2001, Liebowitz's patience, professionalism, and persistence paid off. Bell offered Liebowitz an opportunity to buy his company back on favorable terms: Liebowitz could pay IPG back over a two and a half year period. He accepted immediately.
"It was my friendship with Bell that saved us," says Liebowitz. "When we left, we were even able to take a few clients with us." He says that his clients were all overjoyed his company was stepping out on its own again. And that he was able to pay IPG out of his newly independent company's earnings.
Today Liebowitz describes his company as fiercely independent and adds, "There's no way that will ever change."
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