Moguls, Monsters and Madmen, page 15
Despite some noisy clashes with my boss, Len Gill, we had forged something of a father-son relationship while he grew Echo, with my help, into a fantastic agency with more than one hundred employees. I admired the way he skilfully captained Echo through the Livent tsunami. We had blended our entertainment and corporate marketing to create an enviable model. In the process, I had gone from being an account guy to become president and chief operating officer. However, after more than twenty-five years at the helm, Len wanted to cash out.
Echo was an attractive property to various marketing conglomerates that were then on a buying spree. In 2002, Len negotiated the sale of the firm to CSS Stellar, a publicly traded company located in the UK. Though I was aware of the deal as it went through, I had no power as a minority shareholder to play a role in it. What Len and CSS Stellar decided became a fait accompli.
CSS Stellar was a sports and literary management company with famous directors, authors and race-car drivers as clients. Since they also owned U.S. and UK ad agencies, Echo seemed a perfect fit. Because we handled the Rolling Stones account and they handled Ray-Ban sunglasses, they imagined that the world would look brighter for everyone if Mick Jagger wore Ray-Bans.
Len negotiated a lucrative deal with the majority of the cash on signing. This was unprecedented in the ad industry, where long earn-outs are used to retain the key staff, an agency’s chief asset. We both had three-year contracts, leading to another much smaller payout.
When the gold dust settled it appeared that Len might have had seller’s remorse. It’s textbook that you shouldn’t remain at your company after you’ve given up control. Len stayed on, even though he didn’t need the money and he had already assigned his Echo clients to other account managers. Without these relationships, he had lost his leverage inside the company, which left him with time on his hands. He used the time to launch a campaign to run CSS Stellar’s North American operation with its offices in New York and Atlanta. When this failed, he became angry. It began to taint our relationship.
I wrote Len an affectionate letter in which I said, “Len, you built an unbelievable agency. You trained and grew me so that I could run this agency. Take a step back. Enjoy your life.”
But he couldn’t.
CSS Stellar decided to pay out Len’s contract and sever ties. When he cleared out his office, we all gathered round to wish him good luck. Sadly, that was the end of Len’s and my personal relationship. When the press announced that I had been made CEO, Len sent me a rude email accusing me of orchestrating a coup to assume his leadership. That absolutely was not true. The last thing I wanted was responsibility for a ship I suspected was on a dead-end course.
Len subsequently set up a small agency, essentially to service his good friend, Michael Cohl, the former Rolling Stones’ promoter. We never spoke again. It’s too bad. We had fun travelling the world together.
Meanwhile, I was left with the running of Echo under British rule. Though we had great clients, our British owners did not understand our financial models, especially the fact that the bulk of our billings, such as work for Christmas movies, occurred at the back end of the year. I found myself having to report to London on a monthly basis in meetings that compromised my daily work, and they brought absolutely nothing to the table. After I had run through two years of my three-year contract, I was ready to admit to myself, This isn’t working. I own the client relationships. Why am I explaining everything, over and over, to the Brits who don’t want to understand?
In 2004, I attended what proved to be a fateful retreat with the Young Presidents Organization in Washington. By then, our YPO group included Larry Latowsky, a retail pharmaceutical executive who had recently left his job with a very rich package. When I told him I was thinking of starting a new ad agency, he said, “Why don’t I finance you? We’d be partners. I’d run finance, as well as bring in lots of clients through my connections in retail and pharmacy.”
I drew up a business plan, which included both the staff and the clients I thought might follow me out of Echo. In return, I expected a seven-figure investment from Larry, along with his alleged twenty-five years of accounting expertise. When I showed this plan to Larry, he was enthusiastic.
By the end of the summer, I was ready to resign from Echo, but first I needed a formal agreement with Larry about the terms of our partnership. He was still enthusiastic: no problem. With the deal in hand, I flew to England to see my British bosses. I admit that I was scared, because I was leaving a wonderful job in which I had invested fifteen years of creative enterprise. Sean Kelly, my British contact, turned out to be a pleasant gentleman. I told him, “It’s time for me to go. I’d like you to waive my non-competes and my non-solicits so I can do whatever I need to do.”
To my surprise and relief, he readily agreed. “All I ask in return is that you hold off announcing this until after Christmas. We don’t want to affect the stock price and I don’t want to have a bad Christmas.”
We shook hands. Deal.
By February, I was looking for office space for Endeavour, which would be Larry’s and my new agency. Rob Hain, who had been hired by CSS Stellar to take Echo through my exit, told me with great confidence and ignorance, “We’re going to let the clients fight this out to see where they want to go.”
I replied, “Since they don’t know you, there won’t be any fight, but I promise I won’t solicit, so it really will be their choice.”
My exit in May 2005 was civil. Hain gathered the Echo staff, then said, “Barry Avrich has done great things for this company. We celebrate him, and we congratulate him, and we wish him well.” Everyone applauded, and out I walked, along with the five staff members who were coming with me, including Tori Laurence as a junior partner.
Many key clients followed me immediately, others came later, in spite of generous offers from Echo intended to persuade them to stay. By October—six months later—Echo was no more. Len Gill probably blames me for the destruction of his baby, but he had already sold his baby and I was long gone.
Though Endeavour was a small company in a temporary office with rented furniture, we had a heady first year. Our expenses were relatively low, and we were bold and feisty. A local casino said to me, “Okay, Barry, Endeavour sounds good, but before we sign on, we need to assure ourselves that you have the infrastructure to service our business.”
Inspired by my Rent A Fan Club days, we filled the office with a bunch of people to sit in hastily furnished offices to be present for the client’s walkabout. Casino Niagara signed on, and our agency gave them everything we promised.
Endeavour was doing so well that Larry, our majority partner, made his money back in our first year. My big mistake was in not ending our partnership then and there. Instead, I let him hang around for seven more years, acting as our chief executive officer and chairman. Endeavour grew into a big agency with both entertainment and blue-chip clients with little help from Larry, who had promised to bring in new business from his pharmaceutical connections.
I had had great lifestyle mentors, I had had great show-business mentors, but I had had no great business mentors. Larry was CEO and chairman, and he controlled the accounting department. When I asked to look at statements, he always had some reason why this couldn’t happen. I have no explanation for how I could have let this situation get so far out of hand. I was busy working with our clients and I felt we were doing exceptionally well. I’d become fed up making reports to Echo’s British owners every month for two years. I trusted Larry or . . . maybe I just didn’t want to know? I certainly should have paid attention. There were warning signs, such as the number of accounting staff we kept losing. I looked the other way.
What Larry developed under my nose was an elaborate and flawed plan in which he used Endeavour profits to buy businesses that had nothing to do with Endeavour’s core mandate. He bought businesses that dealt in beverages, coupon publishing, pharmaceutical promotions, energy bars. He later justified these purchases as fast-profit opportunities, but he had an uncanny knack for finding companies on life support that never materialized into anything. Six years into what would turn out to be the eight years of Endeavour’s life, I told Larry, “This is a hard meeting, but let’s face it. You’re not bringing any value to this company. You need to look for something else to do; you can’t take a salary any longer. It’s time you moved out of this office. You’re still an owner, but I can’t see you here day to day.”
Larry agreed. He probably was relieved that I hadn’t yet discovered the dire state of our accounting and how he had funded the purchase of so many failed companies. I personally hired a truck to haul away his furniture. To the best of my knowledge, a year later the business was still flourishing—that is, until Christmas 2012. Endeavour experienced a sudden cash crunch that I couldn’t understand. On the face of it, we were having the year of years. In reality, I was on the Titanic and we had just hit the iceberg.
At first, I was flabbergasted, and then I was sick. I’d been through difficult negotiations before, but nothing like this. I was not a controlling shareholder. The company that my staff and I had built on our backs belonged to Larry. Len Gill and I could fight like cats and dogs, but Larry and I had never fought. He was a passive person who I believed had a dark side. I felt violated. I felt frightened, but I also knew that I had a responsibility to forty-five staff members and clients who trusted me.
I also had my family to support and protect. Christmas was approaching, along with the holiday we had planned. Suddenly, I had business expenses that had to be paid immediately and it amounted to a lot of money. Hindsight is 20/20. Why had I gone into business with Larry Latowsky? Why hadn’t I believed in myself enough to borrow the start-up money so that I owned my own firm?
A friend of mine had recently sold his company for billions. Through the years, he had often asked, “How’s everything going? Can I help?”
I went to see him, which was very difficult for me, and I told him, “I need a small loan for ten days, then I’ll be fine. Could you help me with that?”
My friend turned me down, though the amount I needed was equivalent to lint in his pocket. Then he added, “Let me tell you why.”
“No, I don’t need to know.”
“Well, I’m going to talk to my father tonight about this.”
His father? What an odd statement, given that he was so affected his whole life by having lived in the shadow of his uber-successful father. He carried a chip the size of a lumberyard on his shoulder. He often confessed the pain he felt about not being recognized for his own accomplishments, but it was tough to have sympathy for someone who had the resources to strike out on his own but stayed in the warm cocoon and suffered. I found it boring.
“No, that’s fine.”
He called me the next day to say, “I found a company in Vancouver. I know them, and they’re going to help you. You’ll get a phone call in ten minutes.”
I received the call, during which I was told, “We’ll give you the money, short term. It’s not a lot for us, and we’ll have to charge you a significant service fee.”
I accepted their offer. It was a complex arrangement that required me to involve my wife in signing papers, which I found humiliating. I received the money. I used it and then I paid it back as I said that I would. A company representative called to thank me on behalf of his lending company and my friend, who’d brokered the deal and had turned me down.
I asked, “Why is he thanking me?”
“Because he owns our company.”
Great. This friend, who wouldn’t loan me the money, “found” his own company to make the loan in order to charge me interest. It was another hard lesson in the scarcity of loyalty.
That night, when I was still trying to hold my world together, I had dinner at the House of Chan with my friend, Eddie Greenspan. Eddie, who knew of my troubles, told me, “I want to give you the money you need.”
I broke down at the table. “Thanks, but I’ve figured it out already.”
I also figured out that I had one true friend.
That was Act I.
I still hadn’t decided how I was going to handle Act II, in which I would have to deal with Larry. No one in the advertising world knew his name. He was unknown to our clients. If I simply abandoned Endeavour, what would happen to the company and the staff I left behind?
I made my junior partner, Tori Laurence, our COO, in the hope that we could take control and eventually buy out Larry. Thank God for her bloodless approach to managing issues! We spent many days behind closed doors, plotting, weeping and sometimes laughing out of desperation. I also created a legal team, composed of Eddie Greenspan and Ken Rosenstein from the law firm Aird & Berlis LLP, to advise me on how best to take control of the situation. It was during these investigations that Endeavour’s comptroller, who had been under Larry’s control, finally broke down and showed us a complicated, handwritten schematic organization chart with Company A, Company B, Company C, Company D, which was where all our cash had been going. There was also some plan involving the German stock exchange. As we uncovered Larry’s intricate move of cash around the various companies, attempts at asset-based loans and a failed merger, it became apparent that in spite of Endeavour’s stock of goodwill, its massive success and blue-chip clients, the agency was unsalable and could not be saved.
Eddie was not happy with what he saw and advised that I should take serious legal action against my partner, but I knew that any suggestion of a scandal might ruin my career in advertising. Was it reckless business moves of a fool or something worse? It was not an accusation or headline I was prepared to risk. Instead, Aird & Berlis came up with a plan of attack that had me set up a breakfast meeting with Larry at the Intercontinental Hotel. He was still unaware we had uncovered his schematic organizational chart and, as far as I could tell, suspected nothing. I told him, “I want to buy Endeavour. How much do you want for it?”
Larry was thrilled. “Wow, do you have the money?”
“Yep.”
He gave me the figure he wanted for the company. I said, “Thank you,” then stood up to leave.
“Aren’t we having breakfast?”
“Nope.”
I walked out of there, feeling like Charlie Sheen wearing a wire in Wall Street after meeting Gordon Gekko in the park. I didn’t have a wire. I felt like I did, because my goal had been accomplished: I had left Larry feeling secure, perhaps even hopeful and enthusiastic, giving us time to plan our exit with clients and staff, so that he would not, in a panic, seize funds—which he had the power to do as the controlling shareholder—for a midnight run.
I went directly to Aird & Berlis to tell Ken Rosenstein the figure that Larry wanted for Endeavour. Three weeks later, I called Larry, “Come to Endeavour and we’ll present you with our proposal for the business.”
On a cold day in February 2013, Larry arrived for what he thought would be a great occasion. Ken told him, “We’ve uncovered the true nature of the accounting problems at Endeavour so this is your choice. We will conduct a forensic audit that will potentially expose you to potential liability.
“The second choice will be an orderly windup of the agency. Barry will walk away from Endeavour with his team intact, with the exception of the accounting department, which we obviously don’t want, and with the company’s client list. There’ll be no non-competes, no non-solicits, and what’s left of Endeavour will be cleaned up by a professional accounting firm that will collect receivables and settle with the creditors.”
Larry chose to let me go. My exit happened on March 1, 2013. I walked out of Endeavour to create my own agency and begin anew. It was the biggest decision of my life. I had had to ask myself, Do you really want to start all over again? Why not just make films? But I had clients that I loved. I had a staff I loved, some of whom had been with me for seventeen years.
When I decided on the new agency, I made Tori Laurence—who had faithfully been at my side for fifteen years—my partner at BT/A, which accounts for the “T” in our agency’s name. I promised her a great life if she would embark on this adventure with me, then we locked and loaded for battle. We were walking into a hell of uncertainty, which brings me to Act III.
While still at Endeavour, Tori and I had gathered together the staff to tell them, “Whether you were aware of it or not, we had a majority partner in this agency. You might have seen him come and go from this office, or maybe you didn’t. That partnership has dissolved. It’s time for us to start our own agency. You won’t see any decrease in your pay. We’re all leaving this place on Friday, and we’re starting up in our new place on Monday. We’ll probably hit some bumps on the road, but we want to make this as seamless as possible. If you believe in us, then come with us.”
And they did.
I also had to manage our clients, along with everyone else who was asking, “What happened to Endeavour?” While flying on a wing and a prayer, all I could tell them was, “Trust me, go with me.”
And most did.
Tori and I had fourteen days to find office space, then forty-eight hours to move everyone in. Before we finished packing up, the real estate agent called to say, “Sorry, you’ve lost the space.”
I asked, “Who owns the building?”
The agent replied, “You’ll never get to them.”
“I get to everybody.”
I made three phone calls. I found the building’s owner through real-estate mogul David Kosoy. He fixed the problem, and we moved in. The space Tori had found for us was completely furnished, including the phones and the computers lines, so it was literally plug in and play. We were up and running within twenty-four hours.
