By mid-1983 the turnaround was in full swing. Tech Data started moving into PC products -- disk drives, printers, keyboards, and the like. "By the middle of that year, we were making money again," Steve says, "and I purchased a majority share of the company.'
Today, with 10 distribution facilities from coast to coast, 430 employees, and fiscal 1989 sales of $245 million, CEO Steve Raymund no longer needs to revise his résumé. As for Tech Rep Associates, Ed Raymund sold that two years ago. Ironically, it was purchased by his employees.
When Your IPO Is Shelved -- and the Money's Already Spent
Company: Jacor Communications Inc., Cincinnati
Rank: #76
Founded: 1979
Sales: $78.5 million
Profits: ($6.2 million)
Business: Owns and operates radio stations
CEO: Terry S. Jacobs
Age: 46
It was in the summer of 1982 that Terry S. Jacobs began to fear that his dream might come apart. Then 40, Jacobs just a year earlier had abandoned a six-figure salary in the insurance industry to become an entrepreneur. "Starting your own company is a way to get to the top in a hurry," he says. " If it works.'
An actuary by training, he had become intrigued by the broadcasting business. His former employer, American Financial Corp. (AFC), had invested in John Kluge's Metromedia Inc., and Jacobs watched as Metromedia stock soared from $5 a share to $550 before splitting 10 for one. Kluge then took it private, and by selling off pieces he became a billionaire.
"That got my attention," Jacobs says. "As I started researching, I noticed that broadcasting always placed in the top five in profit growth, revenue growth, and return on equity in industry group rankings. I had always wanted to do something on my own, and this was a business where you could start small and grow into a big company. Lots of people had done it.'
And so in January 1981 Jacobs bid farewell to AFC to try his hand at radio. He put together $1.9 million -- $600,000 from savings and friends and $1.3 million from the Bank of America -- and purchased three small religious-programming stations, in Cincinnati, Baltimore, and Toledo. Religious stations, he explains, are less expensive and less complicated to run than mainstream operations, a good place for a newcomer to cut his teeth.
With interest rates topping 20% in those days of galloping inflation, Jacobs found he needed to raise more capital quickly to pay down his bank debt. Although the economy was in recession, he decided on an initial public offering of some 1.1 million shares of his fledgling firm, Jacor Communications Inc. He selected the New York City investment banking outfit of D. H. Blair to underwrite the deal. "This was in the spring of 1982," Jacobs says. "It took a while to get a small company like ours in a legal and financial position to go public. You need three years of prior audits, and we had to go back and put together financials on stations we hadn't owned three years earlier, and that was real difficult. We didn't have much money, but we spent most of what we had on lawyers and on getting the prospectus written and printed.'
Meanwhile, the recession deepened. And that summer, lacking confidence that it could accomplish the deal, Blair informed Jacobs that it was going to put the IPO "on the shelf" and wait for better timing. Markets would improve, Blair predicted, in nine months.
But Jacor couldn't wait nine months. "We had used most of our capital getting ready for the IPO, and we couldn't borrow any more," Jacobs recalls. "And if we couldn't raise any equity money, we'd be out of business by then." The company was losing $50,000 a month -- half of it to interest payments -- and had a cash cushion of just $270,000. "So we had no choice but to go forward.'
Jacobs found a small Cincinnati brokerage house called Blank, Conger & Sena that was willing to bet on him, putting its name on the prospectus. Lacking size and marketing muscle, however, the brokers were unable to sell much of the stock. The markets were impossible. Instead, it fell to Jacobs himself to perform what he calls a self-underwrite. "This was the most critical period in the life of Jacor," he says, "but I absolutely refused to give up on my dream.'
Jacobs quickly borrowed $350,000 to buy a third of the stock himself. "I found a nice, friendly bank that was willing to loan it to me," he says, "but I had to pledge everything, including my kids, the future of the company, and my house. I was the first purchaser because I felt it was important, when I was going around trying to sell the stock, that people know that I had already stepped up and put my money in, that I was a believer. I thought that would be an inducement for other people to do it.'
Then he hit the road. He went to New York City and knocked on every door where he might possibly get an appointment, all the small and midsize brokerage firms. He traveled to Atlanta, Chicago, Pittsburgh, Phoenix, and Denver, anywhere he could find regional investment houses. "Most were names I'd never heard of and haven't heard of since," he says with a laugh. "I'd be ashamed to show you the places that wouldn't even let me in the door.'
It didn't help, he admits, that the prospectus was one big risk factor. "If you looked at it, you would not have bought the stock. I was selling a dream, really. I kept getting the same question -- what was an actuary, a financial guy, doing trying to operate a broadcasting business? My reply was that management skills transfer between industries, and that as long as you know what you don't know, you can find people who do know it. That was a constant battle. I ran into literally hundreds of people who said, 'You'll never make it -- this company won't be around next year.' It was tough to get anyone to believe in me.'
