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Being Upfront Gets Better Results than Trying to Sneak It By


Credit: dbking

I’m generally not tracking the “post ads to your social networks” movement, be it sponsored blog posts or tweeting ads to your followers on Twitter. There is one aspect to it that I think is most important: disclosure. Robert Scoble has a post up, More thoughts on in-Tweet advertising, where he notes that he unfollowed people on Twitter who were running ads:

So, I unfollowed and won’t be looking back. Actually I unfollowed Pirillo too. I don’t think he’s disclosed everything clearly or explained where his ads were coming from and until he does I’ll stay away.

His perspective reminded me of an experience I had years ago in the late 90s when I worked as an investment banker for Bank of America. It taught me the right way to disclose unsavory facts.

Selling a Superfund Deal: The Wrong Way

You know what the Superfund is? It’s the federal government’s program to clean up the nation’s uncontrolled hazardous waste sites. Throughout America, there are parcels of land with dangerous materials in them. Superfund is there to help get them cleaned up.

We had a client, a rising star in the software world, that need financing for a new headquarters in Mountain View, CA. A headquarters built on a Superfund site. That designation, from 8 years before, meant the land had been declared a hazardous waste site. By the time of the deal, the site itself was cleaned up, and was in an “operation and maintenance” phase. Its status was sufficient for the company to build on. But anything with “Superfund” on it is a big red flag in banking. And we knew it.

I was in the debt financing unit, and I worked with our real estate group on this one. After deliberating, we decided to bury the Superfund status deep in the materials selling the deal – in the prospectus, in the deal presentation. Act essentially as if it was a non-event.

Which at this point, was true. The property was clean and ready for development.

It was also a mistake.

Other banks got to the Superfund status of the site as they went through their analysis of the deal, and saw that it had an afterthought treatment. They didn’t like that.

And they didn’t participate in the deal at the levels we had expected. We got stuck with a larger percentage of the deal than we wanted. We scrambled, got one other bank to join and accepted holding a larger portion of the deal.

Wasn’t a pleasant experience. Nope, not at all.

Selling a Superfund Deal: The Right Way

It’s not often in life you get a chance to rectify a mistake so readily. But I did. Several months later, the software company approached us to increase the deal size, by nearly double. You might imagine the trepidation that request caused internally.

To raise double the amount, after having a number of banks turn us down, meant we were going to have to go much deeper in the market. It wouldn’t be easy.

We decided to do it, but with a big shift in approach. We led with the Superfund status. Put it out there, and directly address issues. Create a separate write-up that specifically addressed the Superfund status, the remediation efforts, and the reasons Bank of America was comfortable with it.

When I got out there and presented the deal at the prospective lenders meeting, I talked in detail about the Superfund site, upfront. Amazingly, no one got up and left the meeting. They seemed to take it in stride.

And the result? Easily got the larger deal done, and even increased its size a bit.

Lesson: Don’t Be Cute

What did I learn? People aren’t stupid. Treating them that way is a sure recipe to piss them off. Scoble’s comment illuminates that fact.

I’m not saying openly declared ads will be welcome, but for sure trying to slip ‘em in to the tweet stream is the wrong way to go. There is a “right” way to go about this advertising thing, if it’s going to happen. Acknowledge people’s concerns, and address them intelligently. You’d be surprised the effect that has.

Don’t make your Twitter account a hazardous waste site.

UPDATE: I received an email from the EPA’s Superfund program manager regarding how to find information about Superfund site. I’ve posted it in the comments below.

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About Hutch Carpenter
Senior Consultant for HYPE Innovation (hypeinnovation.com)

3 Responses to Being Upfront Gets Better Results than Trying to Sneak It By

  1. Randy Zwitch says:

    This is a great point to remember in general…consumers aren’t stupid. You may fool them originally, but once they figure it out, the reaction will be worse than if you solicited them directly.

    One place that’s been bothering me lately is television. With the invention of the DVR, the stations weren’t getting the ‘ad eyeballs’ they once were. Their solution? Put ads INSIDE the show!

    You think I don’t notice when there’s a weird, “What’s that? Moutain Dew *takes drink*, Yum!”

    I’d rather they run a text bar at the bottom like Cable news does, rather than write some silly line in that has nothing to do with the plot

    We’re not stupid, and hearing all these brand names just seems silly.

  2. As a follow-up, I received an email from Melissa Friedland, Superfund Program Manager for the EPA. She wanted to let people know where to find information about Superfund sites and their status:

    ———

    Dear Mr. Carpenter,

    My name is Melissa Friedland, and I am the Superfund Program Manager for Redevelopment at EPA. I read your article “Better to Be Honest Than Sneaky” and wanted to pass along a tool that EPA’s Superfund Redevelopment Initiative (SRI) has created to help potential site owners or lenders understand that the contamination on a property has been addressed and the property is ready for reuse. A Ready for Reuse determination (RfR) is intended to aid the real estate marketplace by making an affirmative statement, written in plain English and accompanied by supporting decision documentation, that all or a portion of a property at a site can support specified types of uses while remaining protective of human health and the environment, so long as any use limitations established by EPA continue to be met.

    Use of RfR determinations has proven to be valuable for dealing with issues of Superfund site stigma and helping to eliminate confusion over what future uses are appropriate at a site. Local officials, developers and EPA staff in Regional offices say that RfR determinations have played an important role in the reuse of sites and serve many beneficial purposes. We have heard anecdotes that organizations and individuals obtaining an RfR determination have used it as a tool to communicate the opportunities for reuse at a site to lenders.

    If it’s helpful, more information on RfR determinations including guidance and examples can be found at:
    http://www.epa.gov/superfund/programs/recycle/tools/rfr.html. We continue to support this tool and have offered resources to Regions to write one or two each year. If you have any questions or if I can provide any further information, please let me know.

    Best regards,

    Melissa Friedland

  3. Pingback: Being Upfront Gets Better Results than Trying to Sneak It By | CloudAve

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