Being Upfront Gets Better Results than Trying to Sneak It By
November 23, 2009 3 Comments
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.