By Adam Moore
adam@corridorbusiness.com
The 134-year-old Gazette Company was relaunched with a new name and purpose in January, and Daniel Goldstein is the man charged with bringing the pieces together. A veteran of family asset management for high-wealth clients around the globe, Mr. Goldstein joined The Gazette Co. in April 2016 as chief investment officer, and helped guide the company’s eventual transition to Folience, a 14-person ESOP holding company overseeing its business units including The Gazette, FusionFarm and Color Web Printers. He was named president and CEO of Folience in February of this year as part of Chuck Peters’ transition to chairman of the board.
Mr. Goldstein spoke with the CBJ about the thinking behind the rebranding to Folience, the company’s recent media acquisitions, and his thoughts about the Corridor as a longtime resident of northern Italy.
When did you begin having conversations about joining what’s now Folience?
It was around February or March of 2016. They had come out of the sale of KCRG and were looking for somebody [to bring investment experience to the company]. I came out here for a couple visits, and we had some long, intense conversations with people in the company, the community and on the board. It was substantive, even if compressed and intense, but then I started right away. I came to Cedar Rapids, bought a place and moved in. In one year, we went from being The Gazette Co., which had a board that was predominantly family members from the fourth and fifth generation of the Hladky family, to a holding company with a complete change of focus and a new board, which is very interesting.
What can you tell us about the new board?
Chuck [Peters] is chair of the board, which is nice to have that continuity and institutional knowledge along with access to his international networks. We also added three new members: Wendy Guillies, who is CEO of the Kauffman Foundation, and brings great organizational development, marketing and communication skills; Bill Adamowski, who is heading up technology transfer at Iowa State University and brings strong revenue growth and innovation focus; and Tracy McCormick, who spent her career as an investment banker with JP Morgan and is a lead director and shareholder of MidWestOne. Tom Pientok, CEO of Apache, brings deep ESOP and acquisition experience to the board. Cathy Terukina [executive vice president] and I were asked to join the board to ensure continued internal management representation of the employees.
So Mr. Peters is still active within the company?
Chuck remains as chairman of the board – he did not retire. A lot of people ask that, but it’s really not the case, and it’s very important to us that he remains a very vocal investor for our mission. As Chuck himself explains, what was up until Jan. 1 was a very long history of a company that required a certain type of leadership for what was then a very different future. It’s one thing to be a family-owned, family-controlled, media-concentrated company; it’s another thing to be a diversified holding company working with an outside professional board. And so, not only did Chuck not retire, but we both say that I did not replace Chuck. We instead have a new company with a new way of operating and a long-term growth plan that required a different leader with a different set of skills.
Can you explain some of the thinking behind the rebranding to Folience?
We worked with our own company, FusionFarm, as a client, going through this iterative process of identifying our purpose, vision, mission, voice, etc. to come up with a brand platform including a new name, logo and tagline of Folience. The name comes from the latin word, folio, which is the science of putting together portfolios. The idea is that we’re investing in different things as we move from a media concentration to a holding company with diverse companies.
The other thing we did was clean up [the Gazette Co.’s structure] to create a more efficient holding company structure. When your company is an amalgam of broadcast and print, you have a very different purpose and structure than if you’re a holding company. So the first thing that we did was split out our traditional print media under one group of families, which is Gazette Communications, and then our creative and research companies under another group of families, called Novalect. It has better branding and strength of presence when [the operating units] have their own autonomous existence. One of the issues of being the Gazette Co. is that people would say, “You’re from the Gazette, why are you talking to me?” This way, the Gazette [the newspaper] has its strong presence, and we have a different way of being in a conversation.
Can you explain the holding company concept a bit more? How does it benefit Folience’s different holding units?
You have, for example, the Gazette, which is its own company, with its own culture and ways of doing business, but at the end of the day, it’s part of a larger container, which is Folience. It can be confusing for people outside of the company, but what Folience does as a holding company is it supports the success of its operating units through shared services. By bringing in other healthy companies and spreading the base of risks, lowering shared service allocation costs, etc., it gives the entire container a better foundation. It also increases the value, which is of great interest to our employees, because that’s what an ESOP is all about. Diversification across industries and geography also helps weather economic cycles.
What kinds of businesses are you looking to add to the company’s portfolio?
They would primarily be professional services and manufacturing companies – nothing too complicated. We don’t want to get into FDIC or pharmaceuticals or any heavily regulated [field]. We want healthy businesses; because we’re 100 percent ESOP owned, you want something that is going to be additive. We’re not private equity investors, we’re not venture capitalists – we don’t want to be taking on that kind of risk. We also look for continuity of management and a fit for our culture.
What are the benefits for private owners selling their company to an ESOP like Folience?
There are a couple things around the ESOP that are very attractive. From a seller’s perspective, there are some great tax advantages that are unique to ESOPs. There’s something called a 1042 exchange, which is a specific advantage that if a shareholder holds shares in a C corporation and they sell that to an ESOP, they can defer roughly 30 percent of the tax on the transaction. And not only can you defer that, but if you pass the sale through your estate … it’s stepped up in basis and completely goes away.
So it’s a huge advantage to sellers, but what’s of greater importance is there’s a stronger commitment to the management, workers and the community if you’re bought by an ESOP. Oftentimes you see private equity investors buy a company and asset-strip what they want, close down the company and move it off somewhere else. With an ESOP, you’re transferring the wealth from a small group of private owners to the entire base of management and workers in the company, so there’s stronger commitment to the community and continuity. A lot of sellers we’re talking with are interested in finding a future for their company, and see that ESOP solution as a great way to have succession while retaining that commitment.
Folience bought several news operations in southeast Iowa in late 2016. What opportunity did you see there, and is media going to be a focus for Folience when it comes to future acquisitions?
We bought the Washington, Mount Pleasant and Fairfield mastheads from Inland Media Co., and there was a very strategic reason to do that. We felt that we could help strengthen their presence in their communities. Right away, we implemented some changes that were very appreciated in the communities, such as repaginating and bringing color print, so that was nice. We can also share our news feeds and bring some greater resources for developing their reach into those communities. It also strengthens our presence in those parts of the Corridor.
It’s not our focus to make acquisitions in media, it was just an opportune event that they came up for sale, and there was mutual agreement by both sides that it was strategic.
Do you still have a decent war chest after the $100 million sale of KCRG to Gray Television in 2015?
It’s not what people think. It was publicly reported that we sold KCRG for $100 million, which is absolutely true, but we don’t have that sitting in a pile somewhere. There is a cost that was built into that transaction. You sell something for $100 million, but then it takes time to invest. It’s a little bit like building a house – when you’re building it, all you’re doing is spending money. You don’t get to enjoy the house until it’s done. We’ve been investing, and we’ll see the returns on that now moving forward, but the first year has been a matter of tearing apart what was there, rebuilding and getting ready for the future.
You’ve been in the community for a little over a year now. What’s your personal take on the Corridor?
It’s a really enjoyable place to live. I’m not a big city person. Every time I have to sit in traffic in Los Angeles or Chicago or New York City, I say, ‘Thank God I live in Cedar Rapids.’ It’s also a pleasant consequence of living here that I’ve met some very interesting people, and have seen some very innovative ideas and technologies – whether it’s coming out of the university or over at Geonetric. The level of national and international interactions with the Corridor are more than most people outside Cedar Rapids would expect, and maybe more than what people in Cedar Rapids themselves expect.
BIO BACKGROUND:
AGE: 50
EDUCATION: Bachelor’s, Colgate University; MBA and MS in Science and Technology, Rensselaer Polytechnic Institute
HOMETOWNS: Dolomite Mountains, Italy; Cedar Rapids
INTERESTS: Getting outdoors, motorcycling, swimming, theater
