Dunn to buy back its assets

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Winning a bidding war against database giant infoUSA, Stephen T. Dunn, president and CEO of direct marketing company Mal Dunn Associates has secured the assets of the company for more than $4 million. The decision was made October 16 in a Putnam County, NY, court case.

In late August, Dunn had filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on August 24. Chapter 11 allows for a reorganization of a company. Closing of the buyback isn't scheduled, but Dunn hopes it will happen the week of October 22.

"Our first priority was to satisfy our debt to the industry and recover Mal Dunn's reputation: the bidding war helped us reach that goal," Dunn said.

The bidding began last week when infoUSA made cash offers against Dunn's more complicated deal, including a five year payout. The assets it was bidding for were primarily Mal Dunn's databases. InfoUSA did not return calls for comment by press time. Dunn, under the company name Dunn Data Co., has agreed to a $3.6 million mortgage, a $250,000 cash payment, the forgiving of a $600,000 loan to Mal Dunn and various other considerations.

In his affidavit to the court, Dunn noted that the deterioration of his business can be attributed to multiple causes: the advent of the Internet; changes in postal rate and ailing size structures; and rapid consolidation, which left his competitors much larger and better capitalized.

Dunn Data Co. will focus on database business, though it will manage client list requirements as necessary. Layoffs are long completed. Dunn is now looking for a b-to-b database executive, but says his team is complete otherwise.

"The list management business as it is structured today is unprofitable," Dunn said. "As long as the exclusive list management business at 10% or less makes you completely responsible for all facets of a list's assets, it's not a good paradigm. It needs to be reinvented, and part of that reinvention is a non-exclusive approach.

"Although there are advantages to the rollups we're seeing in the industry with infoUSA and others, the small service company of experienced people has flexibility and an ability to work with everyone that the large guys don't have," he continued. "My assets are so dependent across the industry - every kind of mailer, broker and data house - and they all have to work together. This is a very different strategy from someone who wants to be the place for data. I couldn't see how it would work with any large corporation. We're an intersection rather than final destination."

Shari Lidsky, VP of sales for Dunn Data Co., said it's still a struggle to compete with large organizations in list management. "It becomes a money game," she said.

On the topic of what can help keep an independent list and data company stable, Douglas Guyer, president of new business development at 23-year-old International Direct Response (IDR), said proprietary programs give IDR its competitive advantage. Niche market players also enjoy insulation.

"We're always looking at next big thing or the next 10 big things we can bring to the market," Guyer said. "If we just relied on being a list broker we might fall into the commodity type of agency, and we don't want to do that. Then it becomes about how big you can be."

Jim Zuckermandel, president and CEO of Zed Marketing Group said surviving as an independent can be challenging, and he applauds Dunn. "It's not easy when you're out in the ocean in a little boat with big ships rocking waves all around you," he said. "I commend anybody so committed to their profession that when things have been down they dig in rather than bury their head. It's a tribute to his commitment.

"There are a number of us in the industry that provide similar services," Zuckermandel, a 30-year veteran of the business, continued. "A new breed of young people is spitting out information left and right. Smaller independents take more time to babysit clients and walk them through [what] they ought to be doing with genuine care for the long-term relationship. I'm not saying others don't care. There are still clients out there that really respect [quality over quantity]."

Martin Stein, president and CEO of independently owned RMI Direct Marketing Inc., doesn't think it has been a challenge to stay independent. "We designed the company to shift and adapt to needs and changes of the environment," he said. "We've always done that and been responsive to client [needs], so we've been able to stay ahead of the curve."

Dunn Data Co. will soon roll out new offers, including a database of liberals for the election year. Dunn is "exuberant" to retain his company and anxious to get back to normal operations.

"This experience has taught us a lot about running a small service business successfully," he said. "Stay focused on what works for you. Don't let costs or corporate ego get away from you. Above all, work with honest, loyal people with a healthy work ethic. Our staff makes it all happen."

Mal Dunn's unsecured debt, according to court documents, included $7,895,999 in accounts payable to trade clients; $386,307 in accounts payable to production clients; and $168,965 in commissions payable.

The original offer submitted on the part of Mal Dunn included a cash consideration of $200,000, assumption of payables in the amount of $840,000.

This is the second time Dunn has rebuilt the company. Dunn's father was company founder Mal Dunn, who opened the business in 1973. The younger Dunn took over in 1992 amid the first restructuring and after his father's death.

"We're doing it again on larger scale in a very different industry with different challenges," Dunn said. "You find out who your friends are, and [many] good things happen during this difficult time."

Dunn was moved to be able to cooperate with competitors during the buy back.

"It's heartwarming to see us work together in a constructive way with a good outcome," Dunn said. "Working together to solve this is the most amazing thing I've seen that the industry has done."

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