By now, everyone in the list business is aware the Kleid Co. has filed for bankruptcy protection.
Since its inception in 1936 as Mailings Inc., Kleid played a significant role in shaping the list business as we know it today. Its founder, Lewis Kleid, and Rose Harper, the driving force behind the business for the better part of 40 years, are both members of the DMA Hall of Fame.
Mike Manzari, my predecessor, was List Leader of the Year (as was Rose) and served as chairman of the Ethics Policy Committee for several years. I am immediate past chairman of the List & Database Council, and Jeff Kobil, who was a principal of Kleid, also led the council.
Many people are wondering how a company with such a proud history found itself in a situation where bankruptcy was its only alternative.
If I had one decision to make over in my business career, it would be to rethink the wisdom of buying the company back from Saatchi and Saatchi in 1988. Saatchi acquired Kleid in 1985, in the midst of a buying spree that included general advertising agencies and business services firms in many sectors. Within three years, it was having problems assimilating all of these acquisitions and began divesting itself of many of them. Saatchi never saw how Kleid was a “fit” and put us on the block.
1988 was a peak year for Kleid and the list business in general. We had yet to see the severe postal increases of the 1990s, and margins still were healthy. In this environment, we thought the growth would only continue and decided to buy the company back through an LBO, financed by Citibank. Eventually, this debt load contributed in a big way to our undoing.
Another factor was our 10-year lease at 530 Fifth Ave., New York, which began in 1988. Had we a crystal ball at that time, we never would have committed to an agreement that had us paying $48 per square foot by 1998. This is more than double the current rate for acceptable space in Manhattan — and despite a consistent effort over the past few years, we were never able to negotiate an acceptable escape with our landlord. But again, from the vantage point of 1988, no one can foresee the eventual problems.
Throughout the '90s, Kleid was affected by many of the factors that beset the list industry: increased mailing costs leading to reduced volumes, heightened competition, downward pressure in commissions, to name a few. The difference between Kleid and other list firms was that our financial situation allowed us little room to maneuver. We were unable to make investments in additional staff or new systems, which would have helped us keep our old accounts or go out and get new ones.
When we lost the Smithsonian and Condé Nast list management accounts last year, we sat down with our financial advisers and mapped out a plan of action. We decided to seek a merger with another company, preferably one with a stronger list management presence than ours. The plan was to attract new capital into the merged firm, which would not be available to us as a stand-alone company. The merger also would allow for efficiencies in terms of space and staffing that neither company could accomplish on its own.
We began speaking to a number of companies, including Stevens-Knox & Associates, which we decided was a good fit in light of its list management strength and our position in list brokerage. Discussions were under way with Citibank and the landlord to resolve both situations when a major client defected and the merger talks collapsed.
Most frustrating was that we were very close to a solution that would have let us continue to operate in a much stronger environment. Instead, we were forced to file bankruptcy.
In spite of its untimely end, Kleid was a special place for many years. Great work was done by a tremendous staff on behalf of many hundreds of clients over the years. All of us who were there for any length of time will always cherish the relationships and the special feelings of pride we got from working at a company that was an acknowledged leader in its field.
The fact that virtually all of Kleid's account management people were in new positions within a couple of weeks after the announcement is testimony to their skill and the regard that their competitors had for them. Our whole industry is diminished by the loss of Kleid, but no one who wasn't there will know just how much.
On March 12, Richard Vergara was named vice president at Stevens-Knox List Brokerage.