Is red-hot Red Ventures’ big advantage Ric Elias?
Several months back I attended a conference in which Red Ventures CEO Ric Elias was the keynote speaker.
It was the first time I’d heard him in person, and his dynamic, TV preacher-quality presenting style was captivating. It’s no wonder, I thought, why Red Ventures has grown from zero in 2000 to 2,700 employees now, including more than quadrupling in the last seven years. It’s among the largest job creators in the Carolinas over the last five years. The dude can sell!
Now Elias has bagged his biggest acquisition, the $1.4 billion purchase (including debt) of publicly held Bankrate.com, a New York-based company that helps financial institutions sell more credit cards, savings accounts and other products through the internet. (It owns creditcards.com).
It’s a great business given that fewer people want to visit a branch any more, preferring to use cellphones or ATMs for transactions. And for folks looking for a bargain, it can also be a great option.
Unfortunately, it’s also a competitive business if you spend enough to drive traffic to your website. Charlotte-based LendingTree, among others, is thriving by helping banks sell mortgages, auto loans and other products. Its stock has jumped more than 900% over the last five years, tops of any Carolinas-based stock.
There’s always the prospect of Google or Wal-Mart or another giant corporation ready to take a big share of the online financial marketplace. And if Bank of America or Ally or other Bankrate customers can sell more without a third party, they obviously would prefer cutting out the third party.
It’s no wonder, then, that Bankrate is selling to Red Ventures for a proposed price of $14 a share, or less than its initial public offering price of about $15 in 2011.
After earning $5.2 million in 2014, Bankrate has reported a net loss of about $47 million in the last two years. Long-term debt has been flat at about $296 million, though earnings before taxes and amortization have grown. Some of its debt trades with junk-bond investment ratings.
Enter Elias and Red Ventures, which has expanded like kudzu by helping big companies become more effective sellers on the internet. It’s a completely different business model than Red Ventures’ initial work as a traditional direct marketer– a business that Elias said in his speech that he despised except that it paid the bills to get things going. Now, the emphasis is on more sophisticated “content marketing” — what used to be called PR — and great online and telephone customer service, helping consumers make better choices as they buy security, energy, telephone and other home services.
The acquisition now gives Red Ventures another tool to build closer ties with its roster of financial-services clients. And it gives the company more credibility with the media and the public, which increasingly trusts Bankrate as a fair source of financial information.
But Red Ventures’ real advantage may be its Harvard Business School grad CEO with a remarkable success story. Some other things to know about him and Red Ventures, based on his conference speech:
- Elias and his business partners own 75% of the company’s stock, with the rest held by private-equity groups Silver Lake Partners and General Atlantic, which have no right to call for redemption of their shares. (Silver Lake put $250 million into Red Ventures last year.)
- His plan is to never sell or go public, but instead to create a generations-old company.
- Corporate culture is essential, and Red Ventures believes that people who aren’t team-oriented need to move on to other pastures.
- Growth is critical to keep talented people energized. Otherwise, they quit.
- Talented people want to work with other talented folks who challenge them.
- Elias ditched Charlotte to put his headquarters in Lancaster County, taking advantage of South Carolina’s nearly unlimited corporate-welfare checkbook. But Red Ventures still has 700 employees working in Charlotte.
- Elias says that Red Ventures’ success depends on sticking to a long-term vision and not worrying about quarterly profits. That strategy didn’t really work for Bankrate. But with Elias in charge, one suspects the odds improved.