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Michael Garin in Financial Times Creative Business - Openers
September 21, 2004, Financial Times
Reproduced from 21 September 2004 Financial Times' Creative Business - Openers
By CALUM CHACE
(c) 2004 The Financial Times Limited. All rights reserved
Picture the scene. You are one of the founders of Lorimar Telepictures, the US production giant behind The Waltons, Dallas and Falcon Crest. Your employees include Peter Chernin, later to be chief operating officer of News Corp, and Lester Moonves, the future joint chief operating officer of Viacom. And this is how you run the annual pay talks.
"Every year we would host a dinner for our senior people, at which we would openly discuss and agree on everyone's annual bonus. We usually wound up around 2am, and no one left the room until it was all done. I believe in the elevator approach to success: we all rise together or fall together," says Michael Garin.
Garin knows that such an approach was unusual: "At Time they used to try to manipulate us all by telling each of us that our bonus was higher than the next guy. But we all talked to each other so we knew it wasn't true!"
Garin's dealmaking CV is unusually broad including periods on both sides of the table, as a corporate executive and as an investment banker.
A year after joining his first company, Time Inc, in January 1969 he completed his first transaction. He tells a story about how his boss once called him to tell him to stop giving his opposite numbers such a hard time. The 23-year-old Garin had the chutzpah to reply: "I'm going to get the best deal I can for this company. If you want to cut a different deal, you come down here and do it."
Garin went on to become general manager of Time Inc's Programming and Sales. "I represented the BBC in the US from 1975 to 1978, which involved striking co-production deals with the BBC, and selling the programmes in the US. Those were the glory days of the BBC in America, with programmes like Civilisation, The Ascent of Man and Shock of the New establishing the corporation's reputation for excellence."
Despite his high opinion of the BBC's output, Garin became frustrated with Time Inc. "Great programmes are not made by risk- averse people. Time had too many highly political people who were keener to avoid mistakes than to do great things."
He left Time and with two partners created Telepictures, a syndication business which merged to become Lorimar Telepictures, the largest TV production company in the US at the time.
By the time of its sale in 1989 to Warner Communications for more than Dollars 2bn, Lorimar Telepictures owned four TV stations, the US's sixth-largest ad agency and a magazine publishing business. "The secret to our success was delegation. We pushed decision-making down to the lowest possible level, which meant that talented people were keen to work for us."
Garin's next career move was to investment bank Furman Selz. Former colleague Roy Furman, founder of Furman Selz, says: "When I first met Michael I was struck by his imaginative approach to business.
"The way we met was an example: Telepictures needed to broaden its shareholder base in order to obtain a market listing. Most people would start planning an IPO, but Michael gave away tiny shareholdings to a number of non-profit organisations, including one I was involved with. I thought that was a subtle, smart and stylish thing to do, and we became firm friends immediately."
Clients included NBC, CBS and Thames Television International. Of all Garin's deals, his favourite comes from this period when he helped Belo, the US news publisher and TV station owner, acquire the Providence Journal Company, publisher of the oldest continually published newspaper in the US, and more TV stations.
Belo's CEO Robert Decherd comments that "it is rare to find an investment banker who combines Michael's level of business judgment with his impeccable standards of integrity".
Garin says: "Most bankers can open doors and shepherd the players towards a deal, but they can't tell, for instance, whether the claimed synergies in a deal are real or not. Undoubtedly some of the best advice I ever gave to my clients was not to do the deals they were contemplating."
Like others, Garin was seduced in 1999 by the internet bubble. He joined Digital Convergence Corporation, a dotcom start-up, as chief operating officer and helped raise Dollars 185m of equity capital.
"I forgot to do my due diligence. I also forgot the fact that, by and large, small companies do not revolutionise the world, and that is exactly what we were setting out to do. We met all our milestones but we ran out of capital."
In 2001, Garin's world was thrown into turmoil. His wife of 34 years was diagnosed with a fatal cancer and he spent her final 16 months nursing her. In what is arguably a classic American trait, he has sought to transform this tragic episode into a positive aspect of his life. "We pass through this world unprepared for the most important events - parenting and death. My wife and I were able to face both these things full in the face. In a sense, we cheated death of its terrible finality. It would be unseemly to want more."
Although it seemed inevitable that Garin would then return to business, he decided initially against taking up full-time positions and became a non-executive director of several ventures, including Central European Media Enterprises (CME). He was later tapped for the top job.
Nasdaq-listed CME was established in 1993 and has investments in commercial TV stations in the Slovak Republic, Slovenia, Romania and the Ukraine. "It expects to see total segment EBITDA of $70m this year on total segment net revenues of $220m".
How does CME add value to the stations it owns stakes in? Garin argues that central European broadcasters know less about selling airtime to advertisers than many advertisers do.
"If you think about Ford and Unilever, these companies have been buying advertising for a century, whereas central Europe's broadcasters have only been selling it for a dozen years or so. One of the things we do is help even up the scales. And we understand the local sensitivities, because we have been operating in the region for 10 years now," Garin says.
The group's operating philosophy is built on maintaining local management, applying western business standards and then exploiting the rising tide of advertising spend in these markets.
"What I like about the media in central Europe today is what I loved about the US in the late 1970s and early 1980s. When I worked for Time it made Dollars 400m a year. Now it makes that in a week. The US media industry has now reached such a level of consolidation and scale that it is impossible to grow a major new business from scratch," he adds.
"The people in central Europe believe that their best years are ahead of them, and they are right. They know that an individual can make a difference - politically, socially, and economically. The people we are working with are doing just that."
Calum Chace is a media specialist at KPMG. This is the latest article in our series on dealmakers in the creative industries.
For additional information, please contact:
Romana Tomasova
Director of Corporate Communications
Central European Media Enterprises
+44 (0)20 7430 5357
romana.tomasova@cme-net.com
