When your Contactor goes away…a Survival Guide
It happens all the time. You love your independent contractor (Exposition Services, A/V, Registration services, DMC, EAC, et al); they do a great job for a fair price and their service is unparalleled compared to the Big Guys. And then… Your contractor goes away by sale, consolidation, acquisition, merger, buy-out…whatever the financial terms, the Big Guys gobbled them up. Metropolitan Exposition just joined the ranks of going away. What do you do now?
Full disclosure demands that I share that I too was a partner in a highly successful firm that was servicing thoroughly happy clients for over 15 years. We were a regional powerhouse with a national reach in our operations. Our equipment, service and staff were all top of the line, First Class, A#1. We were a tough act to beat and after being wooed and pursued for years by different mega firms, through a series of personal circumstances and agenda …we sold out for the Big Buck$.
Here’s how it goes. The clients (and staff) are told…”nothing will change”…as a matter of fact, with more resources…”things will be even better”. And then, within hours of the sale…EVERYTHING CHANGES.
Let’s look at Metropolitan Exposition and their recent “going away”. The announcements were cryptic by both the seller and the buyer. The wording of the statements leads me to surmise that the accountants, lawyers and tax attorneys cooked up something great for all parties and certainly it was advantageous to buyer and seller and both took full advantage of the tax regulations. It’s like buying something with free money courtesy of the Feds. As a Presidential candidate has been saying, working within the US tax regulations is simply good business.
Whether an asset sale, outright sale, stock sale or just a purchase of contractual assets…it doesn’t matter because the end result is everything changed. Pretty much without exception, any prices that are not clearly defined in your service contract are going up immediately. When a company buys out a competitor for their roster of clients, or to gain additional market share or to just get rid of their toughest competitor it wasn’t done with largesse or really believing this is what’s best for the clients. It’s about increasing Net profit and that’s a tough challenge in this volatile economic climate. What’s the fastest way to increase revenues?…increase the prices !!
Fleeing staff or fired staff (can you say exit interview) or even worse shocked and confused staff that are absorbed but only a temporary basis by the purchaser, basically kills morale. It’s always the same …happy owners who sold out and worried and fearful staff, clients and suppliers. Lawyers in NY, Chicago, Washington DC and Connecticut that I spoke with all basically had the same take (some of which was telling me not to give legal advice and craft this article carefully, but that’s another blog post). There are ways to extricate your organization and better yet prevent the association or promoter from being placed in a situation where they have lost control of their own asset. That asset is the dollars their show or project generates for the contractor.
From a camaraderie, attitude and execution of a Navy Seal Ops team, “Dirty Dozen” do it with less staff but do it better than the Monolith Company is now a DOA corporate culture. Bigger is best is the new regime mantra and somehow they become actually convinced that the former independent couldn’t have been doing it better. It’s a contradictory & disconnected way of thinking that you had to buy out your toughest competitor because they were kicking your ass and keeping the prevailing market prices down…they cough up big bucks to buy them out and then actually are convinced that they were better anyway. What? But that’s the way it is.
Goodbye low prices, goodbye individual personalized attention and goodbye to a lot of fantastic, caring employees that had the authority and autonomy to make your event great by the decisions they made pre show and on show site. You’re now just another client who will be just a tiny fraction of the company’s gross revenue. Despite millions of dollars of advertisements , PR and Social Media, Mr. Enormous contractor just can’t prepare anything but BIg Mac’s or Whopper’s when you were receiving the best gourmet style home cooked meal you ever had by working with your independent.
Now back to my conversations with professionals that are well versed in association and contractor matters. And again, this IS NOT LEGAL ADVICE…it is an amalgam of my own business ownership experiences paying 100’s of thousands of dollars in legal fees, of being involved in a “Contractor going away”, and by being involved in legal challenges both as a plaintiff and defendant related to contracts in the service industry. FIRST and foremost, consult an attorney (see, my lawyers finally did get through to me).
The priority is to do everything in your power to resolve the issue amicably and fairly to both parties without protracted legal proceedings. Don’t you love how lawyers always advise to settle out of court before any filing…AND THEN….you end up in court racking up massive legal fees with no control of the outcome since lawsuits can be judged shopped, jurisdictionally shopped and no matter how right you think you are….there is always case law to be sited for both sides of the dispute. I have been both the winner and the loser in court battles and on a few occasions it took more to “win” then just walking away and taking the medicine would have cost. If your contract doesn’t not address assignability or termination clauses then just let the big guys do what they do best and that is give you a good solidly produced event.
Proactive Prevention:
Independent show organizers, associations and producers alike have many legal eyes trained on the written contractual agreements. And yet, my counsels all told me that business is very good for them. Take the vague out of the agreements and specify how you want your dollar generator (your exhibitors, sponsor and attendee revenue that goes in the contractors’ coffers) handled by a contractor should the ownership and operations of the firm materially change.
Assignable: retain the right to not have your contract assignable should the contractor be sold.
Termination clauses should then be constructed to further strengthen the stipulation that any material changes in ownership, sales (by asset, stock or any LLC or Inc. transfer of control) be cause for termination of the contract. Be fair to the contractor and your organization by establishing a time line where you can no longer opt out. If the Exhibitor Service manuals are in the hands of the exhibiting companies or a window of 6 months prior to the event would be the cut off. Your contractor has gone away but that’s okay. Let Mr. Gigantic Company give you a great experience. Maybe you’ll love it and stay. But you don’t want to get out too close to the event and be responsible for the all the human resources which are calculable and quantifiable to be billed to you for exiting the service agreement. Loyalty is great but fiscal stupidity isn’t. For the clause to be enforceable it must be fair to both parties, compensable for preshow expenditures by the contractor in pre-production and based on industry standards, protocols and norms. Just lay it out….if your best buddy contractor sells the firm………you want out.
Now what happens when you try to go with the Grande Contractor and it’s just not the right fit? Do you want independent Complete Show Services? Give us a call or send me an email. If we can’t assist, I know independents from coast to coast who can offer you fair pricing & spectacular service to produce smooth sailing experiences. Most of us independents really are more fun to be around. It’s the independent corporate culture that makes your event matter to everyone on the smaller companies’ staff that sets us Independents apart. And finally, fare the well Metropolitan Exposition, you were a worthy adversary and I hate to admit it … we’re glad to see you “go away” from Las Vegas.
Good shows to all.
Mitch Isaacs, Sales & Marketing Manager, Las Vegas Expo, mitch@lvexpo.com
