Change. This morning I looked through the 2009 edition of the Monitor 100. I was amused as I read From the Editor written by Stuart Papavassiliou one year ago. His comments included “…And as we learned from respondents to this year’s survey, 2008 was indeed a year like no other.” Little did they know that 2009 would make 2008 look like a walk in the park.
2009 was a year of monumental change. CIT collapsed, GE stumbled, Key shrunk, PNC grew, ILFC nearly disappeared, De Lage Landen contracted, the captives thrived and most of the industry avoided meltdown, yet somehow we got through it.
So far, 2010 has proven to be a year of little change. There appears to be an inordinate amount of tentative behavior — an inability to make a clear move in any direction. Capital expenditures wane. Volume levels lack momentum. I am reminded of Sergeant Phil Esterhaus, the character played by Michael Conrad on Hill Street Blues from 1981 until his death in 1984, who always closed with the trademark line: “Let’s be careful out there.” People are being careful out there, but maybe, too careful.
What Will it Take to Get Back in Gear?
Do you ever wonder what will bring back sustained growth? Does the Fed need to raise rates to show that the economy is indeed growing once again? I think an increase in consumer confidence will give a boost to commercial spending. After all, consumer spending makes up 77% of our economy. Improvement in consumer confidence may come only after we start to see an increase in employment and a significant decrease in the jobless rate. New jobs produce new income for spending and for collection of taxes. Jobs are a key factor to economic improvement.
What’s missing? Yours truly believes that one of the key missing elements is innovation — new products, services or new go-to-market methods that are fresh and different. Could innovation provide the boost our industry so sorely needs? When was the last time you saw a new financial service product that resulted in an ‘aha moment?’ Online credit applications, automated credit decision rendering, digital document delivery and e-signatures were all innovations in go-to-market methods. Tech Refresh … in its day … was an innovative product. Yet no contemporary product has recently been developed that caused the financial services industry to take note. We are stale. Our product has been commoditized and severely lacks differentiation. We all sell money and mine is no greener than yours.
Inspiration and necessity drive innovation. One’s inspiration may be driven by the necessity to solve a problem. Ideas churn and a solution begins to develop. Really great ideas can lead to products and services that yield a first mover advantage for the innovator.
Innovators attract fast followers. Think about how cell phones have evolved from the initial days of installed car phones to luggable bag phones all the way to today’s modern versions of Star Trek Communicator.
Innovators versus followers. The innovators were the people developing these futuristic portable devices. The followers developed products that the original innovators could never have dreamed of in their day. Imagine what the inventor of the Motorola brick-phone — a leader in its day — must think of the newest Blackberry, iPhone or Droid. Inspiration — necessity — innovation.
How can we innovate in financial services to drive growth? Have you or your company assessed the new markets available for financing? Some of the traditional concepts of equipment finance are being challenged. Cloud computing, software as a service (SaaS), managed service providers (MSP) and utility computing are four new megatrends in information technology. If you are a tech lessor — have you thought about how these innovations change the game for your company? Are you willing to provide financing for these products or services? There may be no collateral supporting your transaction. Are you willing to finance services? You had better start thinking about these innovations.
Green is good. Author and New York Times columnist Thomas Friedman likes Energy Technology (ET). He sees ET leading the green revolution. ET includes wind, solar, mass transit, alternative fuel vehicles, hydrogen, biomass, nuclear power, more efficient coal-burning projects and many more.
America supports green initiatives. Our government provides incentives to drive growth in ET and to reduce our dependency on foreign oil. Over $27 billion of the 2009 stimulus package was aimed at renewable energy-related areas, including $11 billion for upgrading the existing electrical grid. Have you begun to explore ways to provide financing for ET, like solar panels, high-speed trains, coal gasification plants, fleets of alternative fuel vehicles or nuclear power facilities? If your company participates in project finance, infrastructure finance or structured finance — you had better be deep in the weeds studying the impact this green revolution will have on your business.
We’re switching gears now. Hang on tight!
Some Change is Too Confusing
As I opened the March/April edition of the Monitor and read the first two stories, I felt an uncanny sense of déjà vu. The stories were about EverBank’s and CIT’s appointment of James McGrane and John Thain as their respective CEOs. Let’s see if I can get this right. US Express Leasing became Tygris Vendor Finance, a division of Tygris Commercial Finance Group. And MarCap became Tygris Asset Finance, a division of Tygris Commercial Finance Group. Then along came EverBank, which bought Tygris Commercial Finance Group, but all they wanted was the small-ticket vendor piece, leaving Tygris Asset Finance — a shell of its former self — in runoff mode.
In golf it’s called “lift and place” Fast forward to February 1, 2010, when CapitalSource announced that Laird Boulden would join the company and become president of a newly formed Corporate Asset Finance group. Boulden is a phoenix. He brought his successful team from Heller Financial to Lombard/RBS Asset Finance. When he left RBS to join Tygris he took his team with him, again. Now they have joined CapitalSource. Rumor has it that the group booked more volume during March — their second month of operation — than they booked in two years at Tygris. Look for good things to come from this team.
Mulligan! Fast forward to February 9, 2010, when EverBank Financial Corporation announced the completion of its acquisition of Tygris Commercial Finance Group, and named McGrane as president of the unit, which will operate as a division of EverBank. McGrane kept his entire management team intact through all of 2009 during the financial woes of Tygris — not an easy task. That’s leadership! His sales team, led by Mike Jones, is back on the streets drumming up business. It must be hard going back to customers for the third time and trying to convince them that: “This time things will be different.” Stay tuned!
Where’s Waldo? Whoops! I meant where’s Wolfert? Longtime industry veteran Rick Wolfert was managing principal at Aquiline Capital Partners, the private equity firm headed by Jeff Greenberg that provided the initial equity capital for Tygris. The funding crisis couldn’t have come at a worse time for Tygris. After lining up $2 billion in equity, the company was unable to access debt when the markets dried up. After selling what remained of Tygris to EverBank, Wolfert reportedly took a sabbatical. His profile page on LinkedIn shows him as principal at Jackson Ridge Advisors in Greensboro, GA. A Bing search of his address shows a lovely golf course development on Oconee Lake.
Sabbatical, early retirement, sitting on the sidelines — call it what you like — the guy deserves a break. Both McGrane and Boulden have worked with Wolfert multiple times. My guess is that they would follow him again under fitting conditions. Rumor had it that Wolfert was a finalist for the CIT CEO job filled by Thain. My money says that he will be back in the game when the right opportunity presents itself.
I wonder… Do you think Thain has an umbrella stand in his office? Hmm … food for thought. What a journey CIT has gone through over the past few years after a century of stoic performance. The stodgy old company acquired Newcourt in March 1999 for $9 billion and two years later sold itself to Tyco for $9 billion, only to be shed in an IPO in 2002 raising a measly $4.6 billion. Exit Al Gamper — enter Jeffrey Peek and Home Makeover begins to convert the yellow iron and factoring financier into a Wall Street boutique. After more than 100 years as a venerable financial institution, CIT files for bankruptcy in late 2009. Exit Peek — enter Thain. Do you know what you’ve gotten yourself into, Mr. Thain? Congratulations on your sabbatical, Mr. Wolfert!
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