Atlas Tower Corporation

Acquisition Date:

Divestiture Date:

Held in Portfolio:

Purchase Price:

Sales Price:

% Gain:

Annualized R.O.R.:

Industry:

S.I.C. Codes:

September 15, 1981

May 25, 1983

21 months

$1,000

$325,000

32,400%

2,945%

Fab Metal Products-Structural Steel

3441; 1629

Portfolio Analysis & Discussion

On The Brink

In September, 1981, V & B Tower Construction Co., Inc. was on the brink of insolvency, but not really due to any missteps of its management. We first heard about V&B from a business broker who suggested that he had a distressed prospect, but it was too far gone and would be out of business before we could get a deal done. Sometimes that posture can prevent you from seeing a real opportunity. Within a couple of days, it was clear to RGI (most recently put out of business by IBM), a unit of InAmerica, that V &B could be turned around in short order.

On September 15, RGI closed a deal with the owner of V&B to acquire the firm for $300,000- $1,000 down and the balance 5 years after signing. While the company name was V&B, the actual tower that it built was known in the industry as the ‘Atlas Tower.’ Immediately, RGI changed its name to Atlas Tower Corporation, of which V & B was a wholly-owned subsidiary.

The company both manufactured broadcast towers and erected them in the field. Because the were very different disciplines, Atlas Tower became the manufacturing entity and V&B became strictly the erection entity. First and foremost, this protected Atlas from certain liabilities that were outside the area of manufacturing defects.

V&B’s real problem was is loan structure at the local bank. Because the company was not adequately financed to manufacture a tower and then construct it in the field, it’s only real problem was cash flow. It was otherwise profitable. Much of its profit margin was paid each month to the bank in the form of overdraft charges on most of the checks written.

Atlas’ first solution was to change the financial structure, so as to eliminate the overdraft charges. Within 60 days, Atlas was profitable and able to take on more sales.

InNovate

Except for the tower, the broadcast equipment industry was populated with large international corporations like Sony and RCA. Many new radio and TV broadcast companies would often lease their broadcast equipment as opposed to the large investment required to purchase it. That is, all except for the tower. Banks and finance companies had difficulty with what to do, if they were forced to foreclose on their leased equipment in the case of a default. Atlas Tower had no such difficulty. In fact, it was easier to take one down than to put it up. See Atlas Tower’s Brochure. . .

In March 1982, in its Exhibitor Booth at the National Religious Broadcaster’s Convention (NRB) in Washington, D.C., Atlas negotiated a lease with a religious broadcasting group that included land, building, tower and all broadcast and studio equipment, for a new FM radio station. Word spread quickly at the show, and before it was over, Atlas had more inquiries than it could possibly respond to.

ExPand

Immediately, orders spiked and it was clear that Atlas’ current manufacturing facility was insufficient to take on the orders. Seeing a new problem in expansion, Atlas negotiated with a city up the freeway from it’s plant, to occupy a very large abandoned manufacturing facility, with a prospect for hundreds of new jobs for the area. While the plan was positive for the county, it was somewhat negative for the city losing one of its largest employers.

At this point, the local banker took action to cancel the company’s financing lines and refused to finance new orders in house. With prime interest rates heading toward 20% with high inflation, rather than fight those who should have been partners, InAmerica agreed to sell Atlas back to the original owner which magically was able to secure 100% financing from the local banker.

Sell or Fight

While InAmerica was probably 12 to 18 months away from where it would have sold the company, considering the economic climate, it chose to sell out.

Join Atlas Tower steelworkers as they ride a cable up to the top of a TV broadcast tower, with nothing but their grip keeping them from the big dive.

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