February 7, 2023

Vermont Sisters With Roots in News Embrace Small-Town Papers

MIDDLEBURY, Vt. — King Lear’s three daughters had their lands and loyalties to fight over. Jane Austen’s Dashwood sisters had the prospect of marriage to occupy them, and Anton Chekhov’s three sisters had local military officers to brighten their days.

None of them ever contemplated a future as risky as newspapers.

For a long time, neither did the Lynn sisters, even though they are a fifth-generation newspaper family. Polly, Christy and Elsie Lynn left behind their father’s dusty but cozy newsrooms for college and careers.

Now they are back. Elsie, 26, moved home in 2010 after she ran out of money while working and traveling through Asia. She manages two of her father’s weeklies in the Burlington suburbs of Colchester and Essex.

Polly, 29, returned in 2011 from Denver, and has thrown herself into running the weekly newspaper in Killington, the popular ski town. Christy, 28, moved back in June after her boyfriend finished graduate school in Vancouver. She helps her father, Angelo, running the business side of Middlebury’s paper, The Addison County Independent.

It is conventional wisdom that newspapers are a fading enterprise. Last month, the Tribune Company bought 19 local television stations even as it sought to sell its portfolio of papers, and twice in August, big-city papers changed hands: The New York Times sold The Boston Globe and other properties for $70 million, after paying $1.1 billion for The Globe 20 years ago, and the Graham family said it would sell The Washington Post after eight decades of ownership.

But instead of fleeing the newspaper business, the Lynn sisters have embraced it, and not just because it is part of their heritage.

“I’ve grown up in the papers,” said Elsie Lynn. “But I don’t think that’s the reason I’m in it. The future is exciting for me. We have this chance and this opportunity to be pioneers and change our career and change this industry.”

The papers the Lynn sisters help run have been surprisingly profitable. They have not faced bankruptcy like newspapers of the Tribune Company including The Los Angeles Times and haven’t cut coverage like The Times-Picayune of New Orleans. In these parts of Vermont, where Internet connections are less reliable and winter snowstorms can block roads for days, readers often prefer print.

Mr. Lynn said that he had run his newspapers debt-free for a decade. While his papers aren’t making money yet from their digital efforts, his newspaper and phone book businesses generate about $4.5 million in gross revenue.

“We can’t afford not to make money,” Mr. Lynn said as he sat in his office here surrounded by photographs of his daughters, the family dogs dozing loudly nearby. “There’s no future losing money in any of these papers.”

It helps that Mr. Lynn has a long history in the business. His great-grandfather, Charles Scott, bought The Iola Register in Kansas in 1882. Mr. Lynn was raised upstairs from the offices of another nearby Kansas paper called The Humboldt Union. In 1984, Angelo Lynn bought The Addison County Independent in Vermont and started building up his chain of papers. Mr. Lynn’s older brother, Emerson, owns two papers with his wife, Suzanne, and Angelo as well as two other Vermont papers.

Angelo Lynn speaks fondly of the newspaper life. He spends his weekends hiking and skiing with his daughters and weekdays churning out enterprising local journalism.

“Once you become part of a community, you see the good that a paper does,” Mr. Lynn said. “That’s very fulfilling.” His daughters’ newspaper futures were less certain. When Elsie Lynn arrived at the newsroom of The Colchester Sun and The Essex Reporter, she had never studied journalism or held a journalism job. She wasn’t convinced she wanted to work with her father and uncle.

“I’ve said, ‘Man, I don’t know, Dad, if this is what I want to do,’ ” she said as she sat in her threadbare newspaper office in a converted stable space on the outskirts of Colchester. “He said ‘No pressure.’ ”

She settled in, typing up wedding announcements, but before long her father asked her to review the papers’ finances. Elsie discovered they were owed $120,000 from advertisers. In three months, she collected $90,000. She also saved her father labor costs by absorbing multiple job titles. Elsie said she often logged 13-hour days writing and editing stories and promoting them on social media.

Polly Lynn was living in Colorado working for an educational tour company with her partner, Jason Mikula, when her father received an offer to buy The Mountain Times in Killington. Mr. Lynn asked the couple, who were already thinking of moving, to come to Vermont to run it. The couple took over in September 2011 just as Hurricane Irene hit and Killington was hit with some of the storm’s worst flooding. She produced the first editions from her father’s dining room table.

Article source: http://www.nytimes.com/2013/08/16/business/media/vermont-sisters-with-roots-in-news-embrace-small-town-papers.html?partner=rss&emc=rss

Deal Professor: A Flawed Bidding Process Leaves Dell at a Loss

Harry Campbell

The private equity firm Blackstone Group has exited the stage for Dell, abruptly bringing down the curtain on a budding takeover contest. It has the elements of a farce, and Dell’s board has no one to blame but itself.

The fizzled bidding for Dell is a result of the board’s extreme reliance on a process known as a go-shop and how it ran the initial sale. If this episode does not change the way companies sell themselves, perhaps it should.

A go-shop is a device that companies started using about a decade ago. The go-shop typically provides that after a deal is announced, the target company shops like Paris Hilton, as a Delaware judge once put it, looking to see if another bidder is willing to compete.

Why would the first bidder allow this?

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The answer lies in its origins. Go-shops were first used in private equity buyouts. The private equity firm would often team with management to make a bid, demanding exclusive negotiations. Boards would agree to this exclusivity but in exchange demand a period of time when alternative bids could be solicited. This way they could be assured that the company was being sold for the highest possible price.

Yet there is also plenty of skepticism about this process. The conventional wisdom is that go-shops are a hollow ritual. The feel-good perception that the company is being actively shopped covers up the fact that the initial bidder has a perhaps unbeatable head start. Once a deal is announced, others don’t have time to catch up, nor do they want to get in a bidding war. A go-shop becomes just a cover-up for a pre-chosen deal.

There is truth to this. At least one study has found that go-shops don’t generally attract higher-valued bids when management and private equity firms are involved. This makes sense. After all, if the original bidding group has management locked up, how is a subsequent bidder going to run the company?

Despite such concerns, the Dell board used both exclusivity and a go-shop in structuring the sale process, although it did add some frills to try to protect shareholders further.

Instead of running an open auction contest at the very beginning, the Dell board negotiated with the private equity firms Silver Lake Partners and Kohlberg Kravis Roberts Company. When K.K.R. dropped out, the board asked TPG to join the process.

But the board focused on only two bidders at a time and didn’t reach out to others. Instead, when Blackstone called about a deal in January, it was left to bid only in the go-shop after it was announced that Michael S. Dell and Silver Lake were offering $13.65 a share to take Dell private.

It is curious that the Dell board adopted the go-shop process so wholeheartedly. Even in the best of circumstances, they are seldom successful. Since 2004 there have been 196 transactions with go-shops in them, according to the research provider FactSet MergerMetrics. In only 6.6 percent of these did another bidder compete during the go-shop period. More than 93 percent of deals with go-shops do not attract competing bids.

You can slot Dell into the overwhelming majority. The Dell board hired Evercore to run the go-shop, and the investment bank contacted 71 parties. Now Dell appears left with only Carl C. Icahn.

It might have turned out differently, if the board had pulled Blackstone fully into the sale process before the announcement of an agreement to sell the company to Silver Lake and Mr. Dell. By failing to include Blackstone — with its growing technology practice that includes a former executive of Dell — from the get-go, it allowed the go-shop process to unfold in the harsh glare of the media.

And when your business is something like a melting ice cube, time matters. A recent International Data Corporation report showed the PC business in a free fall, with United States shipments down 12.7 percent in the first quarter of this year compared with the previous year, and Dell falling behind its competitors. The deterioration in the business was one of the reasons Blackstone decided not to bid.

Hindsight is 20-20, of course. Still, Dell’s board should have known that how it ran the sale would come under harsh scrutiny. Dell’s biggest shareholder outside of Mr. Dell, Southeastern Asset Management, had told the Dell board before the proposed buyout was announced that it would not support a transaction where it could not roll over its shares and that was not in the range of $14 to $15 a share, according to a securities filing. That Southeastern is now heavily protesting this deal is no surprise.

People close to Dell vigorously defend the sale process, calling the go-shop a “success” since it brought Blackstone even this close to bidding.

But Dell’s use of the go-shop now leaves its shareholders with a hollow choice. Silver Lake and Mr. Dell will most likely wait it out, possibly raising their offer a quarter or two at the last minute to win over shareholder holdouts. They certainly have no incentive to do anything before then or to do much more, if even that. And then shareholders will be forced to vote between this deal and taking the risk with a still publicly traded company that Blackstone has now so publicly spurned. It’s really not much of a choice.

Moreover, there will now be furious lobbying by Southeastern and Mr. Icahn to have equity stakes in a newly private Dell rather than take the buyout offer. Southeastern wants to salvage its investment in Dell — its cost basis in the stock is above the current offer price. But it appears the fund has little leverage unless it can persuade these now doubly cowed public shareholders to play a game of chicken with Mr. Dell.

At this point, it is simply speculation whether there could have been a healthy bidding war for Dell. Yet there are lessons here for companies that use go-shops in the future.

The risk that the process leaves shareholders with no real choice is particularly keen when management is involved. Dell’s board went admirably out of its way to secure the cooperation of Mr. Dell with any winning bidder, but even then it appears that he was not so willing to cooperate with Blackstone, as Andrew Ross Sorkin of The New York Times noted in his column.

Running a full auction of a company beforehand when there is leverage to fully secure management’s cooperation appears to be the better course.

In other words, the next time a company says that the price being paid to shareholders will be a good one because they have a go-shop, be wary. And as for directors, when executives from a private equity firm with $51 billion in assets under management comes knocking on your door, you might not want to turn them away.

Article source: http://dealbook.nytimes.com/2013/04/23/a-flawed-bidding-process-leaves-dell-at-a-loss/?partner=rss&emc=rss

Harder for Americans to Rise From Lower Rungs

But many researchers have reached a conclusion that turns conventional wisdom on its head: Americans enjoy less economic mobility than their peers in Canada and much of Western Europe. The mobility gap has been widely discussed in academic circles, but a sour season of mass unemployment and street protests has moved the discussion toward center stage.

Former Senator Rick Santorum of Pennsylvania, a Republican candidate for president, warned this fall that movement “up into the middle income is actually greater, the mobility in Europe, than it is in America.” National Review, a conservative thought leader, wrote that “most Western European and English-speaking nations have higher rates of mobility.” Even Representative Paul D. Ryan, a Wisconsin Republican who argues that overall mobility remains high, recently wrote that “mobility from the very bottom up” is “where the United States lags behind.”

Liberal commentators have long emphasized class, but the attention on the right is largely new.

“It’s becoming conventional wisdom that the U.S. does not have as much mobility as most other advanced countries,” said Isabel V. Sawhill, an economist at the Brookings Institution. “I don’t think you’ll find too many people who will argue with that.”

One reason for the mobility gap may be the depth of American poverty, which leaves poor children starting especially far behind. Another may be the unusually large premiums that American employers pay for college degrees. Since children generally follow their parents’ educational trajectory, that premium increases the importance of family background and stymies people with less schooling.

At least five large studies in recent years have found the United States to be less mobile than comparable nations. A project led by Markus Jantti, an economist at a Swedish university, found that 42 percent of American men raised in the bottom fifth of incomes stay there as adults. That shows a level of persistent disadvantage much higher than in Denmark (25 percent) and Britain (30 percent) — a country famous for its class constraints.

Meanwhile, just 8 percent of American men at the bottom rose to the top fifth. That compares with 12 percent of the British and 14 percent of the Danes.

Despite frequent references to the United States as a classless society, about 62 percent of Americans (male and female) raised in the top fifth of incomes stay in the top two-fifths, according to research by the Economic Mobility Project of the Pew Charitable Trusts. Similarly, 65 percent born in the bottom fifth stay in the bottom two-fifths.

By emphasizing the influence of family background, the studies not only challenge American identity but speak to the debate about inequality. While liberals often complain that the United States has unusually large income gaps, many conservatives have argued that the system is fair because mobility is especially high, too: everyone can climb the ladder. Now the evidence suggests that America is not only less equal, but also less mobile.

John Bridgeland, a former aide to President George W. Bush who helped start Opportunity Nation, an effort to seek policy solutions, said he was “shocked” by the international comparisons. “Republicans will not feel compelled to talk about income inequality,” Mr. Bridgeland said. “But they will feel a need to talk about a lack of mobility — a lack of access to the American Dream.”

While Europe differs from the United States in culture and demographics, a more telling comparison may be with Canada, a neighbor with significant ethnic diversity. Miles Corak, an economist at the University of Ottawa, found that just 16 percent of Canadian men raised in the bottom tenth of incomes stayed there as adults, compared with 22 percent of Americans. Similarly, 26 percent of American men raised at the top tenth stayed there, but just 18 percent of Canadians.

“Family background plays more of a role in the U.S. than in most comparable countries,” Professor Corak said in an interview.

Skeptics caution that the studies measure “relative mobility” — how likely children are to move from their parents’ place in the income distribution. That is different from asking whether they have more money. Most Americans have higher incomes than their parents because the country has grown richer.

Some conservatives say this measure, called absolute mobility, is a better gauge of opportunity. A Pew study found that 81 percent of Americans have higher incomes than their parents (after accounting for family size). There is no comparable data on other countries.

Article source: http://feeds.nytimes.com/click.phdo?i=9b1a1d6d96a2684501c9a6bb1a0c9f6a

You’re the Boss Blog: A Challenge to Conventional Wisdom on Small Business and Jobs

The Agenda

How small-business issues are shaping politics and policy.

Jared Bernstein, who was until May Vice President Joe Biden’s top economic adviser, published an article on the Op-Ed page of Monday’s Times that challenges much of the orthodoxy about small business in the United States. He argues that small businesses really don’t employ the majority of Americans, and that they don’t create the majority of new jobs.

For good measure, he accuses the National Federation of Independent Business — which he calls “the sector’s primary lobbying group” — of being “a purely partisan operation.” He notes that the organization “opposed the president’s jobs bill, even though independent analysts estimated it would significantly increase economic demand, and the federation’s own survey shows that ‘poor sales’ — a k a weak demand — is a much bigger problem for its members than taxes or regulations.” (The beef against the N.F.I.B. is not a new complaint — The Agenda has addressed it before, here and here).

No doubt some conservatives and libertarians will use Mr. Bernstein’s essay to buttress their claims that small businesses deserve no special policy considerations from the government. But Mr. Bernstein doesn’t agree. Though small companies are not, in his view, key to our economic recovery, they still employ a lot of people, and as Mr. Bernstein notes, have tighter margins, higher costs and less access to capital and export markets. And they are crucial to an understanding of who Americans are — evoking, as Mr. Bernstein says, “Steve Jobs planting a seed in his garage that grew into an amazing Apple orchard.”

Article source: http://feeds.nytimes.com/click.phdo?i=573355706551b8dc5546d389b339bd50

Economix: When Hard Times Led to a Boom

Book Chat

Alexander J. Field, an economist at Santa Clara University, is the author of “A Great Leap Forward,” which argues that the terrible years of the Great Depression actually set the stage for the post-World War II boom. Mr. Field discussed his ideas at a recent book-signing party. The book will be officially released next week.

Alexander J. Field, author of Valerie Wolk Alexander J. Field, author of “A Great Leap Forward.”

Our conversation follows.

Q. You make the novel claim that the Great Depression years were good — or at least important — for the American economy. How so?

Mr. Field: In 1941, the U.S. economy produced almost 40 percent more output than it had in 1929, with virtually no increase in labor hours or private-sector capital input. Almost all of the increase in output per hour is attributable to technological and organizational advance. As I said in the title of my 2003 American Economic Review article, the 1930s were indeed the most technologically progressive decade of the century.

The conventional wisdom is that the war somehow magically transformed the doom and gloom of the Depression into the U.S. standing like a colossus astride the world in 1948. My counterargument is that potential output expanded by leaps and bounds between 1929 and 1941, and it was this expansion in capacity that both helped us win the war and established the foundations for postwar prosperity.

Q. I would not have guessed that the economy was 40 percent larger in 1941 than in 1929, given how much it shrunk in the early 1930s. When did all the growth happen?

Mr. Field: There was a very strong recovery following Roosevelt’s election, interrupted only temporarily by the 1937 recession. Real G.D.P. almost doubled between 1933 and 1941 (90 percent increase).

An important point to understand, however, is that we’re not dealing in these years simply with the closing of an output gap (the difference between actual and potential). Rather, we are dealing with a moving target, as productivity increased, thus increasing potential, under the combined influences of big increases in R.D. investment, new products and processes, spillovers from the build-out of the surface road network, and in some sectors, creative responses to adversity. That’s part of the explanation for why unemployment was still close to 10 percent in 1941.

Yale University Press

Q. What were the key innovations of the 1930s?

Mr. Field: What’s notable about the Depression years is the very broad range of advance. One can’t point to a single or even a few innovations that somehow defined the era. Nonetheless, notable new products included the DC-3, a plane introduced in 1936 that revolutionized commercial aviation; television, developed with venture capital funding during the 1930s and rolled out at the 1939-40 World’s Fair; and nylon stockings, introduced in May 1940, with 63 million pair sold the first year.

A number of products available in the 1920s moved from low-penetration boutique goods to mass-produced commodities. Case in point: mechanical refrigerators. Less than 3 percent of U.S. households had them in 1929, and they were expensive and unreliable, requiring extensive after-market service. In 1941, 44 percent of households had mechanical refrigeration, including 56 percent of urban households.

Automobiles saw major refinements in the 1930s. Heaters, radios, low-pressure balloon tires, and four-wheel hydraulic brakes all became standard. The decade saw the development of options we often consider standard today — power steering, automatic transmission, front-wheel drive, and V-8 engines. Aside from product innovation, significant process innovation occurred across the industrial sector.

And in contrast to the 1920s, advance was not limited almost entirely to manufacturing. Highway design in the 1930s excited engineers as much as did the information “superhighway” in the 1990s. The U.S. route system, built almost entirely during the Depression, represented a huge improvement over what had preceded it, with big benefits for transportation and distribution.

Organizational innovation also played a role. In railroads, treaties now allowed unlimited freight interchange. Rolling stock — railroad cars — from one road could move onto tracks owned by another, and while there, discharge and pick up cargo, and even be repaired in a “foreign” yard. The agreements and uniform tariff schedules that permitted this were critical in enabling U.S. railroads to carry more freight and almost as many passengers in 1941 as they did in 1929, using many fewer employees, cars, and locomotives.

Q. I think you’re saying that the Depression itself was not the fundamental reason for the innovation boom in the 1930s — the time just happened to be right. Or did the downturn itself play a role? And, in that case, is there any reason to hope that our current slump is laying the groundwork for future progress?

Mr. Field: On the one hand, it would be disingenuous to try and console those out of work with the thought that their sacrifices are laying the foundation for a better tomorrow. On the other hand, there is evidence that for some organizations and industries, just as for some individuals, adversity summons reservoirs of initiative and creativity that have long-term positive consequences. And based on Depression experience, we can be optimistic that when exciting technological paradigms are ripe for exploitation, work will continue on them, slump or no slump.

In thinking about the future, however, we should not overlook the important role played by the government. Federal spending was too small prior to the war to compensate for the decline in private sector capital formation and thus close the output gap. But it had big benefits on the aggregate supply side, as it complemented private sector initiative in expanding potential output.

Article source: http://feeds.nytimes.com/click.phdo?i=9e4931061b1a46274c19a7724594872c