Today’s business environment moves at lightning speed. For the chief executives of the nation’s largest black-owned businesses, keeping pace is priority No. 1. They must continually re-evaluate corporate capabilities and tinker with their company’s infrastructure to gain maximum advantage. Many must contend with emerging competitors, but the most daunting challenge for these CEOs, whether they operate an industrial/service company or a financial services firm, is dealing with large majority corporations treading on their turf.
But the BE 100S are fighting back. By broadening the scope of their business, developing partnerships, or approaching their strategic objectives with a take-no-prisoners attitude, these CEOs are ensuring that their companies are full participants in the business mainstream.
Just look at two of our companies of the year. Dimensions International Inc. (No. 35 on the BE INDUSTRIAL/SERVICE 100 list with $98.6 million in sales) is an Alexandria, Virginia-based program management firm. DI acquired another BE 100S company, SENTEL Corp., an engineering and software services operation also in Alexandria, to produce a tech juggernaut. DI now has expanded capacity to compete against the majors for homeland security and defense contracts. And Fairview Capital Partners Inc. (No. 1 on the BE PRIVATE EQUITY FIRMS list with $1.6 billion in capital under management), our Financial Company of the Year, grew 77.8% in 2004 by shrewdly investing its capital in a slew of minority and majority firms.
Examples of such audacity and tenacity have marked the recent advancement of BE 100s companies: sales of the top industrial/service companies and leading auto dealerships grew from $21.9 billion in 2003 to $23.2 billion in 2004.
But in this environment, companies can change in the blink of an eye. For instance, R. Donahue Peebles, CEO of Peebles Atlantic Development Corp. (No. 18 on the BE INDUSTRIAL/ SERVICE 100 list with $202.9 million in sales), produced a jaw-dropping 147.47% increase in revenues through a dizzying array of real estate deals and hotel projects. Recently, Peebles sold his crown jewel, the Royal Palm Crowne Plaza Resort, which made history as the first black-owned luxury property in Miami’s trendy South Beach, for $127.5 million.
However, some deals were met with shock and disappointment by black consumers. Essence Communications Partners, the publisher of Essence magazine, will leave the ranks of the BE 100s after a 33-year tenure, following Time Inc.’s purchase of the remaining 51%. (In 2000, the media giant had acquired 49% of ECP.) To many, the transaction represented the takeover of another black institution in the same manner that Black Entertainment Television and much of the black haircare industry fell into the hands of majority corporations (see sidebar).
In the automotive arena, import dealers zoomed past domestic auto dealers. In fact, lackluster domestic sales have produced a decrease in the number of black auto dealers at General Motors and Ford. Many of this industry’s top performers, which include Shack Findlay Honda in Nevada (No. 18 on the BE AUTO DEALER 100 list with $110 million in sales) with a 49.57% increase in gross sales and Baranco Automotive Group in Georgia (No. 11 on the BE AUTO DEALER 100 list with $151 million in sales) with a 25.88% increase in revenues, manage sizable import car operations.
Advertising agencies had to endure industrial shifts or make internal adjustments. Some, like Burrell (No. 4 on the BE ADVERTISING AGENCIES list with $190 million in billings), underwent major restructuring: Advertising icon Thomas J. Burrell stepped down as CEO and placed control of his Chicago-based firm in the hands of two top black managers. Others, like the Chisholm-Mingo Group Inc., the 2001 BE Advertising Agency of the Year, closed its doors after 27 years of operation due to brutal economic forces and unrelenting competition.
Financial services companies still feel the competitive squeeze from majority institutions. For instance, black banks and insurers must contend with large institutions–ranging from Citigroup and Bank of America to Allstate and State Farm–that can attract customers through a national network, an advertising blitz, and a host of financial products. In fact, the consolidation of black insurance companies has reduced our top ranking from 10 three years ago to five today.
Despite these challenges, many black institutions continue to find creative ways to build income. For instance, last July, Atlanta Life Investment Advisors (ALIA), the asset management arm of Atlanta Life Financial Group (No. 3 on the BE INSURANCE COMPANIES list with $76 million in assets), struck an agreement with MetLife to manage $50 million of the insurance giant’s assets. Placing the assets in its portfolio of large-cap equity funds, ALIA’s assets under management catapulted from $67 million to $117 million.
But some growth initiatives devised by black financial institutions proved unsuccessful. New York-based Carver Federal Savings Bank (No. 1 on the BE BANKS list with $616 million in assets) failed in its bid to acquire Independence Federal Savings Bank in Washington, D.C. (No. 12 on the BE BANKS list with $178 million in assets). The Office of Thrift Supervision squashed Carver’s nearly $33 million stock buyout because of Independence’s decline in total assets and accumulation of approximately $1.2 million in losses. The deal was expected to boost Carver’s assets to $750 million and place it on course to reach its $1 billion asset goal.
Asset managers continue to be the strongest players among black financial services companies. Ariel Capital Management in Chicago, one of the nation’s best asset management firms–black or white–successfully competes for placement in 401(k) and other employer-sponsored plans against large firms such as Fidelity and PIMCO. Leading the
pack, Ariel’s assets under management have grown 32.92%, from $16.1 billion in 2003 to $21.4 billion in 2004–the first time a black asset management firm has managed more than $20 billion in assets. EARNEST Partners, last year’s Financial Company of the Year, also produced stellar returns. The Atlanta-based firm’s assets under management vaulted a staggering 70.43%, from $8.2 billion in 2003 to $13.9 billion in 2004.Last year’s winners maintained their competitive advantage by becoming major players in the business mainstream. To continue to grow, the BE 100S will need to constantly rethink their strategic focus and move boldly into the future.
[Identifying Black-Owned Companies]
In developing this year’s rankings of the BE 100S–the nation’s largest back-owned industrial/service companies, auto dealers, advertising agencies, and financial services firms–the B.E. Research and editorial
B.E. Research and the BE 100s editorial team conducted due diligence for the 2005 BE INDUSTRIAL/ SERVICE 100, AUTO DEALER 100, financial services lists, the BE ADVERTISING AGENCIES list. We required each company included on these rankings to complete a survey. The information requested includes total revenues for calendar year 2004, a detailed description of business activities, historical data on when it came under majority black ownership, and confirmation that the entity is at least 51% black-owned or blacks own at least 51% of the controlling shares of a publicly traded company. B.E. Research requires that the CEO, CFO, or a current corporate officer sign and da
te our survey as verification of the information and we don’t stop there: whether a company that received our survey responds or not, B.E. Research and our editors make a series of phone calls to each company to verify survey information as well as check the accuracy of financial and business information through corporate purchasing offices, government agencies, and industry reporting services such as the Securities and Exchange Commission and Dun & Bradstreet.
Any company that received our survey and failed to provide financial information and confirmation of their black ownership or refused to respond to the queries of B.E. Research and our editors has not been included on this year’s rankings. These companies have not proven that they are either financially viable entities or that they meet our 51% black ownership requirement. Some of the prominent companies that failed to meet these standards this year: Magic Johnson Enterprises, a holding company with operations that include food and coffee franchises, movie theaters, and gyms; Spiral Inc., a plastic products distribution center business, whose CEO, Reginald Fowler, is attempting to buy the Minnesota Vikings football franchise; Luster Products Inc., a manufacturer of personal hair care products designed for African Americans; Dick Griffey Productions, a music publishing and mineral brokering company; Commodities Management Exchange, an Internet metal trading firm; FUBU, an urban fashion design house; and Essence Communications Partners, which agreed to sell the remaining 51% of the company to Time Inc. Companies that have sold their controlling interests to majority-owned corporations and, as a result, did not make the BE 100S rankings include ROCAWEAR, an urban apparel line, and Bad Boy Entertainment, the music empire of Sean “P.Diddy” Combs. One CEO, La-Van Hawkins of La-Van Hawkins Food & Entertainment Group L.L.C., is currently on trial facing fraud and corruption charges. D.T.D.