Workers use a buyout to buy in: $6.5-million LBO turns an IBM plant into an employee-owned company.
On Sept. 30, Advance Technological Solutions Inc. (ATS) in Brooklyn, N.Y., became one of the nation's largest minority employee-owned firms and, perhaps, a model for solving the job-loss crises in the age of corporate downsizing.
Now a computer refurbishing business, ATS was formerly part of IBM and was formed in 1968 as a goodwill gesture to curb urban unrest. In the process of downsizing, IBM could have closed the Brooklyn plant. But instead, a creative entrepreneurial effort began: to save jobs and demonstrate to other companies an alternative to shutting down in the face of economic ills.
In cooperation with the city, the local community and IBM, former IBM Brooklyn managers arranged a $6.5-million leveraged buyout of the plant in order to form ATS. With 50% owned by its 240 employee - the majority of whom are African-American and Hispanic resident of Brooklyn - ATS is expected to generate over $30 million this year.
ATS president and CEO Wesley D. Ratcliff credits the administration of former New York City Mayor David Dinkins for his effort in assisting with the successful capitalization of ATS. Dinkins himself says it was "inspiring to see the 25-year legacy of high-tech investment" in the Brooklyn community "continue under the ownership and stewardship of the employees themselves."
"What we have been able to accomplish is unprecedented," says Ratcliff. "This was possible because IBM was willing to negotiate and public official were concerned with fostering job and business development among minorities.
To ensure long-term growth and profitability, the New York City Department of Employment, Public/Private Initiatives Division, awarded a $500,000 training contract to Brooklyn-based Pratt Institute in partnership with ATS. The Regional Cabinet from the New York State Department of Economic Development presented ATS with a $150,000 grant to provide skills training and job opportunities for local residents.
Setting up shop in the former IBM facility, ATS has secured a five-year, $100 million contract with IBM. However, the key to ATS' future will be in snaring other contracts not necessarily affiliated with its "parent." Already the new firm has received a letter of intent for a multiyear contract with Philips Broadband Network Inc. of Manlius, N.Y., A contract that could generate up to $3.9 million annually.
It will take time to expand from equipment maintenance to production and to become internationally competitive, as ATS hopes to do. Meanwhile, wages and benefits have been slashed 15% to 20% from the top down. However, employees will receive ATS stock equaling 10% of their annual compensation for the first five year of the company. It's an incentive program Ratcliff calls sweat equity. "The more we sweat, the more we get."
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|Title Annotation:||Advanced Technological Solutions, Brooklyn, New York; computer refurbishing business|
|Author:||Peeples, Dawnyielle L.|
|Date:||Jan 1, 1994|
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