The idea behind corporate trade could very well be a lifeline for many companies as they navigate through the COVID-19 crisis: An intermediary like Active International, which has investments and trading arrangements across a wide range of industries, purchases excess or unwanted assets for full value and turns these assets into working capital. These deals can involve turning unsold retail goods into funding for future media, or an unwanted sponsorship into much needed cash, or any other number of permutations. Even in boom times, corporate trade is a vital part of the global economic engine. But as industries look to adapt to unheard-of economic conditions, corporate trade has adapted to become a lifeline. Many of Active's pre-pandemic deals involved media placement that was executed within the same fiscal, says Kevin Farkas (pictured at top), Active's President of Sales Operations and Chief Risk Officer.
Clearly, this time period would present a problem for many businesses today that have excess inventory, but no immediate plans for advertising. But Farkas says because Active takes a very long-tail approach in its businesses, it can take on long-term investments like buying clients assets, including media commitments, and acting purely as a source of funding in cash-strapped times. Farkas told us more about how corporate trade has become a source of value during a socially distanced chat.
Oriana Schwindt: Is it fair to say you're pretty busy these days?
Kevin Farkas: Yes, it is. Our acquisition of slow-moving assets, including marketing commitments have definitely increased. But more than that, just our conversations with clients and prospects about their unique challenges and need for customized solutions have increased dramatically.
Schwindt: What are you hearing from clients?
Farkas: We assumed at first that everyone who was trying to exit their media obligations was doing so because they were trying to preserve cash flow and reduce expenses. But there are plenty of companies, like food and beverage, who simply want to divert that marketing budget back into supply and manufacturing. And [In addition] there are plenty of companies out there that still see the value in advertising, especially in the CPG and pharma sectors. It’s different by industry and we’re looking to get brands out-of-the-box ways to deal with out-of-the-box challenges.
Schwindt: What's a good example of one of the deals you might be making now?
Farkas: Let's say you're a financial service company who's sponsored a major sporting event that is no longer happening this year. Instead of everyone getting very expensive lawyers involved, trying to figure out if force majeure clauses apply in this case, we step in and simply put the money up front to buy the credit card company out of that sponsorship. In exchange, the client agrees to run some of their marketing spend through us in the future. In the past, we've even helped one brand get out of its commitment for a racing sponsorship by enabling multiple brands to divide and buy individual pieces of that sponsorship. Because of our deep client base, we’re able to create meaningful wins for all parties in a transaction.
Right now, we have clients who are looking to exit their national commitments and transfer that money to a large local footprint, to be more targeted. It makes sense, for some marketers, to only focus on areas of the country that are opening back up. Our robust local team is scaling plans to fit their particular needs. For brands looking for more coverage (80%+ US) while delivering national efficiencies, our proprietary unwired solution provides them with market and creative flexibility not available in network and cable.
Schwindt: How important is flexibility to your business model?
Farkas: It's crucial to our value proposition. Especially now, when brands need very customized solutions and their assets include but go beyond unsold product to media commitments and unwanted leases and buildings, even aircraft, we’re working to find ways to deliver value. And what we're seeing now, more than we have in the past, is a level of receptivity to the creativity required to solve these out-of-the-box problems.
The corporate trade model is very flexible, because we're accustomed to taking risks to create value for our clients. Whether it's cash or a trade credit, we can give them the flexibility clients need right now to improve financial results.