We recently spoke to more than two dozen current and former Univision employees from every level of the company, private equity experts, and management consultants, and reviewed a wide range of documents, and the picture that emerged is clear: Despite the debt hanging over Univisions head, the company indulged a culture of complacency and excess, embodied in many ways by the operations of Fusion Media Group, an ill-fated attempt to stay relevant in the digital age. And now that the ship is off course, the rival interests in the company are at each others throats, in some cases diving off the ship and in some cases teaming up to force enemies off the gangplank. The first few months of this year have seen severe and ongoing cuts, the replacement of the chief financial officer, and the announcement that chief executive officer Randy Falcowho in a recent company-wide email announcing layoffs was reduced to describing them as disruption ... required to transform this business into a company that will not only exist but continue to thrivewill retire by December.
From routine human resources fuckups to vastly overselling the prospects of an IPO whose ultimate doom this March precipitated the companys current cost-cutting spree, Univision has been deeply mismanaged and is in the midst of making huge cuts that have, among other things, already claimed vast swaths of Univision Noticiasthe most vital newsgathering operation serving the Spanish-speaking community in the U.S.and Fusion Media Group. Consultants from Boston Consulting Group, who have reportedly recommended budget cuts of up to 35 percent in some parts of the company, have been combing through the books for months, and more than 150 people have been laid off so far. Plenty more cuts are pending (Univision president of news Daniel Coronell reportedly described them as catastrophic to his newsroom), including at GMG, the staff of which fears the newsroom may be cut by up to a third by the end of June, perhaps as part of a broader pivot toward video and branded content. What is happening to the company is not ultimately a failure of editorial or even executive management, though: If Univision was a mammoth whose failure to adapt slowed it down, it was private equity investors, consumed by the thought of turning their riches into more riches, who brought it down and bled it dry.
The pursuit of a public offering failed due to a combination of antsy investors, new competition, and a private equity deal that the Financial Times would later describe as a symbol of the excesses of the credit bubble. That last bit is the most important.
In 2007, a consortium including Texas Pacific Group, Thomas H. Lee, Madison Dearborn, Providence Equity, and Saban Capital took Univision private for $13.7 billion. These firmsexecutives of which still shape Univisions boardborrowed heavily to finance the deal, saddling their new prize with more than $10 billion of debt. According to an FCC filing, each firm holds between 20.6 and 7.1 percent of Univisions equity, and between 27.3 and zero percent of the voting interests. ... Univisions ratio, estimated at 12.5-to-1, made it highly leveraged even by the standards of the pre-crisis boom period. (In 2013, Obama administration regulators would urge banks to limit companies leverage to roughly half this level to reduce the risk of default.) ... Private equity firms typically cash out their investments after a few years, and Univisions backers have been looking for an exit since at least 2014, when they held preliminary negotiations with CBS and Time Warner to sell the company for a reported asking price of more than $20 billion. Those talks soon collapsed.