As students in the Madden School at Le Moyne College embark upon their study of the Global Jesuit Case Series, a repository of international business ethics cases, one unique, significant example takes place just 45 minutes west of campus, in Rochester, N.Y.
In a financial environment where the prevailing priority is shareholder value and employees are often an unfortunate incidental, the recent merger of Fibertech Networks LLC with Lightower Fiber Networks reveals a Jesuitical achievement; the former start-up company survived and, in fact, thrived; all of its jobs were maintained and more people may be hired; customer service improved and expanded; and still shareholders profited.
This is all due to the adeptness and savvy of two values-minded former competitors who became friends and business partners.
Le Moyne College alumnus John Purcell ’65 and Frank Chiaino accomplished this unconventional merger by recognizing when the stars aligned and quickly maneuvering to achieve the best result for their shareholders, customers, employees and community.
As a student at Le Moyne, Purcell cultivated his ability to ask questions, to dig deeper, and to look beyond the apparent. He learned to think for himself and about others, and gained an appreciation for the ways in which an individual’s actions can impact an entire community. Fifty years later, those lessons helped guide him, as Fibertech’s chairman and chief executive officer, through what he calls “the highlight of (his) business career” – the merger of Fibertech and Lightower in a $1.9 billion cash transaction.
One day after graduating from Le Moyne, Purcell began work in the personnel department of the Rochester Telephone Company. Thirty–two years later he had risen to vice president for mergers and acquisitions, and had led the successful acquisition of 37 local telephone companies in 15 states and seven regional long-distance companies. He also represented the company in successful negotiations with NYNEX Corporation’s cellular unit to form a joint venture with Frontier Cellular. By the end of 1996, Frontier was the fifth-largest long distance company in the country and the 12th-largest telephone company. After retiring, Purcell consulted for other telecommunications companies, including Telecom and the Puerto Rico Telephone Company.
Chiaino closed his career with Time Warner Cable as the president and chief executive officer of operations in Rochester. In 1992, he directed a $100 million upgrade of the Time Warner cable system, and also developed one of the country’s first facilities-based Competitive Local Exchange Carrier (CLEC) operations. For this achievement, he was named “Innovator of the Year” in 1995 by Cablevision Magazine.
Chiaino could not access, lease or buy sufficient fiber when he worked for Time Warner. He saw a need and began to strategize. In 1997, he asked Purcell to review his business plan and offer his advice. Their focus was on building a self-sufficient cable network that would lease fiber access to their customers, aiming to gain the market of big businesses in smaller cities. Their early model was Metromedia Fiber Networks, a business that had started to build fiber networks downstate and attract investors. The need was there; the builder was chosen. They estimated that to build a fiber network through 13 small-to-medium-sized cities would require a $25 million infusion of capital.
Purcell and Chiaino began making the rounds and looking for equity funding opportunities. Purcell, through his experience with Frontier, was familiar with Nautic Partners and Ridgemont Equity, a private equity spin-off of Fleet Bank. Nautic had 15 to 20 young, enthusiastic and very knowledgeable bankers who understood the telecommunications industry and the ins and outs of private equity. Their average rate of return for their customers was between 24 and 25 percent. Nautic was impressed by Purcell and Chiaino’s three-, five- and 10-year projections and strongly recommended that they establish a more conventional operation.
By 1999 they were in the final stages of negotiating the value of the company – what Nautic’s 80 percent was worth and what the employees’ 20 percent was worth. They reached an agreement and on June 1, 2000, the company was funded.
To learn more about John Purcell, read the upcoming issue of Le Moyne College Magazine.
Learn More:
Madden School of Business
Request More Information