Commonground/MGS Shuts Down Over Financial Dispute
Steve’s breakdown: We hate to hear about agency closings but here’s a suggestion. Check your personal network to see if any of your folks are at this agency. Not only could you pull in a new account, you could save someone’s holiday by giving them a job.
CHICAGO, IL & MIAMI, FL: Chicago-based commonground and Miami’s MGSCOMM joined forces in fall of 2014 to create the agency world’s newest holding company with the help of several other marketing units including The Vidal Partnership, Cunningham Group, SWAY Public Relations, etc.
That business lasted just over a year. The entire network has officially ceased operations after surprising many staffers last week by telling them that they would no longer be employed at Commonground/MGS, effective immediately.
The future for all involved parties remains unclear, but as of today the company known as Commonground/MGS has ceased to exist. Here’s the official statement from a spokesperson:
“The agency known as Commonground/MGS is no longer operating as that entity. Circumstances beyond the agency’s control, namely the adversarial relationship between the holding company, PCH Communications, and their lender Fifth Third Bank have caused this major disruption. The entire agency was completely surprised by the bank’s actions. While this situation has been very disturbing to the entire agency, the senior leadership team is diligently working towards viable solutions.”
Last week, HispanicAd ran a post reporting that CGMGS had filed for Chapter 7 bankruptcy and that it intended to liquidate all assets. A spokesperson later contradicted that summary, and HispanicAd updated its story to reflect the fact that no official bankruptcy claims have been filed. But we hear that the bank mentioned in the quote above froze all of CGMGS’s accounts last week, which led to the forced closure and the related announcement.
We also hear that executives are reaching out to current clients and potential investors, that some employees have been working on a voluntary basis since the news broke last week, and that client projects started before the accounts were frozen will somehow be completed. It seems that CG and MGS, the two primary parties that formed the group last year, would like to break apart and reconstitute themselves as separate agencies–though they would no longer be able to use their original names.
Unfortunately, the vast majority of Commonground/MGS staffers are no longer employed at the moment.
Here is the full email, which went out on Saturday.
As many of you may be aware, the Agency has been dealing with financial challenges. Over the last several weeks, we have been carrying out good faith negotiations with our senior lender to attempt to obtain relief from these challenges and we believed we were close to an acceptable resolution with the lender. To our surprise and dismay however, the lender took hostile actions against CGMGS and froze our bank accounts earlier this week. While we have since been attempting to obtain relief from the lender, including negotiations as late as today, the lender has simply refused to release our funds so that we can keep our business going.
It is therefore with deep regret and heavy heart that we have to inform you that without access to funds, we are no longer able to operate our business. Your employment will therefore terminate effective today, December 5, 2015. While the Worker Adjustment and Retraining Act of 1988 may require advance notice of your permanent layoff, the unforeseeable circumstances of the lender’s actions and our faltering business circumstances that necessitated our good faith efforts to actively secure capital to prevent closing the Agency, did not afford us an opportunity to provide such advance notice.
On Monday, we ask that you please collect your personal belongings. If you are not able to go to the office, please contact Lena Economos or Lulu Cepero to make arrangements for collecting these personal items. On behalf of all the management team, we greatly appreciate everyone’s commitment and hard work.
This is a sad day for CGMGS and words can never express our appreciation for the dedication and commitment that each of you had in building this new Agency.
We know you will have many questions. A FAQ sheet will be emailed separately, as we are gathering information real-time ourselves. You may also contact Lena Economos or Lulu Cepero for additional information.
PCH Communications, LLC
You’ll note that the email was addressed to all employees by holding company PCH Communications, which allegedly facilitated the shutdown due to its aforementioned “adversarial relationship” with the lender.
Again, we hear that commonground and MGS are acting independently to try to retain as many of their respective clients and employees as possible in the interest of reorganizing. We also hear that the news came as a complete surprise to everyone in the organization, though the email’s opening line seems to dispute that claim.
The nature of the “financial challenges” mentioned and their proximity to the general operations of commonground/MGS remain unclear–as does the relationship between the founders of CGMGS, PHC Communications (which was created by private equity fund PCH, or Panton Capital Holdings) and Fifth Third Bank.
Sources claim that there had been some tension between the entities headquartered in Miami and Chicago regarding the organization’s shared financial struggles, and we hear that attempts had been made at a rescue of sorts in recent weeks. As of now, all of CGMGS’s managing partners have been released from their obligations.
While commonground and MGS may find second life in some form, the two organizations will not exist under their original names moving forward and will not do business together again.
In the meantime, this will almost certainly be a more difficult holiday season than expected for hundreds of now-former employees in New York, Chicago, L.A., Miami and Houston.