Servicemaster Brands’ upcoming move to Atlanta has likely reason
It isn’t clear exactly why Servicemaster Brands will leave Memphis, but I’d say the reason has a name — Elane B. Stock.
She’s a fabulously educated Midwesterner. She’s in her mid 50s. She’s Servicemaster Brands’ new boss.
And she happens to work in Atlanta, while Servicemaster Brands occupies office space 380 miles away in Downtown Memphis.
No doubt it makes supreme sense to have the company come to her rather than she go to it.
We probably should have seen this coming last fall when Memphis-based Servicemaster Global Holdings was dissolved, leaving Terminix as an independent company separate from Servicemaster Brands, a group of franchiseoriented businesses including Merry Maids and Servicemaster janitorial services.
One thing to know about Elane Stock: She has a boss, Neal Aronson, founder of Roark Capital, which paid $1.5 billion last fall for Servicemaster Brands.
Neither of them returned requests to explain why they are uprooting the company. I reached out to Stock and Aronson multiple times in November and again on Friday. No luck.
Here’s something to know about Aronson. He’s not a Fred Smith, who invented a package delivery service never seen before, Fedex. He’s not a Henry Ford, who figured out how to make cars affordable.
Aronson doesn’t invent, make or sell products. He’s the finance guy. They call it private equity. And what private equity does is buy and sell the businesses created by the innovators.
No doubt in two or three years you’ll read The Commercial Appeal (its parent company subject to a 2019 merger arranged by a private equity firm) and learn Elane Stock polished up Servicemaster Brands and made a small fortune for Roark selling the business at top dollar to some other investment firm that shuffles the offices to another city.
That’s the way business works, and it fits the image crafted by Roark. The way the story goes Aronson picked the name Roark because it’s the name of a character in the famous pro-capitalism novel “The Fountainhead.” But there’s something about the novel’s innovator and the Roark Capital story that doesn’t mesh.
An innovator’s new steel mill can sustain an entire city with thousands of jobs. But Roark Capital isn’t about production, building up cities or raising the tax base. It has more to do with consumption. Steel workers need to eat, and Roark is there to take their money.
The Atlanta firm owns or has sold major stakes in eatery chains including Arby’s, Buffalo Wild Wings, Cheesecake Factory, Hardee’s — brands created by entrepreneurs and now bought and sold by private equity, a world much bigger than you might think. Investors worldwide have $1.45 trillion stashed in private equity firms, reported market researcher Preqin Ltd.
Stock heads Servicemaster Brands
Elane Stock found her way into this world. She had graduated from the University
of Illinois, then secured an Ivy League master’s degree in business at the University of Pennsylvania’s famed Wharton School, landed where a lot of bright up-and-comers land, at the big consulting firm Mckinsey & Co., and eventually went to Koch Industries’ Georgia-pacific, then the American Cancer Society and finally Kimberlyclark, the Dallas-based consumer products manufacturer.
Recruited in 2010 as the Dallas company’s chief strategy officer, she soon ran its fast-growing international sales division, but resigned in 2016 after Michael Hsu was named president of the company. He had joined Kimberly-clark in 2012 at a similar level on the company ladder.
By then she was known in corporate circles. Atlanta data monitor Equifax put her on its board of directors, as did Louisville-based restaurant operator Yum! Brands, Britain’s Reckitt Benckiser Group and the Metro Atlanta Chamber of Commerce. By 2020, Roark Capital announced she was chief executive of its new holding in Memphis. Three months later, Roark confirmed the move to Atlanta.
Private equity or stocks
You can say private equity owns the business and the owner can do what it wants. There’s logic to that, but it still stings when you are the city losing the jobs and trying to keep the tax base together to pay for police and schools.
You might read this today and groan, “Here’s an anti-capitalism tirade.” Which it isn’t. It is about private equity’s underappreciated role. Four decades ago it wasn’t even much of a thing in America. Now it’s a major force.
Even though the media focuses on the stock market, private equity is bigger by one account — 3,800 private equity firms control about 15,000 companies in the United States, while the stock markets trade shares in about 4,300 U.s.-based companies.
Some businesses controlled by private equity firms do trade on the stock market. The old Servicemaster Global Holdings (which contained Terminix and Servicemaster Brands) did just that when it was in the hands of New York private equity investor Clayton Dubilier & Rice, which moved the company to Memphis in 2007 from suburban Chicago.
But many private equity firms shy away from the public markets. That’s because federal rules require more public transparency for companies traded on the stock market.
With the absence of transparency comes less public accountability. When Servicemaster Global was a publicly traded company, its officials began shopping for a new head office site (Atlanta was under consideration). Executives explained at length in 2016 what they were looking for (amenities suited to young tech workers) before choosing Downtown Memphis, a move which elicited more than $24 million in subsidies by government agencies.
Contrast publicly traded Servicemaster with Apollo Global Capital, a New York private equity firm that a few years ago took over Memphis-based Harrah’s, owner of the Caesar’s casino empire. Apollo moved Harrah’s headquarters to Las Vegas with hardly any public explanation. Boom, it was gone. Just like Servicemaster Brands.
Ted Evanoff can be reached at evanoff@commercialappeal.com.