“Control your own destiny or someone else will.”
Jack Welch

If there’s one thing we’re not short of in London’s media hub, it’s bullshit. Plenty of it has been generated in the last few days following on from i-level’s quick but not painless death. So here’s three things I understand about what happened:

The Good
I-level had a decent business and they did great work for their clients. Even though they weren’t the same machine they were a few years ago, it doesn’t mean their capabilities had vanished. It’s true that larger agency networks have made great strides over the last few years in their digital expertise, but to say they’d overtaken i-level, or other digital specialists, isn’t true. For all the talk of integration you might hear, the reason most clients go with a large agency network is to save money on fees.

The Bad
The elephant in the living room of course is the COI. Any company that counts one client as nearly half its business is sitting on a time-bomb. Plan A is to aggresively pitch for as much business as you can to right the ship. Plan B is to get acquired by that client. Plan C, which you hope you never have to resort to, is to be able to ruthlessly reduce costs (i.e. sack a lot of people) if that client decides to move on.

I-level was already trying Plan A. Even if Dennis Skinner became PM, he wouldn’t nationalise i-level, so Plan B is a non-starter. Did they execute Plan C? I’m not sure.

The Ugly
In April 2008, ECI, a private equity group, bought 60% of i-level. Part of that deal placed a large amount of debt, around £32m, on the books. Turnover had already started to reduce just after that deal, and with the loss of the COI, the original valuation of £46.5m looked ridiculous. So the private equity people decided to call time on their investment, get back what they could then get out. A large amount of cash was in the business in the form of media billings from clients, still to be paid out to media owners.

Private equity investors always get first dabs on their debt when a company is put into administration, so they took the money that should have gone to pay for media. Thus the coffers were empty with i-level still owing millions to media owners. Liquidation was the only option that remained, and some media owners will be scaling back their summer parties.

A Fistful of Dollars
So there we are. An unglamourous end to a pioneering business. Don’t criticise ECI; they place bets, and when they don’t look like paying off they make sure they limit their losses. Your pension probably has a stake in them.

Perhaps the original founders could have used their payoff to step in, but either didn’t want to or they didn’t have the liquidity to move quickly enough.

As ever, Bob Willott wrote a great financial analysis last week. Mark Palmer has come to the same conclusion as me, but put in the effort to find a footballing simile. Stephen Rust, out-going CEO, has blogged on the good and the bad already. Hopefully we’ll get the ugly later this week.

So that’s my view. What happened doesn’t tell us much about specialist versus generalist, differentiation in the market or, heavens forfend, the future of digital media. David and Goliath continue to battle it out. But it does give us a sad tale of the perils of business finance. Perhaps you agree or think it’s more bullshit. Either way, let me know in the comments.