Jahm Najafi, chairman of the private investment group Najafi Companies, said he is prepared to be patient in turning around the fortunes of Bertelsmann's Direct Group North America, which the Phoenix-based company agreed to acquire earlier this month. In a phone interview, Najafi stressed that his firm specializes in acquiring undervalued assets and that the Direct Group “fits perfectly with what we do.” A month before making the Direct Group deal, Najafi invested $86.5 million to acquire Trend Homes, which operates in the very distressed home construction market and which had been in Chapter 11.
Najafi said that what makes his company different from typical equity groups is that “an exit strategy is not a variable,” explaining that his usual time frame for holding onto companies is five to 10 years. Najafi said he was attracted to the Direct Group, which includes Book-of-the-Month Club and Columbia House because “it has great brands, a great management team and lots of members.” And while the Direct Group has struggled in recent years, it remains a formidable direct-marketing company; it accounted for about 35% of Bertelsmann's Direct Group 2007 revenue of 2.55 billion euros—approximately $1.3 billion. Najafi confirmed that Direct Group head Stuart Goldfarb will remain in charge of the company, and Najafi joined Goldfarb last week for a series of town hall meetings with employees in New York City and Garden City, N.Y. Najafi provided a few details about how he hopes to revive the company, saying he will consider expanding the types of products the direct-marketing company offers beyond its existing core of books, music and DVDs. Greater use of the Internet will be a “natural part” of the group's growth, he added.
Najafi, who earned his Master's in business and economics from Harvard after graduating from the University of California—Berkeley, formed the Najafi Companies—originally known as Pivotal Private Equity—in 2002 as part of the Pivotal Group; it became an independent company in 2006. The deal for the Direct Group is Najafi's first in the book world, and Najafi said he felt honored to be involved with “spreading knowledge. It's a wonderful industry to be a part of.”