Kellogg World Alumni Magazine Winter 2009

A sense of value

Jeff Ubben knows how to boost the potential of an undervalued company — and an undervalued student

By Rachel Farrell

To most investors, a company with a plummeting stock price looks like a red flag. To Jeff Ubben '87, it looks like an opportunity.

That's because Ubben, the founder, CEO and CIO of ValueAct Capital, invests in — and turns around — failing or undervalued firms, particularly those with intellectual property rights in healthcare, technology and information services.

  Jeff Ubben '87
  Photo © Sam Willard

Ubben knows how to make changes that quickly generate value, such as replacing a CEO, buying a competitor or dropping acquisitions that detract from the company's core business. By zeroing in on the business's foundation, he explains, a company will become stronger, tighter and more valuable in a relatively short period of time.

"We can make money just by focusing on the core business and getting rid of the distraction of peripheral businesses," Ubben says. "And it's not hard — you don't have to find a new market; you don't have to come up with a new product even. You just have to refocus."

Ubben has a unique relationship with these firms. Like a board member, he makes decisions in the best interest of the company; unlike a board member, he holds a significant stake in the business, which gives him more leverage in decision-making. Like an investment banker, he offers direction on acquisitions; unlike a banker, his interests are perfectly aligned with those of his shareholders. 

Ubben also differentiates himself as an investor by taking on illiquid assets and working with companies for a longer-than-typical period of three to five years.

"Nobody does what we do," Ubben says. "Public market investors generally have much shorter time horizons and they're not interested in being illiquid. There are very few people in the market who want to get all the information about an underperformer and make a fully informed decision on behalf of all shareholders. It's easier to sit behind a screen and generate reasonable returns without getting on a plane all the time to meet with directors."

Interestingly, Ubben approaches undervalued people in the same way: He invests in them. Along with providing philanthropy to the Kellogg School, the American Conservatory Theatre and the Edgewood Center for Children and Families, Ubben has given a generous amount of time and capital to The Posse Foundation, a renowned college access and youth leadership development program.

Headquartered in New York City, the foundation identifies high school seniors with academic and leadership potential who may have been overlooked by top-ranked colleges and universities. These students, most of whom are minorities, receive training and mentorship and are then placed at elite, four-year schools with full-tuition scholarships. More than 90 percent go on to graduate.

As national board chairman of The Posse Foundation, Ubben focuses on the organization's growth strategy and business model, which he notes is dynamic and highly sustainable.

"It's like a venture capital model," Ubben says. "I have to raise $6,000 annually to identify, train, support and graduate each scholar, and we get a merit scholarship from each university that's $35,000. So we really have a six-time multiplier effect. It's an organization that can scale, and because of that we can have a big impact on the country."

And that's good news for the business world, notes Ubben, who believes that organizations benefit when the unrepresented get a seat at the table. "We want to bring these diverse people into the boardroom," he says.

Go to "Paying it forward"

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