Category Archives: Business

The Business of Life Chapter 42 – where the road ends

“You’re a very lucky man.” my cardiologist told me as I tried to get my breathing under control following a treadmill stress test that had nearly collapsed me but produced no pain.  “You appear to have suffered no lasting damage.”  “What can I safely do in terms of exercise in future?” I asked hesitantly.  “Anything you want – anything someone who has never had a heart attack can do.”  The relief flowed over me.  He went on to inform me that I was already fitter than the vast majority of police he tested for their medical at age 40.  Six months after my heart attack I wasn’t sure if I should be elated or depressed.Where the road ends

“A poor choice of parents!” was his response when I enquired why I had suffered a heart attack as a fit man who ate healthily, wasn’t overweight, had never smoked, drank in moderation and whose cholesterol level was only average.  My father had had his first heart attack at age forty one and, despite suffering many more, had gone on to die aged seventy four.  He was very fortunate that we lived within a few miles of three of London’s major teaching hospitals.

Following four days in intensive care some months earlier, I had been discharged into the care of my GP and a Cardiac Rehabilitation Nurse.  I include my GP but he transpired to be conspicuous by his absence, something that was probably wise.  During the previous year I had ‘presented’ (as the medical profession love to refer to it – such an impersonal term) several times with acute arrhythmia only to be constantly informed that it was nothing to worry about.  It has since been confirmed that the arrhythmia was certainly a precursor to my subsequent heart attack.

My euphoria at still being alive stayed with me for a long time following my experience.  But the initial feelings of normality faded rapidly upon returning home.  For the first few weeks I realised I was as weak as the proverbial kitten.  Even a lengthy conversation exhausted me and I would take two or three naps during each day.  I consider myself extremely fortunate to live in one of the parts of the country where the NHS offer a cardiac rehabilitation programme.  I received home visits from my nurse giving detailed advice on diet and what I should and definitely shouldn’t do in the early days including guidance on the exercise I was expected to take each day.

Importantly, after six weeks I started with an exercise & guidance programme designed specifically for post heart attack patients.  Looking back the exercises we did seemed more like a programme for geriatrics but they were challenging enough (terrifying at first) and each day we were pushed a little further and a little harder.  My sense of competitiveness had returned and my new friend and fellow sufferer Andy and I subconsciously ensured we pushed ourselves harder each session.  Each day I walked and each week covered many miles across the moors around our home.  I felt good and eight weeks after my attack drove the 100 miles up to Newcastle to start work once more.

 I had read so many stories of people whose lives had been dramatically changed as a result of an acute and life-threatening illness.  But having been guilty of no life threatening behaviour that required immediate changes to my lifestyle, I felt that I didn’t need to make any great adjustments.  I had changed, however, inside.  I felt calmer and more knowledgeable.  I had been through hell for most of one day and been lucky enough to have survived.  I have always believed that all experience is a potential lesson for learning, so I’ve notched up one more.  Looking back the really curious aspect of that day was that I was never frightened.  I can’t say why, but it just didn’t occur to me to think of death or disability.  I just had faith that if I could just hold on, the medical profession would make me better.  It wasn’t religious faith, just a form of confidence I think.

So, no major adjustments were made to my life (despite the concerns of my wonderful family) and I went back to doing what I had done for so many years and continued to enjoy it.  Despite the continued frustrations!

 Roger and I knew that we had to replace him if we were ever to sell the Metal Spinners business.  However, over a five to six year period we went through three potential replacements.  All were very experienced and qualified engineers and senior executives.  I had drawn up very precise specifications, employed experienced head-hunters, exhaustively interviewed candidates and tested the lot and then took the required references.  All failed in a year or less.

 Despite years of experience, extensive qualifications in psychometric assessment and a rigorous interview technique I must admit that recruitment (at all levels) is still a hit and miss affair.  All of these executives (and more over the years) professed a desire to join a medium sized concern where they could make a difference.  However, one progressively took to hiding in his office, trying hard not be become involved in anything that might be threatening.  The next certainly got involved in everything that moved but suffered from terminally bad judgement.  And the third?  Well he was up to the job but ended up playing politics so I would have to question his judgement as well.  I have come to the conclusion that many executives get to their ultimate level in large corporations on the back of their teams.  Put them into a smaller organisation and they simply can’t adjust and can’t perform.

 Despite these problems the business prospered and our debt from buying out 3i was eliminated.  Without a replacement for Roger we decided to put off any attempt to sell the business and concentrate on improving profitability still further.

With the winding down of some of my business activities by 2009, I began to wonder what academic learning would feel like.  Having left school at fifteen and never having attended university, there had always been a feeling of unfinished business lurking in the back of my mind.  I knew from my business education in the USA that I could more than hold my own when it came to absorbing and applying knowledge.  Psychometrics had long been an area of interest (and application) and I had logged up numerous qualifications.  “Why not take a psychology degree?” I thought.  I enrolled with the Open University and was soon heavily engrossed with the course and receiving grades that satisfied me.  However, events were soon to conspire against (or at least interrupt my new found studies).

“We’ve just received a letter I think you’ll be interested in,” Roger said dryly in a phone call one Friday afternoon in late August the following year, “I’ll email you a scan of the covering letter but it’s actually a large parcel of information.”  A few minutes later I was reading a very serious communication from the London office of the international agents of a large USA corporation.  It was an expression of interest in buying our business.  Approaches from prospective purchasers were nothing new, I received a number every year and most went straight into the bin being clearly from people who didn’t understand our industry sector and were merely tyre-kickers incapable of raising the sort of money we were worth.

A couple of years previously (following our failed attempt to sell) we had received a similar approach from a firm of venture capitalists in Chicago on behalf of our largest US competitor.  The approach seemed deadly serious in that a team of four of them wished to visit and start acquisition discussions.  The party that joined us for dinner that Sunday evening a week or so later in Newcastle included the two VCs and the president and CEO of our competitor.  It seemed that they were on a buy and build acquisition spree and wanted an entry into Europe.  We sat and listened to a great deal of boasting and bluster over a long dinner and finally agreed to take them around our factories the following day.

Monday morning I left Roger to take the party around our two sites.  Several hours later they returned and almost the first words out of the president’s mouth were, “Jesus, you guys are already where we aspire to be a long way in the future!”  It was only too apparent that we were strategically and culturally incompatible.  Although three or four times our size they were far less profitable, had far lower levels of technology, chased high volume, low margin business and simply didn’t understand our markets.  They went away, never to return (although the VC did come back a couple of years later with another approach that also failed).

The package that had been FedEx’d to us indicated a very considered and very well researched approach on behalf of the parent of our most serious USA competitor.  Included within the information pack was an outline of the strategy of both Standex Corporation and Spincraft, their engineering division.  The letter indicated that they were deadly serious and were prepared to make a significant offer for our business, which they viewed as being strategically valuable.  Although we were very profitable, debt free and on a continued upwards curve we knew that we lacked a replacement for Roger.  Neither Roger nor I wished to undergo a lengthy period working for a new owner.  We were both refugees from corporate life and neither of us had any desire to return to that fold.  Nevertheless we agreed to meet with them.

Shortly after we succeeded in buying MSG I had said to Roger, “That was the hardest thing I have ever done.  But I know it’ll be even harder when we try to sell.”  Those words transpired to be acutely prophetic and what followed was another six months of difficult and exasperating negotiations.  It wasn’t that Standex was deliberately difficult,  but it was a large USA corporation with its legion of executives from every conceivable department all of whom became involved.  When you added in their lawyers, our lawyers, financial advisors and accountants it became the feeding ground for confusion and misunderstanding that I feared.  Somehow goodwill and commitment on both sides endured as the processed dragged on particularly with regards to environmental issues (not that any actually existed).

The replacement for Roger transpired to be a problem that was easily resolved.  We agreed with Standex to set about a recruitment exercise and I ensured that Len the CEO of Spincraft joined us for the interview sessions that I set up for our shortlist.  We had four excellent candidates and in the final analysis the decision was clear cut and unanimous and Brian was recruited to head the MSG business.

Completion had initially been set for December but it came and went with myriad strands of disclosures and negotiations still open and dragging on.  December moved into January, which came and went in similar fashion.  Misunderstandings flared up and were resolved with phone calls at all hours and a lot of goodwill.  It was clear they were deadly serious and committed to the deal but still the ground had to be covered and indemnities and warranties agreed.  A new date was set for the end of February but so many strands of complex issues remained it seemed that we would never get the deal to bed.

March came and suddenly it seemed problems were being resolved and the deal looked set for completion.  A date of 8th March was finally agreed.  The day dawned bright,  clear and spring like and I savoured the drive into our lawyers’ offices on the Quayside in Newcastle.  It seemed that it was finally going to happen but I held my breath and waited.  The day passed in great boredom interspersed with little flurries of activity as one last minute query or another was settled.  Shuttle diplomacy it was, with each party confined to its own meeting room.  Finally at around 3.00 pm the three of us were ushered into a third, large meeting room to put our signatures to dozens of documents.  It was done.  We had sold the business we had bought almost thirteen years previously, had invested in and developed and now it belonged to Standex Corporation and I was convinced would be good owners.

I sipped a celebratory glass of champagne, had a few words of thanks and congratulations with Roger and Malcolm and slipped away quietly.  I was just…numb.  Thoughts of what it would be like to make a successful sale had always been pushed out of my mind – business had always been too precarious to waste time on dreaming.

The sun was still shining from a perfectly clear, blue sky as I drove far out into the beautiful Northumberland countryside simply wanting to be on my own to think.  Finally I pulled over in a quiet lane where I could see only miles of rolling hills and switched off the engine.  It was still and so quiet and I let it wash over me feeling nothing but a delightful sense of calm.  I phoned Denise to let her know the good news and then Victoria and Alex, whom I had kept completely unaware of the whole process.  I stayed a little longer but no waves of emotion came, just that same feeling of tranquillity.  I had made no plans and realised I didn’t have the slightest inclination to start doing so.

After fifty incredible, roller-coaster years the business in my life had been concluded.  I had promised Denise that if the sale succeeded I would, aged sixty five, finally hang up my boots for good.  My time in business had finished in a way I could never have dreamt of at any time on the journey.  I allowed myself a smile of satisfaction.  I had started out on this journey through the world of business as a lad of fifteen armed only with an O level in English and a pugnacious determination to get on.  It hadn’t turned out too badly.

 Image courtesy of Antonio Androsiglio (via chilloutpoint.com)

The Business of Life Chapter 41 – when the attack comes (part 2)

I am somewhere inside Airedale hospital and in acute pain, the worst pain I have known in my life.  A stern but sensible looking female leans over me and informs me that I am having a heart attack.  I feel nothing except pain as she goes on to tell me that I am to be taken to Leeds where they have a specialist unit and they will perform angioplasty and insert a stent if necessary.  I am to go in the same ambulance.  Some conversation is going on with Denise over following the ambulance.  I am glad not be involved.When the attack comes (part 2)

“I’m in pain!” I tell the assembled throng.  They tell me that they can give me more morphine and soon a needle is in me again and then I’m being wheeled down those corridors again with Denise telling me she will see me later.  I feel alone but relieved to see my two ambulance men; they are good guys and I trust them.  We soon set off and I hear the siren again.  I try to work out where we are and succeed some of the time.  I am surprised at how fast the ambulance can go and how it doesn’t have to slow very often, when I’m not thinking of the pain.  My chest is being crushed.

I’ve always prided myself on what I feel is a stoic like ability to ‘hang in there’ through the worse times and I concentrate on doing this now.  I feel like I’ve been doing it forever; hanging in, holding on.  It’s not working.  I pull down the oxygen mask that has been placed over my face and I am ashamed to hear myself suddenly pleading.

“Make the pain go away!”

I have no shame.

I get a squeeze of the hand and stern instructions to replace the oxygen mask but they can’t make the pain go away.  I decide that all morphine can do is slightly blur the pain, perhaps take it down half an octave but the volume stays the same. The oxygen is about as much use as a chocolate teapot.  The pain rises to a crescendo and then gradually it reduces, ever so slightly it dulls a little and then a terrible wave comes again.

I’m going to be sick!

I vomit into a paper bowl.  It doesn’t feel better the way a good chunder usually makes one feel.  The ambulance man tells me that morphine can have that effect.  On goes the journey.  I dimly perceive that the sun has faded and been replaced by dark cloud or fog.  And it’s colder still.  How much colder can I get?  I think we must be going up Otley Chevin and try to work out how much longer it will take.

I vomit again.  I feel like the worse kind of shit. 

We speed on ….it’s taking forever.

I want to writhe around to ease the pain.  I do and it doesn’t   I try being even more stoical but it’s becoming a hard role to play.

Dully, I sense we must be nearing wherever in Leeds we are going as I am vaguely aware of a cycle of braking, slowing, turning and acceleration.  And the fucking speed bumps again, the cruel, fucking speed bumps.

Suddenly we have stopped and I am being wheeled out of the ambulance.  I feel cold as I am wheeled down corridors once more and then into a large room with a group of people – waiting for me.  I don’t have to wait – I must be important.   I am transferred from the stretcher onto another gurney-like bed where soon people are working on me.

 “Lie still.” I am instructed.  This is difficult, as I have found (relative) comfort (mental not physical) in a resumption of my writhing.  Something is happening in my groin.  I distract myself by looking at a bank of monitors to my left and over my head.  I decide I don’t like what is going on and concentrate on the pain.  From the bit of my brain that is still able to function I start to recall the comments made to me by my business partner, Roger, who had angioplasty and a stent inserted 6 weeks earlier.  Roger is a big guy who has battled MSRA and terrible pain for many years due to spinal damage before falling prey to angina.  I recall him telling me that the insertion of the stent was the worse pain he had ever experienced.  “Oh, fuck!”

“You really must lie still!” one of the hovering team sternly instructs me (I have decided to award them this description as they seem to be indulging in some sort of co-ordinated behaviour).  I wonder if he’s ever had a heart attack.  I think I stop moving for a moment before resuming a sort of slow, rocking, writhing and wait for the pain to get worse as I now believe it will.  Will I be able to cope I wonder?  This pain is bad, very, very bad.  Will I be able to withstand much, much worse?  Fiddling is still going on in my groin area, I am aware of this but it no longer has relevance to me.  I am detached, properly, not the semi-detached variety, but I am lost in my pain and the expectation of worse to come.

A slap on my shoulder brings me out of the depths.

“You’re done!” he tells me, whilst briskly ripping plaster about the size of the Isle of Wight from my chest.  “They’ll take you up to recovery now.”  I am shocked.  The pain didn’t get worse.  I am aware of being moved on the gurney by following my progress across the ceiling.

Somewhere between the room where they did things to me and the recovery ward, I think it occurs in the lift, something happens.  I am not sure at first, I have not been sure of much for some considerable time, except the certainty of the pain.

The pain has gone.

I feel normal.  The pain has not eased – it has gone.  I have no pain.  I HAVE NO PAIN!

I am soon wheeled into a small recovery room where a chatty nurse tells me she is going to attend to the incision in my groin where the entry was made into a main artery.  Soon I am sporting a large clamp-like apparatus over the wound that looks like something Lakeland Plastic sell for various kitchen tasks.  Then follows a short lecture on the dangers of moving too much and how I am to inform them if I feel a damp sensation in my groin.  I realise that my sense of humour has returned when I hear myself telling her that they would probably notice the blood on the opposite wall first, it being a main artery we’re talking about.

They then show me a couple of before and after screen prints of my heart.  The before shot shows one main artery completely blocked and another one almost closed.  The after shot shows the main one flowing clear and unblocked.  Amazing.  I ask for copies but am informed that is against some regulation or other.  I begin to feel like a third party again for a moment.

Soon a very cheerful nurse comes and tells me that they have saved me some dinner – am I hungry?  My brain is working once more and I calculate that I must have been having my heart attack for something like 7 or 8 hours.  My sense of humour really returns when I see that the meal they have saved me is macaroni cheese.  I have had a heart attack and they’re feeding me cheese!  It tastes like the best thing I have ever eaten.

Shortly my affable male nurse arrives this time proffering a pair of PJs at least two sizes too small.  He tells me it’s all they have and I accept them as they seem clean and better than the gown I am wearing.  We laugh together and it’s a great feeling.

I lie back and a wave of unbelievable relief and gratitude flows over me.  I am alive and I feel great.  I have survived a heart attack.  I speculate that this is how soldiers wounded in battle must feel when they know they have come through it and won’t have to return to front line duties.

Denise arrives with our neighbour, Michelle.  I feel like I am the luckiest man alive.

Image courtesy of thetherapeuticresrourceblog.blogspot.com

The Business of Life Chapter 40 – when the attack comes

February 9th 2008 dawns bright and clear with the sun shining from an achingly blue sky.  The temperature is below freezing and it is the first fine day for some considerable time.  The weather has eased and I want to make the most of it.  At just turned 62 I’m still fit but outings on the bike have got fewer than I would like this winter.  As I pedal off up Wharfedale on my favourite route I think that coffee and a bacon sandwich at my favourite cafe on the way back is a reward for which it’s worth exerting myself.  My breath is making clouds in the cold air and I’m loving it. When the attack comes

I have been a cyclist for many years and have managed to keep this healthy hobby going throughout the many years of hectic travel, although this winter has been bad and has curtailed my normal mileage.  Apart from the health and fitness benefits I have always found that I do some of my best thinking in the saddle.

Heading towards the junction with the A59 is a short but sharp climb and, feeling good, I decide to take it out of the saddle, in a sprint.  But, “Christ!”  The climb puts me out of breath.  “You’re getting old,” I tell myself but quickly add the reassurance, “but then you haven’t been out for a while.”  Down the steep slope towards the roundabout I try to get my breathing back under control.  I don’t, so (with the excuse of adjusting a brake) I wait a few minutes.  It doesn’t seem to help and my breathing is still not back to normal.  I tell myself I just need to stretch my lungs and get my second wind, so I set off once more.  Half a mile later I am still breathing heavily so I stop again, telling myself it’s just to get some life back into my frozen hands.

I sit on a bench in the middle of a little green at Bolton Abbey, under a naked tree hoping to get my breathing back to normal.  Feeling like an old has-been and glad that no-one is around to see me I sit in the cold sunshine trying to warm up.  After 5 minutes I still feel like I need a really good, deep breath or two to get back to normal.  “Bugger it!” I tell myself, “I’m off and the breathing can sort itself out on the way.”  On I push, certain that I need simply to get the lungs used to working at the normal rate for the bike.

It’s just past 9.00am as I start a long climb up out of the valley bottom.  Normally this is a climb that I would attack out of the saddle but that day I decide to take it easy.  I am already in the lowest of my gears but it is hard work as I push on up the long hill.  After another half a mile I stop yet again.  “Fuck it!” I exclaim to a field of grazing sheep, “You’re a useless, unfit old fart and you just have to accept that you can’t do the things you used to do.”  I check my watch and decide it’s not long until the cafe opens.  I will have the coffee and bacon sandwich a bit early and amble back towards Ilkley, bowed but unbeaten.  I turn and head back.

Coasting back down the hill, I begin to feel even colder in the early February sun and tell myself that it is probably still below freezing.  After the long descent I am colder than ever as I pull up outside the cafe but it isn’t open yet.  I leave the bike propped against the wall outside and decide to sit on a bench opposite, where I tell myself I can warm in the sunshine.  Even in February the sun’s bound to have some warmth.  I sit and face the sun, hugging my arms under my armpits, trying to get some warmth into them.  It doesn’t happen and I feel colder than ever, still trying for that elusive, deep breath.  I tell myself that I’ll warm up soon and then there’s the hot coffee to come.

Suddenly, I feel an overwhelming urge to empty my bowels, not just the normal sensation in the morning, this is really urgent.  I hurry over to the gents and, thank God, it is open.  Inside I struggle with my layers of clothing, cursing bib tights not designed for rapid toilet manoeuvres.  I manage just in time.  It is so cold in the loo I am feeling completely frozen and desperate to get out in the sun once more for some elusive warmth.  I waddle back to my bench and looking up at the clock above the door I see that it’s 9.40am.  Another 20 minutes before I can get hot coffee inside to warm me up properly.

I sit hugging myself, face towards the sun in an attempt to extract some warmth.  I realise that I am completely frozen; not chilly, not cold but deep down frozen.  There is no warming effect from the sun.  I am still desperately trying to yawn and get a deep breath into my lungs but something new has happened.  My chest has tightened and I realise that I am in pain.  I am absolutely frozen, unable to get enough air into my lungs and the pain is increasing.

“You’re having a heart attack.”  I tell myself, quite calmly, the realisation being almost a relief.  I congratulate myself on this obviously astute and accurate diagnosis but the pleasure is short-lived, very short lived.  Seeing a young lad cleaning tables outside the café, I decide to enlist his help and try to move off towards him.  It is a colossal effort, crabbing across to him and the pain and cold are getting worse.

“Can you help me?” I ask in what is intended to be an authoritative request but which emerged from my oxygen starved lungs merely as pathetic pleading.

The young lad is very efficient.  “What’s the problem? Have you had the pain before?  Sit here and I’ll get the manager.”  I sit and don’t think.  A few moments later an attractive, young, blond lady appears and asks similar questions also in a very efficient manner.  Later, I know her as Helen and I call her my guardian angel.  Helen tells me she is taking me inside and will call an ambulance.  They both take an arm and help me into a very small back room.  Walking is an effort and the pain is getting worse.

“Is there anyone I can call for you?” Helen asks as we wait for the ambulance.  I suggest she calls Denise but the effort to remember the number is too great.  “Just give me the phone,” says Helen in her calm and capable manner, “I expect you’ve got it listed under home?”  I am grateful not to have to be in charge of anything, least of all me.  I feel like shit and it is getting worse by the minute.  Helen isn’t able to reach Denise.  I remember that she will be walking the dogs.  “Don’t worry,” Helen tells me, “I’ll try again in a few minutes.”  “Will you look after my bike?” I manage to ask.  The ever efficient Helen informs me that it will be put in their garage and not to worry.  Helen makes small talk and tells me again that the ambulance won’t be long.  But I am cold, so bloody cold and in pain.

Soon the room becomes full of two cheerful ambulance guys and their equipment. I see that it looks like a miniature, portable hospital.  The questions start whilst clothing is rearranged to fix electrodes on my chest.  “It hurts.” I say.  “We’re going to give you some morphine in just a minute.” they tell me.  I look forward to morphine.  I have never taken recreational drugs but it seems like a good thing to be going to have morphine in just a minute and I am sure that it will take the pain away.  I don’t notice the injection as I am too busy looking forward to the pain going away and trying my best to answer questions.  I think that I am doing well with my answers and being very grown up about the whole thing.  It hurts though.

“We don’t think that you have had a heart attack.” he one hovering over me informs me.  I feel vaguely disappointed that my astute diagnosis is wrong.  “We’re going to take you to Airedale hospital,” I am informed; “they’re expecting you.”  I am then shuffled onto a wheelchair and am soon being pushed through the café under the curious gaze of those lucky enough to be having coffee and breakfast.  I don’t have the energy to feel jealous or embarrassed at my depleted state.  I am simply concentrating on my pain.  I am surprised to see that the ambulance is backed up close, doors already open and I am soon inside and lying strapped onto a stretcher.  It feels cold inside, like a deep freeze.

We set off and I soon summon the energy to curse aloud the stupid, ignorant, thoughtless fuckers who invented speed bumps.  I am vaguely conscious of the siren as we finally get onto the main road but the sound is far away.  The pain is getting worse.  I decided that I don’t know what drug addicts see in opiates; they are doing fuck-all for me.

I try to work out exactly where we are at any one time; this is both so I can concentrate on something other than the pain and because I really like to know where I am.  It doesn’t work and I am conscious of the pain being, well, very painful, crushingly so.  Why is it taking so long to get to the bloody hospital?  I tell myself everything will be alright once we are there.

Finally we stop outside A&E at Airedale and the doors are opening.  I am being wheeled out when I see Denise.  I am encouraged to see that she is not breaking down or in tears at my depleted state; she gives me a very welcome kiss and holds my hand all the way down endless corridors.  Finally, we enter a small room filled with lots of people in medical gear who started adjusting my clothing once more.  I catch a glimpse of myself in a mirror and see my skin is white, perfectly white, corpse like.  Things are happening to me whilst I am in pain and Denise continues to hold my hand all the while.  My clothing is designed for cycling not hospitals but somehow I am soon wired up like Frankenstein’s monster and I notice lines on computer monitors out of the corner of my eye.  I don’t want to know what they mean and look away, trying to control the pain.  It doesn’t work.

The activity around me continues.  I feel like a third party to the process but it doesn’t bother me.  I am far beyond caring.  I’m not scared but believe that ‘they’ are responsible for me and will shortly make me feel better; ‘they’ will make me feel better.  Please?

 Image courtesy of floridacyclingcoach.com

The Business of Life Chapter 39 – brought down to earth

Life had never been dull at Metal Spinners Group but on a personal level I had settled into a routine that most weeks saw me travel up to Newcastle on Tuesday morning and return on Thursday evening.  Having invested my entire savings in buying the company (along with my stake in Bridgestream and ABC technology Distribution) I resisted what might otherwise have been a temptation to buy somewhere in Northumberland.  Instead I stayed in a variety of rented flats & B&B’s in the peaceful village of Corbridge culminating with the delightful Jill at Priorfield .Brought down to earth

Travelling had always been a part of my life and if I had to spend longer than a week in the same place I would become restless.  Now the international business wanderings had largely become a thing of the past but I had been wearing out a succession of cars covering 25~30,000 miles each year.  Whilst the time spent away from home was not something Denise enjoyed it did provide me with plenty of guilt free time alone.  The long hours on the road provided valuable thinking time and evenings alone permitted ample time for reading and whatever work I needed to do at whatever time I chose.  I also managed complete box sets of The Wire and The Sopranos, vast number of books and was always up before six either swimming, walking or working out in the gym.

In corporate life I had frequently felt I was under relentless pressure to make decisions with insufficient time to really think things through.  Owning and sharing the running of up to six businesses, all in different industries, all at the same time, might seem a less than responsible thing to have tackled.  However, this lifestyle did in fact help with many problems.  Simply having the time to think more deeply about all of the options and their potential implications overnight helped a great deal and the reaction to phone calls tended to become, “I’ll get back to you first thing.”  Having this time to myself was invaluable but there was one area it didn’t always seem to help.

Business partners can be a great help especially in broadening the range of  experience and skills within the team and the sheer advantage of others with whom you can chew over problems.  But, like a successful marriage, a business partnership requires respect and trust to succeed.  In opting for the role of chairman in these businesses I had to take my hands off the day to day levers of control and place trust in the partner who was MD to make these decisions.  Unfortunately, and to my great cost, Bridgestream was an example of what can happen when trust is abused.  Despite this the majority of my business partners have been entirely trustworthy but it didn’t stop me chewing my fingernails down to my elbows on occasions.

Roger was a vastly experienced chief executive with great depth and breadth of knowledge of the engineering sector worldwide.  He was also a proud and independent man and attempting to look over his shoulder or double guess his judgements would have been sheer folly.  Having worked with him on the broad strategy for the way forward, I would step back and give him the time and space to implement.  After the initial year working together we ceased holding regular board meetings for the most part.  Instead, we would frequently just sit over coffee and discuss progress, problems and the key issues.  Often no decisions would be taken but I knew that, having taken a sounding and gained another view, Roger would then make whatever decision he felt appropriate.  One such decision provided me with more than one sleepless night.

Our largest customer (one of the world’s largest industrial concerns) was forever attempting to drive down the cost of purchasing by one means or another.  Roger informed me one day that he had found out that they were considering moving a major component away from us to another metal forming process.  “It won’t work, though,” he said casually, “I’ve paid for an engineering feasibility study and it proves it won’t work.”  He then shared the study with them but subsequently learnt that they were still pressing ahead with the trials.  “They’ve said they are going to take full production away from us,” was his next report back, “and they are refusing to renew our contract.  However, they want us to produce the samples but that is going to work out very expensive for them!  If we’re not getting the production volume at least we’ll go out on a very profitable high.”

With our largest (by far) customer threatening to take away the largest piece of work we did for them I tried not to think of life without them.  Yes, the margins for this work produced were lower than other business we had and this would blunt the effect of the volume loss, but it was still a nightmare scenario.  Some months later Roger bounced into my office. “Guess what?” was his greeting.  “The new trials are going wrong and they have asked us to drop down to the price we had previously agreed for production volumes.”  My spirits lifted.  “I’ve told them to get stuffed,” he went on, “no contract, so they continue to pay sample prices.  It’s not our fault their other process won’t work.” “Oh shit,” I thought.

A couple of months later when Roger and I sat down with Malcolm to review the accounts, they showed a giant leap in profitability.  “Good this sample business, isn’t it?” smiled Roger.  Over the next year our customer howled and squirmed but kept ordering and the profits mounted to such an extent we were able finally to pay down our remaining debt.  We also got a new contract.  Life on the roller coaster.

In 2006 we decided to see if we could sell and we appointed Deloittes in Newcastle to market the businesses and act as advisors.  Initial discussions led us to the conclusion that it would be extremely unlikely that we would succeed in finding a buyer for both of the companies we owned within Precision Engineering International.  We decided to put Trisk on the market first with the target of Hedson our largest competitor who had failed previously to buy in 1999.  After a long and increasingly fractious process we succeeded with a sale of the business and heaved a sigh of relief.  The only problem was we were left with a very large factory site in Sunderland as they quickly moved production to Sweden.

With Trisk sold we turned our full attention to the MSG business and Malcolm and I put in a vast amount of time pulling together the required information for the sale prospectus.  A global research programme was carried out and a shortlist of 20~30 prospective purchasers was assembled and contacted by Deloitte.  The interested parties were then supplied with the detailed information pack, which resulted in a small number of offers.  Unfortunately, there was only one offer that looked at all worthwhile and this was from a small northern VC.  By this stage our relationship with Deloittes had become somewhat acrimonious over the modest amount of senior management time that had been spent on our account.  Negotiations commenced and it quickly became clear that there were a number of real stumbling blocks to a sale.

The first issue was that Roger was being viewed as indispensable (and at that stage he was) resulting in the condition that he remained with the business.  This was compounded by the requirement that he roll over a large proportion of his sale proceeds into the new company.  Given that 3i still owned just over half of the equity it would mean that Roger would gain very little in cash terms from a sale.  This was bad enough but there was another major problem.

Due to the growing market in China our largest customer had been once more making demands of us and this time it was for us to open a joint venture factory there with them.  We had run the projections on such a project and come to the conclusion that because of the additional costs involved there was no way we could ever make money from the venture.  There was another insidious risk to such a move; with a far Eastern partner in a joint factory our unique technical know-how could be copied.  In the UK no outsider was permitted to observe or film our processes.  By this stage we had learned that there was no one else in the world that could match our capabilities.  This came to light when our ‘loyal’ major customer approached the manufacturer of our equipment to find another supplier only to be informed we were really the only choice anywhere in the world.

Shortly afterwards the purchase offer was withdrawn due (as we later learned) to the threat of a potential £2m investment in China.  By this stage Roger had negotiated a deal to supply sample production to China, promising that we were committed to the joint venture.  Gradually production volumes and shipments to China grew and the concept of a joint venture disappeared.

Following the collapse of the negotiations a strategy was devised to put the business into a more saleable position for the future.  This involved a new drive to widen the customer base (especially in the USA) and to eliminate the dependence upon Roger.  The first step was to commence a search for an MD for MSG and create an operational board for the company that would take control (over time) on a day to day basis.

We had made two previous attempts to recruit a potential replacement for Roger and, despite sparkling CV’s and wonderful references, both had proved to be incapable of the role.  It had become clear that attracting the right calibre of executive was extremely difficult.  We needed a mechanical engineer with large company experience and commitment to continuous improvement and someone who wanted to move into a smaller business.  By this stage we were very profitable and by far the largest company of our type in the UK (if not in Europe), our previously equal sized competitor having all but disappeared.  We were prepared to put together a very attractive offer for a suitable candidate.  But the problem with our two previous executives was that they seemed unable to adapt to life in a smaller organisation.

However, a new threat emerged that was of far greater immediate concern.  I got a call from Ian the executive at 3i who was our official contact (I had managed to avoid having a 3i executive appointed to our board back in 1997).  Ian and I had worked together during the years we had been turning around ABC Technology and had a good relationship.  I knew (from my years as a member of an unofficial group of investing chairmen 3i put together to advise on ‘problem investments’) that they had been slimming down their investment portfolio in businesses that were not of substantial size.  The word from Ian that day was we were being put up for sale in a bundle of around 40 businesses.

This prospect filled me with horror (as it did Roger and Malcolm when I reported back).  An unknown new VC owner who most likely wanted to meddle in our strategy and turn a quick profit was not something any of us could see any advantage in.  I called Ian and asked him if he felt 3i would be receptive to an offer from us for their shares before they put us up for sale.  I got an affirmative but with the caveat that we would have to work quickly to raise the money and complete the sale process.  We had the advantage that Roger had known the regional director at HSBC for many years, who proved very receptive to the prospect of financing our loan.

The negotiation with 3i proved somewhat more difficult than I had imagined and whilst they had no objection to a sale to us they were certainly no pushover.  The worst aspect was a ‘non embarrassment clause’ that held that we could not sell within a defined period without making good to 3i the money that they would have made had they not sold their equity to us.  Given that we needed time to complete our strategy we agreed and the sale and purchase agreement was completed.  The downside was that we moved from being debt free to being the proud possessors of a very large, shiny, new 5 year loan.  But the upside was that Roger, Malcolm and I now owned 100% of our business.  Thoughts of selling were put aside as we pressed on with expanding the business and paying down the new debt burden we had acquired.

Frustrated with the time wasted sitting in  traffic jams I started flying lessons.  The freedom of the air was wonderful but I was brought down to earth after a short period by two factors.  The first was that it rapidly became clear that given our weather patterns (especially around my local airport – Leeds Bradford) flying was never going to be something I could rely upon as a means of business transport.  Even thoughts of pleasure flying on the few favourable days we occasionally enjoy were also dashed when I found that Civil Aviation regulations would preclude me from wearing my (now essential) hearing aids for the medical I would have to take.  This was frustrating.

But frustrating as it was to learn that I would never take to the skies as a solo pilot, another event was to occur that was far more devastating.

Image courtesy of mistralaviation.co.uk

The Business of life Chapter 38 – when a dream goes sour

“I’ve lost my job!” were the first words David uttered when he turned up to see me in early 2002.  David and I had known each other for well over twenty years, since our time in the lighting industry running competitor companies.  Despite the intense rivalry between our organisations we had always enjoyed each other’s friendship when we met at industry functions.  We had lost touch with each other when David had moved to the south for a new role but he had recently relocated back to Yorkshire again.  We spent time together discussing what had happened and the options David had for his next career move.

Our business crest & motto “Strength through knowledge”

It was some months before I met David again, but when he came calling it was to set my career off in a new direction and widen my portfolio of roles still further.  “I’ve got an idea for a business.” was David’s greeting that second meeting, “Are you interested?”  He went on to say that he had paid a large sum of money to sign up with what claimed to be a not for profit organisation that provided re-training for executives wishing to move into business consultancy.  David’s view was that the course he had attended had provided poor value for money and he believed we could do far better in setting up our own competing service.

I was noncommittal that first day but said that I would research the sector and see if the concept of a competing business made sense.  I went through the process of producing a draft business plan.  After reviewing the company in question, all similar businesses and the Small and Medium Enterprise (SME) sector I came to the view that, given David’s recent experience, we could well put together a superior service.  When I added in our respective experience and skills I became convinced that this was a viable proposition.  I met up with David once more, took him through my findings and we quickly trashed out the actions required to get our new business started.

Within a short period I had registered a company (The Academy of Business Consultants), obtained a VAT registration, taken out the required insurances, produced a corporate identity, leaflets and business cards, created and implemented a website and sketched out a marketing and operations plan.  I was driven!  Working with David proved to be extremely productive as we found that we had a synergistic effect upon each other that made creating concepts and resolving problems a simple and enjoyable process.  Within six months of our initial discussions we had our business and launch plans complete and placed the first advertisement of our advertising campaign in the Sunday Times.

The concept we had developed involved refining the enquiries we received from the advertising campaign, getting the candidates to complete an online personality profiling questionnaire and inviting them to an evening seminar.  During these seminars we would outline a genuine array of career options open to them, present a profile of the SME sector and its needs, pitch our training course concept and provide valuable feedback on their behavioural preferences and how these might impact upon future roles.  The responses we received to the advertising were good and we ran seminars in the North, Midlands and London.  However, despite receiving healthy attendance and strong interest it quickly became apparent that we had a failure on our hands.  We had encountered an insurmountable problem.

We had offered a better and more relevant training programme, set our price at a more attractive level and matched the offering of refined leads and continuing support to those completing the training programme.   There was, however, a critical element of our main competitor’s offering that clinched business for them but one we had chosen not to follow.  One of the key factors that invariably clinched the sale for our competitor was an ‘income guarantee’.  Having reviewed the documentation that David had been given it was clear that the guarantee was all but worthless, so hedged around with conditions and procedures that it was almost inconceivable that anyone could succeed with a claim.  Little wonder that they boasted that they had never had to pay out!  We decided that it would be unethical to match this misleading offer and we changed the direction of our business.

Whilst David had found that the ‘hot leads’ he had been provided by our competitor were at best on the tepid side of stone cold he had, nevertheless, succeeded in building a strong client base of his own.  An interesting and resourceful turn of events had been David’s success in persuading a local firm of chartered accountants to sub-contract the provision of business advice for clients to him.  This experience had led him into a similar arrangement with other firms.  The accounting firms were all members of a national marketing membership organisation (we’ll call them XYZ) that provided help and assistance to members to enable them to run a better business.

We knew from research conducted by Strathclyde University that accountants were the most trusted source of advice amongst private business owners.  However, David’s experience was that beyond the traditional areas of accounting and tax, most small and medium sized accounting firms shied away from offering other forms of business related advice.  “Why don’t we offer our business advice service to more of XYZ’s members?” I suggested. “They obviously see the commercial wisdom of offering advice to clients but don’t feel confident or expert enough to do so themselves.”  David agreed and this was the genesis of our new business venture.

I joined David (in my ‘spare time’) in widening the number of firms we approached and we quickly succeeded in winning further clients amongst the members.  Convinced that the service we were providing was potentially of real value to XYZ, we decided to approach them.  This was not a simple matter and it took many attempts over six months before we sat across a desk from one of the two founders.  The meeting went well and we came away with an agreement to trial our service to a sample of their members.  We recruited another highly experienced business advisor to join us and once again proved we could deliver results.  Some months later the trial was extended to a further region and the results continued to improve.

A short way into our extended trial the three of us started to uncover the same situation time and again.  It was the practice owner rather than their clients who was in most urgent need of face to face business guidance and support.  Despite being highly qualified and experienced chartered accountants the vast majority of practice owners lacked the wider business skills to get the most from their teams and their clients.  The answer we soon implemented was to commence a coaching programme with the practice owner in addition to our work with their clients.

We had implemented a client satisfaction feedback process whereby our researcher, interviewed every practice owner and client we worked with following a set period.  The feedback we received was invaluable and showed our service to be rated either first or second out of the whole XYZ offering.  It also enabled us to take corrective action where required and ensure that our service continued to meet members’ needs.  We also fed back the results to each associate and the XYZ management.  The change of direction was extremely successful and led to a real breakthrough when XYZ asked us to provide a national service for every new member they recruited.  We then formed a new company with XYZ as partners.  Given that we were now about to create a business with effectively a sole customer, we argued that such a shared destiny required a reciprocal shareholding in XYZ.  We were not successful in this but settled for the right to attend and participate in their board meetings.

Faced with a national launch far beyond the geographic capabilities of three of us we started an intensive recruitment campaign to cover the entire UK.  Within a short period we assembled and trained a team of 20 associates, each of whom had previously held at least one role as MD or chairman.  Ironically, each of these new associates had been uncovered via our previous competitor’s online network!  Based on the experience that we had gathered from our existing work, our model was based upon a mix of coaching and mentoring.  We knew that pure coaching methodologies (the coach questions and the coachee provides their own solutions) can provide strong results.  However, our own experience showed that a combination of coaching blended with appropriate guidance (based on the vast experience of our associates) enabled a time-efficient and professional solution.

By this stage I had been running businesses for thirty years and been an owner of various different organisations for ten.  These organisations had been many times larger than the one David and I had created and they had given me rich and varied experience.  But having created a successful organisation together from the failure of our initial concept was richly and uniquely rewarding.  To start and build a successful business is something really rather special.  We were now helping many business owners and their teams to be more successful as organisations and more fulfilled as individuals.  David and I had continued to make a truly synergistic team where difficulties were merely fresh challenges to be overcome.  With David’s superior interpersonal skills and my research, analysis and organisational work we were a powerful team.

David and I also worked closely with our new partners, resulting in an initially a strong relationship.  However, management changes took place within their organisation after a couple of years and differences of opinion started to emerge over strategy.  As time moved on I found that I was spending more and more time attempting to negotiate a resolution of these differences.  I became to realise that the rich feelings of satisfaction with our business that I had enjoyed so much had all but evaporated.  I could see only opportunity squandered and a loss of personal freedom stretching ahead.  A concept that both David and I had planned to run on into retirement had become something from which I could no longer derive satisfaction.

Following lengthy discussions over the situation we both seemed to realise that events had changed so much that we could never recapture the fun and satisfaction we had previously enjoyed.  Subsequently, following discussions with our partners, an offer was made to buy out my stake in the business and in 2010, after 8 great years working with David, I departed.

Reading over this last chapter I realise that it ends on a very low note but that accurately reflects the way it felt at the time.  There is a very much more complex story that I have abbreviated into a few short paragraphs but legal reasons preclude me from going into greater detail.  I really missed what David and I had created but time and circumstances had moved on and I had to do likewise.

David continued to run the business with our previous partners for another two years until the situation changed once more and the contract was terminated.  He is now continuing to offer business coaching and advice to a much wider spectrum of professions and still working with most of our previous associates.  I wish him every success in what remains a valuable endeavour.

We had succeeded in building this business together whilst I was still heavily involved in the running of ABC, Trisk and Bison as well as chairing Hallamshire.  I still don’t know how it all fitted together into 365 day years – perhaps the extra day in leap years helped.  And yes, whilst I was having fun in all these businesses, there was always the time I spent each week in Newcastle with the big investment I had made in Metal Spinners Group.  And events there were becoming ever more involving.

Less than a month after my departure an event took place in Newcastle that was to have far reaching implications.

 

The business of life Chapter 37 – the joy of closure

Assembled in a meeting room in a hotel close to Newcastle airport early one morning, the two sides eyed each other warily.  We had not met for three years but had fought with all the powers of the law on our side and what had seemed like pure obduracy & guile on our opponents’ part.  It appeared that Clifford had convinced himself that our legal claims would melt away as we failed in the business his father had founded all those years before.The business of life - chapter 37

The plenary session began with both sides facing each other either side of a long table with the law society facilitators at either end.  Both sides had legal teams present comprising lawyers and barristers, all enjoying huge hourly fees whatever the outcome.  The process of spelling out our claim in great detail and at length whilst staring Clifford in the eye was a strange experience indeed.  It was exceeded only by having to listen to what we felt constituted the fairy tale of their defence and counter claim.  The plenary session over we retired to our respective rooms and the shuttle diplomacy began.  The chairman visited each party in turn to ascertain at first hand the reaction each group had to the others’ position.

It was clear that no quick or easy solution was likely to emerge, in fact it seemed that Clifford and Mike were as resistant to a settlement as ever.  Day turned into evening with no progress at all and the session broke up with each group making its own arrangements for dinner.  The next day began and continued all morning with no progress.  I was becoming increasingly irritated by the corporate finance partner from our law firm who could only match the other side’s bluster and seemed intent on ensuring that we ended up in court.  In contrast, Stephanie his manager who had worked closely with me over the previous three years impressed me greatly with her calm efforts to find a solution.

The day wore on in like fashion and Roger, Malcolm and I were becoming resigned to having to endure the costs and uncertainty of resolution before a judge.  I had been casually intrigued by the behaviour of our barrister who for the last hour or so had been ignoring the rest of us and quietly doodling on his pad (or so I assumed).  “OK,” he suddenly exclaimed, “this is how I see things.”  He then proceeded to share his doodles with us, which were actually a matrix of all of the claims and counter claims at stake.  Ranged against each claim was a percentage calculation of the chances of each party winning or losing with his best estimate of the awards and costs each would incur should they win or lose.

The bottom line was the view that we had an almost 100% chance of winning all of our claims.  His view was that Clifford had, at best, only a 50% chance of winning their counter claim.  However, the killer result was that the costs and damages Clifford would suffer as a result of our wins would exceed any benefit from his counter claim succeeding by a factor of about ten.  We called in the chairman who quietly listened, asked a few questions and departed to put this picture before Clifford and Mike.   An hour later he returned and we learned that they had capitulated almost completely.  A couple more hours later we all signed the necessary documents that drew matters to a close (apart from some remaining issues that festered on with HMRC).

As I drove back to Yorkshire that night I reflected on what had happened over the last three years.  Many years previously Clifford and Mike had put in train a course of action that was relatively insignificant at the time but one that had snowballed into major proportions.  I felt it was sheer arrogance and mindless bravado that had brought Clifford into conflict with us, a process that set about unravelling their plan & compounding matters through their refusal to negotiate.  It was clear that Clifford and Mike’s legal team had failed to advise them of the costs they could incur by their actions.  We had won a long, drawn out and bloody battle that had never been of our choosing and had won handsomely.  Strangely, it gave me little satisfaction other than great relief that the whole sad story was over.  I had closure.

Freed of the efforts and frustrations of a long and drawn out legal fight, we threw ourselves back into the challenges of improving our complex new group of three companies.  MSG was our strategic acquisition, the core of our business with, we believed, great potential for highly profitable growth and an ultimate sale.  By the standards of the UK engineering sector it was already a highly successful business (not least due to its non-involvement in the mainstream automotive sector, one we steadfastly ignored).  It had a potential to become even more profitable through an ability to offer unique solutions to demanding blue-chip customers.  We knew that it would take hard work and patience owing to the extremely long leads times required to replace an existing process.  In the case of one of the major customers we won, it took fully ten years.

Trisk and Bison were more tactical (and certainly opportunistic) acquisitions.  Both produced exceptional profits in the first year of our ownership.  If we had then put both businesses up for sale life would have become a lot simpler (a lot sooner).  However, buoyed by the wondrous sound of cash hitting the bottom of the piggy bank and improving PEI’s balance sheet, we pressed on certain that we had hit the magic formula.  From then on matters got infinitely more complex as the cash production machine slowed.

There are long, frustrating stories behind our ownership of both these businesses but I’ll restrict myself to the following brief accounts.

A common feature of both businesses was the quality of management and many of the staff we inherited (courtesy of TUPE).  In both cases, instead of their embracing the change and opportunity brought by new ownership, we had to spend too much time fighting a tendency to revert to the orthodoxies that drove them into administration in the first place.  It was almost as if they believed their failed businesses had been pursuing the correct strategy and policies all along and some freak external event had knocked them temporarily off course.  These tendencies were bad enough but the net effect was to divert our attention from MSG where, with hindsight, we should have concentrated our time and energies.

With Bison, it only took a parting with the MD (son of the CEO of failed parent PLC) and four short years to sell the business in 2003.  We heaved a sigh of relief and moved on.

The situation with Trisk was much more complex.  The company still had technical leadership in infra red paint curing and had also developed ultra violet technology for more demanding applications.  The business was certainly a world leader in its sector and exported to every continent across the globe.  Once we had taken over we saw that Trisk had a number of critical strategic issues.  A major market for Trisk had been the USA where we had a network of commission agents.  Our products were capable of commanding far higher price levels but the agents had learned to sit on their hands ahead of the peak winter demand until our locally based manager panicked and reduced prices.  This was a pattern that revealed itself to be a major problem in many parts of the world.  Attempting to establish a stable and rational pricing strategy proved to be particularly tough due to internal company politics and the weak MD we had inherited with the business.

The other major problem took several years to emerge as the Trisk management either weren’t aware of the shifting dynamics of their marketplace or they ensured that they wouldn’t reveal what they knew (knowing it would require them to change strategy completely).  Trisk had built its initial success on designing and selling IR paint curing systems almost exclusively used for automotive repair work.  These systems were based around an array of IR lamps mounted on relatively simple mobile stands that could be moved around car repair workshops.  Trisk had also adapted the concepts into larger arrays built into custom spray booths.  A major market shift began to make itself felt in the first couple of years following our acquisition.

Legislation was driving the introduction of health and safety and other environmental regulations and these were killing off small repair shops, consolidating the market towards larger and more efficient units.  As this trend continued (fuelled by a succession of mild winters) sales of Trisk’s traditional mobile units declined.  The problem, that took some time to emerge, was that we were not gaining the share of in-booth systems that we should have been achieving.  Booth manufacturers were being involved at the design stage of the new super car repair shops permitting them to specify whose paint curing system was installed.  By the time Trisk personnel got to know about a new repair centre it was already up and running with a competitor’s curing system installed with the booths.

It was clear that Trisk management and sales staff had simply been unaware of this key shift in market dynamics.  Or worse, they had chosen to keep doing what they always did (in their comfort zone) in the hope that it might bring about a return to the glory days.  Around the time that this strategic market shift was becoming apparent, our MD, Tom, came to us with a request to buy the company out from us.  Tired of the short-sighted and intransigent management at Trisk and a need to re-focus our attention back upon MSG, we agreed.  What followed was a disaster that we should have foreseen.  Tom took many months getting funding and putting his bid together during which time he clearly neglected the company.  The bid he put to us ultimately was derisory, was duly rejected and he departed shortly afterwards.

Roger and I became more closely involved in running the business and the strategic issues began to surface.  Trisk’s real expertise lay in the technology of curing paint quickly and effectively and it was a world leader in this field.  The actual delivery systems were secondary but it was vital that Trisk became involved in ensuring their systems were specified at the design stage of the spray booths.  We recruited a marketing manager to research the market, promote and co-ordinate the use of Trisk technology into booths.

We also looked to see where else the technology could be most effectively employed.  It didn’t take long to discover that the servicing and repair of commercial aircraft was a potentially hugely profitable sector.  The leading edges of wings and tailfins had to be resprayed on a scheduled basis but the paint curing systems used were slow and expensive.  Trisk’s solution could eliminate days of aircraft downtime saving thousands of pounds for the operators.  With these two strategies in place, we employed an aerospace expert and a new managing director.

Sadly, our new MD transpired (despite an apparently strong CV and significant technical qualifications) to be completely ineffective and I had the task once more of seeing an MD off the premises.  It became clear that the sales and marketing team were not being successful in either ensuring specification of Trisk technology into new booth installations nor were they taking the action we had agreed to improve pricing.  Despite diverting major time on the part of our local MSG US manager towards assisting Trisk, the distribution problems there remained.  The fledgling aerospace business was still struggling to break through and gain aerospace approvals.  Our aerospace manager resigned taking up a more mainstream role in the sector.  Despite investing huge amounts of our time the team never seemed to have their heart in stepping out of their comfort zone and taking the necessary action that would turn the business around.

Looking back, Roger and I had believed in the business and had pushed hard to effect the changes that we believed would turn its fortunes around.  Our experience once more had been of ineffective management that we had inherited (and subsequently employed).  Buying both Bison and Trisk had stretched our management capabilities to the limit.  I still believe that we could have made a success of Trisk had we been able to concentrate solely on that business.  Both businesses had initially contributed strongly but we should have sold both within a year.

Although 3i had never overtly pressured us to sell PEI we did experience attempts at ‘persuasion’ occasionally and around this time a fresh ‘persuasion offensive’ was made.  Roger, Malcolm and I discussed the situation and decided that we would put the entire PEI business up for sale.  MSG had been performing well, our debt had been significantly reduced and we would be glad to see the end of Trisk.

Could we find a buyer for the whole business?  Would we receive offers that would reflect the value we had built in MSG?

 Image courtesy of careers.guardian.co.uk

 

The Business of Life Chapter 36 -it’s not just the business risks

Roger was taken seriously ill over the Christmas holiday 1998 and admitted to hospital with crippling back & chest pain.  Following MRI scans and blood tests he was diagnosed with an MRSA infection in his thoracic spine.  The affected vertebrae had all but collapsed, were partially fused, trapping nerves and were the cause of the excruciating pain he was suffering.  No one knew the source of the infection or how it came to lodge in his spine but it seemed life threatening at worst and incapacitating at best.  Whilst Roger was being pumped full of a cocktail of the most powerful antibiotics I pondered our situation. When it's not just the business you have to fear

 The illness could not have come at a worst time.  Our dispute with the vendors of MSG had reached the stage where a court action seemed inevitable and with the only certainty that we would be spending vast sums more to fuel the action.  I had been overseeing the detailed investigative work inside the company and liaising with our legal team.  I could ensure that our claims continued to be pursued with vigour but there was a peak of activity occurring simultaneously on a number of fronts.

A few months earlier one of our minor customers had been placed into administration.  The loss to MSG was small but the business itself was interesting.  The company concerned was Trisk, a world leader in infra red paint curing equipment for the automotive after market.  Situated only a few miles from us in Sunderland, it had enjoyed explosive growth with the founder recently receiving the accolade of North East Businessman of the Year award.  Unfortunately, a combination of poor strategy and uncontrolled spending had run the business into the ground resulting in the management being replaced and the bank appointing an administrator as soon as they had recovered their overdraft.

 The other aspect was that Trisk was also a 3i investment.  Although they had no hope of recovering their original investment they assured me that they would be supportive of an acquisition by us.  Prior to Christmas we had met with the administrators and the new management at the Trisk headquarters.  The new team had all been promoted from within and, whilst lacking experience, seemed supportive of our efforts to acquire the company.  However, there were a number of other parties interested including the largest competitor, Hedson of Sweden.  We were fully engaged in negotiations when Roger was taken ill.

Our efforts to locate at least one suitable acquisition candidate in our own engineering sector had come to nothing.  Having scoured our industry, had meetings with owners and analysed many sets of accounts, we came to the decision that there was not a competitor worth buying.  With the exception of a single piece of equipment (that we subsequently acquired for very little) none even had assets worth acquiring.  It was also quite clear that our competition fought with only one weapon – price.  They competed with each other for components that had always been made by the spinning process simply driving down price in the process.  The result was that margins in all of the competition were slender to non existent.

Following our strategic review we had identified that any new major business to be targeted would have to be conversion from alternative metal forming processes.  It was apparent to us that we could offer significant technical advantages for industrial applications where the risk of failure in life had to be eliminated.  This was a risk in particular (and demanding) applications where components had been made using alternative metal forming processes.  Companies were prepared to pay heavily for a process that eliminated these risks.  As the result of our new strategy, Roger had targeted the medical division of one of the largest industrial companies in the world.  Within hours of his contact they had put an engineer on a plane from the USA to meet with us.  Now, they had followed this up with drawings for a set of major components for one of their products.  The only person with the engineering skills to lead the investigation into how we could produce the components was Roger.

When I went into the hospital the following day to discuss how we might make alternative plans, I found I had been beaten to it.  Drawings were strewn across Roger’s bed and a small team were assembled around him.  “If I don’t do it, no other bugger can.” growled Roger in his inimitable manner.  He proceeded to lead the team that developed our ultimately successful solution from his hospital bed in the weeks that followed.  Samples were produced, shipped to the US and soon approved.  Unfortunately, despite our superior solution (and the winning of an internet auction) we fell foul of internal politics and it was to be several years before we became a regular supplier.

The infection that had laid Roger low was finally pronounced clear but it was to leave him with subsequent and recurrent problems that continue to this day.  Somehow he would shrug the problems off and battle on displaying a level of fortitude and perseverance I have never witnessed before or since.   It soon became apparent that to pursue these strategic opportunities required investment in new equipment that was capable of producing the power and tolerances required for the demanding, new work.  Over the next few years we acquired two of the largest CNC spinning lathes in Europe (capable of spinning components up to 5 metres in diameter).  These were followed by smaller state of the art spinning machines, water jet cutting, high speed plasma and a robot.

Our bid to acquire Trisk was successful, beating off our Swedish competitor.  Getting to know our new business and repositioning strategy proved to be a time consuming process.  However, we quickly had the business back into profit and started looking for fresh opportunities.

In another serendipitous turn of events we suffered a further minor bad debt when a second of our many MSG customers went into administration.  The company, Bison IBC Systems in Bradford, produced UN standard intermediate bulk containers for the transportation and storage of hazardous chemicals.  It was a leader in its field and had a strong reputation for quality.  However, once again we found a company that had been mismanaged, although this time it was through the activities of its parent company.  Following protracted negotiations we bought the assets of the business later in 1999.  A similar pattern occurred as with Trisk and profits started to flow shortly after our acquisition.

 By the end of that financial year both new acquisitions had made strong profits and, combined with our MSG business, we produced an extremely strong result for our holding company, Precision Engineering International (PEI) which we held jointly with 3i.  We now owned a portfolio of 3 industrial companies, each a leader in its sector.

Pleased with our track record, 3i positively encouraged further acquisition activities.  As a result I received a copy of their entire engineering and manufacturing portfolio (over 500 companies) together with an open invitation to consider any of these for acquisition.  Detailed investigation made clear a couple of things to me.  The first was that it was extremely satisfying to discover that we were one of their top performing investments in these sectors.  The other aspect was learning that they were quite amenable to turning over an investment with a fresh set of partners they considered could produce a higher return.  However, despite spending a great deal of time in further research and analysis there was no obvious target for us.  Shortly afterwards, another problem was sprung on us.

When I set up the funding to acquire MSG I had sat through a ‘beauty parade’ of banks (something that might reasonably be called an oxymoron).  The bank that offered the lowest lending rates and the most attractive deal was Allied Irish.  It seemed that they wanted to become involved in supporting VC backed deals and were anxious to become involved with 3i, hence their better than average offer.  All had gone well for several years although it was clear from various meetings that they knew little about manufacturing and less about engineering.  Nevertheless it was a shock when they turned up one day that year and said they were calling in their millions and we would have to refinance.  When pushed for a reason they claimed that they really didn’t understand our sector and were going to concentrate on property, a sector where they had real expertise.  Well, we all now know how that one worked out for them!

We refinanced easily with HSBC and that relationship worked well for a number of years with further lending to support our growing capital investment programme at MSG.  Until that is, they decided to replace their extremely knowledgeable regional director for someone who knew about as much about business as Allied Irish (perhaps less).

In 2000 another significant event took place.  Our claim against the vendors of MSG and our defence against their counterclaim had been consuming vast amounts of my time and we had already run up massive legal fees.  With all legal avenues exhausted, I had prepared for a full hearing with a brief to a very experienced barrister in London.  We were convinced we could win our case and this meeting reinforced that view.  The process had become more and more fraught as a result of constant rejection by the vendors of each and every attempt we made to resolve the matter and obstruction of our investigations.  It didn’t help that Clifford had a reputation as a blustering bully whose usual line of defence was attack.

Nevertheless, in one last attempt to avoid the additional time and expense of a trial we made a proposal to the vendors to join with us in the Alternative Dispute Resolution (ADR) process.  To our great surprise we learned that they had agreed to this process.  The stakes were very high.  We had already sunk a large six figure sum into legal and investigative fees in the previous three years but there always has to be an element of risk and uncertainty in legal matters.  Even the ADR process didn’t come cheap with barristers in attendance on both sides.

 Some weeks later I sat across the table from Clifford with our respective teams ranged around us.  It was the first time we had met since we bought the business three years previously and in that time I heard he had suffered a stroke.  Would illness have mellowed him or would he be as obdurate as ever?  Could we reach a settlement and put an end to the vast drain on time and expense?  Or was this just a futile exercise?

Image courtesy of gastroenterologyupdate.com.au

The Business of Life Chapter 35 – when you can’t take no for an answer

ABC desperately needed to acquire a competitor.  If we didn’t then it was increasingly likely that we wouldn’t succeed in turning the business around and finding a buyer of our own.  We knew that acquisition of a suitable company offered us the only realistic opportunity to reduce the cost of sales, boost influence with major suppliers and make a step change in performance.  We also needed to acquire a competitor with distribution rights to certain ‘flagship’ brands.  We had a suitable and seemingly willing target but one huge problem remained; we had no money and no hope of raising any fresh capital. When you can't take no for an answer

The only option was to get the parent company of our target to fund our purchase.  Having worked for most of my career within very large organisations, I understood the type of pressures that can arise.  Someone in the organisation might be so personally desperate to offload their losses-making UK division that they might be prepared to find a way to finance our purchase.  So, having said we were interested at a much lower price than they wanted, we left them alone whilst they negotiated with a number of our other competitors.  No sale took place.

After about six months we approached them again with the following proposal; we would buy the customer list and the goodwill and pay for this out of a percentage of future gross profits over the next 3 years.  We required that they transfer the stock to us and we would pay for it as we sold it.  Any stock still unsold after 1 year, we could return.  They would make the entire workforce redundant and bear the cost themselves.  Finally they would retain the premises.  Following an agonising wait, they accepted our terms in their entirety.

We had assumed that only around 30% of their turnover would be retained but in the event we kept over 60%.  We also retained the distribution rights to the ‘flagship’ brands (having sounded out these suppliers in advance) and used these to grow our business significantly in our traditional accounts.  Over time we backed away from the poorer credit risk customers we had and replaced these with business grown from the higher quality new ones.

Our investment in stock settled down to a level not much higher than pre-acquisition despite the significantly increased turnover.  A key influence in this had been the previous identification that no one person in ABC (except Mike) had responsibility for the value of stock.  A product manager was appointed who, in addition to his responsibilities in managing the ranges, had responsibility for sales forecasting & absolute levels of stock.  With his efforts and skills, stock turns improved, our service levels got better & working capital requirements reduced.  We were often able to win business at regular prices because we were the only distributor with stock.

One of the most successful moves we made was to de-emphasise sales revenue.  In order to adapt to rapidly changing pricing levels amongst competition, it was essential to allow the sales team certain flexibility over day to day pricing.  The problem was that sales revenue was chased to the detriment of margins.  This was especially evident as every month end approached.  In an effort to remedy this we scrapped sales targets and moved to cash gross margin targets.  All access to sales figures was removed from the internal IT systems.  In our internal communications only cash margins were ever referred to from that point on.  The result was a steady improvement in margins that provided clear, additional profit.

Despite including some of the major global corporations (e.g. IBM) the behaviour of most suppliers was chaotic.  They lacked any evidence of a coherent strategy and seemed entirely reactive, capable only of using price as a variable.  We put together a detailed presentation that Mike then made to each of our suppliers.  In it we spelt out our analysis of the sector, our plans for the future and what we needed from our chosen suppliers.  We announced a supplier performance monitoring system together with an annual Supplier of the Year award.  Each month we shared the ratings of our suppliers across 25 pre-announced criteria.  The results were dramatic, with suppliers rapidly falling over each other to improve their ratings (and in so doing improving service to us).  Tangible support in terms of focussed co-operative promotional activity rose and with it our sales.  The year end saw a major one day event for all suppliers with awards given for the best in category and overall winner.  The programme cost us very little but grew in effectiveness each year.

Performance slowly improved and monthly profits started to be the norm.  Gradually, the losses on the balance sheet were being eliminated.  However, part way through this process one of the major customers was placed into administration owing us over £160k.  There was little hope of any recovery and most of the loss was uninsured.  We managed to cover the loss from the provisions we had built and a small insurance recovery.  The shock of this was severe though.  Strict new credit policies were put in place and the board agreed a new guideline that no single customer would be allowed to represent a greater exposure than a pre-set limit.  It was clear that we urgently needed to lift the quality of our customer base to continue building the business.  Many of the traditional customers were just too risky to allow the credit required to fund the extra volumes we required.

Priority then turned to improving the internal processes of the business and to improving profitability.  A range of Key Performance Indicators (KPIs) was identified for the entire business with weekly & monthly monitoring agreed.  These became the dials we all watched on the dashboard & formed the language we all talked within the company.  A complete review of the financial systems was undertaken and tight new accounting controls were put into place.

A reorganisation of the internal sales structure was achieved that established a series of teams comprising a Field Sales Manager plus a Customer Service Executive and a Telesales Canvasser.  This restricted the number of expensive field sales heads & beefed up the proactive telesales’ prospecting & selling activities.  Grouping them into discrete teams gave a sense of identity & team spirit.  The increased communication achieved within the teams greatly assisted sales results.  Various techniques were tried in an effort to improve the rate of proactive sales calls.  Finally, the ‘quiet room’ concept was born where each prospector went into a spare office for number of hours per week & made calls from a direct outside line with no distractions.  The rate of new business rose.

That some sales people were much better than others soon became apparent.  We suspected that technique was the cause.  External sales trainers were brought in to overhaul our sales approach & re-train the entire sale steam in a revised selling model.  The sales team loved the process and learnt many new lessons, which they were quickly able to apply.  Mike decided not to replace the sales director but to run the sales force himself (which he did with great leadership & drive).  Mike had a natural ability to lift spirits in the team.  Following a particularly successful month Mike would declare a beer and pizza outing to celebrate.  If the business had an especially bad month, he didn’t rant and rave but declared a beer and pizza evening to put it behind them!

Freed of the German company, we were now making profitable inroads into Europe via a UK based sales effort.  Curiously, Hull proved to be a fertile source for staff with European language skills.  The business went on to make three straight years of good profits and the balance sheet continued to improve, building thereafter to achieve a very healthy net asset value.  Finally, the remodelling of the business was rounded off with a change of name to ABC Technology Distribution Ltd.

The bank had been patient during this period and had finally let us leave the ‘intensive care’ department.  Mark T had moved on within 3i and had been replaced with Ian with whom I built a close working relationship.  The relationship however maintained certain protocols one of the most important being that I never allowed a parallel reporting system to creep in.  We were fellow shareholders with common risks and common interest but all the key issues were reported formally.  There was however a great deal of pressure to achieve a sale and I was constantly keeping Ian up to date on our plans whilst shielding Mike from as much of this pressure as I could.

We did have a very clear plan for a sale however, one that was clearly understood by the board and was one that we carefully implemented.  Mike had known the CEO (Mike B) of a major US distributor, Scansource, for many years and had ‘borrowed’ many of their business practices and strategies.  Having closely followed Asda’s emulation of Walmart, which directly facilitated the eventual acquisition of Asda, Mike’s stated intention of selling out to Scansource made a lot of sense to me.  One significant problem had occurred though.  Having opened a competing business in what Mike B saw as his backyard, the relationship had soured.

Now that we had succeeded in extricating ourselves from the USA, Mike attempted a charm offensive designed to achieve a rapprochement with his erstwhile mentor.  The news that we might be ‘on the market’ to such an obvious buyer was duly conveyed.  This did not achieve the desired effect and it was with dismay that we learnt that Scansource were trawling Europe looking for acquisition candidates whilst ignoring ABC and Mike’s blandishments.  We had to battle on with improving the business with no other realistic purchaser in sight.

Finally, Scansource came knocking on our door and negotiations for a sale began.  After a long, drawn out and frustrating process we achieved a sale in May 2002 for a healthy sum that gave me and all the ordinary shareholders a good return on their investment.  Additionally, Andy and I received a healthy incentive payment from 3i that had been offered to us 5 years previously in the event that we achieved a recovery of their investment.  Mike stayed with the business but this didn’t last long as making the shift from owner to employee was never going to be an easy one.  He went on to form another business in a related field that has been extremely successful.  And, in a strange turn of fate, the Scansource European MD ended up working for me in an unrelated business I formed some years later.

The previous five years had never been easy, firstly with the challenges of keeping ABC afloat, then of making that vital acquisition and going on to achieve a satisfactory sale.  This had been taking place against major problems in my other investments.  It was though, and despite the many pressures, one of the most satisfying times of my career working with such a cohesive and successful team.

Elsewhere life was equally challenging, frustrating, commercially dangerous and rewarding.  I was getting used to it.

 Image courtesy of thepoliticalcarnival.net

Osborne’s employee rights sacrifice, equity for all scheme

Do politicians really think through the ideas they float?  Do they have any idea of the realities of business and especially the entrepreneur?  Come to think of it, do they have any idea of the complexities of business?Osborne's employee rights sacrifice, equity for all scheme

As a retired businessman who ran, bought, created and sold businesses, large and small in over a dozen industries, I have a reasonable knowledge of the problems facing business owners and the people who work in them.  I also spent many years in the layers below the top to have a fair understanding of the issues that face employees, what concerns them and what doesn’t.  Let’s start with the problem that Osborne is purporting to solve, the great employee rights and employment law burden.

Before the current edifice of employment law was created and forced onto business the policies that determined how employees were recruited, trained, paid, promoted, cared for, pensioned and fired were largely at the whim of the employer.  What this meant was that all of these factors were points of differentiation that clearly separated good employers from their bad competitors.  Working for Unilever in the 1960’s I enjoyed benefits and practices that would still be regarded as outstanding even today.  Has the welter of employment law really made things better for the average employee in the average company?

Consider first that small and medium businesses (SME) account for 99.9% of all enterprises and 58.8% of private sector employment.  To the vast majority of these businesses employment law brings little benefit over and above that which enlightened owners and managers strive to achieve without the aid of the law.  But it also brings huge compliance costs and the threat of many disgruntled employees running off to employment tribunals.  Today a malicious ex-employee can wreak havoc upon a good employer.  Maternity leave can also create a nightmare for small companies.  There will always be bad employers just as there will always be bad employees.  We must ask ourselves what we have really gained by forcing policies borrowed from some of the country’s (and the world’s) largest companies onto our SMEs.  And that is before we should ask ourselves what role corporation tax and employers national insurance contributions do for employments levels.

So, if Osborne is recognising at least part of the problems facing employers here in the UK with his equity for rights proposal, shouldn’t we be applauding his scheme?  Sadly, I don’t think we should.  I believe that it is another dose of borrowing concepts of best practice from the largest corporation that will do nothing for the 58.8% of private sector employees who work within the SME sector.  And nothing for the company owners of these businesses.  Let me explain why.

There are already employee share ownership schemes that are used by large companies.  Usually these shares encourage employees to save and should they leave or require the cash then there is a very liquid market waiting to buy their shares.  The risk, of course, is that the value of the equity falls (remember Northern Rock).  Overall these schemes do not represent more than a fraction of the total equity of the company and do not carry voting rights or eligibility for dividends.  Are they effective in engendering concepts of ownership amongst participating employees?  Or are they just a savings scheme?  Would such a scheme encourage employees of these large companies to give up their rights?  And would having two tiers of employees be of real benefit to the company?  You decide.

However, when we turn our attention to the SME sector the problems become significant.  In privately owned companies equity is usually guarded closely by owners or can be very limited in number (£100 companies are quite common).  The reason for this is quite simple.  For those owners who wish ultimately to sell the business to achieve a return, then they wish to retain the largest percentage of equity they can.  For those businesses that are run as family concerns then there is little intention to sell and equity is often held in a web of different generations of family members and trusts.

There could be attractions for an SME to set up such a scheme as a means of opting out of employment legislation.  Any benefit for the employee could be completely illusory.  Why?  The issued value of any shares provided in such a scheme is likely to be low and any return only available when (and if) the company is sold.  Given that there is no market in equity held in privately owned shares, any departing employee (for good or bad reasons) would be at the mercy of the company in deciding a price for buying them back.  The cost of setting up such a scheme would be quite high.  Would it raise meaningful sums for a startup or early growth business?  Not a chance.

Of course there are already businesses run as cooperatives but these are tiny in number.  There are also those businesses who run employee share ownership schemes, these usually being very large companies with differentiated cultures and attitudes towards employees.

In my view if Osborne really wishes to help both private employers and employees he should scrap swathes of employment legislation (as it frequently strangles employment opportunities in 99.9% of private enterprises).  He should also reduce or eliminate corporation tax and employers national insurance contributions both of which act as a tax on employment.

Time to scrap the idea, George.  conference season is over for another year.  Just go and talk to a few SMEs before the budget.

Image courtesy of guidetowomen.wordpress.com

The Business of Life Chapter 34 – life under water

Earlier in 1997 I had been asked by 3i to review a technology business they had backed that was being viewed increasingly as a ‘problem child’.  I agreed to meet the two main director shareholders of Advanced Bar Coding (ABC) to see what the situation was and if we could work together.  The business, a distributor of bar coding products, had been formed by the joint MDs in the early 1990s.  It operated from an industrial estate in Hull where it had offices, warehouse and a technical department.  Approximately 60 staff were employed & turnover was around £8.0m (having grown by approximately 35% each year since formation).  There were two other members of the board, a Sales Director & a Technical Director.Life under water

The situation I found was dire.  It was clear that the business was on the brink of insolvency having lost £1.0m in two disastrous investments in the USA & Germany (with the losses increasing each month).  The bank was threatening to withdraw their overdraft and had placed the management of the account into the hands of their ‘intensive care’ division.  The factoring company were reeling in their advances due to the poor credit record of many of the customers.  Margins were slender and seemed to be slipping with each passing month.  On the initial visit I got on well with Mike and Alan (the joint MDs) and was subsequently appointed to the board as a non-executive director.  The total investment made in the business by the shareholders and the bank was, to quote a phrase, “below water”.

Mike was a volatile powerhouse, a dynamic and successful salesman, totally committed to his business but very autocratic and appeared lacking in broader-based business & strategic skills.  His energy was inexhaustible but at times he seemed merely reactive to events.  The other main shareholder, Alan, was a quieter and amiable individual who acted as Finance Director (despite being completely unqualified).  We started work on a revised business plan to try to convince the bank to stay with us while we turned the business around.  A core element of the plan was withdrawal from both the USA & Germany.

The meeting went well but the bank refused to support the plan unless 3i and the shareholders increased their investment.  In a separate meeting they also conveyed that any further support would be conditional on a restructuring of the board.  Specifically they required that Alan step down as joint MD and Finance Director and be replaced by a new and suitably qualified accountant.  I was appointed chairman and required to invest, as was the incoming FD.  3i agreed to inject a modest amount of further capital and the whole package was conditional on finding a buyer of the business without delay.

Mike and I had agreed to approach the subject of Alan’s departure in a joint meeting with him and I hoped that we could resolve the matter, if not amicably, at least following due process.  An early demonstration of Mike’s volatility was not long in coming.  I arrived on the morning allotted for our meeting with Alan to find no sign of him but was greeted by Mike in an agitated state.  “I’ve fired him,” were the first words he uttered, “I couldn’t stand him any more.”  It seemed a row had blown up early that morning between the two of them resulting in this potentially disastrous turn of events.  Not only were we liable for a clear cut claim for unfair dismissal but there was the not insignificant matter of Alan’s equity.

Upon inspection of the Shareholders’ Agreement I found that there was no provision in it that required Alan to sell his equity back to the company in the event of his departure.  Given the dictate we had been given to sell the business, the prospect of a disgruntled Alan with no requirement to sell his shares rendered this possibility almost impossible.  I proposed that I met with Alan and asked Mike to have no contact with him.  Over the next week or so I shuttled back and forth in a diplomatic mission that ultimately resulted in us buying Alan’s shares back for a nominal sum.  With the bank onside, albeit with a reduced overdraft (and ABC still in the intensive care department), the factoring company agreeing to continue support and 3i making their additional investment, we were only left with a small number of mountains to climb.  We now had to extricate ourselves from the USA & Germany, find a buyer for the business and, without delay, find a new FD.

In the event this last requirement proved relatively painless and Andy joined the team first as a consultant and then formally as FD.  An accountant with a very commercial outlook, good venture capital experience and somewhat of an IT expert, he also had the invaluable experience of having been part of a team that built and sold one extremely successful company.  He was a thoroughly nice guy who fitted in well but something of the iron fist in the velvet glove.  If Andy felt a particular course of action was not either legally, procedurally or ethically right then you knew that it was not going to happen.  Colin the technical director was supportive but I had my doubts about Jay, the sales director (who soon moved on as the business became progressively more structured in its approach).

The three remaining board members became the most successful team I have ever worked with in my entire career.  If anyone from outside had been an observer at many of our board meetings they might have thought we stood no chance of success as violent argument was not unusual.  But we proved Meridith Belbin (probably the world’s first, and arguably the best, expert on team-working) right.  Successful teams don’t need to be harmonious affairs, in fact dissent often ensures full examination of the relevant facts and the available options and leads to successful decisions.  Mike grew in my estimation.  I can’t imagine how tough it must have been for him to be planning the sale of his treasured business although I did know that a sale was something he hoped would never happen.  A previously successful entrepreneur, he had seem his creation grow and then fail, saw little or no hope of a return on his investment and had to welcome onto the board two outsiders who questioned every assumption about the business.  We certainly had blood on the walls at times and Mike would often storm out of the boardroom with a face like thunder when a decision went against him.  But always, and often within the hour, he would seek me out and tell me that he had already implemented (or put into motion) whatever change was required.

Mike knew everything about the industry we were in and everyone in it.  The problem was that his knowledge was vast at the micro level but it was akin to a huge database without a search facility that could link aspects together.  He had always existed previously making rapid decisions and usually without reference to others.  The business had been Mike’s train set.  I was worried however that he lacked the experience or toolkit effectively to analyse the industry and our place within it.  He didn’t know what he didn’t know so often he didn’t go looking.  If we were to stand any chance of turning the business around and selling it on (let alone making a return on investment) I knew we had to have a coherent strategy, one that would take us out of the maze we were in.  Mike had resisted initial attempts to instigate a full strategic review.  “Waste of time,” he would claim, “I know everything about this industry and this business.”  Finally, he agreed to a rigorous process of strategic review and over several long meetings, by a process of research, brain-dumping, questioning and probing a clear picture appeared that the whole board could grasp.

In a highly fragmented channel, it was clear from our research that ABC was market leader in distribution.  This leadership stemmed from high levels of customer satisfaction, driven by an industry leading catalogue, great depth and breadth of stock, a superior technical infrastructure and a uniquely proactive telesales process.  Critically, we had premises and systems that could support at least double our current sales.

We had a customer base with a low level of creditworthiness, poor sales and marketing expertise below Mike and suppliers (some of whom were well known global corporations) with chaotic distribution strategies, poor service and zero demand building activities.  It was also now clear that we were suffering from a lack of certain key ‘flagship’ brands.  But overwhelmingly we suffered from a continual cash drain from the USA and Germany operations and a balance sheet with a £1m hole.

It was apparent that there were actions we could take to improve matters such as boosting our technical services and expanding our specialist product ranges, both of which provided superior margins.  We urgently needed to improve the quality of our customer base and lessen the risks we faced from bad debts.  But, far and away, the only option that offered a real step change in our fortunes would be to acquire one or more competitors.

Prices across the whole market were falling year on year and manufacturers continued to dump stock further depressing prices and margins.  But the greatest threat facing the business was of the bank ‘pulling the plug’ completely, leaving us with no means of raising the capital we needed to turn the business around.

The situation the business was in could be summarised as being fraught with problems and opportunities!  There was also only a very limited window of opportunity to act.

Mike admitted that he had learnt a great deal from the process & a new strategy was agreed by the board to move the business towards achieving a sale.  We were still living from hand to mouth in cash terms and were very exposed.  We desperately needed access to the ‘flagship’ brands to improve our offering in every category.  So, the suppliers of the brands we required were approached to allow us to gain access.  An agreement was reached with the least important of these, however the main two companies still declined to add us to their distribution base.

The obvious solution that had emerged from our strategic review would be to buy a competitor & transfer all business to Hull, thus improving sales & profits in one giant step.  We researched all competition & identified the half-dozen most likely candidates who had the key brands we required.  Meetings were held with all of these; some were initially interested in a sale, some refused.  But the crushing difficulty was in obtaining further funding.  Following meetings with both the bank and 3i to present our proposed strategy, both agreed that acquisition was an excellent idea but flatly refused to lend more to achieve it!

 Over the next six months and only following a great deal of effort (initially attempting to improve our operations) we finally succeeded in withdrawing from the USA and Germany.  A small but significant victory was receiving an ex gratia payment from one of the big four accounting firms that recognised faulty due diligence work they had carried out in Germany had led to the problems we had encountered.  We were still technically insolvent (with huge negative equity) but we had stopped making losses and, painfully slowly, each month we were starting to reduce the hole in the balance sheet.

Priority was then given to improving the internal processes of the business and to improving profitability.  Much work was done to analyse the customer base, sorting them into categories.  The sales force was now targeted with specific objectives against each of the main customer groupings.  Certain customers were ‘de-emphasised’ and left to competition.  However, we still could not break into certain of the best potential customers due to our lack of the remaining key brands.  The only remaining way we could gain access to these was via acquisition.  The problem was that we couldn’t raise a single pound more finance.

Of the discussions we had been having with a number of acquisition targets, one of these was owned by an American parent, primarily involved in software.  The UK products distribution business was losing money heavily, the parent was very keen to sell but they wanted serious money for a sale.  The business was ideal as it had both of our target brands, had an excellent customer base (a good percentage of which would be new to us) and had leasehold premises we did not need.  We estimated that we would need none of their staff and could transfer the entire business to Hull.  We also felt that we could grow sales of our product range via their customers.  A perfect match.  We left them with a statement that we were very keen to buy but that their price was too rich for us.  The chances of them selling to us seemed remote as we simply couldn’t raise any money.  The only option left would be to get the American parent to fund our acquisition.  But would they?  And if they wouldn’t, what future would ABC have?

We were still way ‘under water’.

  Image courtesy of lakedistrict.gov.uk