Posts Tagged ‘talent’

Profit In A False Sense of Security

Wednesday, April 26th, 2017

 

I am fascinated by the probable cause when owners, Boards and top management in mid-market businesses (US$10M to US$Bn), “don’t take the money” and shortly thereafter, end up with a failing or failed business. Specifically, when a serious offer is made for growth capital or even an outright sale of the business, and in the next 6-12 months after the refusal, the fortunes of the business partially or totally collapse. Nowhere is this more visible than today’s high growth private tech businesses (the infamous “unicorns”) and in an often overlooked area, service businesses with a powerful owner-operator or managing partner in a partnership structure.

The decision-making factors are consistent throughout. The business has deliberated carefully or taken an opportunistic approach to accepting external capital or key talent. What has varied is the owners’, the Board’s  and/or top management’s judgement, resilience or trust over time. Faced with changing market conditions (regulation, technological and other convergent forces), a key client “win” or “loss”, rising/declining investor or trade interest and so on, there is a discernible change. They consciously ignore other’s prudent advice that they have implicitly trusted in the past (mitigating risk). They increasingly believe that they are “impregnable” in their market position (market hype or vanity investments). They allow common sense to be distorted by inflated but unsubstantiated talk (valuations, growth prospects, barriers to entry, unique technology etc.).

Having worked with six privately-held mid-market businesses over the past 3 years around the globe, who turned down offers and subsequently, experienced very public falls from grace (legal, e-commerce, hotels, gaming, financial services), the underlying “cause” in my experience is ultimately, poor leadership. It is people, not the business that have screwed up.

For my current and prospective clients reading this, who fear my strategic advice comes with a poison in the tail, rest assured I have had a great many more winners than losers!

Yet in the immediate aftermath of a partial or total business failure, there is a rush to assume that the firm’s opportunistic or conservative approach to accepting new capital or talent is the “cause”. That is inaccurate, and here is why. There are a great many successful businesses, who have been consistent in adopting diametrically opposed approaches to accepting external capital or ownership (in insurance, AJ Gallagher vs Hub International, in hotels, Peninsula vs. Fairmont Raffles, or in the premium art business, Christie’s vs Sotheby’s). In just the same way, sticking to niche products, services or geographies or constantly, adopting a diversification approach, is rarely the “cause” of failure.

Take great care in jumping to a conclusion. Profit is to be found, as many smart long-short investors have found, in looking out for a business owner’s, the Board’s and/or top management’s increasing false sense of security, the resulting changes in their behaviour and the positive/negative impact on their business and the competition.

© James Berkeley 2017. All Rights Reserved.

 

7 Reasons To Celebrate London

Tuesday, July 7th, 2015

Today London remembers, 10 years on from the scenes of death and destruction. A city that I have called “home” on and off for 30 years. On 7th July 2005, I was at The Snow Ball in Queenstown, New Zealand with a group of friends when images flashed up on a video screen of the carnage across the city. It seemed distant and surreal in equal measure. What was the bombers’ point? The subsequent alert two weeks later and the manhunt when I was back home are a more vivid memory.

The test is what a city and its’ residents do about it.

Looking around London today, London is thriving. A global metropolis that has

  1. Attracted huge swathes of capital from across the globe.
  2. Unprecedented career opportunities for many people.
  3. The most diverse, talented and creative workforce with a global mindset.
  4. One of the most civilised, safe and secure environments to live, work and socialise in.
  5. The most compelling mix of contemporary culture.
  6. Retained its’ status as one of only two true “global cities” (the other being New York).
  7. The most exciting prospects for the next generation to grow up in.

As with all growing capitalist cities it faces distribution challenges. Adequate housing, infrastructure, health and education provision for all incomes.

The “high” security threat is a badge of honour, a reflection that those with incongruent values seek to cut down the tallest of poppies. We must hope that our security forces and intelligence are one step ahead of those who seek to destroy what we have. Can we be certain? Of course not. My memory flashes back to the early part of my career, the IRA atrocities across the city, the daily roadblocks outside my EC3 office and further afield to New York, where several of my former colleagues from my days working on 104th Floor of the World Trade Center perished.

Yet we celebrate the vibrant, innovative and exciting city we call “home” and the fantastic future it provides for our families, friends and colleagues.

© James Berkeley 2015. All Rights Reserved.