Monthly Archives: January 2012

Venture-backed MBOs/MBIs – Advice from the experts. Part Two

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Part Two – The Market

At the moment due to funding challenges, MBIs are almost impossible. There are still some MBOs getting done and you have a chance to get these away, provided of course you can get funding.

According to Steve Cook of Empire HR there’s plenty money sloshing about for deals £20m to £100 Million, but there’s a challenge at the low end.

Steve’s talk was more about his two experiences of Venture backing: setting up, bringing in a corporate venturer and then selling Empire 1, followed by MBO / MBI of Empire 2.

Steve’s top quote of the evening was “The key thing is ‘just being lucky’.”

He had a number of key tips to share: firstly, to make sure you prepare an exit before you start. “Get all your ducks in a row”, to coin a phrase.

Steve also advised to make sure to cut costs and don’t spend any money in the last year in order to inflate the profit and valuation. Everyone needs to be “on the bus”, ie aligned with the plan and the vision. And all fo the partners must agree the roles and expectations in advance of the process beginning. It’s essential to have a very robust shareholder agreement.

Steve recommended Jim Colin’s book “Good to Great”

If you’re interested in learning more about MBOs/MBIs, take a look at Murray Strachan’s blog

Venture Backed MBOs / MBIs – Advice from the experts Part One

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“They shaft you on the way in, work you hard on the way through, and shaft you on the way out … but that’s the nature of the venture capitalist”

If you’re considering a venture-backed MBO (Management Buy Out) or MBI (Management Buy In) then the advice shared at the January Focus Dinner is essential.

Chaired by Exchange director Murray Strachan, who was involved in an MBO of RGIT Montrose, two speakers shared their wisdom and experience.

First up was Scott Martin of Glacier Energy Services who quoted Murray during his own deal: “They shaft you on the way in, work you hard on the way through, and shaft you on the way out … but that’s the nature of the venture capitalist”.

Scott explained there are essentially three phases to be aware of:

1. Doing the Deal (The way in)
2. Delivering the (MBO / MBI) Business Plan and enhancing value
3. The Exit

When Doing the Deal at the outset you need a number of things in place, namely an inspiring business plan backed by a high quality management team consistently delivering your financial results (relentless delivery is a theme throughout). You need to maintain a maximum number of funding options and funding partners in order to maximise the equity share and deal for the management team. And you should appoint good advisers; don’t scrimp, said Scott, as it’s money well spent.

When you reach phase 2, you have to maintain proactive communications with the VC to make sure there are no surprises, and you need to do what you said you’d do. You need to build a track record of delivery, relentless delivery of results is essential. You also need to delivery the strategic plan as well as the operational plan, which can sometimes be left behind. According to Scott, the quality of your management information and KPIs is critical. And just as critically, you must not breach your bank convenants.

At the final stage, the exit, you must be absolutely clear why you’re doing it. You need to be prepared, make sure your management structure is robust, that your succession planning is complete, and that your data room and due diligence information are all ready.

Scott’s final tips? Look the part. Make sure you have glossy accounts, a good website and brochures, great market and brand positioning. And don’t be greedy – leave something on the table for the buyer / next investor.

Brand Building – the importance of a strong brand

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Marketing guru and acclaimed marketing textbook author Philip Kotler once said :”If you are not a brand, you are a commodity.”

No one wants to be a just a commodity, so how do you build a lasting, memorable, engaging brand for you and your business?

Ian Ord, founding director of corporate communications consultancy Fifth Ring spoke at a recent Focus Dinner, describing the key components of a successful brand strategy and how to build your own brand.

So what is a brand? And what isn’t it? According to Ian, a brand is not a logo, nor a trademark. Nike uses a slogan, but that’s not a brand either, these are simply symbols of a brand. A brand is not a corporate identity, nor a patent.

A brand is a character, it’s integrity, and people instantly recognise what it is; it is a person’s gut feel about what the product or service or company is about.

You really can’t define your brand since a brand is actually defined by others, it’s what others think and say about you and your business. Think of it as being closer to a reputation, if you consider what is the reputation of the company, then that’s very much a brand.

Ian gave several examples of strong brands, such as Coca-Cola and Hoover, a brand that is so well known it has become a verb; doing the Hoovering. Can you imagine a young person saying “I’m going to Dyson”?

There are several key components of a brand; firstly, it has to serve the strategy and secondly it has to be consistent, eg you get the same experience is every Apple store in the world. Ian explained the business must be aligned around the brand, everything aligned to enhance the brand and the overall brand experience.

A successful brand also needs to deliver on the brand promise, for example, if you buy an Apple or a Dyson you have an expectation.

Brand promises have 5 components –
1) Differentiation of yourself, your business or your product – the who what why?
2) Everything is aligned behind the brand
3) Innovation is essential to keep pushing the boundaries and keep ahead
4) You need to validate what you are doing all the time by researching and listening to customers
5) Finally, you must cultivate your brand by trying to improve what you do

If you’re interested in reading more about branding, try these:

The Brand Gap – Martin Neumeier
The Purple Cow – Seth Godin
Delivering Happiness – Tony Hseih, Zappos (a copy of which was sent to members last year)

And you can read more about Ian Ord and the Fifth Ring.

Top PR tips from Susie Fraser at Incentive Media

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Susie Fraser was the speaker at our Supper Club focusing on getting the most out of PR. She shared a number of tips and offered individual advice to everyone who attended. Obviously not everyone could be at the event, so we’ve curated the highlights to share here.

PR must be core to any successful marketing strategy, said Susie. It’s about effectively communicating who you are to customers, competitors and staff, and sharing with them what you are trying to achieve.

It’s no longer like the comedy tv show Absolutely Fabulous where Pats and Edi floated around drinking champagne and calling everyone ‘dahling’.

Companies now demand a decent bang for their buck. They want to know the ROI of their PR activity so it’s important to be able to monitor and measure the value. Used to value by rate card – ie how much they would pay for the ad space, but it’s now harder.

Before you start a campaign you have to know what to expect to achieve what you want. Don’t spend money until you know this. And think about the timescale, because that will depend on the medium you choose to communicate.

Be specific about your targets and KPIs. Do you want to increase revenue by 40% or is it about market share or a new product or service launch or a sales uplift of 25%? Or are you happy with anecdotal results, great testimonials or case studies?

PR isn’t just about getting a press release used by a newspaper, it is so much more. You need to be aware of the other types of publication – online, blogs etc – and you need to make sure you share your message where your audience chooses to be, whether that’s online or offline on social networks or in traditional media.

Have you considered writing whitepaper or entering awards? Both of these help raise awareness and position you as a leader in your field.

PR can also help you focus on building your brand and your business around your values, since people buy a brand, says Susie. It’s important to have your own writing style and speak in the correct brand tone.

She also recommends professional media training, to ensure that when you are speaking to the press – in good times or when managing a crisis – you do so confidently, professionally, and with the knowledge of what to say and what not to say.

And remember, it’s not always the boss who’s best to handle this. There may be someone else in the company who is better suited to public speaking or talking to the media.

Here are some other links with ideas on how to generate great PR:

9 ways to supercharge your press release

5 steps to securing more coverage through content curation

7 common PR sins to avoid