provider of our stockbroking business. Oh, yeah, whilst we are on that, can you send me through any contract documentation of our arrangement with Atkins Robertson? We need to understand if there are any impediments and clauses arising if we notify our intention to terminate the contract.’
‘No problem’, mumbled Ro whilst making notes, ‘I’ll get that from Phil or Alison. Phil is a group commercial manager, he gets involved in contract management with me and Alison is our legal counsel business partner. There have been a few additional schedules added, some addendums and a few additional contracts for other services such as our adviser service we setup last year. We had a step-up in our commission rate because our revenue exceeded the second tier so our split is supposed to increase. Unfortunately, it only exceeds this tier when the value added tax or VAT is added. So, there is a disagreement over whether we get the top tier rate or the second tier. Its worth a few mill to us.’
‘Really?’, responded Sam alarmed, ‘Clint, can you please follow that up and make sure the top tier commission is on the revenue numbers. That should be ours. Ok gotta go.’ Sam was reading his blackberry messages and began to stand from his chair ready to exit. ‘I move at a hundred miles an hour so you need to keep up’, he said as he stepped out the door.
‘Ro, you need to keep these discussions to yourself. They are all private and confidential. Ok?’ said Clint trailing behind Sam.
‘I understand. See you later’, Ro responded.
Ro emailed a copy of the contract to Clint pointing out the section relating to commission and how it didn’t refer to the VAT hence the confusion. Later that day Clint emailed over the business case draft to Ro.
Colleen was standing at the printer in the communications room which is shared by the teams on the floor and includes fax, colour and black and white printers, stationery of all sorts, paper recycling bins, paper shredder, guillotine, workbench and inbound/outbound mail shelves for all the teams on the floor. Colleen had started glancing at the business case document that Ro had printed.
‘What’s this?’ Colleen inquired.
‘Private and Confidential!’ exclaimed Ro pointing to the same words written in watermark format on the front page of the document.
‘Are we changing the business again? What this time?’ said Colleen with some cynicism. She had been involved with the business from the start and had seen two major restructures in those eight years. The latest being the full outsourcing to de-risk the business and make it profitable. This had been achieved but it was only just making a profit of around $5million per year. Good enough for a business operating under ‘care and maintenance’ - meaning nothing strategic. How things have changed.
The next day Ro receives an email flagged ‘Private & Confidential’. Its from Sam and only contains a document and a note saying ‘I’ll call you shortly about this’. Upon opening the document Ro reads that it is a non-disclosure agreement or NDA for short. It basically precludes Ro from discussing the deal with anyone apart from those whom have also signed the NDA. ‘What deal?’ Ro thinks to himself. He reads on. There are no details, only a name, Jonathan Forest Discount Brokers. Ro’s heart quickens. A host of emotions and thoughts hit him. ‘What’s going on?’, he thinks alarmingly to himself. His phone rings, it's Sam.
Sam discusses the development in his usually I’m in a hurry manner and I’m too important to spend time with you attitude. He outlines that buying a business would be the best way to transition away from Atkins Robertson now that its being bought by Wilson Jamieson. Very large corporates often work on the adage of ‘rent before buy before build’. Renting refers to outsourcing, licensing and offshoring services from a provider or vendor who is specialised in that field. Their overhead is likely to be lower and they are likely to be more efficient in providing that service. Buying, as it says, refers to buying a business. Usually one that provides a service which the organisation deems is now more strategic and owning it would enable synergies to be obtained or that business may have high profitability which would add value to the organisation and complement the organisation’s service offering. Build, also as it says, involves building the capability in question. The organisation deems that building provides the best bang for buck, suits its business profile and allows for the best return on investment. In terms of complexity and risk, however, this is usually the biggest risk as cost blowouts can occur.
In this broking business of Mason Thompson it currently rents services from Atkins Robertson. There are no other providers with the services Mason Thompson require in the marketplace. So, if Mason Thompson wants to remove its business from Atkins Robertson it needs somewhere to put it. Using the rent before buy before build means that looking for a suitable business to buy is the next option.
Sam, along with the big 4 accounting firm he has obtained to consult on this deal, has identified Jonathan Forest Discount Brokers as the best fit mostly because Jonathan Forest, 60% owner of the business, is willing to sell.
Jonathan has obtained the services of Everton Marks, an investment bank to identify buyers and establish a tender process. Sam was unable to move quickly enough to gain first rights, mostly because of the fee he would have to pay.. Now, it's down to Mason Thompson and another buyer to battle it out. Sam advises that it's now due diligence stage. Ro needs to complete the NDA and get on a plane to head to the offices of Jonathan Forest for a two day intensive deep dive on the business. He will be joined by Sam and Clint. Jonathan Forest is a good fit because of its technology platform. It's geared toward online and phone business and least focussed on advice, known as full service broking. The platform is custom built from the ground up, is profitable, has 50,000 clients, about 150 staff and includes a deposit book with Wilson Jamieson. Sam advises that the due diligence exercise is time bound. The objective will be two-fold. One, validate the numbers Jonathan has provided and Two, look for any issues which might reduce the value of the business or highlight systemic issues or regulatory issues which may result in the loss of the broking licence or result in a loss of many customers.
Ro has been getting on a plane once a month to visit the offices of Atkins Robertson and speak with the GMs of the various teams. The regular travel meant accumulating frequent flyer points and gradually moving to the front of the plane. Over the last two years Ro’s frequent flyer status moved quickly from Bronze to Silver to Gold. Gold allowed him free access to the airline’s business lounge away from other flyers.
The office visit is an opportunity to get a pulse check on how the business is going. He enjoys the opportunity to speak with the Executive General Manager, Saul Smith, who runs the office but delegates virtually everything to the GMs. Saul used to be the contract manager at Masons business, the role Ro now holds. The founder, CEO and major shareholder of Atkins Robertson, Ollie Baden, got along extremely well with the now EGM. Ollie and Saul acquainted themselves over frequent alcoholic binge sessions. It became Ollie’s way to find out what the strategic thinking was at Mason Thompson. Saul had a great understanding of the operational aspects of the business. After 2 years, Ollie thought it better that Saul ran the Atkins business. Having Saul at Atkins meant Ollie could be sure the operations were run smoothly and effectively, albeit on a limited budget. Knowing that Saul was not going to divulge much information, Ro spent most of the time with Saul’s minions, the GMs and the Heads of teams. The General Managers at Atkins Robertson looked after the technology network, the systems and servers to make sure they were always available. Ro followed the simple acronym, RASS to supervise that part of the business and ensure it was operating satisfactorily. RASS, reliable, available, scaleable and secure covers the integral functions of this part of the business. There were several SLAs, service levels or benchmarks which Atkins Robertson had to meet in this area, but understanding them from a qualitative viewpoint was Ro’s focus was visiting.
The GM of Software Development, John Ruth, responsible for building and maintaining the platform, mostly the website and its features,
