The View Issue 03

Steve Boyd and David Moore: Called to account

Called to account

As UK plc steers an uncertain course through the recession, the boardroombody count continues to rise. While CEOs are fond of proclaiming ‘thebuck stops here’, colleagues know only too well that the blame tends toend up somewhere different entirely.

The pressure on FDs is often intolerable. Long perceived asnumber crunchers safely removed from the commercialfrontline, Finance Directors have increasingly moved centrestage. Traditionally, their responsibilities have barelyextended beyond the production of data. Not only doesthe new breed of FD provide a link between disparatestrands of the business but is often, to all intents andpurposes, second in command of the good ship enterprise.

David Moore and Stephen Boyd have earned their placeamong the FD elite. David is genial, loquacious andfriendly, a people person but with a tough, pragmaticside. He recently won the prestigious M&A MagazineInterim Manager of The Year award.

Presently commuting to Germany where he serves asinterim CFO for international dental product distributor EDPHoldings GmbH, David has a demonstrable appetite fordiversity. Past roles have included spells as Finance Directorfor the Industrial Minerals side of Anglo American plc, amember of the turnaround team for Morrison Supermarketsplc and international roles in a wide range of Private Equitybacked businesses including manufacturing, property andfinancial services.

Stephen Boyd is a battle-hardened Springbok who madehis name – and fortune – at Golden Wonder - Stephen ispart of a management team that takes over the reins andtransforms performance in PE backed business.

Specialising in food manufacture and dealing with majormultiple retailers, Boyd’s approach is pragmatic, directand unsentimental. Unabashed at the prospect ofstripping out cost, consolidating sites or treading ontoes, Boyd’s team has repeatedly delivered handsomereturns for investors and shareholders.

The two men respond to different levels of tremor on thecorporate Richter scale. David is summoned whenconcern and anxiety among PE houses sets the alarmbells ringing. Steve is more of an interim Red Adair – takingthe call when confidence is low or the investment isimperilled or disagreements over strategy can no longerbe mediated.

‘The CFO role nowadays is a very broad one’ Davidconfirms ‘it’s one of the few functions that crosses theentire business. You’ve got to relate to the rest of thecompany, move away from your screen and get involvedin commercial decisions’.

It’s important to demonstrate to the otherparts of the business – to production,marketing, whatever – that finance hasa key role, which goes beyond saying‘your expenses are too high’. You’ve gotto get in there and make Finance oneof the key functions’.

‘I take a two stage approach’ Stephen interjects. ‘Firstly, Iidentify and start the debate. Secondly, I push issues upthe agenda until they reach board level. People mightnot like the fact that a particular trend has been identifiedbut boardroom attention means it will be addressed’.

The third point for me, which is very important, is providingsupport for people to make decisions so they end up lookinggood at board level. If you can bring all of those together –initiating debate, managing the agenda and decisionsupport - you are delivering real value to the business’.

Leadership and discovery

David and Stephen tend todiscover uniform issues in distressedbusinesses. Lack of leadershipand outdated information createdecision-making gridlock. Plungingmorale, demotivated staff anddwindling cash reinforce the senseof despair.

Both men see their role as offering ‘grit in the oyster’,playing Devils Advocate to stimulate change. Theirapproaches may be different but David and Stephenconcur in the need for management buy-in.

‘You have to become part of the management team’David stresses ‘and get close to the people involved. Thedifference between an interim and a consultant is this:instead of advising management what to do, I actuallydo it. My approach is to treat people fairly, be honest andget the cash in’.

‘For me’ adds Steve ‘it’s about getting agreement aboutwhat the facts are. For example, on one recent project Iwas involved in, margins were slipping but no one knewwhy. Salesmen were blamed for giving the product awayuntil my team demonstrated it was consumers tradingdown to less expensive items. That kind of informationchanges behaviour. Once you display the facts in blackand white, you get management buy-in pretty rapidly’.

In the current environment, no one is indispensable.Corporate heads are rolling at an unprecedented rateand the CFO’s is often one of the first on a stake.

From the sidelines, the phenomenon seems puzzling. Afterall, one bean counter appears to be much the same asanother. Stephen and David, however, beg to disagree.

‘If the Finance person makes a couple of mistakes’ Davidsuggests ‘he may have lost credibility. Once people loseconfidence in you, it’s hard to win it back. And sometimesthe business has simply grown faster than the individuals init. They are out of their depth and need to move on’.

‘Chartered Accountancy’ ponders Stephen ‘is aqualification that you can get if you study hard. However,having a finance person who has worked in a PEenvironment, knows what good managementinformation is, has managed a business for cash andunderstands what it takes to drive value for shareholders– that requires a different breadth of knowledge.

‘In my area of consumer goods, thatincludes an understanding of therelationships with retailers, how theydrive their suppliers, the need forpromotional support and how brandsare maintained. That depth of thoughtdoesn’t come naturally to everyone’.

Stephen Boyd has no such fallibilities. Between 1996-2002,Steve served as FD with Golden Wonder Group Limited.Heading up a factory rationalisation programme,acquiring a stream of fresh businesses and developingstrategic alliances, the management team led thesale of GW to Bridgepoint Capital Partners in 2000,delivering a five-fold increase in shareholder investment.

Convinced that additional value could yet be realised,Boyd and his colleagues rolled back over into thebusiness. Breaking the group in two, Boyd facilitated aback-to-back sale to Pepsi Inc and Longulf Ltd, treblingreturns for grateful shareholders yet again.

‘What I look for in a businesses opportunity’ he muses ‘isthe quality of the product range, a supply chain that is notas efficient as it could be and a market sector whichcould do with consolidation.

Given the opportunity to consolidate going forward, there isalways money to be made. I’m not shy about going into abusiness with a view to taking out significant cost or elementsof the supply chain. What I would never go for is a businesswhere the supply chain is efficient and growth is based onwhat we could sell to customer A, B and C if we had theopportunity; the business may not be able to deliver this’.

David Moore is a very different ‘gun for hire’. Admitting heonly became an interim initially because he thought livingin Switzerland for six months would be ‘a bit of fun’, David’sapproach is fundamentally people-oriented.

‘It’s often a case of needing to work with existingmanagement to implement change rather than using a‘slash and burn’ approach. However, you have to eitherget management on your side or change it’ he says.

Phlegmatic he may be but David’s patience onlystretches so far. If resistance to change proves intractable,David summons assistance.

‘On one of the jobs I was involved in’ he recalls ‘theFinance Director was in the next office and notcommunicating with the Finance Team. So I got a guy tocome in over the weekend and smash a hole in the wall.It sounds a bit drastic but it worked’.

‘Some companies have incredibly complex managementreporting systems where you can’t see the wood from thetrees. At one client, I simply covered the office wall with allof the reports regularly produced then took them downone-by-one to produce a simplified process. I said to theteam ‘that’s all you need, isn’t it?’ And it was’.

It’s a whole new world for PE backed businesses. Decliningasset values and absence of credit have produced adramatic fall in deal activity. In an environment when hockeystick growth can no longer be presumed, assets have to besweated harder prior to exit.

Deal makers, movers and shakers

Dealmakers with time on their hands are discovering a new interest inportfolio management. To the dismay of those attempting to get on withrunning the business, banks and PE houses are operating at a much higherlevel of scrutiny.

‘Investors are much more hands-on and demandingbetter quality, more reliable, more timely information’David observes. ‘There is also a need to look forward moreaccurately. Forecasts must be aligned to the actualperformance of the business so the investors know whatcash is coming in’.

‘Banks are also utilising their pool of knowledge – saying‘we’ve witnessed this with Customer A, make sure you findout which other customers have that kind of exposure’.The kind of question we’re getting asked is ‘we’ve noticedthis in x or y business, how is it affecting you?’

‘I have seen examples’ offers Stephen ‘where PE housesare getting in the way of the management at a timewhen it is the last thing they need. Of course, there areareas where a PE house can help – with access to betterfinancing or opportunities to grow shareholder value – butwhen they become directly involved, it’s telling me thateither they don’t have faith in the management or aretrying to look busy’.

Once the economic tide finally turns, the lower and midmarketprivate equity space will have a crucial role toplay in re-stimulating the economy.

Interim CFOs work on a shorter timescale. Charged withhitting the ground running, their task is to provide aninstant injection of experience, energy and expertise forbeleaguered management.

Across the PE landscape, external resource addstargeted value. On the acquisition front, interims offermanagement skills and control mechanisms to drive thebusiness forward. On the exit side, retaining andmaximising value demands blending traditional CFOduties with communication and softer skill competence.

‘Banks are sitting on a lot of problem children’ Stephendeclares. ‘Part of the solution may be looking at themanagement team and thinking ‘if we can find the rightpeople to put in there, individuals who are sympatheticto our needs and can turn it around, that might be theright option’.

‘Problems you could hide in the woodwork’ David interjects ‘and get away with when times were great nowneed addressing. A strong interim, a person who willstand up and get the issues aired is a valuable additionto the team’.

David Moore and Stephen Boyd offertwo very different interim options. Oneis a multilingual ‘Mr Fixit’ renowned forsteadying the corporate ship. The otheris driven and challenging, a man witha proven track record for transformingunder-performing businesses.

Both find themselves at a crossroads. Irked by the actionsof A. Darling Esq., David maintains that recent hikes in UKtax rates provide serious motivation for calling it a day.Then admits that a low boredom threshold rendersthoughts of retirement completely impractical.

Stephen is planning to spend the summer building a newhouse and getting his golf handicap down. In the event,however, that a business proposition proves too tempting,the plans will take a back seat and his clubs will remain inthe bag.

‘When I started out’ David recalls ‘people would say tome ‘why move on, why not take the job permanently?’Without being boastful, my answer was that you usuallyneed to be over qualified for the job you’ve been broughtin to do. Success is phasing myself out of the picture asquickly as possible and passing the baton to someonecheaper and more interested in the regular day job’.

‘There are plenty of underperforming businesses thathave been acquired and require CFOs who cango in and make a difference. The danger is people withfinance experience who have lost their jobs are comingonto the market and think they can do it but simply don’thave the skills’.

‘I’m happy to be out of the market for a couple ofmonths’ Stephen concludes. ‘If you ask me where Iwould like to be, I want to get back into businesseswhere I can do what I’ve done in the past which is makea real impact’.

‘Wherever there is a business proposition that holds water,there will be PE deals. As the banks get comfortable withtaking risks again and asset problems are assuaged, thesituation will change. It may take a couple of years butthere will always be opportunities to make money’.