Some years ago I was asked by an investment bank to look into a business in which they had invested £2m. It had invested only £500k originally when the 2 components of the group – ICIS (Independent Chemical Information Services) and LOR (London Oil Reports) had merged. The new investment monies were to be used to develop the business. By the time I was introduced the company had been back to the investment bank 3 times for more money . Not surprisingly the bank had become a bit concerned.
ICIS – LOR was a well respected provider of price information to the Oil and Petrochemical industries. They produced daily and weekly reports on the price of various grades of oil and related products across the world, and a range of petrochemicals in Europe and the Far East. It also had a huge database of prices of these products going back several years. Its head office was in London with offices in Paris, Houston and Hong Kong.
What I found was truly amazing for such a small but well established business. In the year preceding my arrival, it had incurred losses of c£1.5m, with the run rate of losses closer to £2m. No need to wonder where the investment bank’s money had gone! The managing director had resigned; there was no business planning; no financial planning; no financial reporting; staff were demoralised; and the 2 founder directors were at each others’ throats. But I also found well qualified staff; excellent products; a customer list to die for (eg Shell, Exxon, BP, Statoil, and so on); and good market positions in Europe and the US particularly for the chemical price service, plus opportunities in the Far East.
After doing some detailed assessments and financial calculations I prepared a turnaround plan which covered reorganising sales management, pricing, introducing new technology to deliver the reports, implementing tight financial controls and reducing some headcount. Having persuade myself of the costs, timescales and risks as against the potential upside, I then recommended to the investment bank that the business could be turned round and become profitable, cash generative and valuable if 2 actions were taken – find an effective chief executive and make another £500k available to the business. The bank provided the money and I took over as interim chief executive.
During the next year the business became profitable and cash generative. Subsequently it strengthened its market position by becoming No 1 in Europe, No 2 in the Americas, and No1 in the Far East. I also recruited a permanent chief executive from the industry and became chairman.
The final outcomes were that the business was sold a few years later, the 2 founder director/shareholders became millionaires and the investment bank recovered its investment and made a very handsome profit in addition.