Saturday, 7 July 2007

The London Bombings - and other acts of Terrorism

Yesterday was 7 July, and as well as being the 2nd anniversary of the atrocities in London, was also a poignant reminder for me of the day that one of the last nails was driven into the coffin of Red Letter Days - the company I originally founded which went into administration in August 2005...

Earlier that year we had been diverted off course from other re-financing options, by a rescue deal offered by a major company within in our sector - accompanied by all the usual 'you can trust us' assurances.

We had 'opened the kimono' on Day 1 regarding all aspects of the Company, its financials, its problems, its contingent liabilities etc., and yet, despite having got to absolute 11th hour - with all the legals completed and ready to sign - the other side suddenly pulled out.

The CEO of said company (who I have since found out is something of a laughing stock within his industry, and I also think fancied himself as something of a reincarnation of Marcus Aurelius/Julius Caesar) initially placed the blame on a pot of 'Rachel's Organic Forbidden Fruit' yoghurt which his wife had placed in the fridge that week, which he took to be an omen of doom (yes, really).

When we tried to get the deal back on track (on vastly revised terms - of course! - why else does anyone pull out at the last minute if not to take the piss regarding deal structure and price?), 7 July unfolded.

If the pot of yoghurt had a de-stabilising effect, you can imagine what the unfolding scenes of carnage in London did for the deal.

(Didn't stop them coming back a few weeks later to suggest mounting a 'pre-pack' deal to buy the company out of administration for peanuts, but it would be cynical of me to suggest that was the real reason for reneging at the 11th hour.)

If the administration had unfolded during the week (when said company would have been contactable), and not at the weekend, he may well have got it too. Given Red Letter Days' recently filed first year post administration trading loss of £7.1million, that would have truly served the old codger right.

It's naive for anyone to think they can gain value in a highly branded business by pushing a company through an administration process to wipe the debt before acquiring it. It simply causes too much damage to the brand. But I digress...

So, back to 7 July, and all in all it was a most terrible day on all fronts, which will always remain lodged in my memory.

Here we are, 2 years on, and life is very different in so many ways, but in other respects old patterns still continue to emerge.

If you've ever been through an administration you will know that the DTI goes through an investigation process. This was particularly the case with us given that Red Letter Days had been such a high profile crash.

In fact, the Insolvency Service at the DTI put a full time solicitor on the project - who spent 18 months trying to mount a prosecution to disqualify the directors - before finally giving up and admitting there was no case.

The thing that massively counted in our favour (apart from the fact that we were innocent of course!), was getting a top legal firm acting on our behalf.

In a Director's disqualification proceedings, while each prosecution is served on the directors as individuals, typically if one is found guilty, all are guilty - there are just different levels of culpability which affect your period of disqualification.

So it is vitally important that the Directors act collectively, rather than splintering off, blaming one another and generally trying to cover their own arses.

But despite trying to coralle my co-directors, do you think this was possible? No - because no one wanted to commit to the legal cost of fighting the case. And of course, my inept co-Director who was in charge of the company's insurance policies, had not thought to ensure we had adequate Directors' Liability insurance in place to cover us for the running off period, which would have covered the legal bill.

So, while the other directors either ignored the DTI letters altogether or sent back a flimsy 2 page response (or in the case of a certain Finance Director a response which absolved himself totally while stabbing me in the back for all that had gone on), muggins here took it all a lot more seriously (I obviously had more at stake given my profile) and brought in the brilliant insolvency lawyers Ian Grier and Nicholas Hughes at SGH to fight her corner.

Luckily I had had the foresight to retrieve 18 archive boxes full of all my copies of every Board Meeting, consultant's report, management accounts and cashflow forecasts the company had produced during the period the troubles unfolded (it is strange how things 'disappear' once the company goes into administration and you are no longer allowed access to the building - after all it is hardly in the new owners' interests for you to come out of any of it looking squeaky clean).

All of which meant that my legal team was able to put together a several hundred page response to the DTI, which covered in detail every event of the 2 1/2 year period - every supporting document, right down to copy emails, showing (in absolute excruciating detail) the lengths we (or should I say I?) went to, to try to save the business.

At a personal cost to me of something like £20k in legal fees.

And the contribution from my co-directors? A measy four hundred quid.

I learned a lesson that day, which was once again resurrected for me this week (not just through the 7 July anniversary, but via a series of other events).

When you are running a successful business, or indeed, if you have the 'tag' of being a high profile entrepreneur, everyone wants to hitch their wagon to your star. They love the status of being a 'director', they love connecting themselves to your name, but more than anything they love the thought of 'getting rich quick'.

Yet the sad fact of business is that - whoever you are, from Branson to Sugar - business is tough, there is no 'magic formula', no 'Midas touch', no 'guarantee' of success. The people who are eventually successful get there through putting in an unmitigated amount of effort, focus, committment (both in terms of time, as well as personal cash) and sheer bloody hard work.

Anyone can be a director of a business that is spinning along nicely.

It's when the sh*t starts hitting the fan that you can usually see the true colours of the spineless, penniless ones unfolding - refusing to commit time, effort or hard cash to the cause, running for the hills and leaving you to carry the can.

My advice from all this (and I promise I will get to the point of this Post very soon!) is be very careful of who you allow to hitch their wagon to your star in the first place.

The world is full of lazy passengers looking to make a fast buck, and very few people have really got what it takes to be a real success in business. Choose the wrong business partners and they will dramatically slow you down. So, unless there are very, very good reasons for you to go into business with others - or unless you find a magic person who is the exact complement to your own skills, and is as committed as you are in all respects - you will almost always find it much easier to achieve success by 'going it alone'.

And with that off my chest, I will sign off and enjoy the rest of my Sunday!

Best wishes,


1 comment:

David McQueen said...

That was refreshing to see your side of the story. Wishing you all the best for your future projects.