MasterMind VSL ?? 7 DAY COUNTDOWN - MY #SETBACKS & #COMEBACKS /DAY - 5 / NO 3 : BEING FIRED BY GRESHAM AND SETTING UP PALIO CAPITAL

As you will have gathered from a recent post here, I was unceremoniously fired from Gresham after nearly 9 years in January 2009. Despite singlehandedly being responsible for two-thirds of the capital gains the entire team had achieved during that period. Now don't get me wrong, those deals were ALL 'team efforts' (and those responsible know who they are and likely prefer anonymity here) but it was crystal clear who would get fired if those deals had not worked out. ME.

Did I do a good job on negotiating my Gresham 'EXIT'? Well, almost six years later when my VILLAIN - thanks Heather Monahan - 'Dennis the Menace' (DtM) former Gresham CEO parted company with Gresham PE he called me up ('right outta the blue') and warmly commended me on the lawyer I had used, Tina Williams of Fox Williams, all those years earlier. DtM then unashamedly requested Tina's mobile number (so that she could defend his position). Cheeky? I went along with the game, by this time I honestly didn't give a sh*t, but at least Tina would get another deserved payday and the guys left at Gresham (that would lose out when Tina admirably defended DtM) had all conspired in my 'bloody demise' six long years earlier. Most executives simply by idly condoning 'the crime', three guilty parties by actually voting for it.

Let's not forget some extraordinary deals that DtM rejected at the last minute after we had done all of the due diligence. The most prominent being Virgin Active (VA) a Spring 2001 proposed j-v with Sir Richard Branson of the then 6 VA (trading) gyms in the UK plus a further 80 or so trading gyms in S Africa that VA was in the process of acquiring at a very attractive value (b/c at that time S Africa was perceived more widely as being far more politically risky than it would be today).

Frankly, today I see 'little Britain' (a virtual Banana Republic these days) as being at least as politically risky as S Africa (from a macro perspective), but don't get me started on Brexit - did I mention my Irish passport application is well underway? And if you think I'm exaggerating the downside for Little Britain, check out Ray Dalio 's book The Changing World Order (see notes) which charts Britain's steep decline since the late 19th Century, around the time Queen Victoria died. Brexit was highly unlikely to turn that vertiginous decline around.

Back to Gresham, Spring 2001, let's estimate the capital gain foregone by missing the VA deal ? Probably well over ￡100 million - think I'm kidding? Bridgepoint stepped in a year later in 2002 and partnered VA, subsequently selling its stake for ￡134 million in 2005. DtM's pathetic withdrawal a matter of 'ancient history' by then. So what was the rational for 'Credit Committee''s decision (don't for one second believe this was anything other than one autocrat DtM rejecting VA)?

DtM claimed the returns were 'not adequate' - this was a completely irrational and unsubstantiated claim - the forecast returns approximated to 3.5x cash on cash in the Final Credit deal financial model. So you know, >3x cash on cash was ahead of many deals that got approved before and after.

THIS WAS ALL ABOUT POLITICS. DtM couldn't stand the idea of being over-shadowed by Sir Richard. DtM is a narc. He needs to have ALL of the limelight. That was the REAL reason. However, despite single-handedly rejecting the deal right at the final hour with ￡100k plus of due diligence costs 'on the clock', DtM still had me call Sir Richard. Don't shoot the messenger I was thinking, as I dialled his mobile telephone at a pre-arranged time (as his flight was due to be landing in Johannesburg).

As you would expect, Sir Richard was polite and professional - it was a maximum 2 minute call. All dealt with in the best possible taste (as Kenny Everett would have said!).

I recall coming into the Gresham London office super early to collect my personal belongings one Monday in late December 2008, a few days after my 'leaving drinks' always a weird one when everyone knows you've been FIRED, whatever the actual legal terminology was, is irrelevant. Face it. I was fired. It felt depressing and lonely after 9 years building up a $1 bn AUM PE fund - an achievement I was rightly proud of in late 2008 even though back then I didn't appreciate the enormity of my personal contribution. That appreciation has come with retrospect.

Despite leading over 30 acquisitions in 15 individual 'investee' companies and making two-thirds (nearly ￡240 million of self generated capital gain) of the entire capital gain the various Gresham funds had made in the intervening nine long years, working alongside the narc, DtM, I was now officially out of work and on gardening leave (a non-compete arrangement) under a consultancy agreement for a period of 2 years.

My COMEBACK? By late October 2012 together with Darren Gibson and Jerry Wilson the Private Debt (Credit) fund that I founded in September 2009, Palio Capital, had built a book of firm orders with Oriel Securities Specialist Funds team of c.￡135 million for a dual stock market listing in London and Guernsey.

Why Guernsey? As a Credit Fund our target returns were 1.6x cash on cash, irr = 14% and we needed to attract 'off-shore' investment trusts. Any off-shore territory could have sufficed (eg. Luxembourg). Unfortunately we chose Guernsey. Why "unfortunately"?

Tune-in tomorrow and I will explain how a potentially borderline 'alcoholic' and incompetent regulator (code name: Tricky Nikky - yes you know who you are) fcuked up the IPO we had painstakingly prepared at a not insubstantial investment of time (over 3 years) and money (> ￡1 million personally on the line).

To put our achievement in perspective, the enormity of what that team achieved, with no actual business ONLY an (extremely granular) business plan for a new Credit Fund: liquidity was still tight in the London and international capital markets post the 2008 crisis - the largest new listing (IPO) in London that year raised under ￡70 million.

#management #scaleups #privateequity