Diary of an MBO
For executives dreaming of escape, buying the company they work for is a popular route to self-determination. But what's it like? Julian Hough of newly independent advertising agency WCRS shows Dominic Mills his.
As he cycled in from Blackheath to Soho on 22 April 2003, 41-year-old Julian Hough, one of five top executives running advertising agency WCRS, knew he could be in for a momentous year.
His dilemma was one faced by most successful business people sooner or later. Should he sign up with his current employer - WCRS parent company Havas - for a few more years, or head off for a new firm and a new challenge? After 21 years in advertising - the past few at WCRS having been phenomenally successful, with work for BMW, First Direct, Debenhams and the 118 118 runners campaign under his belt - he knew he wouldn't be short of offers if he left. But most would amount to more of the same for a different multinational holding company.
Besides, he really liked his senior WCRS colleagues; together, they made an unusually stable and cohesive top team. At 59, legendary founder Robin Wight was still going strong; chief executive Stephen Woodford, 44, had been there eight years, his second time at the agency; creative director Leon Jaume, 48, was on his third spell at WCRS; and planning director Debbie Klein, 35, had been there six years.
How could he find the challenge he craved but continue working with the colleagues he liked and respected so much? Little did he know that those very colleagues were also considering their options, and that the solution to their joint work dilemma might be a management buy-out.
22 MARCH '03
Stephen and Robin call me in, looking incredibly excited. They have decided that the time could be right for WCRS to buy itself out from Havas. Like everybody in advertising, we've entertained thoughts of doing our own thing, whether a launch, a breakaway or an MBO. Now it might become a reality.
'We want to do an MBO,' they say. 'Do you want to be part of it?' They have already made contact with Peter Scott (one of the co-founders of WCRS and, having taken WCRS public in 1984, well connected in financial circles). Scott also believes the time is right.
I'm pleased he is on board. He's successful, he understands advertising, and he speaks finance to a level that none of the rest of us can claim to. The plan is for him to take a stake, too.
From the prospect of limping towards another personal five-year contract, I feel instantly excited. I will have to take hefty cuts to salary and pension, but at home Catherine (Hough's wife of 15 years) is immensely supportive. She can see what a difference the prospect is making to me. As a doctor in the NHS, she is exceptionally grounded - a useful antidote whenever I spout adland rubbish.
Things are moving fast. With Scott, we appoint LongAcre Partners as our corporate finance advisers and Osborne Clarke to handle the legal side.
We meet LongAcre's Jonathan Goodwin and Marcus Anselm - they specialise in media deals, so that's a plus. And they are based in WCRS's old office in Covent Garden. They've christened this Project Cruise - not sure whether this is Cruise as in missile or relaxing, sun-drenched, ocean-going holiday.
Leon and Debbie are also in, and we all decide to meet for breakfast every Monday morning. We are the obvious five, as we represent all sides of the business. There are others we want to involve, but at this stage we keep it as tight as possible - we don't want news to leak.
Osborne Clarke take us through the contractual and other obligations we must continue to observe - salutory. We must ensure at all times that we don't infringe our duties as directors.
Heavy meeting about process, strategy and pricing. I'd like to say I am getting familiar with the jargon, but in truth I'm just faking it. …