Fifty Percent for Nothing Then Option to Control

"But equally, successful people say no often too. At least, that’s according to Warren Buffet. Just because an idea is interesting doesn’t mean it’ll be successful, especially if the odds – contracted or otherwise – aren’t in your favour. Sometimes it’s better to walk away. But fast-forward six months, and the power guys came back. They’d been making a further go at things in the meantime but hadn’t secured another investor, so the lawyer member of the pair called up to ask whether there was any chance at all that I was still interested. ‘I suppose there’s always a deal,’ I answered, before adding, ‘I’d do it if you’d give us half of it for nothing.’ The guy was silent for a minute, thinking, before he simply said, ‘Keep talking.’ So, I did – all the while thinking, Oh hello, we’re on here, with surprise. I outlined what I thought would be good terms: They would hand 50 percent of the company over to us, and we would fund it from there – putting in the working capital required to run the business. Plus, we would retain the option to buy another 26 percent of the company later, if things went well. I was futureproofing with that last clause. I knew that if we had more than 75 percent of the company, we had a stronger position and more control. We wouldn’t then need to ask minor shareholders to vote on special…"

"I told him about Empower. Paul predicted a land grab. The way he saw it, it was also only a matter of time before others entered the market in the same way that we were, so his advice was to go really big, really quickly. Get ahead of everyone else. ‘Don’t muck around with this,’ he cautioned. Right now, there was very little opposition – only the legacy power companies – so we had a chance to get market share off them. Paul thought we could become a major player in the industry, but it would all come down to acting fast. ‘You need to go really hard,’ he added. If we didn’t, we risked never achieving scale and, in future, being swallowed. I could see Paul had a point. I countered that we didn’t have the money to scale that aggressively. ‘I’d be keen,’ he replied, suggesting that he round up some other investors and pull a small consortium together. He did, and we sold 20 percent of the company to Paul’s group of investors, which gave us an injection of capital to really get stuck in and grow things fast. Leaning on my ‘speed hiring’ experience at Telecom, we quickly installed 100 salespeople into the business and had them get to work. We had teams in malls, others door knocking – all backed up by television advertising to support what we were doing. TV had worked well for us over at Netco, after all. For over a year, I had a foot in both camps –…"

"We were in our early thirties, so why not? Eric suggested I buy into Blue Star and that we’d make bank in no time. Naively, I didn’t question what he was putting forward when he offered that I could buy in at seven-times forecast earnings before interest and taxes. However, his plan was not without a couple of snags."