Lowdown: 'Liquidiser' who became a 'husky'

From Millwall to Le Meridien, Simon Freakley throws a lifeline to troubled companies. As Jason Nissé reports, he also walks with gumshoes
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The Independent Online

When Simon Freakley was a young, newly qualified accountant, he was sent in as the liquidator of a small chain of nightclubs. As one of the few people who actually dreamt of going into the insolvency profession, he was proud of his new job. But he soon came down to earth when he overheard a receptionist telling a creditor: "You'll have to take that up with the liquidiser."

Less than 20 years later, the liquidiser has come a long way. Last week he was appointed to one of the highest-profile receiverships this year, taking charge of the 11 UK and Irish hotels operated by Le Meridien, which include London landmarks the Grosvenor House and the Waldorf. As global head of the largest independent corporate recovery firm in the world, Kroll Buchler Phillips, Freakley has also just become the first non-American to join the board of Kroll, the US group best known for its private detective work. The tall, chatty 41-year-old opera buff couldn't be less like a spook if he tried.

The business he runs employs over 400 people, mostly in the UK and US, and is the largest and most profitable part of Kroll, which these days is valued at nearly $1bn (£620m) on Wall Street. It has worked on corporate restructurings as diverse as Le Meridien, Millwall football club, Budget Rent-A-Car and the giant US car parts maker Federal-Mogul. One of Freakley's partners, Stephen Copper, is currently acting as interim chief executive of Enron while it is in Chapter 11 bankruptcy proceedings in the US. After the "big four" accounting firms, Kroll Buchler Phillips is the largest corporate recovery operation in the world.

"A lot of bankers call us the fifth force," claims Freakley, speaking shortly before one of those bankers brought him in at Le Meridien.

His ascent started when he lost his job at a boatyard in Cambridge in 1981. He had grown up in the boat-building industry - his parents ran what he reckons is the most inland boatyard in England, at Stone in Cheshire, where the River Trent meets the Trent & Mersey Canal. As a summer job, while at Birmingham University, he went to work for a friend of his parents who built boats in Cambridge. But the business ran into trouble and receivers were appointed while he was there.

"I got an insight into how receivership works and I found it fascinating," remembers Freakley. This fascination endured even though he was one of the people laid off.

Freakley did his homework and discovered that if he joined Arthur Andersen as an accounting trainee he could specialise in corporate recovery. He was at the accounting giant for nine years, learning the business at the sharp end. He remembers one occasion when he was the receiver of a company that made wellington boots for cattle. "They thought it would be a solution to foot and mouth, but it didn't catch on," he says. "We were left with hundreds of wellington boots, with no toes. The stock was worthless."

He left in 1992 to join the burgeoning specialist firm set up by two former Andersen partners, David Buchler and Peter Phillips.

Just over three years later, with both of the founders taking more of a back seat, Freakley became managing partner.

Given his Andersen roots, how did he feel when the firm collapsed after becoming mired in the Enron scandal? "I felt extremely sad. The UK practice was an excellent firm and I had lots of friends there. I can only assume certain elements of the US audit practice were not of the same standard.

"I don't think anyone in the accounting profession took any pleasure in what happened to Andersen, but by the same token it has created a lot of opportunities for an independent firm like us. What has happened is that there has been a structural change in the profession. It is becoming difficult for the big four because of the inherent conflicts of interest. Indeed, the SEC [the US financial regulator] is looking very closely at how providing restructuring services can be consistent with audit."

Kroll Buchler Phillips increasingly finds itself in the happy position of being the only firm able to take on some jobs. The big four - PricewaterhouseCoopers, KPMG, Ernst & Young and Deloitte & Touche - will often have either audited the accounts of a company or provided some other service, such as taxation advice or consultancy. These days, even advising a bank that is a big lender to a company may put an accounting firm out of the running to advise on its restructuring. At the same time, few of the other independent firms have the resources that Kroll Buchler Phillips can dedicate to big cases.

An example of the firm's unique position was provided when Freakley was brought in to be the administrator of the European side of Federal-Mogul. Kroll Buchler Phillips beat off three others bidding for the business - two of the big four firms and a smaller independent rival.

"There may be more specialist practices entering our space but the Canadians have an expression: 'The first husky in the pack gets the best view'," laughs Freakley.

Kroll Buchler Phillips is not only the lead husky, it is about 10 years ahead of the other huskies. When Freakley joined Buchler Phillips in 1992, he became its 25th employee. By the time he sold the firm to Kroll in 1999, it employed 160 people in five UK offices. After buying US firm Zolfo Cooper last year, the operation now has 400 staff in six different countries.

Kroll's takeover came as the result of a phone call made by Julius Kroll, the private detective agency's legendary founder, to Freakley while Buchler Phillips' managing partner was taking an executive course at Harvard Business School in 1997. By coincidence, he had been studying the way in which US multinationals use the UK as the base for their investments in Europe - largely because they feel they can understand the language and the law. Because of this, he thought there might be a lot of business opportunities in sorting out the European arms of US businesses that were restructuring. (The statistics bear this out: of the 10 largest companies filing for Chapter 11 bankruptcy in the US in 2001, nine had significant UK businesses.)

Julius Kroll wanted to expand into corporate restructuring. During the 1990s he had moved his company away from its traditional "security consulting" and "business informational consulting" roots, and into areas such as pre-employment screening and computer forensics, where Kroll people will retrieve information from computers, usually after major systems problems.

The old gumshoe saw Buchler Phillips as a good vehicle for this expansion and suggested the two had dinner. Though there seemed to be a good fit, it still took two years from the first meeting to the eventual takeover. "We had some misgivings about the Kroll brand," admits Freakley. "But we then discovered Kroll had worked for 237 of the 250 largest companies in the US. The other slight concern was how it would be, after owning our own business, to be employees."

Ultimately, the switch has proved relatively painless. Only one of the original 18 partners has left, though David Buchler has retired to concentrate on his chairmanship of Tottenham Hotspur football club. The corporate recovery business is now the largest operation within Kroll.

As last week's appointment at Le Meridien shows, the liquidiser is enjoying his role as the lead husky.

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