Me And My Partner: Howard Leigh and Hugo Haddon-Grant
After a bad day at work, Howard Leigh phoned fellow accountant Hugo Haddon-Grant and suggested they launch their own business. A decade later, Cavendish Corporate Finance employs 16 people and has sold 100 companies
Wednesday 03 March 1999
One day Hugo and I had lunch; he was on the other side of a deal. My impression was that he was competitive and fairly tough, but easy-going. He suggested that we set up our own business, providing a service for vendors only. I enjoyed lunch tremendously and after the appropriate number of bottles of wine, I thought, "That's a good idea".
Six months later, I had had a very bad day and disagreed fundamentally with the strategy Deloitte's were taking, so I phoned Hugo and said: "Remember that conversation? Do you want to pick it up again?" He said: "It's funny you should ring - I have just handed in my notice. Let's meet." We met on the Wednesday. On the Monday, I handed in my notice.
This was the heady days of the late 1980s; we were Thatcher's children and you felt you could walk on water. I remember being quite forthright with Hugo and thought to myself, "There's no downside here". I realised that a large organisation - although there were some excellent, bright, talented people there - was not what I would be comfortable with. I also realised I was earning my employers vast sums by bringing in the work from my own contacts.
Somebody gave us two rooms in Cavendish Square: we were amazed the name Cavendish was not already taken. The acid test came when I went to say goodbye to one of the partners at Deloitte's and he asked where I was going. I said I was joining Cavendish Corporate Finance, and he said: "Very fine firm." Coming to the West End was fantastic and has made my life so much more enjoyable - our clients much prefer it, and when we started there was an enormous buzz.
The thing about acting only for vendor clients is that every single piece of work is fresh. We knew we had to go out marketing. In fact, the first real bit of work we had - for a business called Coopers Walking Sticks - came knocking on the door. It was a 120-year-old business owned by a couple who wanted to retire. We have never spent so much time on one deal than on that one. But the owners came to my wedding last year. That's the nice thing about what we do - you form very strong relationships.
I took on the responsibility of bringing in work, contacting people and talking to them. Hugo took over the financial obligations. He is very competent at making sure transactions pay. The two tricks of our trade are, first, to identify the buyer, then to get the deal through. Hugo is very good at getting that done, although it's a fraught experience for most people. It's nerve-racking - they have never been through it before but a purchaser has, and is skilled at hitting the price at the last minute. The vendor doesn't know what to expect, what they can give and what they can't; what is a fair price and what is ridiculous.
A little bit of our job is keeping the vendor on the straight and narrow, but most of it is making sure the purchaser delivers, and if he doesn't, that others will. It's about judging how hard to push a purchaser and judging whether to go out and seduce another purchaser. In the sale process, the first thing is to understand the business; it's key. Then you have to assess where the purchasers are likely to be. The most important thing is the order in which you contact purchasers: there's no point talking to your competitor till you have talked to the people far away from the business, who take time to think strategically about whether they want to invest. Within three months of setting up, we knew things were okay so we recruited a researcher. We also spent a lot on resources and databases, ones that would help us to find buyers.
We had said that for the first year, we would work without salary. We lived off fees, which meant it had to work. For the first five years, we sat in the same room and that was brilliant because you overheard each other's conversation, every single word. I enjoy living, breathing and thinking about the business all day, all night and all weekend. It's part of me. Hugo likes to switch off. He'll spend a Saturday fishing.
If I had started up on my own, I would have been bust within a week. I would have invested in all sorts of things I didn't need. Hugo is more measured and, curiously enough, slightly harder on fees. I tend to be harder and more aggressive for clients than to clients. He will stop me agreeing a fee and say, "Hang on, it should be more than that", and I'll see he's right. We talk about where we are in deals all the time. The first year, we spent every Sunday on the phone.
Things were difficult in 1992, but we came out of the recession because we hadn't built up overheads. Hugo is clever. We had a two-year break clause for our rent, which Hugo persuaded our landlord to accept in 1990, so it went down dramatically, which had a huge impact.
In the first years, we operated slightly differently: now, we almost certainly have the same response to a problem. We often meet clients together and work out who would be best to deal with it. Hugo has got the measure of who I am. I think he finds me challenging because I am the person who, if given six, will want 12. I push things. I would not want someone like me as a partner, but he knows I need him, and he needs me.
HUGO HADDON-GRANT: I felt Howard was somebody I could do business with. I got on well with him and we came across each other on one or two deals. When we had lunch together, we discussed the idea of setting up in business. I was working for a small corporate finance house: I had qualified as a chartered accountant with Grant Thornton and spent time focusing on mergers and acquisitions, which is now much more of a discipline than it was then. As the 1980s progressed, the idea of people selling their businesses became more acceptable and common. Entrepreneurs realised that they had built up a value and these companies were saleable in their own right: I think that was the result of the unlisted securities market. It meant medium-sized private companies could float, and raised awareness.
I enjoyed mergers and acquisitions, but felt I could make more money doing it for myself rather than for somebody else. I had never felt I was a good employee - I always wanted to do my own thing. After I handed in my notice I had one or two irons in the fire and could afford not to work for a few months. Howard hadn't pursued our idea because of family issues, which prevented him thinking about it, but then he phoned and said: "Are you still up for it?"
We were more successful in the early years than we had expected and we had our fair share of luck. I was looking after support and administration involved in setting up a business, and Howard, being more of an extrovert, was on the marketing side. He comes across as being able to provide the support that the client needs, and understands what those needs are. I was quite happy not to front the business as much as Howard. As our relationship has developed, our overall roles of managing and marketing the business have remained. Howard would be the first to admit he would not be terribly good at the sort of admin that is a necessity.
Selling a business, for most private company owners, is probably the biggest single economic decision they are going to make in their lives. When someone sells, that's his future security. The sale is also an emotional decision.
Our role is obviously to get the best deal for him financially, but it's not always the driving or determining factor. Some people are very keen that their staff are looked after or that the buyer isn't going to sack everybody and relocate to London. Quite often, you are the only person who knows what's happening, because the client can't talk to employees. You really have to be able to manage that emotional side.
You have to have tenacity to get the deal through, to ensure that people carry on talking: there are times when both parties will walk away, and your job is to identify the common ground.
I'm probably harder than Howard in negotiating fees for Cavendish, but there's not a lot of point in doing the work unless you get properly rewarded. I'm also probably harder at looking at deals that I don't think we can complete, and where you would have an unhappy client. We have certainly developed an instinct for that, and we are becoming more selective.
Where a business is wholly focused on two or three people, perhaps the owners, it's very difficult if it is below a certain size, because when those people have received several million pounds, it's difficult to persuade a buyer they will still have the same motivation.
Now we have to delegate quite a lot, particularly when it comes to operational issues. That's a different skill, and something we are going through. There's no set plan where we've said: "In five years, we are going to sell the business." We would like to continue to grow it because there's still a very substantial market.
I value Howard's ability to see business opportunities. He has a considerable talent and he's much more adept at working a room than I am. Perhaps he's learnt from me not to rush at things too hard and fast before thinking them over a bit. He is probably frustrated at times that I am somewhat too cautious, but I think we complement each other. If we disagree, it works its way through the system. I think you need a bit of friction to generate ideas and keep things moving.
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