In an 18-month period in the years 1993/1994 Irish venture capitalist and entrepreneur Pierce Casey was the driving force behind the making of a profit of £9 million (#11.4 million) on an investment of one French franc (15 euro cents). Here's how he did it.
First of all he discovered a French computer distribution company called Omnilogic, which had annual sales of $250 million (#240 million) but had made a $10 million loss in the previous year, was in debt and needed investment. Mr Casey decided the company was ripe for being turned around and then sold to a larger strategic partner. If the plan worked he would make a killing.
Working with the multinational venture capitalist, Apax Partners, he bought the company for one French franc and assumed its debts. He was 37 and the deal was a significant opportunity. In general the rule with venture capital is to back management in which you have confidence and let them get on with the job. However, in the case of Omnilogic, Mr Casey was wearing his entrepreneurial hat.
He began to devote a significant amount of time to implementing his plan. Omnilogic had seven different component companies and his first move was to close the two worst loss-making members of the group. He implemented a cost-cutting exercise in the remaining subsidiaries, got rid of the group's head office, and introduced a narrower or more focused product line. He also introduced more active management of the group's working capital, reducing stock held and the company's debts.
The company was brought to the point where it broke even and was, therefore, strategically attractive to a larger entity. It was sold for £9 million. Mr Casey's strategy of developing the company, with a view at all times on exit, worked perfectly and the French business press gave considerable coverage to the achievement. Apart from the profit it brought in, the success had two other effects: it cemented his relationship with Apax and introduced him to computer distribution in continental Europe.
Both of these factors were important in another profitable venture Mr Casey and Apax got involved in. He set up Fayrewood, an acquisitions vehicle which focused on the distribution of computer parts in Europe. Mr Casey's initial stake in the company was £50,000 sterling (#75,988).
Fayrewood was floated on the London Alternative Investment Market (AIM) in July 1996. It bought the Paris-based Banque Magnetique and Munich-based ComputerLinks, both involved in the distribution of complex computer parts. It also acquired the British distribution division of Interface Systems International.
The share price of Fayrewood rose strongly as its profits grew. Mr Casey took part in the various share placings by the company, at a cost to him of a further £650,000 sterling. His shareholding, which was 46 per cent in 1996, fell as a result of the various share issues, and is now at 15.3 per cent. However, the value of the company has grown hugely.
ComputerLink was bought in December 1997 for just more than £3 million sterling in cash and shares. It was floated on Germany's Frankfurt-based Neuer Markt in July, after its managing directors were given a significant stake. It now has a market capitalisation of £80 million, meaning it has a higher capitalisation than its British-based parent.
Fayrewood owns 53 per cent of ComputerLink and Mr Casey owns 15.3 per cent of Fayrewood, which makes Mr Casey's stake in ComputerLink worth £9 million. His stake in Fayrewood is worth a further £6 million, so his sterling £700,000 investment could be said to have grown in value to £15 million.
Another way of looking at it, simply multiplying the number of his Fayrewood shares by their current value, gives a hard value of £8 million sterling to his stake. Still not a bad result after three years. And both of these calculations afford no value to the Fayrewood businesses in France which have a combined turnover of £8 million and are expected to be floated on the French Nouveau Marche in Paris or in the Neuer Markt later this year.
His success at spotting opportunities and making huge profits, are the kind of business activity Mr Casey must have dreamed of when he was a BComm student in UCD. He graduated in 1976, joined Craig Gardiner and qualified as an accountant after only three years. After contacting a London recruitment firm he moved to Bermuda, where he worked with KPMG. The move saw his salary jump from £3,500 to $28,000, tax free. It also further steeled his desire to work in the world of high finance.
In 1982, he moved back to Ireland to take up a job with the Dublin-based industrial holding group, DCC. He worked with the company for six-and-a-half years, the last two in London. In 1989, he left, cashing in his DCC options to fund his stake in Equity and Corporate Finance, a venture capital company he was starting up along with an unidentified backer. At times the going was rough, but by 1993 the company was making significant profits from its investments. And then Mr Casey stumbled across Omnilogic.
Omnilogic was not his only lucky break. When in London he called on the recruitment firm which had placed him with KPMG in Bermuda and got speaking with two executives who were interested in starting out on their own. He put £50,000 into the company in return for a one-third stake. Last year the company, Walker Hamill, was taken over by the Marlborough group for £22 million. Mr Casey's share was £7.5 million.
Last year, Mr Casey opened an Irish office of Apax Partners. It is the largest venture capital company with a base in the Republic and has very deep pockets indeed. Apax operates funds totalling $5.5 billion and has recently announced a $2 billion pan-European fund to be invested over the coming three years, with essentially no limit on how much of that can be used by the Dublin office.
Internationally the fund will concentrate on information technology, telecommunications, retail and consumer, media, healthcare and financial services, though the Irish brief may be broader.
Its first two investments, of £3.6 million in Belfast-based Integrated Silicon Systems Ltd and £10.4 million in ENBA, the Dublin-based Internet bank and brokerage service, were significant. However, two weeks ago it was disclosed that Apax was involved in a $150 million buyout deal. Swedish company Global Refund was bought by its management, in partnership with Apax and the Co Kerry company, Fexco, in a £118.13 million deal. Global is the world's largest VAT refund services company. The Apax involvement is understood to be $50 million.
Venture capital companies generally expect a return of more than 30 per cent and the market norm for leading companies is to pay fund managers 20 per cent of the capital gains. In other words, the profit to the Apax Dublin office from the investment in Global, if it makes the expected 30 per cent return, would be $3 million per annum.
As well as the large, complex investments being made by Apax, Mr Casey personally is involved in smaller investment projects involving Irish and British companies, a factor he believes complements the Apax activity.
His involvements are known to include syndicate deals with other successful entrepreneurs. Mr Casey and financier Dermot Desmond, through their company Beechworth International, own a 26.6 per cent stake in Unidare and were unsuccessful recently in a bid to persuade shareholders not to approve a US acquisition. It is generally believed they would have made a bid for the company had they been successful in their appeal to the shareholders. But a bid may yet be made, depending on developments.
Mr Casey has a shareholding in Belfast-based Lamont Holdings and the Jones group, and has a private portfolio of early-stage Irish and British companies, mostly technology firms. He is based in Dublin but spends a lot of his time travelling.
And even though he has made so much money he shows no signs of settling back to enjoy his wealth. The thrill of putting deals together, and making huge profits, has yet to fade.
