In This Issue
Oct 2009An Interview with Pieter Van Beeck
In this issue of the CDI Global Newsletter we interview the managing director of one of CDI's strongest offices, CDI Global, Australia-New Zealand, who points to attractive opportunities in the mining and high voltage industry sectors.
CDI News: Let's start with a little bit of history. When did CDI first come to Australia and New Zealand?
Pieter: I got to know Bo Hjelt, who is our founder,
back in about 1986. At that time he asked if I would consider just representing
him on a peripheral basis in Australia. I had a couple of discussions with him
over the next eighteen months, and it was round about the beginning of 1988 that
I got CDI Australia running. And, oddly enough, I helped grow CDI in Asia, too.
I helped set up offices throughout the Asian region, including trying to set up
a South African office, which is my personal background. It was only about 2000
that I started to grow CDI Australia, and from then on, I've never looked
back. It's now a very strong entity and arguably one of the strongest
offices in CDI.
CDI News: Can you say more about the business trends you've seen since 2000 and how you've managed them?
Pieter: First, I'm a firm believer in this principle on a worldwide basis that when there is a downward movement in the market, more sellers emerge, and when there's an upward movement in the market, more buyers emerge. So it's very important to ensure that your networks are kept alive all the time and that you keep that sort of basis in the back of your mind in order to ensure that your business stays reasonably constant through these sorts of periods. Secondly, we don't limit ourselves to any industry sectors. We have industry capability, but we don't rely on that alone. We tend to use the true form of company search. When we go to a client, we say to them that what we are good at is to match you with your targets. We don't profess to know how to make his widgets or how to string a power line across a country. We may know, but we don't harp on that. Rather we say, this is our strength; this is what we do; and we stick very much to the knitting.
CDI News: Can you tell me a little about the market itself for company
search? What kind of companies are you dealing with? What kind of industries? What kind of opportunities are there?
Pieter: While we don't limit ourselves to any industry, we do find, though, that in one year you might be very focused on the food industry or in another year the chemical industry, and you may not then touch an industry that you were busy with this year for several years to come. We find that we get mandates on the back of the work that we do for clients. We tend to pick up mandates by way of contacts where we've executed a mandate successfully and then that yields mandates in other lines. Whether that is in one industry or another is irrespective of what we provide as a service. Our service is only company search in its true form as defined by Bo Hjelt many years ago. What we sell is our ability to identify the right target by way of a headhunting approach as opposed to any sort of financial analytic approach. In that way, we very clearly differentiate ourselves from business brokers and the investment bankers.
We are also very focused on the middle market and our definition in Australia of the middle market is companies of probably not much less than USD 10 million and not much more than USD 150 million. From time to time we get a big company that comes in, but it's a division of the big company that we then help. We also tend to shy away from loss-making companies because it's too hard to sell them.
CDI News: What kind of year has it been in terms of the M&A market?
Pieter: In the last year we've been looking at opportunities in the beauty sector and in the publishing sector. But it's not time to say, well, there's one sector that came out of the global financial crisis stronger than another.
As much as industry trends, another factor influencing activity in the middle-market area is that managing directors in middle-market-sized companies don't have the time to look at M&A opportunities themselves. They are too busy running their own businesses, and they don't have the support staff generally that they can use to do what we do. We try very quickly to relate to the owner of a company. If you go into a flour mill, he's usually covered in flour. If you are there in a jacket and tie, it puts him off immediately, and so we research our owner to find out what he does in his company, how hands-on he is, and only when we know a little bit about him do we go there, literally appropriately dressed, armed with the background that we know will trigger his green button in the first two minutes. Because you only have two minutes with these people -- maybe five if you're lucky -- to trigger his button and convince him that he should be listening to you for half an hour because the moment his eyes glaze over, you're wasting your time, and you're wasting his time.
CDI News: What are the "green buttons"? Or do they differ from client to client?
Pieter: In the game we're in it is all about
people. It's knowing how to handle a person who's very busy and
knowing how not to waste his time and knowing how to open his mind to a message
that you'd like to pass onto him and hold his focus on that message.
If you can understand the person you're dealing with and match him with a live
person in the execution stage, that is 50% of the battle of matching
companies. The other 50% has got to do with whether his numbers ring true.
Are his profits what he says they are? But my job is matching people. It's
a match maker of people.
That's really what it is. If the receiver and the guy who's trying to sell whatever he's trying to sell matches with that personality, you've won at the end of the day because you can sort through all of the issues that might come up because you know there's good will, they trust each other, and that's what it's about.
CDI News: When you go out and you talk to the people in middle-market companies, do they talk to you about what concerns they have today about running their businesses?
Pieter: It would be very true to say every company has
its own concerns and its own challenges, and, yes, it's often that we get pulled
into these discussions because we've won the confidence of the owner or the
managing director of that company to the extent that he starts asking us
questions about what we think he should do about certain problems.
It could be competitors that are beating them about the ears, and they don't
know how to handle the competition. It could be identifying issues with not
knowing where to look for a solution to production-type problems. Then we say,
"Look, in our travels, we've met such and such an engineering company, or this
company might be able to help with certain technology." So we constantly feed
them information by way of referring them to the right targets.
CDI News: Are you dealing mainly with
companies in the Australian and
New Zealand markets? Or are you finding companies from Europe, North America and Asia looking at Australia and New Zealand companies?
Pieter: It depends on who you talk to in our company here. Some of us like to work with international companies, and others of us focus more on companies here at home. In either case, it is important to be regularly in front of your client, not by way of a telephone call but by way of meeting him in his office or the restaurant or wherever he chooses to meet. You have to be there to read the body language and properly serve him. You have to be there to understand the issues he's going through, and you have to be there to make sure that you can manage the situation.
CDI News: Are there any particular sectors that are of interest to international investors and international companies?
Pieter: The mining and the manufacturing
sectors or parts of
the manufacturing sectors are of great interest to overseas companies. You then have a number of service sectors such as, for example, high voltage electrical power -- the transmission of power from the power station to the cities. That particular sector is a very strong sector and demands the attention of big companies, be they in Australia or international. Then you get sectors like the automotive, which is struggling in this country and will probably struggle for many years to come. That would be a sector that I would say you'd have to search quite diligently to find something that could be of interest to overseas companies because it's shrunk over the years. And it's very reliant on Australian-government financial support. So, it's not one that shines out.
You have to understand Australia and what Australia's good at and then relate that to entities that are based in certain countries. The sugar industry, for example, is strong in Australia, so the sugar industry's one that you say, well, go to Brazil and go and look for opportunities in Brazil because the sugar industry is one that you could do with that country. So what we tend to do is match an industry sector with a certain country.
CDI News: What are some of the aspects of dealing in Australia that are different from other countries such as the United States or Great Britain or China? What makes Australia Australia, I guess, is another way of saying that.
Pieter: I think Australia by comparison to
countries like the U.S. and a
number of countries in Europe is a small country in terms of the size of our companies. But when you compare it to other countries such as Brazil and Spain and Italy, then we tend to come into our own, and we would be very much similar to what you find there. So in the U.S. you'd find that you probably deal at a higher level -- meaning companies with higher turnovers.
In Britain I would say that we would deal in a similar way to what we deal with here in Australia, even though the British economy is bigger and the population is a lot larger than what we have in this country. Then compared to Germany and Holland and many of those sorts of northwestern European countries, we have a very relaxed way of dealing here. Just to take a small example, we don't have to wear a jacket and tie to a meeting. We become very direct with one another here, whereas in Europe, there are rules that you have to abide by, and you can't necessarily circumvent those rules. You have to understand your markets to be able to deal successfully in the market. So what I'm describing for Australia obviously won't fit with the German way of doing business. It may not even fit with the U.K. way of doing it. But it is our way of doing business, and international investors need to understand that if they are going to deal successfully here.
CDI News: Are there natural trading partners with Australia, natural lines of trade and investment where you're likely to connect with one set of companies and countries more than you would another?
Pieter: Actually, the countries matter less than the specific companies and business sectors that they are in. Take the example I gave you of the sugar industry and Brazil, and you see that we do business sector to sector, more than country to country. We can do business with China, Japan, Brazil, South Africa, any place you want to look, whether it's the Middle East or Russia or wherever, it just depends on the sector.
I'll give you an example. We're working on a high voltage roll up. Our definition of high voltage is voltages that go from six thousand, six hundred volts to the limits in countries. In Australia, the limit is five hundred and twelve thousand volts. Usually that encompasses transmission and to a certain extent distribution. There is a need in this country to roll up small- to medium-sized companies because these companies can't in their own right offer the products that a Siemens or an ABB offer and are at the beck and call of the Siemens and ABBs because they're smaller. So there's a level of frustration where these small companies want to grow. They don't know how to grow in their own right, so there's a roll-up opportunity. I've now spoken to the office in Switzerland about it. If we can roll this kind of company up into a two-hundred-million-dollar company, then companies like Siemens and ABB will take note, and they'll probably buy for multiples far in excess of what we are going to put the thing together for. So that's one industry example that we're working in at the moment that we can very well take overseas.
There's another one that I'm working on in Norway where we have identified a
company that has a technology in the oil and gas sector where it lays
telecommunications cables from a land base to a water platform, and apparently
the technology is extremely good and highly innovative and could result in the
oil platform virtually running without any people. So that's an exciting
opportunity and another example in the oil sector where in this instance the
Norwegians are coming to us to say "can we help."
CDI News: This current recession has affected North America and Europe fairly badly. Has it affected Australia in the same way?
Pieter: No, it's been a lot
better. Australia's a lucky country, and it lives
up to its name. Technically by the definition of a recession we have not had a recession. We have not been in a recession, and it's true to say that we are moving very strongly upwards at the moment. It's an exciting time.
CDI News: Does that make Australia attractive as a kind of safe harbor for companies in other parts of the world, thinking, well, we're going to try to do business in Australia because Australia looks like it's got a solid economy, and we want to have at least a piece of our operations over there?
Pieter: Let me answer your question from a business, and then a more personal, standpoint.
From a business standpoint, you get two arguments about investing in Australia. On the one hand, Australia is a market of 20 million people. It's geographically as big as the United States. We've got arguably six key cities in which 80% of the population resides. The problem is that if big companies, or even what we would call large medium-sized companies, want to invest in Australia, the turnover in Australia by comparison to what they might turnover in Europe or America is probably not very great. We're probably only 2% of the global economy or less. So you get these arguments, well, if we're going to invest in Australia, Australia's a long way away from America and Europe. The argument is that we can put the management time in it, the people time, the resources, the funding, and ultimately only come up with 2% of our turnover.
The counter argument is that because we are a western country, we can relate to both western and eastern views. It's very true to say we do offer in many instances a sort of satellite operation. You could use Australia to match with western and eastern thinking --meaning that if you have a company in America that prefers to deal with a western company, they could put an operation up in Australia, and we'll deal with Asia. The Australian government actually pays for such initiatives.Now let me answer your question from a personal standpoint. I come from South Africa, and I've never looked back. South Africa's no longer my home. Australia's definitely my home, and I have great faith in how we do things in Australia. We have tremendous knock backs here in terms of natural disasters. And we come out of it stronger every time, and we learn a lot by what happens. And we take heed of what happens, and I think perhaps that's part of our success. But I also think part of our success is that the Australian society is a very cosmopolitan one. It's a very tolerant society, and as a result of that, people have to work with one another. I'm not saying we don't have our moments. We have negative things that happen like every society, and I'm not trying to paint it up. But I'm very much saying that Australia's a lucky country. We tend to get through things in such ways that sometimes we say, "How the hell did we do that?" And we do. We just get through it. Whatever the situation is, we seem to rise above it and get through it.
Author: Pieter Looringh van Beeck