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Seven Greatest Ideas for Taking the Plunge • 11

conglomerates where it became harder and harder to see what value membership of

the morass of businesses that made up the whole added to each individual business.

Recession struck and 'core business' became the order of the day. This involved

selling off those chunks of the business not seen as strategic and which happened to

be, quite honestly, those chunks that were demonstrably not making money. If your

company has a board-level strategy of doing this, you have an opportunity to go on

your own in the same business you have built for someone else by man-

agement buyout - MBO. Large

One of the best examples of this was the empire grown by Saatchi businesses

and Saatchi in the advertising business. They bought up many small agen- frequently have

cies for sums of money that were only just relevant when the economy was around them

booming and highly unrealistic when the downturn came along. Many such millstones

founders of businesses prospered twice in this regime, once when they of illogic and

sold the business to Saatchi in the first place, and again when they bought strategic

it back for a fraction of that price two or three years later. madness thai-

I offer this illustration to remind us at this stage that large businesses taking a division

frequently have around them such millstones of illogic and strategic mad- from them and

ness that taking a division from them and turning it round into a profit- turning it round

able concern is often desperately easy. Here is proof of this by one specific into a profit-

example and one generalisation. Both of these examples show that the able concern is

proposer of an MBO has one distinct advantage over the people running often desper-

the large company. The proposer is concerned with the detail of the busi- ately easy.

ness they are about to run whereas their quarry, the managers in the

Megacorps, have more strategic things on their minds - like their careers.

In one instance an advertising agency offered a small agency owner a deal. He

could back his agency into a new company they were forming as part of the large

organisation they were building. He would then take over as CEO of the new com-

pany containing his agency and three others they were buying. The price was de-

pendent on an 'earn-out'. If his original business grew to a certain profit target, they

would pay a large amount of money. What they didn't think about, and the small