It’s been a long and exhausting few months for Christine Christian, the chief executive of Dun & Bradstreet Australia. On top of running a rapidly growing business, Christian has been running a dual-track sale process, preparing the business for a float and a sale at the same time.
But the hard work paid off when in early September the business was sold for $233 million to the US-based D&B Corporation. The sale delivered Christian and her staff, who owned just under 10% of the business, a share of the $100 million profit the sale reaped.
Today, Christian talks about managing the sale process while chasing aggressive growth, the future of D&B under new management, and why the GFC has taught SMEs a valuable lesson.
So are you still walking around the office doing high fives with everyone after the sale?
I haven’t even had time to do one high five unfortunately James. We’re really excited and delighted with the outcome but we’ve made a commitment to the corporation that we will continue to deliver the growth, the targeted growth and so to that end there really hasn’t been very much time to pause and celebrate because there’s a lot to do.
How did you find the process of managing the business at the same time as running the sale process? Was there a lot of extra pressure?
Well for us it was even compounded by the fact that we were actually working a dual track process. We are in the very advanced stages of an IPO listing and you would understand that that is an arduous process in itself, let alone while running another bid in parallel. It just compounds the pressure and the level of work when you’re doing that because you’re entertaining two parties basically and negotiating fairly heavily with two parties. And then you’ve got the business to run and it’s a business that’s been growing fairly aggressively, with lots of product innovation and a number of priorities to juggle. So I think that I have to be realistic and say we’ve been operating in a fairly pressured environment for some six months.
And from a sort of a managerial point of view, have you been able to spread that load over your team?
As much as we can. Where I’ve been able to do that in a practical sense, I have, but most of the heavy lifting in these processes unfortunately is directed to a very small number. It’s just by virtue of the process. Really, it’s just a matter of project management. We approached this on the basis that we understood that it was going to consume a lot of our time and so it was just a matter of mapping out what needed to be done and just trying to make sure that with all the priorities, that we didn’t take our eye off the business in terms of insuring that the business was operating without any disruption.
I guess it is the worst time to miss a target.
You never want to miss a target, but it’s the worst time to miss a target. No, we were very focussed on achieving the financial targets during this time.
You lead a management buyout nine year ago, and in this latest sale you and the management have sold your shares. Was there ever any desire to keep some of the ownership in the hands of management?
Look, I think we were fairly realistic about that. We’ve gone through two buyouts. We did a buyout with AMP in 2001 and then we did a secondary buyout with Lazard Carnegie Wylie, as you know. So we did it twice and we understand that under private equity that there is always an exit event and you approach those transactions on the basis that as a management team our accountability is to increase the overall enterprise value of the business and make it as exit-ready as possible and as attractive a business as possible for prospective buyers.
Now, we knew as a management team we just assumed it was going to be an IPO, that that was going to be our most logical exit and in doing so management would have retained some equity because, it’s just general arrangement that managers do.
And it was really only in June that D&B Corporation approached us and indicated that they were very interested in buying the business that we thought about it as a management team. In fact that to some extent, this is probably the best outcome for this business. We believe that D&B Corporation is the natural owner of the business to some extent but we’re now going to be challenged by assisting the corporation in implementing its growth strategy in Asia.
And so we’re very happy that we were able to liquidate all of our shares. It would have been very difficult to do anything other than that because as there’s no point in having shares if there’s no exit event.
Will there be a different philosophy running the business with an exit in the back of your mind and running the business without an exit in the back of your mind?
Interestingly enough, no. I think it’s a very relevant question but in our case because the corporation has purchased this company because they liked the way we have been operating the business, they like the fact that we’re very, very performance orientated, we’re very growth orientated and they have not paid a premium for this business only to see its value destroyed. So to that end they’ve actually made significant effort and they’ve even called them concessions to keep the entrepreneurial spirit in the business. For example, they’ve agreed to manage this business through an independent board. There will be representation from D&B but we’ll also be appointing some non-executive directors to ensure that the business continues to operate as it has done. Now that’s very unusual.
Have they sort of given you some direction on the types of growth areas they’d like to push into? Is Asia the key?
Look they have, but what we’ve been doing is very much aligned with their aspirations in Asia, so we’re a perfect fit for their Asia strategy in that we have a fairly diversified capability, we’re involved in consumer credit, in collections, Company 360. We’ve actually got a number of businesses that could have application in Asia.
Asia is now recognised as a region that is growing significantly, the corporation understands that countries like China, India and Japan are very important trading partners for Australia. Demand for information on Australian businesses by the rest of the world is increasing and conversely there are a lot of transactions occurring between Australia and many parts of Asia that require good quality risk management information. So the demand is there and we are in the perfect position to be able to satisfy that demand.
Obviously it’s been a long couple of months for your team, but how are they feeling? Are you committed to the business for a certain period under the terms of the deal?
I think our management team is very, very excited because we see this as a new challenge. I mean we’ve been focussing very much on our domestic market but we’re looking forward to this new challenge with a redefined strategy. The strategy is not going to change dramatically but we’re looking forward to now being part of a global organisation, assisting in the execution of the global strategy and aspirations. So it’s just a new set of very exciting challenges and to that end they’re all very energised and very much looking to the new chapter.
Will there be opportunities for people within the Australian organisation to have more involvement in the wider D&B family?
No doubt. D&B have stated on the record that one of the drivers for buying the business was the talent within the Australian management team, they’ve recognised that we have developed some very innovative capabilities and they believe that we could play an expanded role that would go beyond the shores of Australia and New Zealand.
Christine, if I could just finish on the local economy. Last week we saw the latest D&B expectations survey showing confidence is improving, but what is your sense on how SMEs are tracking? The feeling that comes through from the survey is that people are generally more optimistic but they’re still waiting for that optimism to translate into dollars in the till.
That’s true, but if we just look at the latest survey, all of the key indexes have improved dramatically since June. You know sales, profit expectations, inventory, capital expenditure, they’ve had a remarkable improvement in the last couple of months which suggests that the economy for the December quarter will be very strong.
Probably the only area that I see where that sort of wait and see approach is really happening is in hiring intentions. I think many businesses are suggesting that if there are more skilled workers and those skilled workers were prepared to accept realistic wages, then our economy could improve even further, their businesses could grow even further. So it’s really wages pressure and lack of skilled workers in some segments that are holding us back.
Look, in some other areas such as small business I think they’re still experiencing some cashflow issues, but I think that the GFC to some extent has been a good thing in that it’s provided some real education, particularly for the small business on the importance of cashflow because the credit markets were really tight, banks weren’t lending during that time and many of them realised that they needed to work their cash a lot more efficiently and effectively. I would suggest that that is partly why small businesses are even feeling fairly positive about the Australian economy. And also we avoided a recession and so it’s no surprise that the Australian business community is feeling a lot more positive about our domestic market as say compared to the US or the UK for that matter.
I guess the one issue that could come up as the recovery continues is that cashflow growth trap where you’re spending money to try and grow your business.
Exactly, it’s about using your cash wisely. There’s no point in having to borrow money with interest rates that you can’t afford to invest in a new product where the outcome is uncertain. It’s really forced smaller businesses to understand the importance of a good investment case, a good business case and the cost of money.