David B. Horne on his methodology for scaling businesses, the impact of Covid-19 on business valuations, raising finance, and on his own plans. We also discuss how he developed his own brand.

• His acronym FACE stands for: Fund, Acquire, Consolidate, Exit
• One of the businesses he worked with achieved a growth of 25 x in just three years
• Covid-19 and lockdown will affect business valuations, but investors are still looking to invest once the pandemic is over
• Rebranding two companies can bring them together and unify them
• IP and brand are key in the value of a business
• Here is a link to David’s Book Add then Multiply

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Shireen: Hello, and welcome to Brand Tuned, successful brands successful business, the show for entrepreneurs and brand creators, where we discuss personal and business Brands to give you ideas and inspiration for your own brand. I'm Shireen Smith, lawyer, entrepreneur, author, and advocate for developing purpose based brands to change. 

David B. Horne qualified as a chartered accountant with Price Waterhouse in 1987. And moved into in House Finance roles for blue chip companies, including a 10 year stint as CFO with some very fast growing companies, when he raised over 100 million pounds and bought or sold more than 20 businesses. This experience resulted in his art then multiply methodology for helping founders to scale massively. By raising funds and investing in their businesses. He's put it all into a book of that name, which recently won a business book award in its category. So welcome, David to the Brand Tuned podcast. 

David: Thank you, Shireen, nice to be here. 

Shireen: What does the B in your name stands for as a matter of interest? 

David: It was my father's mother's maiden name. 

Shireen: Oh, all right. And are you actually more difficult to find on Google as David Horne without the B. 

David: There are several other David Hornes that are also on Google. One of them is the chief executive of I think it's now ln er used to be virgin railways. One of them actually, the interesting thing came when I was doing my research before my book went on to Amazon. And there is another David Horne, on Amazon, who publishes quite prolifically publishers game. 

Shireen: What a nuisance for you. 

David: So I thought I thought I'll just throw the bee in there to have something different. 

Shireen: Yeah, that's a good idea. You want to stand out, obviously, when people put your name in. So David, what is your methodology for supporting businesses to scale, and what type of business is it most suited to? 

David: So methodology is called face which stands for fund, acquire, consolidate, and exit. So basically fund is raising money acquire is buying other companies consolidate is putting them together. And exit is ultimately selling your business so that you can go on and do whatever the next stage of your life holds for you. And in terms of who is it relevant for, I mean, really, it's it's relevant for most established SMEs, it's probably less relevant for startups and things. So really my kind of my kind of target client, it doesn't depend on on on any particular industry. But target client would be a fairly established business with at least 2 million pounds in turnover, so that they bought sufficient size and scale to have a reasonable valuation so that when they raise money, you know, they don't end up being diluted down too much. But that enables them to raise enough that they can grow to make some attractive acquisitions. And, you know, kind of, I guess, in layman's terms, the way I the way I often position this is, you know, you could own, you could own 100% of your business, which is like owning 100% of a pie, that's worth a couple of million. Or you could raise capital and be diluted down and own 50% of a business. But because of the scale up that you've done, it's now worth 20 20 million. So if you've got the option of owning 100% of 2 million or 50, presented 20 million. And you know, it's a choice, some people want to maintain 100%. And that's absolutely fine. But for those who are not totally tied to the idea that they have to have complete control, it's a great way to scale up a business quickly. And I mean, I have a case study in the book of an entrepreneur that I worked with for three years, when I joined his business. Turnover was 1.1 million profits were about 400 grand. Three years later, we had made seven acquisitions, turnover was 28 million and profits were four and a half million. We were operating in three different countries. So that's 25x growth in revenue in three years. You can't do that with organic growth. 

Shireen: Wow, that is something so how do you actually help them? Are you poaching them or do you work in their businesses? How does it work? 

David: Combination of the two, really. So I'm in the process of, I was until COVID-19 Hit in the process of developing a mastermind program that I was going to run, to open this up to a wider range of people. And that would be a sort of a coaching and a training thing. But in addition to that, I do work directly with the founders. So in the last 12 months, I've worked on two exits, both of which had been pulled because of COVID. And I'm currently working on a substantial fundraising for a client in Switzerland, which we're still working on, and we're still hopeful that it will be able to get it away. But it's an interesting time. So we'll see where it goes. 

Shireen: Right. So very interesting. So do you think it's going to become more difficult to raise funds during a recession? 

David: Yes, and no, I, yes, it's going to be more difficult, because valuations are going to be under pressure. You know, because it's always tricky to assess the valuation of a privately held business. But if you're in an industry that has some publicly traded comparable businesses, you can use that as a benchmark for, you know, looking at what's an appropriate earnings multiple that you could use on the business or any other multiple that you might choose to use. And on the basis that you know, there's a publicly traded company doing something similar, then you can make the argument that that's a fair valuation. And I mean, stock markets around the world have, you know, they've fallen off 20 30%. So valuations are going to come under pressure, there's no question. But actually raising capital. I mean, the investors still have the money, they have it in their books, they have it on their balance sheets. They some of them have specifically said they're going to wait until COVID-19 is over, or at least until the lockdown is over before they make any investments, but I'm aware of a number of of investors that are still actively looking at deals. So you know, it's, it's, it's going to be a little harder, it'll be a little bit longer. Valuations won't be as high but the money is still out there. And for the right business, it can be raised. 

Shireen: Okay. I was interested that you think that your mastermind wouldn't be viable anymore. What so what impact will the Coronavirus epidemic have on the vision that you have for your business? Um, 

David: That's a good question. I guess in my head, I had the mastermind being an in person program. Could it run online? I mean, we're, we're finding, we're finding that a lot of things can run online. Ice still like the idea of people coming together and being together physically. And for anyone who's been through a really successful mastermind program? It's quite an intense personal experience. And I mean, I'm not saying that it's now not going to happen because of COVID 19. But I think it's it I think it'll be delayed. But yeah, who knows, maybe I should put some feelers out and see if people are interested in starting something and on an online basis and take it from there. I still would like it to be an in person event at some point. Because, yeah, I feel that you get more, you know, you can you can do lots and you can communicate lots online, but you get more from being face to face in the same room with people. 

Shireen: Yeah, absolutely. But a combination of the two might work quite well. 

David: 100%. And in fact, that the original plan had been to run a two day event every other month, and to do a series of zoom calls in the month that we weren't meeting. Right. So maybe I just need to rethink it. And maybe the first few meetings will just be done on Zoom. There'll be more preparatory stuff. 

Shireen: Yeah, I mean, it's a great time at the moment for people to rethink their vision and mission values and, you know, prepare for the change in the economy, which will happen eventually, I guess, mid 2021. Hopefully. Hopefully, yes. So David, how did you come up with the name add then multiply? 

David: So I first launched my, my consulting business and it was originally called Bowen business consultants. So your question about the BA in my middle name was was was relevant there. And then I just when I started thinking about focusing more on what I do in terms of the expansion and growth and advising, and I have a very good friend who is a branding expert. He used to do a lot of work with some some of the big global branding agencies and works for himself now. And I invited him to lunch and we were just chatting. And I was saying, Look, I'm thinking of doing something different with the brand and the name of the company. And, you know, this is where I'm looking at taking the business. Can Can we explore options, and he came back to me with a whole bunch of different ideas. And one of them was actually, interestingly, he said, he said, drop the business consultants and call that just call the company bone. And then I'd had an old logo that had that was an eight pointed star, there was literally a plus sign and a multiplication sign one on top of the other. And he said he really liked that, but but he said, Why don't we go with Boeing? And then the sublight? Sub strapline Add, then multiply, and I just looked at and I thought, add them multiply. That's it. That's, that's the one and I changed the name of the company. And we we've been trading as add them multiply ever since? 

Shireen: Yeah, it really explains what you're all about, doesn't it? The way you work? 

David: Yes, much more than go in business consultants did. 

Shireen: So did you do any further work with him on your brand? 

David: He designed the cover of my book. And whenever I'm working with clients that need any branding advice, I bring him in. 

Shireen: Right? So have you actually formally gone through a process to develop your own brand strategy or vision and mission values and so on? 

David: Yes, but it's not documented. And I probably should take some time while at Well, while we're on this, on this lockdown to actually document it. Yes, we've been through the process. We've got a written brand guidelines. But yeah, the vision mission values. And you know, it's interesting in, in my book, one of the one of the things that I've talked to clients about to people about as as one of the preparatory steps is to make sure you've got real clarity over your vision and vision and culture and values. So I guess it would, it would help if I did that, you know, it's one of those cobblers children kind of examples. 

Shireen: We'll take a short break at this point, as I'd like to mention the Brand Tuned series of webinars, which support founders to think through their brand, taking IP into account at the right time, which is good for you make firm decisions about what to create. Just visit brand tuned.com. And the webinars are reference right there on the homepage. Okay, back to the podcast. So I'm just trying to look up your your logo, because I just wrote an article today about visual hammers. Yeah. So you've got quite a good good one that could be a visual hammer, you've got the plus and the multiply with a star in the middle. Yeah, yeah, that's, that's really excellent, because it conveys exactly what your name is. I really like your brand. Thank you, when you merge two cultures, like when you sell, acquire a business, I imagine it must be quite difficult to blend two cultures which have totally different, you know, purposes, visions, missions, and so on. To bring them together, can you give us an insight into the challenges and how you dealt with a particular case? 

David: Sure, um, gosh, I could give you a few. And it's interesting. This is this is the consolidate stage of my of my face methodology. And, as I say, in the book, this is the area where get this right, and you can make a real success of the of the deal, get it wrong, and this is where the deal can go horribly wrong. My first adult experience of m&a was early in my career after I'd left Price Waterhouse, my my, my biggest client was a company called NCR. And they made me a very attractive offer to join them. So I took it and about two years into that NCR was subject of a hostile takeover bid from AT and T the US telecoms business. And in the 90s it was identified as one of the worst ever value destroying m&a transactions until we had the excesses of the.com Boom. But yeah, I you know, that the change in culture is huge. I was you know, I was a, I was a middle level manager in a, you know, a huge company at the time, so I wasn't really involved in the detail, but when I fast forward to, to my roles in PLC days. I'll tell you about my second PLC, which was a company that did online In auctions, and we got wind that our largest global competitor was up for sale. And so we went out and raised 28 million and bought them and did a global integration, we were in 16 countries, they were in about a dozen, and there wasn't that much overlap. So we ended up being in 23 countries, that were three countries, the UK, the USA, and Germany, where there was a significant overlap, and we ripped out a lot of costs, and did a huge, you know, restructuring. And it's really a case of, you need to sit down and really plan out in detail, what are the steps you're going to take. So one of the commitments we had when we did the fundraising was that we were going to rip 5 million pounds of cost out of the combined entity. And as the CFO of that group, it was my job to track those savings. So we had to sit down and go through with all of the regional heads. And, you know, when you're ripping up that kind of money, it's mainly people. And so I had a great big spreadsheet of, you know, all the different people that we had said we were going to take out and what it was costing and all that. And, you know, you deal with that. And then when you've got in the countries where we had the big overlap, so not only did we have the challenge of ripping out a lot of costs, but we also had the challenge of of trying to put the cultures together. Yeah, there were some differences, we worked hard to make sure that on the top executive team, there were members of both companies. So I mean, in in the top exec group, there were what eight people, and I think five of them were from the acquiring company, and three of them were from the acquired company. And that, you know, that that gave us an opportunity, because it meant that the people in the acquired company felt that they had a representation. On the other hand, you know, we had some challenges with with one or two of those people who were very resistant to some of the change that we were looking at doing. I'll use another example from my first PLC, which was a digital media and publishing business, we actually had a very clearly set out strategy, we would not keep former owners in the business. So if we, if we bought a if we bought the business from a former owner who had whatever role in the company, their role ended at the completion of the deal, we would, we would ask them to stick around for a handover period. And we will use we used to, we used to put them on something called the senior advisory board. But the senior Advisory Board had no mandate and never met officially. But it was a way to it was a way to let the people understand, you know, the get for them to walk away and feel that they you know, they still had some value and stuff. And that was important. But therefore, because it was a wholly under our management, we were able to make some of the cultural changes that we wanted to, to in order to, you know, to drive the business forward and really to look at what are the changes that we want to make? What are the what are the investments that we want to make to it to develop and grow the business? At the end of the day sharing, it's all about people. And, you know, you you need to understand the different motivations that people have. And you need to understand how to get people to, you know, get on board with with new initiatives. And sometimes you have to make some tough decisions. And you know, there are sometimes people who, who are casualties in the process because they wouldn't or couldn't adapt to whatever the new environment was. 

Shireen: Do you actually consider whether the cultures can be blended together before you buy a company? 

David: Oh, that's a good one. We usually look at how complementary the businesses are. I mean, in my first PLC, we had a political division that was very well established. It was a brand that had been around for nearly 200 years. And then we bought the new kid on the block in the industry, which was only about 10 years old, but was a really fast driving hard charging, sales driven organization and culturally very, very different. And what was really interesting was that that new organization, they came up against us as the competition all the time because we were the established name. And we actually reached a decision together with the leaders of of that business, that we would rebrand and they would drop their names and adopt our adopt ours because it had much greater brand value in the marketplace. But we also allowed them to can we softened down some of their hard charging sales activities, but we came in that political division became a much more sales driven organization than it had been before. So we actually took aspects of both cultures. And I think you know, I As with anything, when you're putting bits and pieces together, it's good that you can find good things from both. 

Shireen: Yeah, it is. Do you ever go through a rebranding exercise in order to bring the two businesses together more and unify them? 

David: Yes. So we did that with the political division in that company. So we dropped so so where they had publications that had brand recognition, we left the names of those publications in tact. But we changed the so when when their people rang up. So so our established brand was called Dodd's parlor out was was called dots. And theirs was called parliamentary communications. And they were more than happy to just draw parliamentary communications for I think there was a transition period of six months, where we called them DODDS parliamentary communications. And then after six months, they were very happy to just drop the parliamentary communications and use dogs because it was such a well recognized brand, 

Shireen: I imagine it must just be so difficult, because even for a company to make sure that all the different divisions, make decisions on brand, takes quite a lot of training, and communicating. And then when you lose knowledge, because people leave, you have to keep that alive somehow. 

David: I mean, I mean, keeping people on board is one of the key things. And again, I'll go back to the auction business. So they're the world headquarters of the company that we bought was in LA, and our North American headquarters were in Baltimore, on the east coast. And so all of their group finance people were based out of LA. And we knew from the due diligence that their finances needed a significant overhaul. But equally, I was very concerned that I didn't want to just fire everybody in LA, and try and pick up and go. And I was absolutely thrilled when I managed to convinced one of their mid level managers in their finance team to relocate to Baltimore. So we actually had some institutional knowledge. And I go into that in more detail in the book, there's actually a little side panel on institutional knowledge, because it's a, it's a really important thing to remember when you're when you're running a business. And it's just, you know, the things that people understand and know instinctively from day to day, and the funny little anomalies that happened a year ago that, you know, nobody remembers. And I had that earlier in my career, when I was working in a very acquisitive PR agency group, and we got taken over and merged into a much, much larger business. And my role was made redundant because they already had a European CFO, and they were bigger, and they made the acquisition and that, you know, that's kind of life. But it was interesting, because they made both me and my boss in the UK redundant. And we had done seven acquisitions in two years. And it was about six or seven months before I got the first phone call to come back, because nobody understood the details on the deals, and there were disputes. And then it came to year end. And the auditors were asking questions, and nobody knew the answers. And I ended up doing rather a lot of consulting work for them. And you know, and I've seen that happen so many times. So so doing something to protect institutional knowledge and having representation of both sides of the business involved in the process is really, really important. 

Shireen: Great. So how important is IP and brand to the value of the businesses that you've acquired? 

David: Oh, it's key, I mean, in in the broader sense of IP and brand, not just the name and the logo, but the whole way of doing business, the whole ethos, what the brand stands for. And again, if I take the example of the political publishing one, you know, here was here was a new, aggressive startup business doing quite well, all of a sudden, they had the opportunity to carry on doing what they were doing, but instead of the sort of the Ford XR four brand, they now have the Rolls Royce brand. So, so from that perspective, it was a that was a great move. And, and, you know, those kinds of things are really beneficial. I think, as well, again, you know, from the publishing side, the protection of IP is absolutely critical. Because, you know, we were, we were, you know, getting we were buying rights, you know, I mean they weren't, you know, there weren't really physical assets that we were buying, we were buying publishing rights and the rights to, you know, the ownership of titles, whether it was books or magazines or websites or events and all Was that so the IP was absolutely critical? 

Shireen: Yeah. Sometimes I come across people who say that they're not really bothered by their name because they think they're going to be acquired and whoever acquires them won't want to use the same name. But it's still the value of the business accumulates Ramba name. And so, you know, the acquirer can change the name, but they'll just redirect any traffic to that website, it doesn't matter that they're going to change the name, you still need to be able to be distinctive before you get acquired. 

David: Absolutely. And and, you know, not worrying about your name on the basis that you might get acquired. Well, what if you don't get acquired? And you end up with a rubbish name? 

Shireen: Yes. So have you actually ever increased or reduced the amount you will paying for a business based on what you discovered during due diligence? 

David: Yes, absolutely. The the auction business, we saw the deal was valued at 28 million US. And the initial purchase price was 31 million US. And we found a number of things in due diligence that led to a $3 million purchase price adjustment. 

Shireen: Can you reveal any particular deficiency that? 

David: Yeah, so they had, they had told us that certain types of things were no longer happening. And we discovered in due diligence that those things were happening. And we held an escrow reserve on the portion of the of the purchase that was relevant to that particular transaction. So it was an auction business. And normally in the auction business, you, you buy and sell on commission, so you act as as effectively as the agent. So you have a buyer, and you have a seller, and you act as the party, who's in between. But every now and then, some auction houses do what's called principal business where they actually buy the ownership of the assets from whoever was selling them, carry that risk on their own book, and then sell them. And this particular company had had a couple of principal transactions that had gone bad. And we discovered that during the due diligence, and we had been assured during the negotiation process, that they didn't have any material, principle transactions. And we discovered two of them, and put 3 million that were valued at $3 million, and we put $3 million into into an escrow account. And sure enough, those assets didn't sell. And we, we took the money back out of escrow, and it was effectively a purchase price adjustment. That's it was a very, very difficult negotiation. But but we did do it. 

Shireen: Interesting. So which brand in your industry? David, do you particularly admire? And why? Which industry? Would you categorize as yours? 

David: Oh, which industry? Do I categorize as mine? You know, early on in my career, I read a wonderful book called become a category of one. And I like to think that I am in some ways, I mean. 

Shireen: Well, you are very distinctive in what you do. 

David: There are, you know, there are other corporate finance houses, there are other boutique consultancy firms. I mean, if I wanted to pick a name that most people are going to recognize, I pick PwC, partly because I'm an alumnus of the firm. And I still have very good contacts there. In fact, I've done a number of of things with PwC, where, you know, we've been involved in, in, in partnering together, I met up a recently appointed partner a few months ago, and was talking with her about, you know, what I do and what areas I'm in? And she said, Well, you know, one thing that might be really interesting is, you know, you bring clients alone, you start with the clients, when they're worth, let's say, 2 million, and then they get up to worth 2530 50 million, and then they're going to need a broader range of services that you cannot offer, you know, maybe you can just funnel them into us and, and, you know, I'd be delighted to, to be able to say to my clients, well, you know, work with me and grow with me, and then we'll, we'll get you into it to becoming a PWC client. So yeah, I'll say PwC is a brand that I admire. 

Shireen: Well, that's lovely that you qualified there and their brand but you admire. So thank you very much, David, for this interview, we'll be sure to add mention of your book in the show notes and great, so thank you. 

David: Thanks very much. 

Shireen: Thank you for listening to this episode of Brand Tuned, where we aim to answer the question, what does it take to create a successful business and brown I'd love it. If you would take a moment to give me a review. If you have any questions, send me a message. You can find me on LinkedIn, or most other social media platforms, or on my personal website, shireensmith.com.