Articles
Faith in the Future - Profile: Alan Bristow
Corporate Financier, April 2009
Faith in the future
Alan Bristow’s ICON Corporate Finance has carved out an enviable niche advising technology companies. He tells Marc Mullen why long-term commitment is a prerequisite of success.
Just one year after Alan Bristow founded ICON Corporate Finance to advise UK technology companies on M&A and fundraising, dot-com was turning to dot-bomb. By 2002, the technology bubble had well and truly burst. Old economy industries were back in favour, while the buyout and property booms were beginning. Bristow faced a dilemma: should he target the new growth markets?
Bristow had formed ICON in 1999 in an office with a laptop and a telephone, just as the boom went into overdrive. If anything, success came too easily. A new paradigm of business had arrived and the doubters simply ‘didn’t get it’. He says: ‘Literally, you would pick up the phone, say to someone: “Do you want to do this?” and they would send over a million pounds on a ridiculous valuation. It was halcyon days, but it was also just very detached from reality.’
In March 2000, Lastminute.com floated on the London Stock Exchange valued at £571m, the symbol, in the UK at least, of the peak. Two weeks later the market crashed, with valuations across the sector plummeting more than 90%. The following year the telco market crashed, there was 9/11, and the corporate frauds of Enron and WorldCom (and countless others you have not heard of) stoked the pessimism.
But Bristow was not going to give up on tech that easily: ‘We considered broadening our church, but we never seriously came close to going down that path. Instead, we thought we’d go deeper into the sector. Fears over its long-term prospects did not cross my mind. At the end of the day, technology is what drives the world and it is technology that will get the world out of the mess it is in at the moment.’
On the move
With a degree in economics and politics under his belt, Bristow qualified as an ACA with mid-tier City-based accountancy firm Hodgson Harris (now part of Baker Tilly) in 1985, which taught him the fundamentals of business: ‘With the ACA qualification you have to be on top of the numbers, which are usually at the start and end of everything. Compared to an MBA, you get a very good grounding in understanding balance sheets and P&Ls.’
He then joined Price Waterhouse (now PwC) and promptly headed Down Under. Initially, he relished the exposure to multinationals that being with a bigger firm brought, but by the end of his two-year contract in Melbourne, he felt ‘somewhat numbed’ in his role as audit manager, and joined an investment group of companies, just in time for the crash of 1988. That first downturn taught him lessons he thinks are relevant today: ‘It’s pretty easy to run a business when the market is going well. Where people really earn their stripes is in the tough markets. As Warren Buffett put it – you only find out who is swimming naked when the tide goes out.’
Returning to the UK in the early 1990s, Bristow cut his teeth in the technology sector in the West Country. He set up a corporate finance business for mid-tier accountants Robson Taylor, and dealt with the fledgling market of technology sector venture capital firms. He was hooked on the tech sector, but again itchy feet struck and he began to formulate ideas for his own firm.
Brand values
ICONs on computers inspired the name. Bristow liked both its techie feel and ambitious meaning. The firm was never going to be Alan Bristow Corporate Finance as he didn’t want ‘just another corporate finance outfit trading under the founder’s name’.
The other ICON co-founder was marketing director Nicky Cotter. Over the past 10 years, she has developed the brand and relationships with key technology players on a global basis (ICON Global). A healthy programme of events –Exit Masterclass seminars, CEO Leadership Summits and IT Giants Q&A evenings –attract blue-chip technology companies such as Microsoft, Oracle, Intel, Symantec and Amazon. And while the halo effect of being surrounded by such successful technology businesses boosts the firm’s image, it is mandates Bristow wants.
To date, ICON has advised on more than 200 transactions with a total enterprise value in excess of £1bn. The firm regularly finds itself on awards shortlists, and Bristow has a string of awards under his belt. It all helps get the ICON message across and bring in business.
Critical to the overall strategy are direct relationships with the world’s leading technology-related acquirers. Bristow decided international M&A networks would not be the ICON way and guards the relationships under the ICON Global brand. Apart from not being too keen on fee-sharing arrangements, he wanted to keep close control of the sale mandates. Recently, about 80% of ICON’s exit mandates, which come from UK and European companies, have been ultimately sold to overseas acquirers in Europe, the US and Asia.
International aspirations
Last year ICON advised on the sale of Practique Associates, the European market leader in incentive compensation management solutions, to Merced Systems, a Silicon Valley-based software company. This was the culmination of the team’s efforts in building up its international network with potential acquirers. While the US is all about building up the contacts, Asia is a tougher nut to crack.‘
It is still a pretty tough gig to sell a business from the UK to an Asian buyer. I think the Indian buyers in particular are looking for bigger scale. Size is important and we are usually dealing with companies in the range of £5m to £40m. If Tata Consultancy Services is going to buy a business in Europe, they are not going to buy a business for £5m, £10m or £20m – they want something a bit more transformational.’
ICON has kept a small, tight-knit, committed and hard-working team – largely as it was before the crash of 2000. This Bristow modestly puts down to a mixture of decisions, which take on strategic significance with hindsight, and luck. But it is also in no small part down to his view that the worst thing for a corporate finance firm is churn of staff. ‘As a business, we have taken a lot of risk in terms of the way we make our living, but we have been very cautious in the way we run the business. And one thing you have to be cautious about is the people you take into the business, particularly when you have a small team. You have to get the balance right. There are an awful lot of people in corporate finance, but there are not an awful lot of really good people. If they are really good they are probably not going to be knocking on your door.’ And the team ethos? ‘There is one big trait that unites us at ICON and that is the desire to get a deal across the line.’
In a market where ICON is the tech specialist among corporate financiers, it is crucial that those acting for buyers and sellers of businesses and raisers of finance for those businesses understand exactly what their role is in this niche sector. ‘For us to do what we do, we do not need to be experts in specific tech industry technology,’ says Bristow. ‘The companies we are dealing with have very high-level intellectual property, which is not easy to understand. What we are good at is understanding where the technology meets the money.’
In the current tough climate, Bristow says to raise money you need to have something that will force people to sit up and take notice. He expects investors to move up the risk profile, making raising venture even tougher. But despite the gloomy outlook, his faith in inventive business people in the technology sector remains undimmed: ‘What entrepreneurs are very good at is finding a way through the mire. In good markets or bad markets, there are issues and problems and it can be hard to raise money. It is going to be a tough road for a while but entrepreneurs will find a way.’
Case Study - A long-term solution
Alan Bristow first met Professor Martin Lowson, a former NASA scientist who had worked on the Apollo moon landings, in the summer of 1999, just months after he founded ICON. Lowson had an idea for a revolutionary driverless taxi system called the ULTra (Urban Light Transport). Low-cost and environmentally friendly, the four-seater pods could be used for transport networks at airports, offices or even in cities – a bit Bladerunner, but with massive global potential.
But potential and delivery are two different things. After hearing the concept, Bristow decided it was too early for VC investment: ‘I said your chances are at least 95% against, but if you go off and do this and do that, when you come back you will have improved your chances.’
Four years later Lowson returned, having taken on board the advice and having raised £10m in EU funding to build a test track. Making it clear to Lowson that this was still a tough project to get funded, ICON took on the engagement and developed a corporate finance strategy. In April 2005 a strategic funding round of £1m was closed, followed six months later with the main round, when airports operator BAA invested £7.5m in return for a 25% stake. A 4.3km pilot version of the ULTra is being built at Heathrow Terminal 5. If successful, ATS, the company that developed the system, will have the opportunity to install ULTra throughout Heathrow – potentially a £200m contract.‘
The hard bit of creating successful businesses is just that – it is hard,’ says Bristow. ‘What entrepreneurs do to get where they get is phenomenal and Martin is an example of that. And if we believe in our clients, we stick with them with tremendous tenacity and help to make it happen.’
Marc Mullen is deputy editor of Corporate Financier.
Reproduced with kind permission of the ICAEW
