The Fundamentals of Going Private
ON THE RECORD
As chief executive of Hemscott, Ros Wilton has steered the London-based vendor from a publishing company to the leading UK fundamental data provider. Since its reinvention, she has led Hemscott through international expansions with the acquisitions of US data providers Bigdough, CoreData and Company Fundamentals, and has been at the helm of the company’s decision to de-list from the London Stock Exchange and merge with US-based i-Deal Data Systems.
Inside Market Data spoke to her during the recent annual meeting of Hemscott’s major shareholder, Veronis Suhler Stevenson, in New York.IMD:
What will be the benefit of being a private company as opposed to being listed?Wilton:
The company has been listed for some years. In 2004, VSS came in as our majority shareholder through a transaction in which we bought a US company from them called CoreData, which was a US corporate fundamentals database. And at the same time, VSS took a majority stake in us. About two months after that, we bought another company, a US-based company called Bigdough. Again, a very high-value data provider to capital market professionals, made available through a compact management and communication platform.We originally intended to raise money from the market to finance part of that deal. But because it was so soon after the first US deal, we found it difficult to do, and VSS stepped in by providing a convertible loan note in order to finance the deal. That was in November 2004. Since then, we have integrated our businesses, we have consistently improved our results, and in November 2005, we announced a further acquisition of a company called Corporate Fundamentals, a Boston-based company that had extensive data collection operations in Delhi and state-of-the-art technology for collecting company fundamentals. And we have transitioned our data collection from the US and the UK over to India, at extremely good cost savings. Despite all this, and our various announcements, our share price has not moved. And about the beginning of this year, we announced to the market our intentions to take the company private because the board felt that the benefits of being publicly-listed were not there insomuch as there was illiquidity in our shares; that there was cost involved in being a public company through all the various different regulatory roles such as broker fees and other costs... such as [having to produce an] annual report. Also, we didn’t really have access to the capital markets and money, because our share price hasn’t moved. At the same time, as a public company we have to give out information on our company which could be very competitive for our competitors. That puts us at a disadvantage. And therefore we decided that we wanted to take the company private.
IMD:
What is the current status of the proposed deal to acquire i-Deal?Wilton:
A new US holding company… will acquire a majority interest in i-Deal. When Hemscott has completed its privatization process, it will come into that holding company. Organizationally, I will become chairman of the group, and Scott Ganeles will become chief executive, based in New York.IMD:
How will your role change as you transition from CEO to chairman?Wilton:
I will be able to take on a much more strategic role and focus more on acquisitions and brand strategy, but also strategic sales. And therefore, I won’t have the day to day operational responsibilities of chief executive.IMD:
You mentioned savings as a result of moving some operations to India—what effect is that going to have on current and future costs?Wilton:
In terms of the full company—Hemscott, CoreData, Bigdough and Company Fundamentals—there’s always been a rationale of synergy…. In terms of Corporate Fundamentals, this was a technology and engine operation—so it allowed us to take 25 people in the US and 25 people in the UK and transition the jobs that those people were doing to our Indian operation and expand that operation to do a lot more than just data collection, thereby saving an increased amount of money. And that is still ongoing, as is all strategy of maximizing… intellectual property of the company.IMD:
What effect will going private on your ability to raise funds and pursue acquisitions?Wilton:
… We will be leveraging the company through debt. At the moment we have no debt on the company and we have cash on the balance sheet and cash in the bank. Clearly, as in many private equity deals, cash is raised through a combination of equity and debt. And that would the structure going forward.IMD:
Are there any other areas into which you would like to take the company?Wilton:
I’m sure there are, but realistically having put four companies together in under two years, there’s still a lot to do.IMD:
What does i-Deal bring to the company?Wilton:
An execution software platform for fixed income and equity IPOs. If you think about what Bigdough is—a contact management and communication platform—it’s clear that we’re selling into a similar customer base. Customers of ours ask for integration with other platforms of third parties, and it would be sensible to integrate modules that they have with certain modules that we have—plus the fact that we have very high-quality data that could be made available into other people’s platforms…. And we catch companies that are going into the IPO stage when we are building their Web sites and providing data and information on them.IMD:
What effect have the companies that you’ve bought had on revenues?Wilton:
In the first half of this year our revenues have increased by 25 percent, and pre-exceptional EBITDA by about 108 percent, which includes one-off cost savings that we’ve made as a result of the Indian operations, and you can see by the 25 percent growth we have maximized cost-selling opportunities by … integrating our products to enable them to sell much more easily into our customer base.IMD:
Hemscott has a strong business in the UK, and you’ve acquired companies with a presence in the US. Are you also going to look at acquisitions or expanding content in the Asian market?Wilton:
We do sell into the Asian market already…. We have clients in Tokyo, for example. My view is that we will not open an office in Asia at this point in time…. I can’t rule out acquisitions, but we have so much on our plates already at this point.IMD:
Asian users would be using the products to access data on UK and US companies?Wilton:
They are looking at the shareholders and fund managers across the US. We’ve started adding Asian buy-side data to our database as well as global holdings. So for example, if you were looking at airlines and comparing British Airways to Qantas to KLM, then you can look up those three companies to see how their shareholders compare and who the fund managers are behind that.IMD:
How would you describe the evolution of the company?Wilton:
Hemscott began as a book publishing company, and I was brought in to re-engineer the business…. The company today is a high-level niche provider of very high-quality intellectual property data and software. … If it’s easy to get, then it’s a commodity; if it’s difficult to get, then it’s valuable. And there are two buckets of data—easy data you can extract from an annual report, and difficult data, which is the people data that we have. We have a very detailed people data on UK directors and offices, and other data that is not easy to get, and we put them together in a format that enables quick ease of use.IMD:
MiFID is creating opportunities for dealers to disintermediate exchanges for trade reporting, so exchanges are looking at ways to mitigate that, and at other revenue sources. Do you think the exchanges… could be the future fundamental data providers?Wilton:
If you take an example, the London Stock Exchange has started to collect data, and they do sell company fundamental data. But they also own a trading platform called Proquote. And Proquote actually buys our data for its institutional clients. They don’t use their own data. I will let you conclude what you want about that…. Anyone can compete if they want to, but they need to compete up the value chain and provide better tools, content, customer relations—that’s the way to grow a business. Nasdaq bought Shareholder.com, which is a competing service to our investor relations products and to the Bigdough application. It’s true, the exchanges are an information source, they are information manufacturers. But you’ve still got Reuters, Thomson, Bloomberg, Hemscott and a number of other players in there.IMD:
You have an office move in London coming up. What is the plan for that?Wilton:
We’ve had a pretty big office for a while and with the move of some of our operations to India, it meant that we were rattling around even more in our office. We have now concluded a transaction, which means we are moving to offices which are much smaller and are going to be less expensive.CEO Confidential Name: Rosalyn S. Wilton, CEO, HemscottDate of Birth: Jan. 25, 1952Hometown: LondonEducation: London University (Mathematics)Current home: Kent, UKFamily: Husband and two daughters, 26 and 24Q. What CD is in your stereo (or iPod) right now? A. Classical Graffiti by The Planets. Q. What book are you reading? A. I love biographies and psychology books like Blink and Tipping Point by Malcolm Gladwell. But the only thing I’ve been reading lately are the 85 documents to complete our deal. Q. What did you do for your summer vacation? A. I read 85 documents. And I went to a small part of Northeast Greece not far from Bulgaria and chilled out for six days between the deal. Q. What’s your favourite city or place to visit, and why? A. I love San Francisco—you can get anything you want. They really understand customer service there. And I love Paris—it has fantastic architecture, wonderful galleries and wonderful food. Q. What newspapers or magazines do you read? A. The Financial Times and Inside Market Data. Q. What was your first paying job and how old were you? A. I was 14 and worked in sales in a clothes shop. But even before that, I was always buying and trading things with my own money. Q. If you could have dinner with any person, real or fictional, dead or alive, who would it be and why? A. I actually quite enjoy having dinner with my husband—it’s nice when we can spend time together. Q. How much sleep do you get each night? A. Six hours. |
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