FSN Ulrik Smith’s full speech at the Nordic Buy Out Forum 2019

FSN Ulrik Smith’s full speech at the Nordic Buy Out Forum 2019


Thank you Jarle for organizing and for
the introduction. Thank you Wiersholm and thank you to the NVCA for bringing it
together this Nordic Buy Out Forum When Jarle called me and said “Ulrik can you please come to the Nordic Buy Out Forum?” I said “Sure, that sounds
exciting I always enjoy those sessions” and he said “Well can you please talk
about how FSN does deals in an elevated price environment?” I said “No I don’t
think I’m going to talk about that” and I proposed instead perspectives on private
equity. I left it broad, I left it open so I feel I have a little bit of a free
rein here and maybe that’s why I got through the shot right after punch So I was gonna go with no slides and then on Friday Jarle sends an email
saying Tuesday noon I want all your slides. Please email them in advance so
we can put together this program so I thought okay I’m gonna have three slides,
so it’s gonna be a little different I’m gonna share some perspectives and some
of my perspectives on private equity and the first perspective is that private
equity is a little bit of a misleading name for what we do. I don’t know what
you think but does anyone here really like the name “private equity”? Do we like
the way it sounds? Does it describe what we do? When you talk to your siblings or
your spouse or your in-laws, or your kids ask you what you do and you say “I
work in private equity”. Do they say “Oh I how exactly what that is, can you please
tell me more? That’s really exciting”. That never happens right? Well, that’s probably
because the name “private equity” is very misleading. It strikes me as being closed
from the name as being closed very analytical, very introvert and very
behind closed doors kind of hidden activity – private equity. And maybe that’s
why our industry has somewhat of a misunderstood perception in some circles
in society, is that our name is relatively misleading. Now as you know
the Norwegian Venture Capital and Private Equity Association is supporting
this event. But if any of you have actually looked at the invitation that
you have received? How do we abbreviate our organisation? Is it “NVCPEA”? No
so our name is so misleading that when we are meeting together to celebrate our
industry, we don’t even use it to describe ourselves. We cut out the “PE” and
we just call it “NVCA”. So it’s time for us to upgrade ourselves and to change
our name Now I love what we do, I love going to
work every day in the morning but it’s time for us to change our name from
“private equity” to “people equity” and that’s perspective number one:
“Sometimes a name can be misleading” Earlier today, we heard Rikke talk about
human capital, talent, people diversity Then Martin was up here from Askeladden and he said that “Finding the best people is the most important
thing that we do ” so it’s all about people. PE is all about people. We in our industry, we tend to be overly competitive, very analytical, very ambitious, very numbers driven, very focused on anything
we can measure and sort and put into an excel spreadsheet. Grades, numbers,
GMAT scores, anything that we can analyze and crunch. Now it’s important to
be able to analyze and it’s important to be able to understand numbers. That is
necessary in our industry, but it is not sufficient to be successful in the long
run. If you only focus on the numbers and the hard skills, it’s easy to lose sight
of the people and the soft aspects of people equity and that’s what I realized
that at the end of the day you got to put people first, you got to build trust
through emotional intelligence, through character, through values and through
integrity and when you’re able to do that, all the good things will follow.
As you build great relationships, your investors will re-up with you as you grow
in fund size. As you build great relationships, your CEOs will want to work
with you again in the next portfolio company, taking down recruiting costs,
taking down training and onboarding costs, creating better companies.
As you build great relationships through chairmen and chairwomen, your industrial
advisors will want to work with you again and again, taking risk out of your
investments and out of your portfolio companies. When you look for founders and you look at owners of businesses and they want to find a partner, they want to
find a partner they can trust and that they can believe in and that they can be
proud to have partnered with to take their company from here to the next
level. So people is what PE is all about. And people skills is a competitive
advantage in our industry, and that is even more important now when we have an
abundance of cheap debt, lots of dry powder which we saw, twenty nine billion and very high multiples People skills, and people, and relationship skills
become a competitive advantage Now I’ll be really honest with you, it’s
taking me a while to realize that I’ve been on a journey to realize that PE is
all about people. I was a pretty hardcore numbers guy. I love crunching numbers, I
was a certified analytical robot you know and at McKinsey even in the 90s
they called me, don’t quote me, they called me “Tiger boy” so I was pretty pretty
hardcore but I was not alone, I grew up in that environment. When I first started
work in the 90s, I was going down on a consulting project in the states, I lived
in Canada, I was flying out to the states and people asked me in the office “Are
you gonna go down there? Are you gonna work with this guy called John?” I would say “John? Who’s John?” Well he’s this military guy, he’s this US Special Operations guy who in the Gulf War parachuted in behind enemy lines and
he’s a pretty hardcore guy. He was a little bit of a mythical
figure, so even in Canada they’ve heard of John. So I was like “Whoa that’s the
guy I’m gonna work with”. I go down there and I meet him and he’s this tall
guy, very broad-shouldered, square jaws and he has these eyes, like these special
forces eyes, that just pierce straight through you. So he’s looking at me and
then I’m like “I’m fresh out of college” and looking at me and he says “Ulrik,
get ready to work like hell I slept more during the Gulf War than I
do now. Oh and by the way my name is John, nice to meet you.”
So this was the guy, this is how I grew up This was a hardcore guy and I loved it. There was no chit chat, no nonsense, no waste of time Just going straight to the point So that’s how I was until the day I
really blew it, I screwed up, I made a massive mistake. I thought that analytics
and John’s kind of focus on intellect and hard skills are what you need to be
successful. But I was dead wrong and I learned the hard way and that brings me
to perspective number two so 15 years ago I was doing one of my
first deals here at FSN and it was a transformative experience for me and how
I view people equity which is what we do I had spoken to this founder for quite
some time and we’d agreed that I would go and visit him and ago she ate the
structures and the transaction value in the details of the transaction what do
you do you prepare how do you prepare you prepare with analysis so I made this
beautiful analysis 150 pages that was a lot of slices in the are a hundred 50
pages with a whole bunch of numbers all the things you could imagine perfect
analysis and I go down there I’m really fired up and I say channel the founder
and what do you do well you’d go with presenting you flip slides that’s what
you do right so you go through your beautiful deck and I get to slide five
and he goes to me bull Rick get out now dear mr. founder I have 145 pages left a
beautiful analysis you’re gonna love it and he goes no Vorik it looks mia gives
me this look that you don’t mess with and it says Ulrich
we’re done here so I had to leave I had to leave and that was the first time I
ever got kicked out I had no choice and then I went out to the car and I was
gonna drive and I thought what kind of businessman doesn’t appreciate analysis
right he’s a founder he started this great company he’s grown into a
fantastic company he must love numbers he must must love analysis what is wrong
with this guy and I was driving and it was a rental
car and the rearview mirror was kind of not properly placed so I look in the
rearview mirror and then what do I see well I see it was some receding hairline
I see a big nose and then I see two ears and one mouth that’s me in the rearview
mirror and I’m thinking ah I remember now someone telling me one day about two
ears one mouth and I realized I had to change the way I
approach things so I call my back and I say dear mr.
founder I’m really sorry I blew it can you please let me come back please give
me a second chance which I probably didn’t deserve to be honest but he gave
me a second chance so I came back to the founder with no analysis no paper no
slides no suit I brought two ears and one mouth and I sat down and I said dear mr. founder how are you
doing how do you feel how often do we ask people how do you feel when they’re
gonna negotiate a deal and then I just sat there and waited powerful Bergin
rights it’s it’s difficult to sit and wait so but I managed because I pulled
myself just sitting away you know I told myself we’re like two ears one mouth two
ears one mouth so I’m just sitting there waiting and after a while he goes auric
I’m not doing so well I’m sick and I’m tired and I’m like hmm interesting and then he continues to say the price
that you offered is fine and the analysis I don’t care about the
analysis I don’t care how you get to your your price I care about three
things like woo what what can he care about that’s not price and not analytics
he says I care about my son I care about my van and my VIP tickets and at this
point I’m like whoa I did not have that in my presentation and then he goes let
me explain to you all Rick what I mean by that you are probably going to fire
my son I don’t want you to fire my son and I say dear mr. founder we can agree
that your son will continue to work at the company for three years as long as
he adheres to our code of conduct because that’s important and as I said
this he was visibly relaxed his veins were not protruding as much he lost some
of his puffiness and redness and he was relaxed in this chair a little bit and
then it’s as auric my van and that goes yes we have a beautiful
van in the company and I used that van every spring fill it up with my stuff I
Drive to my summer house I am there for the summer and then I fill it back up in
the fall and I Drive this stuff back to my house I want you to promise me that I
can bore that man twice a year for as long as I live that was his point number
two so I said mr. founder that is okay and
he gets even more relaxed in his chair and then he goes to the third point and
it says we have VIP tickets there are four VIP tickets to the local football
team has a very small local football team that maybe nobody has ever heard of
even in very rural part and VIP seats just having to recover from all the
other seats but he said I just want to go there with my friends and see the
games so you have to pay for those four season tickets for as long as I live
and I said mr. founder we can live with that too
and then he leans forward takes out his hand and it says auric we have a deal he was very happy and we were very happy
too it turned out to be a fantastic investment for us now a few months later
I understood why I asked about the part about his son but then we had shook
hands and we honor our word so we did honor that that word despite despite the
observations so in private equity or people equity we slice and dice
everything we slice and dice numbers we have a ton of ratios but what I’ve
learned is that the most important ratio and people equity is this now that
brings me to the third perspective that I like to share with you as fee professionals we travel a lot and
when we travel we must be busy right and if we’re busy we must be quite important
and we like to feel important and historically I think we as an industry
have probably taken ourselves a little bit too seriously and probably we work
hard and that’s fun but we probably sometimes work a little bit too hard and
if we’re honest we probably also sometimes work a little bit too much on
the things that are urgent and maybe not so much on the things that are important
remember that when you get all those emails in your inbox and you start
trucking through those instead of thinking what’s really important that I
do today so we need a reminder we need a reminder of what’s important in our
lives and in our professions in order to be better with people we need to have an
off button and be able to take a step back and reflect now my wife and I as a
birthday today we have three children and the oldest one he’s eight his name
is dip left and he loves sports right anything he can kick he can throw he can
beat he can run around with you name it he’ll do it he loves it
so one day I come back home from work I’ve been traveling for quite a while
and he goes daddy why are you traveling so much why do spend so much time on
planes with dusty and I say well I fly around to meet
people and he gets really excited you know he goes dad
what do you do in Ames people do you get to play football with people from
America and China and Sweden that sounds like fun right and ago nobody we talked
and he was curious you know what do you talk about well we talked about how how
we can do things better how we can work better together as people I would can
achieve better things together and he looks kind of confused and then is that
what you talk about what else do you talk about well we also talk about sales
and gross margin and all pecs and EBIT done and sometimes we even talk about
networking capital optimization and it goes dad can I have ice cream now so
we’re busy people and sometimes we don’t switch off but we need to switch off and
take a break from our daily routine because we need to find balance because
balance lives become and creates better and more balanced people which helps us
with developing relationships with other people which helps us become better at
our industry people and equity so you got to find your ice cream so as we go
into the holidays I hope you can all enjoy finding your ice cream thank you
very much you

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