From Silicon Valley to Swaziland by Rick & Wendy Walleigh (psychology books to read .TXT) 📕

but I wanted to retain a sense of optimism and generate enthusiasm for working with Dave. I really thought Dave would be a good partner and would deal fairly with the existing stakeholders, giving them a chance to recoup their investments and make some money.

The call with Brian was long, as expected, but it went well. As often happened when conversing with Brian, I spent a lot of time listening as he recapped six years of plans, dashed hopes, struggles, and excuses for failures. However, after hearing how the meeting went with SIDC, Brian quickly grasped that he was not in a good negotiating position. Basically, he knew that Dave was his only hope for salvaging anything from MPE. So we began talking about what Dave’s conditions would be and what Brian would want out of the deal. As we talked, a scenario emerged that could be agreeable and beneficial to all sides. Both Brian and Dave believed that Brian could contribute a lot in getting the plant and the company running. However, after many years of working for himself, Brian was not interested in a long-term management position in a company where he didn’t own significant equity. Instead, he suggested the possibility of setting up his own sales company in South Africa selling treated poles coming from Dave’s plant. This type of scenario could fit with Dave’s preferred mode of operation, which was to have arrangements with independent responsibility, risk, and rewards but also including incentives for mutual success. Brian agreed to talk to Robert and explain the situation to him. I agreed to meet with Dave and explain their interest in moving forward. At the end of the day, I was feeling good that we had some direction and perhaps even momentum.

I continued to crank through some more numbers for MPE. Although not an Excel wizard, I could put together some pretty good spreadsheets. At least they clearly showed the important factors and consequences of various scenarios. I even graphed the cash flows over time resulting from alternative decisions. I wanted to make it as easy as possible to see what the choices were and what the outcomes could be. I also wanted to make it easy to see the effects of changing assumptions. My primary beneficiary was intended to be Dave. He’s a lawyer with a great intuitive sense of business, but not a numbers person. I wanted him to understand and be comfortable with the story the numbers told.

I met with Dave later in the day. I brought him up to speed on events and loaded him up with spreadsheets to review. I suggested to Dave that the next step would be to get all of the relevant parties together for a one-to-two-day meeting to begin working through the details of a start-up plan and a deal. He agreed, and I asked Mpendulo to schedule the meeting for two weeks in the future. Although I knew most of the work was still ahead, I was feeling good that we at least had a strategy. As I later told Wendy, “Although there are still 101 tactics that have to go right, at least we have a direction.” On Monday, after returning from Cape Town, I learned that Mpendulo had scheduled the two-day meeting among Brian and Robert from MPE Timbers and Dave to start on Tuesday but that it had been postponed until Wednesday because Robert and Brian had uncovered two new prospective investors, and one was actually visiting the treatment plant site that day. I was shocked that two potential investors had suddenly emerged, so I called Brian to see what was going on. Evidently, Brian and Robert had been talking more about Dave’s initial conditions for a deal, specifically that Dave would end up with 100 percent ownership, and they really didn’t want to agree to it. Independent of how much they might be compensated, they wanted to retain at least some ownership. Something in their discussion must have motivated them to try harder, and somehow they discovered their new financing candidates. One was the investment arm of a trade union group in South Africa. Robert had gone to college with one of the officers. The other was the Investment Development Corporation (IDC) of South Africa to whom Brian had been introduced by a friend of a friend.

Brian indicated that Robert had already taken his friend, from the South African trade union group, to see the plant and would probably want to stop by our office and talk with us in the afternoon. They were both still planning to meet with us the next day. Later, Robert did bring his friend to our office and wanted me to present my assessment of the project to them. This was something that I wasn’t really prepared to do. Since we had only one prospective investor, I hadn’t seen the need to pull together a formal report; although I had done a lot of the necessary financial analysis. So we met in our conference room, and I talked informally about the attractive characteristics of the project and said that I was working on the formal report. This seemed to be enough for today, but it was clear that I had to start some serious writing.

These developments totally changed the nature of the meeting that we needed to have the next day. I called Dave and asked him to come to the office tomorrow afternoon. Mpendulo and I would meet with just Brian and Robert in the morning. We still needed to get a lot of details on the start-up plan, but we also needed to plot out how they wanted to approach the various investors.

On Wednesday, it became very obvious that I had to quickly issue TechnoServe’s version of the MPE business plan and funding request. Brian had met with the representative of IDC of South Africa, and he was also interested in getting our report. I committed to getting out the report by the end of the next week, which meant finishing it early in the week so that it could go through internal reviews and revisions. I also needed additional information from Brian to finalize some of my financial numbers. He committed to deliver it the next day.

Throughout the morning meeting with Brian and Robert, Mpendulo and I got our questions answered on the start-up plans. In the afternoon, we brought Dave in to talk about our original topic, the conditions for a deal. Dave was still opposed to less than 100 percent ownership, but he said that he would be willing to consider some shareholding for Brian and Robert, if he didn’t have to invest too much. The higher his necessary investment, the less he was willing to consider other shareholders. So everyone wanted to see my report and particularly the financial analysis that showed the required investment under various scenarios. We also discussed the most important risks remaining to start up the company. In addition to resolving the various sources of financing and ownership, the major risk was that MPE had not secured a sufficient long-term supply of poles (timber). There were lots of forests in close proximity to the MPE plant, but MPE had to get a commitment from one or more of them to supply poles. Robert agreed to work on this, and Dave said he would look into it as well with his contacts in the industry. Without the commitment for a supply of poles, I agreed with Dave that the risk of the deal was unreasonably high.

Overall, we had some good meetings. We weren’t moving ahead as quickly as I had hoped, but there was activity, and it was generally positive. I would write my report. Brian and Robert would show it to the new potential investors, I would send it to Dave, and then we’d go from there. Assuming that one of the investors would commit to the funding, we still had to resolve all of the other issues, which weren’t trivial. Several of the issues were deal killers if they remained unresolved, but I was hopeful. Once we got a lead investor, I thought the rest would be possible, but certainly not easy.

The following week, I finished the MPE Business Plan and Funding Request and sent it to Leslie for review and approval. To simplify my task, I had decided not to duplicate the materials that MPE had already produced that went into depth on the market and the particulars of their business. I focused on the big strategic and other critical areas, foremost, on the financial requirements and opportunity. Once the business got going, it could generate great profits, but in the short-term it would require a lot of capital, and there were still a number of serious risks. I put all of this into my document and hoped I hadn’t skewed it too far in one direction or the other.

Two days later, I incorporated comments from Leslie and Mpendulo and sent the document as a draft to Brian and Dave. Brian sent the report on to Robert and both of them planned to meet with the investors from South Africa the next day. Later Brian called and said he thought the document was fine as written, so I gave him permission to take “DRAFT” off the document and to present it to the interested investors.

On Sunday, Brian called to let me know that he would be going to England that evening to check on the health of his mother, who was in her eighties and diabetic. He had gotten a call from his sister requesting that he come visit and help make decisions about his mother’s condition and care. His mother had been living independently but had been having difficulty with her health and taking care of things in general. It was time to have her move to a retirement home.

Brian also wanted to let me know that the meeting with the union investors had gone well and that activities should continue whether or not he was able to return quickly from England. In three weeks, the union representatives would be coming to Swaziland to visit the plant and to meet with us in our offices. They wanted to hear an outside opinion on the project. I told Brian not to worry. We would be ready, and we would take care of them. Again, I felt a great sense of responsibility and wanted to present the situation appropriately. I wanted the deal to go through because it would generate jobs and economic growth, but I wasn’t supposed to be a salesman. The business could be very profitable, but that wasn’t guaranteed, and there were serious risks. I wanted to be enthusiastic but very factual, so began planning my presentation.

Finally the date for my MPE performance arrived. Robert had brought the trade union representatives from South Africa to our Swaziland office to hear the project overview. I think they understood my unusual position. Although I was promoting the project, I had the credibility of a third party. They evidently trusted that I could maintain the proper balance between the two roles. The conflict of interest was obvious, except that I would not benefit personally from a deal. Given that, I guess they saw that I could maintain my integrity.

Overall, the session went well, but it wasn’t easy. I didn’t really know the roles and responsibilities of the people who I presented to, but I think they were probably from the governing board of the union rather than investment professionals. They were intelligent and knowledgeable, but they weren’t financial experts and a lot of my presentation was about the financial aspects of the project. When contemplating an investment of nearly a million U.S. dollars, it was important that they understood all the aspects of the investment, both the business itself