From Dan Peña – Executive Coach and Mentor to the High Performer
Dear Subscriber and Friend,
It has been a long time since my last newsletter. I have been busy moving house, closing my Houston office and getting my son and daughter ready for the next phase of the educational life.
I am firmly placed in Europe (though the Brits don’t consider themselves part of it) now and working very hard at what I enjoy and do best.
My new (really old) life which is "deal orientated" has taken off with a bang. Some of the transactions The Guthrie Castle Group is working on are impressive. They range from Public to Private buyouts, to divestitures of small or large divisions from large companies. Our new website is quite different – www.guthriecastlegroup.com. We are generalists and work in virtually all areas. We have added some very senior expertise and will discuss them in due course.
Being able to spend more time at Guthrie, London and the Netherlands, and soon Germany, seems as if it were the ’80s again for me vis-à-vis my lifestyle. I was young and had just moved to the UK in 1984 with my wife and two baby sons. My daughter was born two years later.
My youngest son started university and my daughter began High School last month. They have both moved into their new environments. My oldest son left the nest two years ago. How time goes!
MASSIVE CATASTROPHY
I have hesitated to write about the tragedy of 11 Sep. Not because I don’t have an opinion – for those that know me personally I have opinions on almost all subjects. I have not written earlier merely out of respect.
I took the first plane possible from London (Sep 15th) to LA after the massive destruction in NYC and the Pentagon. Opinion varies on what happened to NYC and America depending on where you are. Taking four countries like The Netherlands, Germany, Great Britain and the U.S., which I am closest to, the latter three are changed beyond belief. The Netherlands, which I just returned from, doesn’t show any change whatsoever. Holland is still Heaven in their mind! Of course they feel badly for all that were affected directly and the USA and the world generally. Great Britain and Germany have bellied up to the bar along with Australia and others in very special ways. It is too bad such a tragedy has to bring all these countries together.
I’ve been asked why I look at what happened in NYC and Washington DC in a different way than most. Notwithstanding it was a travesty of biblical proportions, I have seen the results of massive carnage before, at a very young age. The images are still with me.
I walked through the streets of Berlin, Frankfurt, Hamburg and Rotterdam in 1951/52 as a young boy. The cities were still flattened from WWII. I saw my first dead person frozen to a log at the age of seven outside a small village in France. My father was a CID American Army officer during the Korean War, in Europe and I happened to be with him when he was called in an emergency. I still remember the great shock I had and my father trying to explain how so many cities could be in rubble and the dead man I saw. He later explained the man was an American Army officer who died serving his country and was killed by communist spies. I asked on all occasions, "why Dad?"
During this same time frame I lived in Verdun, France with my parents. As all children, I wondered away from home and found myself playing in the trenches, bunkers and fields around the city. For those of you familiar with history, 85 years ago the battle of Verdun was fought for some ten months. During that battle of the "war to end all wars" some 400,000 men, alone, came away wounded and maimed. There is no accurate count of the dead – but it was big! As it turned out there were no winners at Verdun. I didn’t comprehend that then. I do still remember the horrid things I found digging whilst going from trench to trench almost 50 years ago. I hope and pray that this war on terrorism will be decisive. In no way am I trying to diminish what happened. I am merely saying these events shaped my attitudes etc. as current events will shape others attitudes.
I could go through other events that shaped my life, but what I am attempting to relate is the U.S. and especially the New Yorkers (as they are called) and the world are changed forever.
It is common knowledge that NYC is where it is happening in business and world government with the United Nations. Part of that reality is, like the song says, "if you can make it there you can make it anywhere". I believe this tragic event will only make these adages more true. I was trained on Wall Street, and by the Onassis Group, in NYC. For those of you that haven’t heard I am considered by almost all, as a tough, no nonsense, straight talking (occasionally crass) steel willed businessman possessing unwavering dedication and loyalty. I learned much of this working in NYC in conjunction to what I was exposed to over my lifetime.
All I described make me who I am. Just as your own social and economic milieu have made you who you are. At the end of the day we can either thank, or blame mostly our parents for our genes and, or training, or lack there of – plus our life experiences!
A GREAT ONE STEPS DOWN
Jack Welch the famed former GE CEO has recently published his biography. A good friend, very senior himself in a multinational company, said it was a good read – I trust his judgement. Other reviews are mixed, but include words like autocratic, brilliant, fearless and heartless. Mr. Welch is a product of his environment and has clearly been the "CEO of the past two decades". He has been the benchmark for excellence for a generation. You might ask why? He was at GE for 40 years.
DEALS STILL BEING DONE
Speaking of environment, I have made the rounds since 11 Sep on both sides of the Atlantic and there is still plenty of money for GOOD DEALS. I have meetings next week with VCs and banks on 5 deals.
The numbers have to stack up as always! Professional managers are weeding out the weak deals from their portfolios and putting money in their stronger deals. Remember, 80% of all financial transactions are done with people deals have already been done with. It’s the reverse of the 80 – 20 rule.
The end game for many of you is to do your first transaction – you then have a track record! The Dream Team I write and talk about, ad nauseaum, is even more true now! My entire methodology was developed in a collapsing market. Many industries are in trouble – ergo many opportunities with lower and falling prices. As I have written before no one knows when the market will bottom. Therefore purchases on the way down and on the way up the economic trough will give you (what I call) the blended price. It has worked for me in four decades.
Some of the UK pundits say if it has telecom in it, or is in North America – FORGET ABOUT IT! Of course that also means huge opportunities. I am currently working in various areas: telecoms, construction, manufacturing, retail, automotive, power and tool rental. I still enjoy, very much,
One of which is a "real super star" and much will be written about him in the future.
In all the above cases I have found the VC’s, insurance companies and financial institutions receptive with good experienced management teams (Dream Team) and financial numbers that work. Again, it is how you approach them. Practise. Practise. Practise. And remember you get to be a good presenter by making, first, bad presentations! Presentation skills are extremely important! You only have one time to make a first impression!
I get a number of deals to review and various questions from QLA devotees. The bad deals invariably have economic models that are based on erroneous assumptions. Remember, you get to understand good deals by looking at and attempting bad deals and having experience around you! I know it is hard, but "just do it" as the Nike advert says! Our "Chat Room" will facilitate quick response from me. It will also be conducive to "your comfort zone", because it will be faceless. How it will work will be discussed soon.
The bottom line is, this is an economic era most of us will not live long enough to see again. Instead of hiding we should be out turning over rocks. Most people are better off staying in areas they know best, but that is not mandatory. Surround yourself with SMART people and never stop swinging the bat, and magic will happen. This will not be easy unless you change! Just think if you were judged by who you hang out with – are they SMART? Are they where you want to be? High performance people don’t "hang out". They stopped doing that, if they ever did, when they left school. Remember lone eagles sore!
(I just got off the phone with a young German (26) who brought me a bad deal some months ago who is now on the right track. I still remember meeting him in the Churchill Hotel in London. As he was over 40 minutes late, I could only spend 20 minutes with him. He was dripping with sweat, but had a dream. His vision is now clearer)
MOST FUN DEALS OVER FOUR DECADES
When I look back at my career and look at the 95 (now much more) times I was told "Dan, You Can’t Do That", listed in my book and on my new website, a few stick out boldly as my favourites (and all were done in awful economic times – just like now):
a. Starting the first financial planning department on Wall Street in 1973 during the bear market of 73/74. The pundits said what?
b. Taking the first option (an agreement to buy something in the future) public on the London Stock Exchange in 1984 in 3½ months. During that same time-frame the dollar collapsed to almost parity (1 to 1) to the British Pound. The shares traded in Sterling! The assets were US and valued in dollars. The advisors choked!
c. Listing a company on the Amsterdam Stock Exchange (Dec) in only seven weeks from initial introduction in Nov ’85 when I could not get it done in London, or the US because of falling oil prices and needed money to close acquisitions. The advisors choked!
d. Raising the first money on the London Stock Exchange post Oct ’87 Stock Market crash in Nov ’87. The advisors double choked!
e. Raising the first money on the London Stock Exchange post Aug ’90 Iraq invasion of Kuwait with Kuwait as my 30% partner in Sep ’90. The advisors choked and stopped breathing!
f. Building an, almost, half a billion dollar energy company through 22 acquisitions as oil went in a free fall from $40 to $8 per barrel. Every deal got tougher and the advisors always said I was crazy!
g. Initiating and completing from "idea to a focused exit" of a "public to private" $305 million healthcare company on the London Stock Exchange that had collapsed twice under my leadership with DLJ and CSFB. The deal was considered not doable in the UK mid 1999, having started it in mid 1997 with an "apprentice plumber" as my partner.
All these were accomplished when the markets and odds were against my teams. It sounds like bragging, but I want to make a vivid point. WE ARE IN A SIMILAR ECONOMIC ENVIRONMENT. Fortunes are going to be made. MBO’s and MBI’s are being planned by the thousands all over the world. Management teams are looking at their own companies to buy. Teams from other companies are looking at companies in their own industry to buy into. Large companies are spinning off assets to raise cash and, or pay down debt. And the game goes on.
All of the above are being accomplished at cheaper prices than Sep 11. Some are being done at wholesale prices because companies can’t carry debt service. Some will go out of business if they don’t sell assets on the cheap NOW!
The experienced wait for times like this. In my career 1973/74, 1987, 1990, 2000 and 2001 stand out as huge opportunities. Of course, in each industry there were other down periods. The energy business suffered from 1982 – 1990. Of course, I, nor the teams I LED didn’t buy into these scenarios and some of my best years for deals where during these periods. The operative word is "LED".
THEN A COACH
I would argue that getting some of the people who read this letter across the goal line from 1993 – 2000 as a coach were MUCH BIGGER SUCCESSES than any I ever had personally.
The "plumber" mentioned above and I did a $305 million transaction. He has since built a career on that transaction not knowing a debit from a credit. A "pre med student" and I did a $10 million real estate securitisation not knowing how to do a spreadsheet. A "carnival barker" (qassi circus clown) and I did an IPO valued at $60 million. And an "airplane mechanic" and I did a merger valued at $120 million with the carnival barker. Neither knew anything about finance. How about a "staircase salesman" buying a 10 million-guilder construction company last Dec who still can’t read a balance sheet and financed it at 110%. Or a "refinery worker" and "playboy" building a financial services company borrowing 8½ million guilders and making six acquisitions from 1998 – 2000.
Don’t misunderstand me. There were plenty of failures to fill up additional pages, along with many other small successes to go with the above. Whilst they were able to raise money and buy companies this doesn’t necessarily mean they can run them properly. Many have had hard times since. At some juncture, with their newfound success, they believe somehow they have been transformed into Warren Buffet.
In my next life I will try 8 years of coaching operating systems and financial management instead of raising money and acquisitions. Again, all the above was accomplished in great times of chaos, confusion and uncertainty and in most cases with financially unsophisticated individuals. I could go on for pages giving you more examples of success in the face of bad, to extremely bad news. Remember from chaos comes order! Choordic!
REAL LIFE
Speaking of chaos, two partners that own a UK based £20 million turnover company just walked out of my office here at Guthrie. One had attended a castle seminar.
They have a very large share of a worldwide market. The company is in high-tech manufacturing. The market has deteriorated greatly and may continue declining for some time. They have some 20 years invested in the business. Both smart engineers with 85 – 90% of their sales made through outside sources not in their control – manufactures reps!
The reps will sell whatever is in their own portfolio of products easiest to get through the recession, with the highest margins for themselves. Hence there is no reason for the reps to increase their efforts to assist the company.
The company is worth significantly less today than 2 – 4 years ago. There are more details but they only get worse. Having a big market share of a small market with slim margins is tough at best. They are near my age and have been looking for an alternative for a year or two.
I had previously told the primary founder
I told them today to sell to their employees, because they would value it higher, are emotionally tied to the business and banks / VCs would finance it waiting for an upturn in the market 4 to 7 years hence when they can exit. In the meantime the founders have an exit. Too bad most people wait too long – usually during bad times – to start thinking about an exit. I wish them luck! What should they do? The Chat Room would have the answer!
DIDN’T LIKE BEING RIGHT
FYI – From 1900 – 2000 there have been 22 recessions averaging 15 months each. Stock markets are leading economic indicators.
I wrote and said at the beginning of this year I believed the market would go south – BIG TIME. I said I didn’t know exactly why, but some pundits would tell us why – after the fact – I said the market was overvalued! We then had the March / April collapse, led by high tech/telecoms – then some recovery.
Now Sep 11 has changed the world and how we think for ever. Many of the industries that were out of vogue are now in and high rise view offices are looked upon differently. The Physical Security Industry is "in", and telecoms are supposedly "out".
Open your mind and eyes. Look at business differently. Life certainly is not the same – if the "war on terrorism" is on going, various industries will prosper. Their prices have already gone up. Just as prices of airlines, insurance companies and others have gone down. How we insure assets will change! You can fly and stay in Las Vegas for almost nothing. Dinner shows are free in some hotels there. I could go on and on! Get out of the caves! Pull your head out! Keep your eyes open!
If you aren’t thinking differently, notwithstanding this horrific loss of life, you will be exactly where you are now, if not worse off, 3, 5 or 10 years from now. Re-read my book – re-listen to my tapes! Out of respect for what happened I didn’t write sooner. I EVEN TOOK SOME TIME OFF! Time waits for no one. Look at poor Polaroid!
PERSONAL CONVICTIONS
For those of you that know me well (hell not even well) you know what I think should be done to this psychotic faction of people who did this shameful and heinous act to innocent people. My politics have not changed. If anything they have been reinforced by these recent actions. For every pound of concrete made to rubble and lost in NYC and Washington DC, my and the good guys resolve has been strengthened. I am proud to be an American. I am proud to be a Veteran and a former U.S. Army Officer. And I am even more proud to say it!
As my father says at 83, "if you live long enough you will probably see everything in life twice". Depending on which end of my 56 year life span you look from I sincerely hope and pray I don’t see this kind of carnage, or the carnage I saw as a child again!
To the Worlds Quantum Leap and God Bless America and All Her Loyal Friends and Allies.
Daniel S Peña Sr.
P.S. As you have read the recent QLA Product "Clear Out Sale" went well and Paul, my retired British Royal Marines assistant will be having another traunch out soon. I’ve attached two of the recent emails received from recent happy product purchasers as a postscript – I am not surprised.
P.P.S. NEW WEBSITE: My new QLA Dan Peña website will be completed 1 Nov and our QLA Chat Room should be done shortly thereafter. I call it a Chat Room, but the ONLY one you will be able to chat to is me at designated times for quantumly less than attending a seminar. Lucky you!
P.P.P.S. Examples of emails received regarding product sale:
#1 "Hi Dan,
Please send me more details of the remaining product sale items. I have just finished watching the videos from the 3 day seminar – THE BEST INFORMATION I’VE HEARD IN ONE PLACE.
With thanks.
Keith"
#2 "Hi Dan,
It’s about 4.30am Sunday morning. Having gone through the "Finance Your Dream" video, I am having trouble sleeping!!! I have just got up to reset my goals. I have been aiming way too low. I always tell people that the one thing that most "screws" with the mind is lack of direction. Advice that I have personally ignored over the past year or so! Thank you Dan for delivering the "kick up the arse" that I needed. I will keep you updated with my progress. I have been passing the web address to some people that I know will enjoy your style. Hopefully they will benefit as much as I am.
All the best.
Mark QLIP
(Quantum Leap In Progress)"
