Friday, October 17. 2008Perhaps Some Ill Winds Are Not As The Old Adage Describes Them?John Linton Maybe some ill winds actually don't do anyone any good? It seems that the 'global financial crisis' (which Australia was fully protected from according to Krudd) is actually beginning to affect some aspects of Australian business based on what I have noticed from my in boxes and telephone message banks. It seems that there is an increased level of M and A activity from the main 'brokers' in the technology parts of the market. The number of people contacting Exetel, either directly or through a 'broker', about our interest in acquiring small/very small ISP/Telephone provider type companies has noticeably increased although many of the 'brokers' are people who have contacted us before and I've advised them, quite unequivocally I would have thought, that Exetel would never be a buyer of 'customer bases' or of companies. It hasn't deterred at least three of them for sending me new 'opportunities' this week and then constantly leaving messages on my mobile telephone asking me to "call to discuss". In the four days of this week so far I've received 11 such 'opportunities' - a new record by a very long way. Of more surprise has been receiving two calls yesterday afternoon from two new 'brokers' I've never been approached by before on behalf of "seriously interested and major" companies who would be interested in acquiring all or part of Exetel and, even more strangely, Exetel's operations in Sri Lanka (about which they seemed to know an awful lot more than I would have thought was possible from the information we have made public). I was intrigued enough to 'spin out' these conversations in the hope of learning something 'to my advantage' but apart from receiving a summary of how tough current market and financial conditions are - and getting tougher and more dangerous (demonstrating that the persons giving these 'summaries' were not very bright and certainly knew almost nothing/nothing about what was going on let alone what may be causing it or where it may go) I got virtually nothing from my investment of over an hour of my time. If I was as clever as I think I am in my more generous spirited moments I might have concluded that there are now three companies operating in the Australian marketplace that are pretty anxious about their slowing/slowed/stopped customer growth and what that means for their projections on ROIs for some hefty equipment investments they may have made. However I wasn't in a generous spirited mood yesterday afternoon so I didn't reach that conclusion. So after investing more than 30 minutes of my time with the first 'enquirer' I said that if he wished to progress any discussion he would need to exactly 'spell out' what he/his "serious and major" company was actually proposing, in what time frame and how they would establish a financial offer. He said that wouldn't be possible "at this initial stage" and he was only seeking an understanding of Exetel's interest in entering into detailed discussions. So I advised him that we had no time for such activities, which he would fully understand as he had just finished telling me how very difficult it was in this industry right now, and therefore we could not spend any further time talking with him. He was not pleased but I subsequently managed to persuade him to end the telephone call. Hopefully he then contacted the next 'target on his list' and wasted even more of their time than he did of mine.
Given that there aren't many ISPs who would be big enough to think of buying even a small company like Exetel (and discounting Telstra, Optus, AAPT and iPrimus) you get to less than half a dozen. It seems that there are three of them (counting the previous approach from the first broker some weeks ago) looking for 'acquisitions'. If that's a correct assessment then it does seem that times are perhaps becoming tougher than it seems to me. Or maybe it just means that three "major and serious" (I can't think of any of them who could be described as "admired" except by themselves) believe the market is 'collapsing' for small ISPs and they can pick up some 'bargains' as companies like Exetel would be desperate to sell out for a pittance. If there is a recession in Australia then times will obviously become very difficult and the generalization about recessions is that they reduce the number of competitors in any market with only the very big or the very strong actually surviving and eventually when the recession ends being even bigger and stronger (with less competitors) than when the recession began. Exetel certainly isn't very big, in fact it is small - so that factor is worrying. However I think Exetel is very, very strong in terms of its extremely low cost of operation and the 'mental toughness' of its management and the very great skills of its key personnel. I, personally, on Exetel's behalf have little fear of an imminent recession in Australia and the inevitable consequences of what recessions bring to small businesses. (and please God, don't punish me for that arrogance/hubris). I think it is a time, recession or not, to act even more conservatively than in the past and to ensure that every last cent is wisely spent - which means spending as little as possible. I'm glad we have no borrowings and we have always paid cash for our equipment and never leased anything other than our North Sydney office space and now the office space in Colombo. We certainly won't be hiring more personnel in Australia for the time being and we will continue to gradually implement our successful work from home processes to ensure we don't need any more office space in Australia. I will be interested to see what further 'consolidation' takes place in the Australian communications business over the coming year and will do everything possible to try and ensure that Exetel doesn't get 'consolidated'. Trackbacks
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I'm neither a customer of yours, nor an employee of the business, but am quite involved with the ISP industry in Australia and just wanted to drop you an email to say hello. I don't need a job, I have one, and am happy doing what I'm doing! No I'm not a journo and will not be sharing our discussions with anyone, this is just a hello. So no catches here!
Almost everyday I jump online to your blog and await your entries, mainly because I like the frank and humble perspective you have on the Australian ISP industry and find it refreshing in times where everyone portrays a picture to the public quite different to the real situation. Like your business, I have been involved with the same challenges that most ISPs face, the supplier negotiations, the need to productise new offerings and ensuring the sales keep coming in whilst cost is kept reasonable via balancing automation vs cost of development. What I would like your opinion on (if you may entertain it in your busy schedule) is your thoughts on the talent pool in Australia. One consistent finding I have with every business I deal with is the apparent shortage of skilled and dedicated staff. From sales agents, customer service reps, even decent product managers and marketing staff seem hard to come by (based on experience within the Melbourne market). Is it a factor of the apparent Gen Y laxed attitude or changing dynamics in a highly competitive industry where any good people are already doing their own thing, or are being held ransom by perks and fancy titles? How do ISPs, or any business in that matter, find and retain such staff? From a management perspective, it appears if you need to get something done, you almost have to do it yourself, or spoon feed to the point where you should have done it yourself anyways! I recall a recent example where I found myself actually taking calls and making sales pitches (having never taken a sales call in my life) and "training" a defensive agent on the features and benefits of one of our products, which in my eyes, were blatantly obvious (having given the agent a full run down on the product, and other competitive offers in the market and how ours compares). It seems there are either too many other, easier jobs for these people or the drive to perform is not being nurtured. But either way, coming into the financially difficult times, I would hope they care more for performance and retaining their jobs! Anyhow, just a message to say thanks for your blogs, and I look forward to reading more! Comment (1)
Thank you for your encouraging comments.
Your questions address the hardest aspect of any business - large or small. I don't think they are related to 'now' or any other particular time in the history of commerce. Finding good people is as hard or as easy as the individual who is doing the looking (and therefore the selection.) It's a truism, but none the less true, that there are no bad employees only bad managers - or if that's too strong - inadequate menagers. This is true in any sized commercial organisation but it becmes more apparent in small companies because, usually, one person does the hiring and then works very closely with the people they hire so they are acutely aware of the performance of the individuals. In small companies the actual level of performance of each individual is critical to the performance of the small company - in large companies poor performers are shuffled around without their lack of performance making much/any difference as larger companies are generally over staffed as a consequence of their poor management. I have no magic advice other than only employ very bright people, only hire people you personally like and then take a very real personal interest in their career progress always putting their needs above yours. I've found by adhering to these simple 'rules' I seldom if ever work with inadequate people. Comment (1)
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