Why Not Start Off Your Year with the Deal Junkie?

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Anybody who is anybody in the mainstream retail industry knows Gilbert Harrison, the founder and CEO of Financo, and now Chairman of Harrison Group. Simply put, Financo was a firm that did deals, and the maestro of course, was the founder, the ultimate “deal junkie” himself. Thus, his autobiography, recently published by Post Hill Press is appropriately titled …you got it, Deal Junkie.

Book Report

For those of us who have known Gilbert over the past half century, we know that his smiling face on the cover is both an engaging friend and reflects the gleam of the rush of a junkie just before nailing a deal. And anyone who knows him also knows he made a ton of deals, including some real “whales” over the years. His musings in Deal Junkie cover the art and science of putting deals together, but also provide a very interesting and warm view into Gilbert’s personal and family life, as well as the many friends he made along the way. Gilbert’s book is a useful reminder of the recent history of retail with plenty of color about the highs and lows of the market over the years. It’s a great timeline of what has shaped the industry and a look at the icons who have made this industry so intriguing. His reminiscences range from the Lehman Brothers boom, bust, and rebirth; some of the largest egos in the industry and his years alongside the legendary Marvin Traub to the greatest specialty retailers of all time and the rise in ecommerce. Get it and read it. You will enjoy it. And, for all the veteran senior and C-level leaders in the industry, there’s a lot of nostalgia that you will love.

Holiday Frolic

Those lucky enough to have been invited to his annual holiday party at the Harmonie Club attended unforgettable events where about 200 of the greats and near-greats of the industry would gather. What was his secret to success? The invitations came with an off-the-record promise that these titans would playfully take shots at each other, even yelling all the way across the room from one CEO to another.

In his book, Gilbert chronicles “The Event of the Year: The Financo CEO Forum and Dinner,” and it almost reads like a novel. It’s a real page-turner that describes both the entertaining event and the “wow” of the iconic attendees. He lists the incredible number of CEOs who attended over the years relating tales of the bantering and repartees. Here’s a taste of the flavor of the holiday forum 12 years ago:

WWD reported on January 13, 2010. “It was everything short of fisticuffs at the Financo Forum Monday night as senior retail executives testily debated price, the internet, and expansion—all while trying to outshine each other. The Financo event, always a lively affair, this time featured the outspoken Sir Philip Green, Topshop’s owner, whose repartee swung from the jovial in nature to downright confrontational. The other panelists were Millard “Mickey” Drexler, chairman and CEO of J.Crew Group, who added an edge by debating the importance of price with Bruce Rockowitz, president of Li & Fung Ltd., and was needling Rockowitz into disclosing his retail clients, but Rockowitz resisted. James Fielding, president of Disney Stores, and Solomon Lew, chairman of Australia-based The Just group, rounded out the panel.“What a scene. What a fracas. What a good time. Oh, how far our annual CEO dinners had come,” said Gilbert.

Perspective and Context

Gilbert doesn’t just write about the deal. His experiences are lessons that are principles for all commerce leaders, writ large. He relates the kind of pragmatic and backstory stuff that makes a fun read while providing real guiding principles for leaders to shape their businesses around. Here are just a few excerpts that illustrate the larger perspective he offers on leading a successful business.

Teamwork

If anything came out of the four years that I spent at Lehman, it was realizing how teamwork is essential to being successful. At Lehman, between the politics and the bureaucracy, no one seemed to care about anyone but themselves. As previously noted, bankers didn’t want to share deals with anyone because they feared they would get a smaller bonus. Unbelievable. When I restarted Financo in 1989, I told all my bankers that in addition to their base salaries, their bonuses would be determined according to three principals: the overall profit of the firm, the individual’s performance, and teamwork. Financo bankers could be substantially penalized by not working together.

Having strong relationships with the people at my firm, those who I saw every day, was something we worked hard to achieve. My belief has always been that one bad apple spoils the bunch.

Confidentiality

Whether practicing law, acting as a financial advisor, investment banker, or a consultant, confidentiality is critical in this business. Should there be any leak of discussions, a deal may be undermined. Of much graver concern, there may be significant liability and even SEC violations. The need to keep things confidential first dawned on me when practicing law in New York at Mermelstein. One day, a client of ours was in the bathroom at the Plaza Hotel, and two people unknown to him came in and started talking about seeing the CEO of a certain company and how they intended to make an offer to buy a division of it. They actually said the price they were willing to pay, right there in the bathroom of the Plaza Hotel, where, for good reason, they thought they could speak without fear of consequences. Well, the client overheard them, wanted to buy the business, called up the same CEO, and made a higher offer than what the bathroom-talkers were willing to pay. Next thing you know, he’d won the business. It was very successful, and he made millions on the acquisition. When I heard this story the first time, I couldn’t believe it. What were the chances something like this could happen? Almost zero. And yet it had happened, and for the bathroom-talkers the results were catastrophic.

Good Hiring Practices and Maintaining a Happy Office

Having strong relationships with the people at my firm, those who I saw every day, was something we worked hard to achieve. My belief has always been that one bad apple spoils the bunch. When I interviewed potential bankers, I also tried to meet their spouses or significant others, especially those of our managing directors, who were the top people working with us. Many of our bankers were just out of college or had worked at other firms, but we would do everything we could to get to know them. We mostly interviewed at the Wharton School but also at NYU, Columbia University, and the University of Michigan. Along with one or two of my colleagues, I would go to the campuses, and in addition to the one-to-one interview, we would take a small group to dinner. As we narrowed the field, we would invite a group of prospective hires to our office for what we called Super Sunday and spend the day with all the bankers—from the top people to the analysts speaking with them. Many of our younger people were the very best at helping us decide who to hire. Many had gone to the same schools, were in the same fraternities and, though still starting out, brought a special strength, ability, and insight into our search.

Once a year, we also had an outing at my home in Southampton. It would start on a Thursday for only the top people, and we would have a total strategy meeting and dinner. The next day, the rest of the firm would come out, including the entire support staff, for a day of fun. This was very successful. For the company to operate well, we needed to create an environment that was hospitable to those who made it what it was day in, day out, and to do that, it is important to spend social time out of the office as a firm. Everything we did was designed to try to make the workplace an environment that people wanted to be at and where they felt they belonged—that we weren’t just another big shop like some of the other investment firms.

Chemistry

When a company is being bought or sold, you have to make sure the chemistry is right. It’s very important in these deals. In most cases, the founders of entrepreneurial companies when bought up by bigger companies are meant to stay. But if you put millions of dollars into a founder’s pocket and you don’t treat them correctly, they’ll walk. And, if you’re keeping a founder and giving that founder millions of dollars, you also have to find ways to keep that person incentivized. Sometimes the founders will tell you, “I’m willing to stay for three years and make a transition.” If that happens, the key thing you have to do is make sure you can promote someone at the company into the CEO position or go out and hire a new CEO. That is critical in the dynamic for making a successful acquisition. But as far as chemistry, there can be other factors. As an example, I had done a lot of work for the largest retail specialty store in Canada, Dylex, when it bought Brooks Fashion Store. But an executive at Dylex had broken away from the company and founded a Canadian chain called Le Senza, which was dominant in Canada the same way Victoria’s Secret was dominant in the US. They also had licenses all over the world. So, I was retained by Les Wexner to try and acquire this company. We ended up buying it, and for the first time Les—who for reasons that I never before understood, as previously discussed—expanded beyond the continental US. He seemed pleased that he was going global. But he made one crucial mistake, and it undermined the whole deal: the president of La Senza demanded that its headquarters remain in Canada, separate from Victoria’s Secret offices in the US. So, there was never a true merger, nor the synergies to take advantage of the combination. It became a sour point between Les and me, and La Senza was given away for next to nothing in 2019.

Showing Up

As with anything in life, you’ve got to be there. And if you’re not there, then you’re not going to get very far. Sometimes we have to learn this the hard way. I had gotten to know the Pentland Group, the British shoe retailer who had invested somewhere around $75,000 into Reebok in the infancy of the company and became the second largest shareholder after the founder. (Talk about timing, Pentland Group eventually took out over $700 million on the company.) Stephen Rubin OBE, the chairman and CEO of Pentland, and I worked on a number of deals, including Speedo when they acquired it. Meanwhile, we were looking at other companies that might be a good fit. Converse was on our radar. The company had gone bankrupt, but the feeling was that it had great potential. So, I went with Rubin’s CFO to attend the bankruptcy auction, and we tried to buy Converse. Unfortunately, Rubin couldn’t come with us. He would have had to fly from London to New York.

Ordinarily that wouldn’t have been an issue, but he was sick with a terrible cold. Our authority to bid was limited to a certain number, and the auction was going down to the wire. Though we were right there, people began to outbid us. I tried to get Rubin on the phone in London to get permission to up our number. I called him again and again, but he wouldn’t pick up. Again, he was ill, and with the time difference, he was very likely asleep. In the end, we only needed about $1 million more than we were authorized to spend, but without Rubin’s go-ahead, we couldn’t do it. And so, Pentland was not the next owner of Converse. It was enormously frustrating. In 2019, Converse had almost $2 billion in sales. So please, do remember the importance of showing up. And, if you absolutely cannot, in instances such as these, do make sure to deputize someone with the proper authority to make a crucial decision at the critical time.

Do Not Underestimate Anyone

In 1968, the world was crazy with mergers and acquisitions as well as initial public offering known as IPOs. I was in Philadelphia with my wife Shelley and our young son, Edward, working at Blank Rome. (Robin and Nancy had not yet been born.) One of my first assignments at Blank Rome was to work with one of the firm’s partners on taking Levitz Furniture public. In those days, Levitz was one of the “hottest” stocks in the country. The closing took place at the New York offices of Bache & Company, then one of the leading Wall Street firms. It was one of the first occasions that I had attended this type of closing. Ralph Levitz, the Chairman and CEO of Levitz Furniture, received two checks from the public offering—one was for the company in the amount of about $10 million, and the other was for the sale of his own stock which totaled around $6 million, huge amounts of money at that time. After the closing, we all went to lunch at Delmonico’s, in its day one of the most famous Wall Street eating establishments. While the bankers and lawyers were well-dressed, Ralph Levitz and others from his company, while now very wealthy, were not especially done up for the luncheon and didn’t come off as especially “sophisticated.” Well, the waiters were treating Ralph very unpleasantly. We suffered through lunch, and when Ralph was finally presented with these two checks, he said that he was going to get even with the waiter. At the time, people didn’t use credit cards the way they do today, and while Ralph probably had a lot of cash in his pocket, when presented with the bill, he took the $10 million check out, gave it to the waiter and said with a straight face, “Can you please give me the change?” The waiter, also with a straight face, said, “Sir, do you have anything smaller?” At which point, Ralph gave him the $6 million check and finally got a smile from the waiter. Which is to say: in business, as in life, do not ever underestimate anyone.

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