Interview with the chief architect behind King Worldwide
Oliver Niedermaier was born in Munich and lives in New York. He has a PhD in management but doesn’t get bogged down in academic theories. He’s on familiar terms with the stolid European establishment but he has an entrepreneurial sparkle that is distinctly American. In fact, his ability to bridge culture gaps is one of the factors behind King Worldwide’s success.
After selling his customer relationship management software and consultancy business, Pepper Technologies, to Computershare in 2004, and following a stint heading up Georgeson for Computershare, Niedermaier has rapidly stitched together the world’s biggest empire of IR brands. As CEO of King Worldwide – the new name for Sage Holdings – he has overseen the acquisitions of DF King, M:Communications, Taylor Rafferty and other well-known names.
With around 900 employees and 1,000 clients, King’s yearly revenue is more than $100 mn but less than the $500 mn Niedermaier vows to eventually achieve. Last year 45 companies in the S&P Global 100 were active clients, and it’s an indicator of this CEO’s can-do attitude that he says this number shows not just strength but ‘headroom’ for growth.
Niedermaier says King was founded on the conviction that large, global public companies want integrated services, yet the IR space is ‘highly fragmented, under-consolidated and fairly localized.’ In 2006 he and his colleagues took their idea to the Riverside Company, then a $1.8 bn private equity group focused on buying smaller middle-market companies.
Riverside helped launch Sage Holdings in June 2007 with initial plans to invest $200 mn buying IR-related companies, just as the golden era of private equity was about to come crashing to an end. By the close of that year, after screening hundreds of companies but determined only to buy ‘premium’ firms and make its first acquisitions big ones, Niedermaier and his team were facing a worldwide credit crunch.
‘The equity side was never an issue but, for a model like ours, we wanted reasonable leverage. That wasn’t easy anymore, and it’s still not easy,’ Niedermaier admits. With hindsight, less leverage is ‘very good. It makes us sleep well at night.’
In the beginning
King’s first acquisitions in February 2008 put IR giants like Thomson Financial and Computershare on the alert. For around $180 mn, King scooped up DF King & Co, an old-school proxy solicitor, and M:Communications, a London-headquartered financial PR firm launched in 2002 by two City legends, Hugh Morrison and Nick Miles. King went on to buy Taylor Rafferty, Broadgate Consultants, Capital Precision, Hallvarsson & Halvarsson and Donlin Recano.
Except for administrative functions and office space, the acquired firms have hardly consolidated, with just 3 percent to 4 percent cost savings planned for in King’s model. But while the separate brands live on, ‘the whole is nevertheless greater than the sum of its parts,’ Niedermaier says, citing ‘revenue synergies’. A good example is a new product called the Roadmap, integrating Taylor Rafferty’s consulting services with Capital Precision’s data platform.
By offering IR services across a broad spectrum, King makes money in good times and bad. In an up market, transaction volumes, shareholder activism and IPOs drive growth. In a down market, bankruptcies, debt restructurings and steady retainer work do the same.
One challenge has been to retain and incentivize management and employees, including the entrepreneurs who grew some of the acquired businesses. So King implemented group-wide, equity-based incentive schemes. While managers in the various units have their own profit and loss responsibilities, ‘we really expect people to think ‘King Worldwide’, which could mean ignoring a revenue opportunity for themselves if the client could be better served by another part of the group,’ Niedermaier says. ‘We aren’t a roof like some of our fully integrated, technology-driven competitors. But neither are we a loosely integrated marketing network, letting our group companies compete against each other.’
Broadening horizons
Niedermaier seems to have thrived on the twists and turns of King’s roll-up – screening companies, identifying targets, getting the right price, and arranging financing. ‘Dealing with all the moving parts is the challenge for someone like me, but it’s also the fun,’ he says. ‘It gets more complex when the financing mix includes equity, mezzanine finance and senior debt, with these different investors looking for different things.’
There is one thing they all want, though: to make King ‘the world’s leading financial communications and stakeholder management company.’ It’s a space Niedermaier estimates at $2 bn in yearly revenue. He wants to capture 20 percent to 25 percent of that market and grow King to $1 bn in value. Some growth will be organic, but more acquisitions are expected, too. For example, emerging markets, particularly Asia, are a gap that King needs to continue filling.
Niedermaier believes that, with the global banking system stabilized and corporate balance sheets awash in cash, King will benefit from a boom in IPOs and M&A. As for existing clients, the financial crisis has created more need for traditional IR services, not less. ‘There’s a huge increase in complexity added to a new era of regulation,’ he concludes. ‘Every public company is going to need a much stronger investment narrative.’
Sample King Worldwide deals, 2008-2009
- Simmons Bedding – Bankruptcy communications
- TCI and CSX – Alternate board slate at annual meeting
- Kraft’s acquisition of Cadbury – M&A defense
- Oracle’s acquisition of BEA Systems – M&A defense
- General Motors (Europe) – Debt restructuring
- BASF’s Revus Energy acquisition – M&A
- BHP Billiton merger with Rio Tinto – M&A
- Lloyds TSB’s acquisition of HBOS – M&A
- Visa – IPO
