HKBN Co-Owners of the Future 14. Reflections from Visit to CVC

Transcription

1 HKBN Co-Owners of the Future 14 Reflections from Visit to CVC 4 th July, 2014 Top (Left to Right): NiQ Lai (Head of Talent Engagement and CFO of HKBN), Alvin Lam (Senior Managing Director of CVC), Vandalic Wong (HKBN Talent Management intern), Derek Wong (HKBN Talent Management intern), Calvin Leung (HKBN IT intern), Miranda Lee (HKBN IT intern) Bottom (Left to Right): Louie Pang (HKBN Enterprise solutions intern), Alexander Wong (HKBN IT intern), Brian Yeung (HKBN Finance Intern), Monish Iyer (HKBN Finance intern), Srdjan Dangubic (Pan Asia Investment Director of CVC) Prepared by Brian Yeung 1

2 Introduction On 4 th July, 2014, eight of HKBN s brave Co-Owners of the Future visited CVC Capital Partners, one of world s leading private equity firms, in its Hong Kong Office in Central and met with Alvin Lam, the Senior Managing Director and Srdjan Dangubic, the Investment Director of CVC. The process was short but fruitful, we managed to have a peek into their industry and careers, came out with a little more knowledge and a lot to share. Content Pg. Number Reflections from Co-Owners of the Future Brian Yeung Finance 3 Derek Wong Talent Management 4 Alexander Wong IT 5-6 Vandalic Wong Talent Management 7 Louie Pang Enterprise Solutions 8 Calvin Leung IT 9 Miranda Lee IT 10 Monish Iyer - Finance 11 Appendix Intensive Post-visit discussion with NiQ 13 2

3 Brian Yeung Finance Visiting CVC was quite a unique experience for me. A private equity firm is not something like HKBN, HKBN is a talent company while CVC is a company company. In HKBN, we recruit more than 2000 talents, from sales to CPEs (Customer Premise Engineers), but in private equity firms like CVC, having more than 300 employees is considered a lot already. In HKBN, we invest on fiber and our talents sell it to customers, but CVC invest on companies like HKBN to help them invest and prosper. After our meeting with Alvin, I have gathered a few points that I found quite true and valuable for working in private equity firms or even in different careers: Investment takes time It took CVC 3 years, going back and forth with HKBN to finally invest in the company. A thorough research has to be done before investing in a company. A thorough research does not only mean the company s financial information, but it consists of: information of the market, both financially and potentially, the Management committee of the company, whether they can drive the company to a better future, and finally the business strategy, if it is sustainable or profitable. Research takes time, and it takes a lot of effort as well as a wide perspective in order to have a good eye for investment First job might not be what you are looking for One thing Alvin mentioned was the career path he has taken. Before going into the PE industry, he was working in a consulting firm. Having a science undergraduate degree, it was interesting how his career has transformed throughout the years. He stated that CVC employees have a very diverse background, and it doesn t really matter what career you start off as, you can always find another job you like in the future. Always work with the best people Lastly, Alvin emphasized one thing when talking about careers, was to work with the best people. If you work with the best people, you get to compete against the best competitors, which will, in result, bring the best out of you. HKBN seems to be doing the right thing, partnering with the best companies in each of their respective field of expertise on the enterprise side. 3

4 Derek Wong - Talent Management The meeting at CVC on 4 th July is a very good opportunity for me to learn. The most important thing that I have learnt from this visit is that how CVC minimizes its risk and maximizes the revenue. In other words, I know more about the success secret of CVC. For instance, CVC will look at the companies which are ruled by good management committee members. You may wonder how CVC can justify the management committee members are good enough to invest tremendous amount of money to the companies. Let s take our company HKBN as an example. We have the Co-Owner scheme for Point 4 or above. The values of mangers, directors and management committee members are aligned with each other under the scheme. We are trying our best to strike for excellence and business growth. Thus, the value alignment from down to top serves as a good criterion for CVC to evaluate whether HKBN is a good company to invest and ruled by good management committee members or not. By doing this, the risk of losing money will be minimized. If HKBN makes money, CVC will also make money. CVC will also follow up after the transaction. It will give comments and suggestions to the companies about how they can do better. It seldom intervenes in the management decisions as it believes that autonomy is one of the key success factors of a company. What it does is to raise the awareness of some important issues and monitor the growth of the company. Hence, we should give credits to our Co-Owner scheme and take the autonomy as the opportunity for further growth of HKBN. Last but not least, I would like to take this opportunity to thank HKBN for arranging this company visit of CVC to enhance my exposure and I really enjoy and treasure it so much. 4

5 Alexander Wong IT Meeting with Senior Managing Director Alvin Lam and Investment Director Srdjan Dangubic furthered my knowledge in many ways. Mr. Lam and Mr. Dangubic discussed with us firstly about the purchase of HKBN from CTI followed by an introduction of private equity. HKBN was purchased by CVC with about 5 billion dollars HKD but behind the scenes, there was a lot that we interns would see. It took a few years for CVC to decide to purchase HKBN as Mr. Lam discussed. The buyout process took a lot of decision making and understanding. From HKBN, Mr. NiQ Lai talked about how over the past couple of years, a lot of money was put into the media aspect of HKBN causing immense tension in the company. CVC saw this as an opportunity, as HKBN was a listed company with a big name thus starting communication over the past years leading towards the buyout. Mr. Lam also explained that within the process before buying the company, there would be a lot of cross checking to make sure the investment is safe and worth putting resource into. One example that Mr. Lam used was how if a generic company were an attractive company but the CFO of that company would not recommend investing in their company, it would seem strange. This situation would instantly raise questions as to why the investment would not be recommended causing Mr. Lam to worry about if the investment is not worthwhile. Therefore, per CVC s record of investments, they do everything in their power to make sure that their investment is a correct choice. In addition to HKBN s buyout, Mr. Lam explained what a private equity firm does. CVC makes investments in a large range of companies from food industries to clothing company shares. These investments can go in the billions of dollar range unlike other investments such as angel funds, which contribute much less. Also, Mr. Lam discussed how not all deals will work out and loss will be expected. In these situations, CVC and all of their investors will feel a proportional loss. Conversely, in a good situation where there is a large profit, everybody will share in the prosperity. This policy ensures that everybody will win together or lose together increasing mutual integrity and cooperation. On a personal question to Mr. Lam who started with a bachelor s degree in electrical engineering at Massachusetts institute of Technology, I am inspired that he has chosen to keep options open. He could have chosen the path to further in the field of electrical engineering but he became a consultant followed by his more recent position of senior managing director of CVC. As both Mr. Lam and Mr. Dangubic has said, there is a very wide 5

6 range of majors coming from their company with engineering, liberal arts majors etc. However, you can still keep your options open and follow another path to success leading me to the conclusion that there is no single, definable path to success. There is only the continued alteration of ones path to head towards the goal of success through hard work, using connections and seizing opportunity when it shows itself. I have learned much from this short encounter but I have yet to witness the doors that I may have opened by this opportunity set by Mr. Niq Lai. It is not every day that you can have the precious time of the senior managing director and investment director from a renowned private equity firm. I am thankful for this opportunity and hope to continue to make use of my own skills to set my own roots into this society of connections. 6

7 Vandalic Wong Talent Management We often admire people who are very successful, what we don t see is the hard work every successful person has to put in. The Acquisition of HKBN by CVC Capital Partners was finally completed on 30 May 2012, the largest Asian private equity deal for What we don t realize is that the acquisition had to go through years of comprehensive analysis, engaging with the management over and over again before the deal was done. I was surprised that most of the talents at CVC have no common education background. Despite working at the financial industry, most of them graduated with a non-business degree. Having said that, it helps them to develop their critical thinking as well as decision-making process. A typical example would be Alvin, the Senior Managing Director. He stated that perhaps graduated with a Bachelor of Science Degree helps him to develop his analytical thinking technique. He probably wouldn t have been so proud of his unique ability if he didn t choose such path. I have also learned about the recruitment process from Srdjan. Actually, it is quite different from what I expected. Surprisingly, CVC do not have a HR department located in Hong Kong. They submit an acquisition form to London, the headquarters, to seek for approval. If the request has been approved, CVC would contact some of the recruiting agencies to get it done rather than hiring directly themselves. From this meeting, I have learned the acquisition process through target identification, analysis of market, financials, and business opportunities, as well as the acquisition proposal in order to make the deal successful. I understand that an acquisition involves huge amount of resources, time, and efforts. Like the Chinese saying 1 minute on stage, 10 years hard work off the stage captures this well. 7

8 Louie Pang Enterprise Solutions We had a meeting with Alvin Lam and Srdjan Dangubic from CVC on 4 th July. They had told us numerous of information like what makes a company that CVC would invest or buying it, and some details of HKBN s Co-Owner strategy. The most interesting thing I found is the working experience and the way of viewing career of Alvin. Before joining CVC, he was a consultant at Boston Consulting Group with highly paid, yet he decided to work in CVC because he found more satisfaction in P.E. firms than in consulting. And one thing Alvin emphasized is doesn t matter what you are working on, if you want to great, work with the best people. I believe no matter how much you earn but doing what you love to do is essential. Life is uncertain, whether we take risk or not. So why do we waste time on the job that we don t enjoy? Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. Steve Jobs 8

9 Calvin Leung IT During the business visit, I learnt about how private equity funds work and their relationship with the rest of the business world. As an intern working in the IT department, the experience was rare and invaluable; it was truly an eye-opener for me. As Alvin did an informative introduction about different types of corporate investment, I understood that PE funds usually choose firms with a potential return rate of approximately 20% to invest in. He also mentioned that CVC uses a clever strategy to increase the incentives of staff to earn money for the companies. They leave a portion of ownership for the management board to invest in, so that CVC and the portfolio companies have an aligned interest if the firm earns big money, CVC benefits as well, and vice versa. This might be a method that a lot of corporates have been using to operate their business, but I find it useful for managing small start-up groups as well. In general, CVC assess companies by their financial performance and management committee before adding them to their portfolio. Among all of the companies under CVC s current portfolio, HKBN was chosen not only because it is not a profitable enterprise controlled by prosperous families in Hong Kong; more importantly, HKBN s unique corporate culture and vision appears to be very appealing to CVC. Before Alvin ended our discussion, he provided us with some insights regarding our career paths and future prospect. Studying Computer Science and Computer Engineering in university, I asked him how his Electrical Engineering degree related to his current work in private equity. He told me that the degree was not the most important thing in our career path; the skills you get from school, e.g. confidence, analytical thinking, communication techniques are the things that really matter in the long run. His previous experience in the consulting industry also contributed a lot to his current job. I would like to quote Alvin at the end of my reflection, as I deem his words profoundly inspiring. Ultimately, it doesn t matter what you do in the future; be it the telecommunications or pharmaceutical industry, you just have to do it with the best people, that is the only way to learn and succeed. 9

10 Miranda Lee - IT It was my pleasure to visit CVC office and had a dialogue with Alvin Lam, the Senior Managing Director and Srdjan Dangubic, the Investment Director of CVC. They have represented CVC to show a warm welcome to us even though we were just small potatoes. Quality cookies and drinks were prepared before we arrive. This made me feel a cultural difference compared with those local companies. Whenever CVC decided to invest on a new company, they did not just focus on financial status but also managerial and other aspects. In consideration of our daily lives, we should bear in mind to apply lateral thinking theory as we learn from their management before decision making. Risk always exists, even for CVC, a company with strong capital base. It is important to assess potential risks that would be involve from full perspectives before implementation, In short, the senior management of CVC gave me an insight: Investment risks cannot be avoided but it can be eliminated when a company has a sound and effective management team. 10

11 Monish Iyer Finance On Friday 4 th July, the Co-Owner of the Future Summer Interns including myself went to the CVC office to learn more about private equity. After spending an hour with Alvin talking about the different things that CVC does and the variety of companies that they work with there were certain things that really stuck with me. The things that stuck with me were: Investing in a Company Takes Years of Research and Knowing the Management One of the things that Alvin stressed when talking about the process of investing in a company is how important it is to develop a relationship with the management before making the investment. He used HKBN as an example and how he was talking with the management for several years. To me, it seemed that it was important to him to trust the management s commitment and personality which is why he spends time to get to know them. Investing involves a lot of relationship developing as well as astute analysis. It takes more than Previous Financial Performance to be a Good Investment While Alvin stated that it is important for a company to be performing well financially in order for it to be considered a good investment he did say that it was not the only thing that matters. In addition to a good financial performance he talked about how you must also use personal judgment and be able to predict that the company will continue financial growth and is heading in the right direction. This means looking at their plan going forward and seeing how the firm is operating. If there is something concerning about them, such as their complacency then they might not be a good investment despite their past success. It can be Beneficial to Try Different Career Field Another thing that Alvin talked about was his career path. He went from consulting to corporate to private equity. While the three fields are very different he did say that he did learn a lot from all three and is able to implement what he has learned from all three today. I think this is very important especially at HKBN. In HKBN if we want to continue to kick-ass and outperform our competitors then we must also look to gain knowledge outside of just our industry. This is how we will truly WoW because we will be thinking with a broader mindset than our competitors. 11

12 Appendix 12

13 Intensive Post-visit Discussion with NiQ After the visit, the eight Co-Owners of the Future went for drinks with NiQ and CJ (HKBN s Head of Investor Engagement of the Future) at Sevva, to reflect on the visit and further the discussion. 13