You may also listen to the podcast on:
Richard Dyson: We are joined today by Clive Kahn - Chartered accountant, CEO and entrepreneur and in particular a businessman with a record of growing and transforming businesses. The first part of Clive’s career was with Travelex which he helped grow up to the point of its sale to Apax Partners in the early 2000s and since then Clive has been involved in several more business turnarounds.
Between 2007 and 2014 he grew the payment processing business Cardsave, which merged into Worldpay. And more recently he has turned around Payzone UK which this year rebranded as Takepayments. In both cases Clive you have achieved huge growth in revenues and profits, and we will talk about their stories in more detail later. Thank you very much for giving us your time.
To begin with - Can we talk about your early career? Go back even earlier than that perhaps and can you tell us something about your childhood? Were you always interested in business?
Clive Kahn: Absolutely. My father was a shopkeeper, and that business took up his whole life. Really, the whole family participated. I spent my weekends and my holidays working in the shop with my father and that experience taught me various things that I'm sure I benefited from in later life. Most definitely the merits of hard work.
Richard: What sort of shop was it? And where was it?
Clive: It was a type of shop that you actually don't see anymore. It was called the Travel and Sports Centre. One branch was in the Haymarket and the other branch was in the Strand. It was one of those shops that literally sold everything. From Capodimonte porcelain to camping equipment. From Swiss army knives to trunks and suitcases and executive cases. From ski wear to Afghan coats.
Richard: Tell us about the next steps for you?
Clive: From a very young age my father drummed into me that I was going to be an accountant. So, I was really left with little alternative, but to be fair to him, he always said, 'Get your qualification and it will open the door to many other opportunities,' and he was proven right.
Richard: At what point were you less of the accountant and more of the grower of a business?
Clive: I started off working in a profession, which did not come naturally to me. I found it difficult at first, but I got there in the end and actually, I started working part-time for Lloyd Dorfman, the founder of Travelex, whilst I was still working in the profession and then when I qualified, he said, 'Come and join me' which I did, again, initially as the finance director.
But I got more and more involved in the commercial side of the business, particularly involved in setting up the corporate foreign exchange business and also, I had responsibility for most if not all of the acquisitions which I think was a major part behind the growth of Travelex.
Richard: Was it the sector itself that was interesting you or was it the development of a business, the growth, the strategy and planning?
Clive: We grew that business from 30 people when I joined in 1985 to 6,500 people when I left in 2006. From being a solely UK business to one that operated across 35 different countries and jurisdictions. So, I think it was the experience of going through that extreme growth, the experience of integrating new acquisitions into the company, which were probably more important than just the sector itself.
Although that sector did drive home to me the benefit of dealing with a business which deals with large numbers of small transactions and the fact that if you can maximise the margin, or tweak the margin on these transactions slightly, it has a tremendous benefit to your bottom line.
Richard: You joined in the 80s and that business grew at that enormous rate to the point where it was sold to Apax in the early 2000s, 2004, 2005. What was that point of sale like for you?
Clive: Extremely tough. I handled the sale and because of its' size, it took an awful lot of effort in terms of managing the corporate financiers, managing the due diligence, and the legals. Again, running a business or selling a business which operates across so many different jurisdictions and so many licencing, it was a very complex transaction, and it took months to do.
Richard: Behind the scenes, there was a huge amount of activity, presumably?
Clive: Sure. The important aspect is to be able to finalise that transition without overly impacting the running of the rest of the business. So, I tried to take on most of the responsibility for undertaking that transaction to allow the rest of the management to carry on running the business which is important because the people buying the business want it to be successful from the start.
Richard: You stayed on for a couple of years. What was that period like?
Clive: It was a period which took some adapting to. I became CEO rather than CFO, and Lloyd Dorfman, the previous chief executive became executive chairman.
Richard: You talked about one key transaction in the latter period of growing the business with Thomas Cook. Do you want to talk about that and any of the conclusions that you drew from that?
Clive: It was a transformational transaction. Thomas Cook was very much the global leader in our sector, and we were no more than the terrier snapping at their heels. The fact that we managed to buy it was, in of itself, a great feat. But the fact that we managed to finance it particularly well, created tremendous value for Travelex. In summary, from memory, we paid £450 million for Thomas Cook financial services.
We financed the whole deal on a bridging loan from our bank, but we were able to do that because we had a plan to be able to repay back that loan from some money that we created through financial engineering in the business. So, all I can tell you was within six months of completing the transaction, not only had we repaid back the £450 million bridging loan from the bank, but we had a £100 million surplus in our bank account.
Richard: Amazing. What are the ingredients of a transformative successful transaction like that?
Clive: As I said, the financial engineering that we came up with was shrewd. It worked very well and had a phenomenal impact on our business, but with all acquisitions, I think that people tend to focus on doing the deal, finalising the legal arrangements and then think the job is done. But that's wrong.
The main work only starts once you have completed the deal. Many transactions of this kind fail because people don't give sufficient time or attention or effort to the integration. The real value from any transaction emanates from how well you integrate the two businesses. That's what I spent much of my time and effort doing post that transaction. We created tremendous synergies from combining those two businesses, but most importantly we combined them well culturally and getting that cultural integration is often the most difficult.
I also believe in any integration; you need to do it as quickly and as speedily as possible. It often results in a loss of jobs and people will want to know that their jobs are safe. That we've finished the redundancy process as quickly as possible. You also need to be of a very strong mind and confident, because there will be so many people who tell you, 'You can't do this, you can't do that,' and you just need to have the courage of your convictions.
Richard: With Thomas Cook, had you then looked as part of eyeing it up ahead of the transaction, at how feasible that integration was going to be?
Clive: Absolutely. You prepare your forecasts based on the combination of the two businesses and of the synergies that you are going to create. But you are only looking at it from one perspective. You have far from perfect information when you are buying a business.
Richard: Because at that stage, they don't know you're interested?
Clive: In this case, they did know that we were interested, but you still didn't have that many opportunities to discuss your plans for the business. It's a competitive situation and so therefore you go through a process. I bought several businesses in my time, and it never ceases to amaze me, particularly given the amount of money you're spending on these businesses, how little time you have with the business or discussing your plans.
When you buy a car, at least you have an opportunity to drive it up the motorway and back, but mostly for these businesses that are bought, you spend little more than a day in the business before you've actually committed the tens or hundreds of millions of pounds to the acquisition. So, you very much have to have the courage of your convictions. You have to have your plans, but you're not totally sure what's going to happen until you get your feet under the desk and start talking to people and start making things happen.
Richard: How much of that is about the people themselves? With that transaction, were you confident you'd be able to get on with the key people? How important is that element of it?
Clive: I don't think it was a case of whether we could get on with those people. It was a case of being confident that we could choose the best people from both organisations. It's important for everybody to believe that the process that you use for the integration is fair. That we wouldn't just keep the Travelex employees in preference to the Thomas Cook employees, but we would choose whoever was best suited for the job. Otherwise, all the Thomas Cook people would have left and then you end up getting little value for the business because in any business that you buy, people make up a large proportion of their value.
Richard: That is fascinating. I am keen that we move on to talk about other aspects. Can we talk now about the period post-2007, after Travelex for you? When you moved into other businesses. Can we focus on Cardsave? Can you explain what Cardsave does? How did you discover and find a way into it?
Clive: That's a good question. So, I left Travelex in November 2006 and I knew one thing for sure, I wasn't done. I wanted to go and do it again. And importantly, I wanted to go and do it again totally by myself. I was naturally restricted from staying in the same sectors, so I started going out there, looking for new opportunities.
I advise everybody who is in a similar situation in today's world, lots of people are, that you have to treat the finding of an opportunity like a job. It's as much of a job when you are in employment when you have your business. Finding a new opportunity is a challenge and you just go and speak to everybody, follow up every single lead, follow everything down and as I have found to my success, eventually you find the right opportunities.
In 2007, I found this strange little business called Cardsave, based in this even stranger town called Grimsby. I wasn't even sure where that was, which was in this sector on payment processing.
Richard: Is there a bit of detail that you can share about what was the networking or string of events that led you to that?
Clive: You go and speak to people in corporate finance. People who are involved with buying and selling businesses. You go and speak to other business people. You go and speak to professionals. You go and speak to recruitment consultants because they often know what's happening.
Again, you go and get off your bum and knock on doors and speak to people and generally, even if they don't want to offer you an opportunity, they will refer you on to somebody else and you have to pursue all of those leads. The other obvious group of people to speak to is people in the private equity world as well.
Richard: What was it about Cardsave that caught your attention?
Clive: I just saw it as being a business that I could do more with. I prepared my business plan, and I could see that really what it needed to do was focus on sales and to significantly increase its activity. I also thought that it would be an opportunity for cross-selling. Having said that, as I found in Cardsave and subsequent businesses, cross selling is always very difficult to do.
Richard: Can you explain what Cardsave does and what it is that you were selling?
Clive: Cardsave works in the card acceptance sector. Put simply, we enable businesses to accept cards in settlement for their goods and services. So, if you are a shopkeeper or a service provider, you will want to have a card payment terminal and an account with a card processor. If you are an online merchant, you'll need a payment gateway and a payment processor. We supply all of those.
Richard: That was a period of rapid growth was it, as a lot of business started to migrate online and card usage was growing?
Clive: Card usage was definitely growing. Card usage for the last ten years up until this year, has been growing about 5% a year at mostly the expense of cash. I try to set some rules for businesses that I look to invest in, and the main one is, always invest in a business, in which the macros are going in your favour.
It's easier to run downhill with the wind at your back than trudge uphill through treacle with the handbrake on with the wind in your face. Most definitely, the macros have been working in our favour in the card acceptance sector.
Richard: How much competition is there? Going back to this period of growth and cross-selling. What were some of the difficulties?
Clive: The main difficulties with their business was convincing and selling to the staff that they were just scratching the surface. Explaining to them how they could do so much more than they were doing now. Just to lift their horizons and build on the steady foundation that was there, to create a business that was twice the size.
We doubled the profitability of that business in three years, but I have to say, not in any three years. We completed in that business in August, September 2007, and within weeks, if not months, we had the financial crisis. So, when every other business was struggling and going south, we doubled the profitability of that business in three years. We practically doubled it again after selling it into Advent and Bain, who owned our shares alongside Worldpay until we merged the businesses together in 2014.
Richard: How did you inspire staff and colleagues to buy into your vision of growth?
Clive: By talking to them and continuing to talk to them. I find with most people, it's no good just saying something once. You have to keep up with that message. I call it Chinese water treatment. Drip, drip, drip. If you want to get a concept across, you have to keep on repeating the message and finally, it sinks in. But also, you do it by people seeing what's happened and once you start investing in a business, most people are open to that, and you employ more people.
They can see that it benefits them. The other really critical thing to do and important thing to do, a transformational thing that we did with Cardsave was we got everybody in that business pointing in the same direction. And that wasn't the nature of the business beforehand.
Richard: What do you mean, pointing in the same direction?
Clive: So, Cardsave is primarily a sales business. And the sales function is you have telemarketers who create appointments and then you have salespeople who convert those appointments. I'll never forget the very first sales meeting I ever went to.
It felt like World War Three had broken out, in that the meeting just consisted of the telemarketing people blaming the salespeople for not converting their appointments correctly and the salespeople blaming the telemarketing people because their appointments were not of sufficient quality.
Richard: You were listening in and they knew you were there?
Clive: Yes. This was second nature to them. This is what happened at every other meeting for years prior to my arrival. So, it soon became clear to me that we had to agree on a definition of what was an acceptable appointment, and it also became very clear to me that we had to set the commission plans correctly so that the appointment makers only got paid for their appointments when they got converted to a signing. That way, we made sure that everybody's goals were in line.
Richard: So that's a practical way in which everyone is pointing to the same outcome?
Clive: Correct. And then you back that up with reporting and you back that up with excepted measurements of success.
Richard: You make that sound very obvious and simple but presumably, lots of businesses fail to get this right?
Clive: Many, if not most do. But business is not complicated. Business is simple. Putting financial dynamics and engineering to one side, the basics of business, particularly a people business, it has to be simple. It has to be dealing with concepts that people can understand. You never get anything perfect and very often in business decisions or permission plans there is a challenge between complexity and simplicity of getting it absolutely right, and simplicity. Simplicity should always come first.
Richard: Let's talk about Payzone. Cardsave you merged into WorldPay having had that growth in revenue and profitability you described. Payzone, you became involved in 2016 and in a shorter period you've achieved more there in terms of growth and profitability. Is that right?
Richard: How did that happen?
Clive: That's another interesting story. I left Worldpay in a very good place. I had done well personally, but also importantly to me, my people, my staff, had done well. I was glad that they were in a position where they could grow and develop under the Worldpay wing and in particular, Worldpay promised me that they wouldn't close the Grimsby office. So, I probably shouldn't have been surprised, but in May 2015, I got a phone call from the CEO of Worldpay who said, 'Clive, I know we promised you this, but I thought I'd do the right thing by telling you that we have changed our minds and we are closing your Grimsby office.'
I said to him, 'Dave, but you know you've got good quality people there and there's no economic reason to do it.' He said, 'Yes, I know, but we're doing it.' So I know that one shouldn't be sentimental about business. I know one shouldn't be sentimental about people, but what can I tell you? I'm a people person. I feel strongly and passionately about all the people who work for me, and I felt strongly and passionately who had previously worked for me. So, at that time, I made the decision to start up a business from scratch, employing the people from Grimsby.
Richard: Amazing. That was a very different origin and motive behind starting that business. You were building on the knowledge you had of those people skills.
Clive: Correct, but having said that, I'm also very conscious of the fact that starting any business from scratch, even one that you know very well, is difficult. It's always easier to buy a small business that has foundations for you to build on. So, with that in mind, when I was introduced to the Payzone UK opportunity, I did have a look at it. I'd been aware of Payzone UK for many years because we operate in a similar industry.
Payzone UK operated in the bill payment industry. This is a different business. It enables people who don't have access to bank accounts and cards and only have cash to top up mobile phones or pay for the utilities, pay for their rent, light and heat, and they do that by taking cash into corner stores, convenience stores, newsagents, who have our terminal there with a switch. The shopkeeper takes the cash from the individual, enters the details into the terminal, sends it to our switch, we update the utility and the individual either gets his mobile phone topped up or gets his gas and electricity paid. We then direct debit the shopkeeper. That was a business.
I'd never been attracted by that business because it's a cash place business, and as I said, I like to buy businesses which the macros are going in your favour. That was not the case with the bill payment business, but they had a small card acceptance business as well and that was the attraction. So, we bought that business a week before Christmas, 2015, to effectively, again, we'd been up to their offices in Northwich once. So, we got to see it properly on the first working day of January 2015.
Whereas Cardsave was a business that had potential and we really had very few bad surprises, Payzone was a very poor business. Every stone we overturned was another problem and I can remember having several, 'What the hell have I done here,' moments. We had plans to leverage off their systems and their management, but they were both as bad as each other.
I kicked out senior management within days if not weeks. I brought in new management, started again and although we'd always planned on focusing on the card acceptance business because the bill payment business was in such a bad state, we had to spend the first six months focusing on that, sorting it out and putting it back together again.
Richard: This was using staff that you were effectively reuniting from Cardsave?
Clive: Well, the staff that we'd taken on from Cardsave were actually in a different vehicle and were working separately initially. We brought the two businesses together after six months.
Richard: They continued to work effectively in the same business as before?
Clive: Correct. And Payzone had a small card acceptance business as well. Which was always the attraction, because we knew that was the growth business, but by the far the biggest business in Payzone was the bill payment business, and because that was so broken, we had to mend it before we could then divert our attention to building the card acceptance business.
Richard: Even so, huge strides in four years.
Clive: Yes. A lot of work went on. Let me give you the story. It took us about six months to get the bill payment business settled down and then we started to focus on building the card acceptance business. We grew it very quickly. Once people got to hear about the fact that we were starting up again, we were inundated with requests from good quality people to come and work for us. And again, we all make mistakes and I probably said yes to too many people, which put pressure on us to grow too quickly.
Even though we were replicating what we had done previously in Cardsave, it takes time to build a business and we made lots of mistakes and lots of errors. We focused too much on the front end, too little on the back end, but we've now got it to a stage where we have a great, very well run, very well managed overall business.
We grew that business from 25 people to 350 people in five years. We grew it, I'm talking about just the card acceptance business now, from 12,000 customers to 50,000 customers in five years. We grew it from £4 million worth of revenue to a run rate of £37 million worth of revenue in five years. The other thing to update you on is that Payzone UK is now a purely card acceptance business because we actually sold the bill payment business to the Post Office in 2018.
Richard: In a way, you have literally ended up with something that looks like what you built with Cardsave. Is that fair?
Clive: Correct, but bigger and better. Significantly better than Cardsave.
Richard: You described difficult moments where you thought – ‘why the hell have I done this’? Why do you continuously put yourself into these stressful positions where things may, or may not, work out? What is it that drives you to keep on going?
Clive: I would say I am definitely a driven individual. I'd probably need to go to a psychoanalyst to understand quite why. Maybe I feel there's a need to prove myself. I'm not sure who I'm proving myself to, but also because this is what I love to do. I say to people, 'I've tried golf. I've tried tennis. I can't see myself spending my life playing those games and if nothing else I'm much better at business than I am at either of those sports.'
Richard: Are you surprised by your own success, looking back? Going back to your father’s general store and to qualify as a chartered accountant. Now looking back on what you have achieved, are you surprised?
Clive: I've always been an individual with aspirations. I've always tried to get on and do as well and try as hard as I can. I've always cared to do everything that I have done. Ask me if I'm surprised at my successes, no because in most cases the success is the crystallisation of a plan, any forecast that I embarked on the activity with. Yes, we've created a tremendous growth of revenue in takepayments, but that is what we planned to do.
Our actual results are almost exactly in line with our plan. I'm sure that my backers didn't expect us to do that. It may be a very pleasant surprise as far as they're concerned and certainly, we arrived at the same place from slightly different routes, but that's always going to happen in any business. So, I can't say that my success has been too much of a surprise.
Richard: There are many people listening who would love to have a fraction of your success. What is your advice to those who are earlier in the journey of transforming or growing businesses? What are the key things that you recommend they keep at the back of their minds?
Clive: All businesses are different and so what works for one doesn't necessarily work for the other. But for most businesses, the differences between success or failure comes down to sales. People forget that sometimes, but sales is the main determinant as to whether your business is going to succeed or not.
So, with any new business, you have to be satisfied that your product, your service, satisfies a need. You then have to develop a proper sales plan showing you how you are going to communicate your product to those people who need it and how you are going to back that up with sales.
When it comes down to it, it's all about execution and executing on that plan, and again, with any new business, things will not go exactly your way whenever you want it to and you have to be able to see that and understand that you've made a mistake, and to understand the need to, and have the ability to pivot your position and change things so that you do get it right and keep on pivoting and changing until you can see that your sales plan is working.
Richard: Clive, thank you for so much your time. It's been super talking to you, Clive Khan.
The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Past performance is not a guide to future performance. The information is not an offer, solicitation or recommendation of any funds, services or products or to adopt any investment strategy.
Issued in the Channel Islands by Cazenove Capital which is part of the Schroders Group and is a trading name of Schroders (C.I.) Limited, licensed and regulated by the Guernsey Financial Services Commission for banking and investment business; and regulated by the Jersey Financial Services Commission. Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested. This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. All data contained within this document is sourced from Cazenove Capital unless otherwise stated.