Part 20 (1/2)
”The firm I want to buy is an IT group based in Reston, Virginia, which is about twenty miles west of Was.h.i.+ngton, D.C.”
”You mean, information technology?” she asked.
”Yes. The firm helps large, multinational companies install and integrate state-of-the-art software systems into their existing legacy networks. Their engineers design and build custom software systems in certain situations, as well.”
”IT is a tough business right now, isn't it?” Angela asked. ”I don't have much experience with companies like that, but I've read that those professional-service models are difficult to scale. And that corporate America isn't spending as much on those kinds of services as they were a while ago. Lots of IT companies have seen their stock prices. .h.i.t the skids lately, haven't they?”
”Which makes it an excellent time to buy. A year ago the firm I'm looking at had a stock market value of almost a billion dollars. Now, with the share price trading in single digits, the total value of the firm is down to around two hundred million.”
”What's the name of the company?”
”Proxmire Consulting.”
Angela didn't recognize the name. ”What's so special about Proxmire? As I understand it, there are lots of IT companies that do what you've described. Why are you so hot on these guys?”
Lawrence smiled approvingly. ”Very good, Angela.”
”Thank you, Mr. Lawrence, but-”
”Jake,” he interrupted quickly. ”I've asked you to call me Jake several times. I don't want to ask again.”
”Sorry.” She hesitated. ”Jake.”
”So why these guys? An excellent question.” He nodded at her gla.s.s. ”You haven't touched your wine. It really is delicious. Don't waste it.”
”Why Proxmire?” she repeated firmly.
Lawrence nodded, resigned to her cautiousness. ”Two years ago Proxmire acquired a company named ESP Technologies in a stock swap. ESP designs and develops cutting-edge predictive software systems.”
”Predictive software? You mean the kind of application where a user inputs historical data and the software provides most likely outcomes.”
”Yes.”
”Forgive me for being so blunt, but that isn't cutting edge. There are lots of other companies doing that.”
”Believe me, these people are light-years ahead of the compet.i.tion. Their proprietary logarithms are incredible. With only a few variables their predictions are more dependable than the compet.i.tion's by a factor of ten. Maybe more. And this firm has huge data banks to cross the incoming historical data with, which further refines the predicted outcomes.”
”How do you know?”
”One of my portfolio companies licensed ESP's software six months ago and the results have been spectacular.”
”I'm listening,” she said, picking up her winegla.s.s for the first time.
Lawrence watched as she drank. ”I own a chain of convenience stores in the South.”
”Really? Which one?”
”Cubbies.”
”You're kidding. You own Cubbies?”
”Yes, I bought it three years ago from the founder. It was a private transaction. We kept the deal extremely quiet.”
”There was a Cubbies near the trailer park I grew up in. They used to have this great Italian Ice machine at the back of the store.”
”They still do. Thanks to the ESP technology, we've moved those machines closer to the potato chips at most of our two hundred locations. Same-store sales increased 14 percent last quarter without any increase in advertising dollars.”
”Because of ESP?”
”Absolutely. They researched the demographics for each store, then a.n.a.lyzed specific historical item volumes, pricing, and merchandising across the chain, and developed a new store setup profile for every location. One of the software's recommendations was to relocate that machine at a lot of sites. The results have been immediate and measurable. No question ESP has had a profound effect on the business. Cash flow has doubled.”
”So you're impressed enough to buy the entire company just to get to ESP?”
”I believe ESP could ultimately be worth billions by itself. The problem is that Proxmire, the parent company, hasn't had the marketing dollars to spend on rolling out ESP's software through the appropriate distribution channels. As you mentioned earlier, they've had their own cash flow challenges over the last twelve months, and they seem focused on simply keeping themselves afloat.”
Suddenly things were beginning to sound interesting again, and she took another swallow of wine. Lawrence was right. The wine was delicious. Of course, why would she have expected anything else? The bottle probably came from some special stock. A stock the hotel reserved for the few guests who could afford this suite.
For a moment she allowed herself to wonder what it would be like to have no monetary concerns, to do anything and everything she wanted, whenever she wanted. Would total financial freedom be worth the need to have armed guards and decoy teams, to live life always looking over her shoulder? She couldn't convince herself it would be. In some ways Lawrence was a prisoner of his own wealth. In a gilded cell, for sure, but a prisoner nonetheless.
”Do you intend to make a public tender offer for Proxmire?” she asked.
”Yes.”
”But, if I'm remembering our conversation in Wyoming correctly, you were worried that Proxmire's senior management wouldn't be enthusiastic about your intentions.”
”Right. Look at Bob Dudley's reaction to hisperception that I'm stalking Sumter,” Lawrence scoffed. ”Imagine a CEO's reaction when heknows I'm coming after his company. These men enjoy running the show, Angela. It's all about ego for most of them, not about what's best for the stockholders. As I told you, senior executives worry that, once I gain control, I'll come in and change everything, and, at a minimum, hold them accountable for their performance, or the lack thereof. Maybe even fire them if I wake up on the wrong side of the bed one morning when they aren't hitting their numbers. That's where you come in.”
Angela licked a drop of wine from the corner of her mouth. This might turn out to be fun after all. ”You want me to meet with Proxmire's senior executives? By myself?”
”Yes,” said Lawrence. ”I want you to lay out the entire scenario for Walter Fogel, their CEO. Explain to him that I'm willing to pay a reasonable premium for Proxmire shares if he and his board accept my offer without a messy proxy battle. Explain that I want to work with them to develop a plan for a major rollout of ESP's primary products. That I will commit additional capital over and above what I pay the public stockholders for their shares to enable management to accomplish that rollout.” He smiled. ”Then use your considerable charm and beauty to persuade Walter to embrace my offer.”
Angela put a hand on her chest. ”You are going to let me negotiate the deal?”
”Absolutely. And lead the due diligence effort, focusing almost exclusively on ESP. I really don't care what you find at the rest of Proxmire. I care only that everything checks out at ESP. You have to scrub that part of the deal squeaky clean. Find out everything there is to find out at ESP. Make certain there aren't any skeletons in the closet.”
”Why so much focus there?”
”My ultimate strategy is to take ESP public out of Proxmire. I want to make certain the investment bankers I use don't find anything that would get in the way of the IPO. And, as long as you are diligent, they won't.”
Angela's eyes narrowed. ”Tell me the truth, Jake. No more s.c.r.e.w.i.n.g around. Why me? Why not one of your high-priced Wall Street suits who does this for a living?”
”I told you. I'm very focused on keeping this project confidential. I-bankers can't seem to keep their mouths shut. They'll whisper the information to their friends, and before you know it the price will jump ten bucks before we even announce our offer to purchase. I'll end up paying the price.”
”I'm not buying it. There's more to it than that.”
Lawrence nodded approvingly once more. ”You're a sharp lady. My people were right.”
”I'm very happy for them and I hope you give them all big bonuses for being so perceptive. What's the real answer?”
Lawrence looked away for a moment, then stared directly into her eyes. ”The CEO of Proxmire is single and black. Walter Fogel is from a small town in the South, and he's lifted himself out of poverty by his bootstraps with nothing but brains and determination. No old boy network was on his side. In fact, he's had just the opposite. That network has been working against him all of his life. You will connect with him immediately because you understand exactly what a man like Walter has gone through to get where he is today. And because you connect with him, he will connect with you, making everything a great deal easier.” Lawrence paused, trying to gauge her reaction. ”It's as simple as that.”