The Money Makers

by Harry Bingham

  ‘We’ve got unanimous approval. The deal’s on.’

  5

  Madison had moved in on EuroRoad Haulage. Once again, there was no dramatic putsch planned. It was just a case of intensive research convincing Fiona, Deane and Matthew that there was an undervalued company out there, whose loans were worth more than the market judged. Madison bought heavily.

  As usual, the scale of Madison’s purchases made a big difference to a thin market. The market price of the bank debt rose by about five percent. The market price of the bonds rose by about four percent. The company’s share price rose from three pence to three and a half pence. That half a penny rise doesn’t sound like much, but it’s one sixth of the original share price. Seventeen percent, as near as dammit. After Matthew’s costs buying and selling, the seventeen percent became a more modest twelve, but still he was ecstatic. He’d got treble the return he’d have got on bonds. He would make his million more quickly in shares and he’d make it more safely too. Better returns meant fewer trades. Fewer trades meant fewer opportunities to get caught.

  There was only one fly squirming around in the ointment.

  When Matthew had stumbled out of the little alleyway, fresh with the pleasure of his success, who should he have stumbled into but Brian McAllister?

  ‘Bit early for a pint, isn’t it?’ asked the Scot, nodding up the alley in the direction of the pub.

  He’d meant nothing by it. It’s just the sort of thing you say when you bump into someone in the street. But Matthew floundered. He groped for words. He waved his hand around - his hand that still held his portable phone. He opened and closed his mouth.

  ‘Been waiting for a friend,’ he said, at last.

  It wasn’t such a stupid thing to say, but his way of saying it couldn’t get much stupider. McAllister nodded slowly, as though Matthew had just unveiled a great mystery, then smiled and walked on.

  Nobody, but nobody, played a better game of read­ my-soul than Brian McAllister, master of the trading floor. What had he seen? What had he seen, as he looked so piercingly into Matthew’s stuttering, awkward, guilty face?

  6

  The price of South China Trust Bank shares had nudged down to thirty-six dollars. Over the week it had come down a full two dollars fifty, another six and a half percent fall. That was good news for Zack, Scottie and Phyllis, huddled round their coffees in the uneasy dawn. It was five thirty in the morning and once again they were gathered in the Hong Kong offices of Hatherleigh Pacific. Lord Hatherleigh was in England, but insisted that they call him at any time of day or night to let him know their decision.

  ‘Why d’you think the price has come down so far? This is more than just the bad news on the shipping side,’ said Scottie.

  They’d been through this many times, but some people get nervous before spending 1.35 billion US dollars.

  ‘We don’t know exactly. Probably no one does. What’s clear, though, is that banking stocks as a whole are down three or four percent. South China is worse hit because it’s a worse bank.’ It was Phyllis Wang speaking. She was the Madison expert on the Hong Kong market and she spoke with authority. ‘But we’re not aware of anything which should cause you to hesitate at this stage.’

  Fingered by the grey light of dawn, Scottie’s ruddy face glowed a dull pink.

  ‘Only our company’s future,’ he whispered.

  Zack and Phyllis smiled. What Scottie said was true. Bankers flit from deal to deal like birds in the wood. The company executives who actually do the deals have to live with them, the successes and failures, for years. A bad deal can set a company back five years or more. A good one can skyrocket it to a level of success impossible by any other means. And Scottie was justifiably nervous. South China was nearly as big as Hatherleigh Pacific itself. Not only did Hatherleigh aim to swallow something its own size, it wanted to do it all with borrowed money. By any standards, that was hugely risky. And despite all their homework, there was always the risk of something they didn’t know.

  Zack and Phyllis waited calmly. There was only one decision Scottie could come to. He was welcome to take his time.

  ‘There’s no chance that the stock price falls further? If it does, we’d pick up the company cheaper.’

  ‘Of course it may fall some more,’ answered Phyllis. ‘Equally it could rise. We can’t predict that. But you have your borrowing facilities in place. You have a company you like, at a price which is excellent. You know of no reason for delay. This is as good as it gets.’

  ‘You’d better be right, guys.’

  Scottie owned about one and a half percent of Hatherleigh Pacific. He would be responsible for seeing the deal through, for shaking up South China and turning it into a money machine. If he succeeded, he stood to double his fortune and consolidate his reputation as one of the most daring and effective businessmen in all Hong Kong. And if he failed - well, failure was not to be contemplated. Across the harbour, a molten sun lifted above the grey rim of encircling sea and glimmered lividly beneath the cloud. Scottie glanced at it, and shook himself.

  ‘You guys think we should bid forty-five dollars?’

  ‘That’s right. You need to pay something over the existing share price, otherwise no one will be interested. You could try to low-ball it, but the chances are you’d need to raise your price later on. We reckon that at forty­ five dollars you stand a chance of taking the company out in a single punch.’

  Scottie pondered. The sun struck a thousand orange flames from the skyscrapers opposite. It looked like an advert for hell: ‘Come to hell - it’s flamin’ pretty’.

  ‘OK. Let’s go for it. Forty-five dollars it is.’

  ‘You’re ready?’ asked Zack. ‘We launch the bid? You understand that there’s no return?’

  ‘Yes. I understand. You can go ahead.’

  Phyllis moved towards a phone. She had her team on stand-by to issue a press release, which would formally state that Hatherleigh Pacific was bidding for South China. Within a couple of minutes, Hatherleigh Pacific’s takeover of South China would be public - and irreversible. In Weinstein Lukes’ dealing rooms the share traders would start to buy stock in South China at any price up to forty-five dollars.

  Scottie now had a couple of calls to make. One was to the Chief Executive of South China. It was just a courtesy call. What he’d say, in effect, was: ‘It’s nothing personal, but we’ve just bid for your company. If we win, you’re sacked. And in the course of the takeover campaign, we’re going to say lots of nasty things about you, to convince your shareholders that you’re useless. I just wanted you to make sure you heard it from me first.’

  It’s a bizarre form of courtesy, but it’s standard practice. The other call was to Lord Hatherleigh, now fretting the evening away in his Chelsea home. He’d be pleased. And excited.

  Scottie moved towards a phone, while Phyllis stood in the comer talking into her mobile. The orange light which filled the harbour disappeared as quickly as it had arrived. The sun, now lifted clear of the grey sea beneath, rose into the suffocating embrace of the covering cloud and the world grew dark again. Phyllis clicked her phone to off. The press release was issued. The bid was launched.

  7

  When George had said ‘Game, set and match’, he might have added the word ‘tournament’. Things were going outrageously well. Furniture Today had written the most grovelling apology conceivable, and included a long and flattering article on the ‘Gissings miracle’ with extensive colour photos of all their product ranges. Full-page colour ads would appear for free for the next two years. Plus, of course, the Aspertons’ war on Gissings had been thrown violently into reverse. The Aspertons had sent out letters to all their customers retracting the libel. Their order book for the Asperton Brilliants had been passed over to Gissings, and the mighty Asperton marketing department was now selling Gissings furniture as though it was their own. The volume of orders was so great that Gissings was working at full capacity and work was even having to be subcontracted to ot
her manufacturers. The prices were good, too. Without the remorseless competition from the Aspertons, and with the huge flood of positive publicity, Gissings could sell as much as they wanted at the prices they wanted.

  Everyone whom George had fired when he first took charge of the factory was now back on the payroll. Salaries had been restored to previous levels, plus a generous allowance for inflation. George had even insisted on paying a bonus to all employees, despite a muted protest from Jeff Wilmot. The mood on the shop floor had never been better.

  They were making money, too. If they kept sales up at this rate, they’d be producing three million pounds’ worth of furniture a year, and selling it at a ten percent profit margin. That was three hundred thousand pounds in a year. The money would go towards repayment of the debt, of course, but Ballard hinted that Gissings could keep at least some of it towards completing the long-delayed expansion of their production area.

  ‘Don’t tell me you’re about to start being generous now that we don’t need you to be? Typical bloody banker,’ said George.

  ‘Not at all,’ said Ballard. ‘The moment when a company’s in profit and growing fast is exactly when it needs money. You’ll get some use from it now. Before it would have just disappeared up the chimney.’

  ‘Yeah, well, we could use some cash to expand our production area and save ourselves having to subcontract. Bloody subcontractors eat up half our profits.’

  Ballard’s moustache muffled his smile, but his eyes twinkled with laughter.

  ‘What are you laughing at?’

  ‘You. You should have seen yourself when you first arrived up here. You looked a right sight, all designer shades and flashy car. And now you’ve turned into an out-and-out Yorkshireman and a bloody good businessman at that. Better than your dad.’

  ‘Better than Dad? You’re joking.’

  ‘No. He was an exceptional entrepreneur. He’d have made money in a prison camp, he would. But running a big business was never his thing. He always got in everyone’s way and ended up making things worse. You get the best out of people. Old Tom Gissing would be proud of you, really proud. Just remember: if you want to, you can take this firm all the way to the top.’

  ‘If I want to?’ echoed George. ‘What d’you mean “if I want to”?’

  Ballard looked sharply at the younger man.

  ‘Well, there’s your dad’s will, isn’t there? I assume you’re still aiming to make your million.’

  ‘There’s no way on earth I can make a million in time, David. With a bit of luck we’ll make three hundred grand this year and maybe even more the next. But by the time we’ve paid off your bloody loan and invested in the production area and stuff, it’ll be years, absolutely years, before I can get a million pounds out of the place. Maybe, five years’ time, more likely seven or eight. That’s better than I ever expected, but I’ll have missed Dad’s deadline by years and years. You know that as well as I do.’

  Ballard’s smile had completely vanished. His smiling, pudgy face focused intently on George’s, his shrewd eyes searching there for an answer to something. At length, the veteran banker spoke again.

  ‘You’re right, George. If you stay at Gissings, re-invest your profits sensibly and keep your eye on the long term, it’ll take you at least five years to make a million. As you say, it’ll probably take longer. You’ll expand your production area, then you’ll add to your product range, then your marketing people will do their stuff again and quite soon your production people will be clamouring for more toys. So it might be five years, it might be ten. All you can be certain of is that Gissings will grow, and prosper, and enrich you and all those who work with you.’

  Ballard paused again, unsure whether to continue.

  ‘Yes?’ George prompted. Ballard continued to hesitate, but then appeared to make up his mind. ‘But that’s not your only option. You can sell the company. It’s making three hundred grand profit before interest. You should be able to sell it for six to eight times that amount. If you’re lucky you may even fetch ten times. You’ll need to knock something off that for the debt, of course, but you should clear two million. Possibly more.’

  George was astounded. Never once in all this time had this thought occurred to him. He had assumed he would come third out of three in the race to the million. He guessed that Zack and Matthew would each make their fortune, and his best hope had always been not to be ashamed in front of them when the contest was settled. And now . . . now Ballard was suggesting he could actually come first. Make his million - his two million - and scoop his father’s jackpot. Thirty million quid, or more. Just imagine the look on Zack’s face! And Matthew’s if it came to that. He’d feel damn sorry to say goodbye to Gissings, to the whole bunch of them who had helped him turn the company around - but it was hard to argue with thirty or forty million quid.

  ‘But who would buy it?’ he asked lamely.

  ‘If you want to sell it, tell me. I can probably find you buyers if that’s what you want. But think about it, George. Think about it hard.’

  8

  You’re in your car, driving peacefully along. You stop at some lights. A bloke comes up to you and says: ‘Please get out of your car and give me the keys. I’ve just offered the finance company ten grand for the car, and they’re inclined to accept.’ What do you do?

  Well, let’s assume you succeed in refraining from violence. Let’s assume you manage to think calmly. The first thing you might do is get on the phone to the finance company. Don’t waffle on to them about ties of obligation, your long-standing relationship and all that blah-blah. Instead, say this: ‘Ten grand? Are you crazy? This is a genuine low-mileage vehicle, immaculate paintwork, engine as clear as a bell. Don’t even think about accepting such a ludicrous offer.’ Be convincing. Be clear. And if you feel you have to, there’s nothing wrong with a little bit of personal abuse directed at the person making the hostile offer.

  OK. That’s your turn. Now it’s his go. What does he do? He does the same. He gets on the phone too. ‘Low mileage? Yeah and my aunt’s the Pope. That car’s higher mileage than the bleeding space shuttle. The only thing holding the body together is the paintwork, and as for the engine ... all I can say is, don’t sneeze when you’ve got the hood up. Ten grand is five more than it’s worth. Take the money and scarper.’ Most likely, this bloke is stung by the nasty things you said about him: all that stuff about his parents’ marital status and his personal hygiene habits. He probably feels that now would be a good time to add a word or two about your own less pleasing personal characteristics.

  Good. Now it’s your go. Your go, his go, your go, his go. The war of words continues for a while. If you begin to bring the finance company round to your way of thinking, the bloke’s got a choice to make. He can raise his offer, or hope to swing it with the cash he’s already put on the table. It’s a tough call, but either way a bit more personal abuse won’t go amiss.

  And this was the stage that Hatherleigh Pacific and the South China Trust Bank had reached. South China had just fired off its latest broadside at its shareholders. Now it was Hatherleigh’s tum.

  Zack and Lord Hatherleigh were in Hatherleigh’s Pall Mall offices, hunched over a speaker-phone on a conference call with Scottie and Phyllis Wang in Hong Kong. They had all been impressed by how hard South China was resisting their attack. The beleaguered management seemed to have shaken off its lethargy and come out with all guns blazing. The battle swayed from side to side. Hatherleigh attacked South China’s abysmal record. South China attacked Hatherleigh’s bid for being opportunistic and cheap.

  ‘What do you people make of their latest document?’ rasped Scottie.

  ‘Eight pages of abuse. Eleven pages of stuff they’ve already said. One page which matters,’ said Zack.

  ‘Page three, right? The new profit forecasts?’

  ‘Correct. They claim that their profits this year are going to be thirty percent higher than the stockmarket was expecting. If that’s true, then, on the
face of it, we should be offering thirty percent more than we are.’

  ‘And d’ye believe they can make these profits? They’ve never managed that kind of increase in the past.’

  ‘Yes and no. They’re not allowed to tell out-and-out fibs, so they must be pretty sure that they can achieve these profits. But -’

  ‘What?’ Scottie roared in, without waiting for Zack to finish. Are you saying we’ve got to pay another thirty percent? We don’t have that kind of money.’ Scottie’s excitement threatened combustion. Zack could imagine his red face almost bursting with the pressure.

  ‘Wait a minute, Scottie.’ He glanced sideways at Hatherleigh, expecting a smile from the more self­contained aristocrat. But Hatherleigh wasn’t smiling. This was too serious. ‘If you look carefully at these profit forecasts, you can see that all the extra profit is coming from financial trading. Buying and selling foreign currency, that kind of stuff. Now South China’s markets haven’t suddenly gone through some kind of boom. We know that, because our own Far Eastern dealing rooms have been quiet. And that means only one thing.’

  The silence was audible. Zack continued.

  ‘They’re making more profits because they’re speculating more. Gambling. They’ve nothing to lose. If they make money, they boost their profits and stand a chance of keeping their independence. If they lose money - well, hell, they were going down anyway.’

  ‘So before we were buying a bank. Now we’re buying a casino?’ The question came from Lord Hatherleigh.

  ‘Yes. But you can close down the casino part as soon as you take control.’

  ‘Can we walk away? Can we walk away from the deal now?’ Lord Hatherleigh asked the question so quietly the listeners in Hong Kong could barely hear him.

  ‘Why would you want to walk away?’