Interviews  >  Jon Moulton: For better or worse

Jon Moulton turns failing businesses into profit-making successes – and he doesn't mince his words. Nick Kirby finds out what makes the man tick.

 

For 30 years, Jon Moulton has been identifying underperforming businesses, buying them out and making them profitable – for the most part, at least. Amid his many successes, there have been failures, but he sees that as an inevitable part of the investment and turnaround game.

Perhaps most well-known for his attempted (and ultimately unsuccessful) takeover of MG Rover in 2000, when he was with Alchemy Partners, Moulton is a big name in the world of venture capital and turnarounds. In 2009, he parted company with Alchemy, established his new firm, Better Capital, and immediately hit the headlines with a buyout of Readers' Digest.

He also made headlines with his attacks on the Labour government's handling of the recession. In a stab at the Prime Minister Gordon Brown, Moulton's vineyard at the family home in Kent produced a wine it named ‘Recession Red' and plonked a picture of the then-PM on the bottle.

As well as running Better Capital, based in Guernsey, Moulton is a trustee of the UK Stem Cell Foundation and an active angel investor. He spent some time explaining to businesslife.co how he got where he is now and what keeps him going.

You've been involved in the turnaround business for 30 years now. Some people would say it's a pretty tough market to be in – does it attract a particular type of person?
Yes it does – people who love battles! You've got to make lots of decisions at high speed that often involve considerable legal and HR complexities. It's high-pressured and is definitely more at the tactical, ‘violent' end of investment. You need to thrive on stress, and you need to accept you won't get things right all the time.

So you have to accept your failures and move on?
It's curious, but good turnaround professionals have low failure rates. That doesn't mean that every deal turns into a great success, but you generally manage to end up with a business that survives.

On success, what has been a career highlight?
The deal that stands out is one I did in the mid-Eighties – Parker Pen – which we turned from a business losing £20-odd million a year, to a business making £40-odd million a year, and in the process moved the head office from the US to the UK.

And anything you wish had gone better?
MG Rover, obviously [which was sold to the rival Phoenix Consortium, and subsequently went into administration in 2005]. I have no idea how successful I would have been – but I couldn't have been any less successful than the guys who did get it!

Does the failure of the Phoenix Consortium make you cross?
One important part of my make up is that I don't dwell greatly on things that didn't work out. There have been quite a few instances – I do a lot of angel investing, for instance, and lose a considerable amount of money. So I really don't think too much about what's not gone well. In terms of the MG Rover deal, it intrigues me, I find it intellectually interesting to try and work out if it would have been a success, but that's about as far as it goes.

Do you think that people who invest in turnaround companies have a reputation of being ‘bottom feeders'?
Well some of them are! If you didn't have bottom feeders, the bottom of the sea would be quite a messy place. So it isn't necessarily a bad thing. Someone has to rescue companies, and on some occasions you will make a lot of money out of it. When you buy something that is making heavy losses, and therefore very risky, you are going to put lot of effort into it and deserve to make a lot of money. I think that the term ‘bottom feeder' is very pejorative – yes there are circumstances where people are involved in asset stripping and taking advantage of someone who has foolishly got themselves in a bad position, but the majority of the turnaround world is not like that.

You turned 60 in October last year, but your enthusiasm certainly doesn't seem to be dimmed. What do you aim to achieve with Better Capital?
I'd like Better Capital to be the most successful turnaround investor in the UK – that would do nicely. I think I'm little too late in life to think about global domination! We generally only target UK and Ireland companies – Ireland at the moment is a fascinating market.

In some of your media appearances, you seem to be very straightforward, outspoken and to the point.
My nature is not to mess around. If I can see a short way through something rather than a long way around it, I'll take it. I have the same view when it comes to giving my opinion. I'm lucky, because I can afford to be outspoken – I don't work for a giant corporation, I'm not a politician, so I can speak my mind.

As you say, you don't work for a giant corporation, do you prefer to keep things smaller?
I've always preferred working with a small group of lively people. Successful periods of my career have always been such. Having a dozen good people around me is ample. I also try to surround myself with the best people – my most common mistake is to compromise on that. An opportunity in starting over is I can put everything in place as I want it to be.

Is a post-recessionary period the perfect time for turnaround companies
It is normally, but this time it's different. Corporate bankruptcies are running at about a sixth of the rate of 1992. The very low interest rates, the high level of debt and the instability of the banks are all combining to create a world where companies aren't going bust or getting into serious financial trouble in any great numbers at all. The turnaround business will come firmly into its own when interest rates turn upwards.

It's not a very comfortable statement to make, but it's a valid one, that at the moment there is an unhealthily low level of corporate failure in the UK. It's pretty much a 30-year low. There are lots of not-very-viable business models stacking up with piles of debt, and they can just about pay the interest at one per cent, but when it goes to five per cent it will be over quite quickly, There is a pipeline of companies waiting for trouble and a sharp rise in interest rates will precipitate a quite unprecedented level of corporate insolvency.

Your previous company, Alchemy, was based in Guernsey and now Better Capital is there too. So, why Guernsey?
Quite simply, it works. Guernsey is a very effective place to locate things. The structures are well proven, the standard of legal and accounting skills are high, costs and regulations are reasonable, and I've been doing stuff here since 1985 so it would take me quite a bit to move. Importantly, you can have a sensible conversation with the Guernsey Financial Regulator, which is something very rarely achieved in the UK.

So you live in Guernsey?
Part of the time, yes – although I am a UK tax resident. I've had a home here for three years and I divide my time between here, Central London and our main home in Kent, as well as my chalet in France.

We hear a lot about pan-Channel-Island cooperation – as someone who has been doing business here for some time, what is your take on it?
Well there already is a degree of cooperation over Europe – they do certainly talk to each other and the Isle of Man over matters that affect all of them. That said, I think it would be rather a shame if they went for a Channel Island union – I think there's a lot to be said for a bit of independence, a bit of competitive spirit, and there's an awful lot of history, so while I think they should certainly talk to each other and cooperate a little, they shouldn't go nuts on it. I quite like a bit of diversity!

What does the future hold for you and for Better Capital?
For me it holds the prospect of old age and death! Better Capital has somewhat better prospects – it intends to be the pre-eminent name in turnaround in the UK

Add a Comment