External Directors and Exits

March 18, 2011Post by Laura Humphreys

Further to my last blog, I presented my five minute spiel at the Institute of Directors First Boards meeting a few nights ago.  I was lucky enough to be on a panel with two very impressive men, both having worked with external Directors to see their businesses through to very successful exit (sale). It was a great night and I loved being in the company of such successful business people.  I thought I’d share with you their key tips on the role of external Directors and their thoughts on exit planning.

The first is Jim Donovan, now active Board Director and investor in a number of entrepreneurial ventures.  He talked about his experience as co-owner and CEO of Deltec, a maker of advanced antenna systems for mobile phone networks in Australasia, China, Europe and the Americas. In 2000, Deltec won the New Zealand HiTech Trust’s Supreme Award, together with the HiTech Growth Company of the Year Award and the HiTech Investing In People Award. It was named by Unlimited Magazine as one of the “Best Places to Work in New Zealand”. In 2001, Jim Donovan led the sale of Deltec to Andrew Corporation, a Fortune 500 company. Here are my key out takes from Jim’s address on the role of external Director in relation to exits (note: the comments in brackets are my interpretation and addition to points being made and not an attempt to reflect the speaker’s’ views):

1. To force management and owners to face up to problems (as a Director you may be the one to have to spot the problems in the first place and see their potential impact if not addressed)

2. To help management and owners come to terms with decisions that have to be made (these may be tough decisions where the risk of not making a certain call could be the demise of the business)

3. To manage the owners’ implied power of veto (the owner/majority shareholders have ultimate power to hire and fire Directors and make final decisions.  If you can’t ultimately agree with the call made by owners, you might have to resign as a Director)

4. To manage and faciliate shareholders’ disputes towards positive outcome for the business (when a company is owned by a number of shareholders this can happen on a regular basis – over small and large issues)

5. To hold owners’ hand through the process of exit (being true to the purpose of a business – see my last blog – an exit will be inevitable, the Directors need to be playing their role in grooming Management/owners towards this and then help make it a reality).

As noted, these are just my out takes from Jim’s address, he covered a lot more background to the build up and eventual sale of Deltec and added a huge amount of value to the evening.

My next blog will feature my key out takes from the other panelist Matt Kenealy, joint founder and major shareholder  in Axon Computer Sytems which sold to Integral Technology Group for an undisclosed sum (a rumoured deal of NZ$18 million).