In the second of our Evolution Capital Alumni series, we speak to John Donoghue, founder and owner of Aylesford-based Icom Holdings, about how selling a stake in his business has given him a new lease of life.
John Donoghue sold a majority stake in his business to award-winning BDR Voice & Data Solutions back in January 2018. But unlike many in his situation, Donoghue is still very much involved in the business. Indeed, he says the deal has given him a renewed sense of purpose.
He explains: “To be brutally honest I was quite sick of the business by the time it came to sell it. However, the transaction has completely revitalised the old management team – and me. I receive a lot of support from the new owner and the whole thing has given me a new lease of life. In fact, we both have our sons working in business, which is a testament to the belief we have in the future – and provides us with a good deal of succession planning.”
Icom was advised by Evolution Capital, which was engaged to prepare and structure the deal. Evolution was also tasked with finding a suitable and complementary buyer against some exacting criteria. Icom’s strong contracts and relationships in the public sector, and particularly their status as a Government Framework Supplier, made them particularly desirable.
Donoghue adds: “I took a great deal of care and diligence in choosing the right buyer, who had to be a like-minded business partner. There were plenty of good advisers out there, but we needed one who knew our marketplace and were sensitive to our aspirations. Evolution Capital understood our requirements and came up with a shortlist of six potential buyers of which three were shortlisted. Additionally, I had an incredibly loyal management team which had been with me since the mid-90s and any decision I made had to be right for all of us. It was a great result all round.”
Given that John had worked tirelessly on the business since its inception since 1990, how has life changed since the sale?
Donoghue continues: “The disposal of a large part of the business was very rewarding, both commercially and strategically, and has certainly provided us with the necessary financial security for the future. However, as far as my time is concerned, I probably have even less time than I used to. The time savings I have made on the operational side have been swallowed up on the strategy of the new group.”
However, he claims he is enjoying his new role in the larger business. Indeed, he has no personal exit plan and sees ICOM “going on forever”. He adds: “The business has doubled since the disposal and its general direction has pleased all concerned.”
In his spare time, 55-year-old Donoghue is as competitive a sportsman as he is an entrepreneur. He is an accomplished cyclist, triathlete and golfer who has always encouraged a competitive attitude in his children.
He continues: “Sport is analogous to life. In football, for example, there are lots of average players who have transformed themselves with the right attitude. With a combination of determination, hard work and honesty, anything is possible. Take a look at Gary Neville when he was playing for Manchester United – there were arguably much better players than him around but he had an attitude that transformed not only himself but all those playing around him – truly inspirational. Business is very similar – the right attitude can be transformative.”
Donoghue, who started his first business from the garage of his house, learned to perfect the process during his journey and a lot of water has passed under the bridge since those early days.
The company has changed considerably since the sale and there has been a process of symbiosis within both businesses, with methodologies and best practices osmotically seeping into each. “We are a lot more sales led these days and there is far more process and structure involved in the commercial side of the organisation. It’s amazing what a new set of eyes and a fresh approach can achieve,” he explains. The deal has clearly injected the whole business with a renewed sense of energy.
Plenty of restructuring has taken place and there are centralised benefits coming through as well as a simplification of much of the commercial process. There have also been lots of opportunities for cross-selling and up-selling between the two groups of customers. Donoghue adds: “As a business we are investing heavily and expanding, which is having a very positive effect on our bottom line. We are also considering the next acquisition, which I am very involved in personally. My main challenge these days is managing my time effectively in what is essentially a brand new role.”
For most business owners, there is no formal training programme to prepare for creating and executing a successful business plan other than lots of heuristic training, learning quickly and not repeating costly mistakes.
John is no exception and feels there were a lot of things that he would do differently with the benefit of hindsight. He continues: “I would definitely pay more attention to the cash flow and particularly the P&L. In hindsight, I would also ensure I had a flexible management team that could evolve as the company changed. However, top of my list would be to get expert advice from industry experts like Evolution Capital so that by the time I was ready to sell I would be completely prepared. I could not have done what I did without their advice and assistance and would recommend them to anyone.”
The telecoms space has been subject to a significant amount of change since ICOM’s inception and a successful vendor in this marketplace has to have several different strings to their bow.
Donoghue has three top tips for new entrants.
Be an expert: “Many successful vendors are now really facilities management companies. There is still room for those doing this well, but they need to be the best at what they do.”
Be flexible: “For those companies already incumbent in a changing marketplace, they have to be able to evolve and adapt very quickly. They need to target as broad a base of customers as they can realistically support and not be over-reliant, as we were, on a small high-value customer base.”
Think team: “Finally, owners need to create the best management team they can with the resources they have available. This team has to be there through thick and thin and they all need to be motivated and rewarded – but don’t give too many shares away too early.”
One thing is clear – the ICOM story is certainly not over yet.
Read our case study on how Evolution Capital helped ICOM grow through a partial sale.