BC Business
When a company goes public, it’s big news. It’s high-fives all around for investors who realize their much-anticipated “exit strategy.” The media keep a tally of IPOs as a measure of the economy’s health. For the company involved, the sudden infusion of cash means a jump-start to its growth plans.
But reality sets in as soon as the headlines have faded. Management must now answer to investors expecting positive results every quarter. The finance department has to work full-time just to keep up with regulatory requirements. Instead of mapping out a long-term strategy, the CEO spends countless hours in conference calls with analysts and the media. The executive team might be forgiven for wondering where its “exit strategy” actually lies. It’s not such big news when a public company goes private. Sure, when a media darling such as Intrawest ULC gets snapped up by a private hedge fund, it makes the headlines. But when Sierra Systems Group Inc., a $140-million-a-year IT-systems consultant, got snapped up by San Francisco’s Golden Gate Capital, it caused hardly a ripple in the local press. President and CEO Iraj Pourian recently sat down with BCBusiness to reflect on the company’s transition to private ownership. How did the idea of going private first surface? Sierra was being approached by a number of interested parties over a year ago, and the board of directors felt obligated to make sure the process was properly handled. So we created a strategic committee to look at the possibility of selling Sierra. What does going private actually involve? Walk me through the steps. We hired investment bankers who went to the market, and they canvassed close to 30 companies. After a long process of due diligence, we went exclusively with Golden Gate Capital back in August or September of last year. Once the board decided that the price was right, they distributed a management information circular to the shareholders outlining details of the proposed transaction. We held a shareholder meeting on December 12 to consider a motion to accept the Golden Gate Capital offer. We got 97.2 per cent of the votes that were cast in favour. How will the sale affect strategic planning for Sierra? Publicly traded companies face significant pressures to deliver results to investors on a quarterly basis. This can limit their ability to put in place long-term business strategies where the return on investment may take longer than a quarter. Golden Gate will provide Sierra with greater access to the capital required to execute the acquisition component of our growth strategy. Raising capital is typically slower and more challenging for public companies. Sierra will be able to act with more agility when facing an opportunity for growth. Public companies also face significant costs associated with investor relations, disclosure obligation and regulatory compliance. As a private company, Sierra will be able to realize cost savings that can be reinvested in the growth of the company. Sierra can also draw on Golden Gate’s in-depth knowledge in terms of executing our plan, and the other companies in the Golden Gate portfolio may create revenue opportunities for Sierra Systems. Can you elaborate on your growth plans? From where I sit right now the outlook looks really rosy. On acquisitions, we now have a better opportunity working with Golden Gate – which is in the business of acquiring companies and growing them – to acquire companies that are a good strategic fit for us, and that means nothing but growth. Then we also have our own group growth plan. We see great opportunities, for example, in our justice group. We also see tremendous opportunities in electronic health records and health practice and government as a whole, whether provincial, federal, state or county. What will it mean to be part of the Golden Gate portfolio? Golden Gate Capital is a multibillion-dollar private equity firm. It generates returns for investors through buyouts and equity investments in industries that include software and IT services, consumer products, financial services, media, electronics and semiconductors. These companies are all in the software business, and we have a number of initiatives that we’re working on with them. It provides us with another base from which we can build relationships, either selling their software and doing system integrations for them or simply providing consulting services, because most software companies have a consulting side to them. How will the sale affect day-to-day operations? Very little. We will keep our brand and our strong internal culture, and we plan to keep all current employees and grow the team that we have. Golden Gate approaches each investment as co-owners and principals with the management team. They have been working very closely with us so far to build exceptional long-term value. They do not seek to run day-to-day operations. How has it affected your own work life? Warren [Beach, CFO] and I had to spend a tremendous amount of time preparing for our board meetings, for analyst calls, dealing with investor relations. Warren and his team spent a huge amount of time on regulatory compliance. So management time that we save not doing those things means we will have a better chance of focusing on the operation of the business and growing the business. That’s been a blessing since going private. It’s just great. Has it meant more personal time for family and outside interests? I wish I could say yes. Warren and I didn’t have much of a Christmas because the transaction was getting to the latter part of its closure during Christmastime. And since closing I’ve had to make the rounds of all of our locations; I just got back after two-and-a-half or three weeks of traveling. So far I haven’t seen a benefit on a personal level, but I’m sure it’s coming.