At Dave Wither ’ s office the next morning I explained what had happened. After I had finished he leant back with a sigh and said, “quite a story.”
“Have you dealt with things like this before?”
“Not exactly, but I have dealt with other cases where deals have been done on extradition. We will now have to wait for them to contact me. I suspect that in exchange for his release Adrian will have to sign an admission of guilt.”
“That sounds risky.”
“Well these deals can never be watertight, and of course from their point of view, regardless of what you give to them, they can never be sure that you have not kept a copy of the material. So risks on both sides.”
“OK, can you let me know when you hear from them?”
“It might take a few days. In the meantime what about your car theft situation, do you want me to have a word with Chief Superintendent Fleet?”
“Yes please, if you would.”
With that I said goodbye and made for the office where I found Alec and explained what had happened.
“Well it looks as if it is getting sorted out satisfactorily. I can cancel all the security guards, do you agree?”
“Yes. So where are we up to on everything else?”
“Well the float has occurred and the price has climbed about 15 % above the issue price despite the extra volume we issued, so all is good. I think we need to settle the whole team down to getting on with the real business while at the same time we will need to come to terms with being a public company.”
“Oh and Martin, Armstrong went in and bought shares on the market on the day of the float so they are still a shareholder, about 3 % I believe.”
“Why on earth would they do that?” I exclaimed.
“Hedging their bets, I suspect. They obviously believe that the shares have substantial upside potential.”
“But why not just hang on to some of what they already had?”
“I am not a venture capitalist, but something to do with maximising the profit realised today in the fund while still having a bit of any upside.”
“Ah well, what about Dalrymple,” I asked, “have you had any thoughts about them?”
“Well the comments Ridley made to you are interesting, but I think we should let them chase us, and from what he said I think they will. The real question is are we interested?”
“Will we get an opportunity to do due diligence on their technology and development plans? If what we are hearing is true, that they need us to help them with the technology, then it will be the marketing advantages not a technology benefit that will drive whether we are interested.”
“We will have to do due diligence on their books as no doubt they would want to do on ours, but I am not sure whether we will get the opportunity to do in depth due diligence on their technology, they would probably view that as the family jewels that they would not want to reveal in the absence of a formal agreement. I agree however that the strength of their established customer base could get us in to places where it might otherwise take us years to gain acceptance, and therefore justify a deal in its own right. If they follow up then I will talk to Frank, to see if he also wants to pursue it, then we will need to do some real research work on all aspects. Maybe we need to commission an outside party to do it for us. You agree with that?”
“Seems good to me,” and with that set off to find out what was on my desk.
Later that afternoon Dave Withers called. “I have heard from a law firm in New York and now that I have confirmed I am representing you they expect to send me a draft document tomorrow. So things are moving forward. I have also spoken to Fleet and she believes that in the circumstances the car theft charge can be dropped. The difficulty is the owner who is still annoyed. I have said we can agree some reasonable compensation for the owner. I think that can be covered by the out of pocket expenses in this agreement. Is that OK?”
“Sounds good, let me know when you have something from New York.”
“It will be a day or two before I get back to you. There will no doubt be some amendments I will want agreed before I show you anything.”
Two days later there was still no news on Adrian, so I called Dave Withers.
'I was just about to call you; there has been a little bit of a hitch. They want a list of the people who have seen the material that your brother down loaded, do you know who that would be, and would you be prepared to warrant that the list is complete?”
“We have shown nobody the material, although I did describe it to Alec Bell, but even then I did not mention the identity of anyone on the video.”
“That should do, I will get back to you but I am beginning to think this could take some time, more than just another few days.”
“Poor Adrian, do you know where he is?”
“No, I don't and there is no discussion of his abduction at all. This is all about agreeing not to prosecute him. The silent assumption is that he will appear once this agreement is finalised, in fact I am assuming that he will be required to sign it before he is released. I will email you a copy of the draft agreement to read. Is your work email address OK for that?”
“Yes, please do, I will let you know if there are any issues, speak to you later,” and with that I hung up.
Over the next few days I was fully absorbed in over seeing the beta release of ForceNet. It all seemed to be going well. Already we had received a number of useful inputs from the first beta site and the decision was now made to release it to another two sites. This was an extremely tense time for the team, particularly the development boys. Normally they would not be involved in 'holding cust omer hands' during this process; it would be handled by the product people, but this release was so large that it needed quite a few of the senior software engineers to also be involved. This generated a number of arguments over priorities, arguments that were in essence healthy, but they were arguments that did n ot need to involve the customer; a fact that the software people would sometimes tend to forget. Times were interesting and very demanding and I spent a lot of time out on site with the clients making sure that our issues did not disrupt their businesses.
In the midst of this I was summoned urgently to Alec’s office one afternoon to find him having a meeting with Frank Whittle, Bill Williams and Ron Armstrong. Alec turned to me as I walked in, “Sorry to drag you away Martin, I know you are under the gun, but I thought you might want to be involved in this.”
“No problem, what is going on?”
“The subject of Dalrymple has come up again, Ron perhaps you would explain.”
“It appears that Dalrymple may be short of cash. I hear that their banks are refusing to extend them any further credit and that they are out looking for funds on the secondary market, possibly even VC's like us?”
“How come, they have a huge share of the US market?”
“That's what I said,” said Alec.
Frank butted in, “I have heard rumours of this in the city as well, and in fact more than that, I have had an informal approach. The story is that they have a number of very large partially completed contracts that have technical problems.”
“What technical problems?”
“It appears that they have oversold their current control package and it is not performing to spec. The end result is that they are not getting paid; this has been going on for some time and is beginning to cause them serious cash flow problems. They have been unable to convince their banks that they can fix the problem so their banks are hesitating to support them.”
“The rumour is that they might seek chapter 11, in the next week or so.”
“Chapter 11? What on earth is that?”
'It’s a form of protected administration, quite common in the US.” responded Alec.
“Wow! So much for them buying us out.”
“Yes,” said Alec, “it is a bit of a turn around. The question is, is this the end of our interest in them or is it an opportunity for us?”
“You mean buy them out of administration?”
“Possibly,” said Frank, “but administration is never good for the reputation and it might not go well so their banks could face losing quite a bit of money. Ron believes that gives us leverage. This company probably has the technology to fix their technical issues and if we were interested their banks might look more favourably on supporting them.”
“In which case we have to do Due Diligence on those contracts,” I said, “we don’t want to take over a never ending contractual wrangle on specs.”
“I agree,’ Alec said.
“If the banks face the possibility of a haircut then presumably the shareholders are dead in the water,” added Frank.
“Yes probably, but I think this may answer any queries we had about Mendip Finance's aggressive interest in us. The shareholders were desperate to retain some value to their investment in the business and thought they could conceal their cash flow issues by raising funds to acquire us and at the same time have a technical solution to their contractual completion problems. I think they identified us as the only solution for them and they were therefore desperate to buy us.”
“Neat,” I said, “Is this why I got beaten up and both Alec and I got threatened?”
Alec nodded, “It seems it could be.”
“Who are the shareholders? The ownership structure disappears in to the murky depths of the Cayman Islands, probably impossible to deal with.”
“That would probably not be necessary,” mused Bill Williams. “If their bank was taking control then they would be able to sell the business, not the company, to us although there would inevitably be lots of issues to c onsider including tax.”
“I don't think we want to get bogged down in the mechanics at the moment,” said Frank. “A s company chairman I think this opportunity has significant potential and should probably be explored, however I am conscious that it can only be done if you think the team can cope with it Alec.”
“With my marketing hat on I think it seems too good an opportunity to miss. I would need time and more information to assess whether we could handle it operationally.”
“Sounds like we all agree that we should take this further,” said Ron. “I think we could be glad that we held on to 3 % and if you need a bit more cash to consummate a deal we could help. At a price of course!” We all laughed.
“Well, if you agree Alec, I will informally brief each member of the board. If decisions have to be taken quickly we need to get them on board as soon as possible. If possible I will set up a date for a board meeting in the next couple of days. Alec, I think you need to set up a meeting with the Dalrymple CEO, Mark Winter. After that I will try and set up a meeting with the Dalrymple bankers. I think you could help me with that presumably through your 'informal approach'.
“Yes, who was the 'informal approach'?”
“I would rather not say at the moment, but they can help us set up a meeting with the bank.”
“Well it seems that the only one who has nothing to do out of this is me, that's a nice change!”
“Don't gloat yet Martin, if this does go ahead, solving the technology problems on their contracts will become your headache!”
I returned to my office to find that the draft agreement had come through from Dave Withers. I called him.
“Dave, I have read the agreement and there is nothing in there that I can't accept. I expected a much bigger document.”
“Its written under US law, and typically their contracts are much shorter than ours. As an English lawyer some of the shortcuts in terminology grate but in reality they do te nd to get rid of the verbiage of some of our contractual law.”
He continued, “I will tell them to go ahead, can you print off two copies, and sign them, and get them witnessed and courier ed back to me this afternoon? I will then get a copy off to them before the end of the day.”