Tonight I would like to share with you the story of how, as a 22 year old, I turned a $5,200 investment into a multinational software company and divested this business for a 10 digit sum and subsequently how this business was on sold just 36 months later, as part of a larger transaction, for $163.8m dollars in cash. For those of you who are studying M&A – this represented around 45x our EBITDA or around 3.4x our revenues.
Before I begin the story – I have an admission to make. Firstly, I do not hold an MBA, in fact I am embarrassed to admit that I never even graduated from University – half way through my Commerce degree I withdrew from University and being here tonight might be the closest I get to an MBA.
So a little about CommtechWireless to place everything into context. CommtechWireless commenced its operations in Perth, Western Australia and over a decade, established a global business with subsidiaries in the United States, Hong Kong, Shenzhen the United Kingdom and Denmark. The business was involved in monitoring alerts within acute care hospitals. When an event occurred, we would notify the appropriate care provider of the event – through wireless technology. For example; if someone was having a cardiac arrest then we would notify the crash team to come and save the day. What started off as monitoring nurse call systems, quickly turned into a whole myriad of inputs; from patient monitoring, fire alarms, security systems, infant abduction, stat blood results, building management systems – a whole middleware industry was born. What fuelled things even further, was the number of handheld wireless devices being deployed; it seemed overnight everybody had an iPhone or Blackberry or some other wireless device. The technology that we developed in Perth, Western Australia has been deployed in 7,500 locations in over 60 countries, earning CommtechWireless a position in the BRW Fast 100 list for three consecutive years. Additionally, the company was the recipient of the Telstra Small Business of the Year award and numerous accolades from AusIndustry and the WA IT&T Awards.
Tonight, I would like to share a couple of experiences throughout my life, which I felt shaped my own future and the subsequent success of CommtechWireless. So where did things begin? Well, like all good entrepreneurs – I am passionate about the industry I am involved in. In my case; I had brain surgery as an adolescent and a keen interest in technology – the result was a medical communications business, CommtechWireless.
I would like to touch on the brain surgery for a moment as I feel that this event was a defining moment for me and the catalyst behind my passion and enthusiasm. When I was fourteen years of age, I was diagnosed with a benign astrocytoma on the motor section of my brain. After consultation with numerous neurosurgeons, my parents had to make the hardest decision I think any parent could be faced with. On the bright side, my neurologists estimated my survival at greater than 50%. On the down side however, as the tumour was so intertwined within normal brain tissue, odds were that if I lived through the surgery I would be left without the use of my fine motor skills for the right hand side of my body. Tough choice. Do nothing, and your child probably will be subject to a deteriorating brain disease. Do something, and you have a 50/50 chance of survival but a high likelihood of some form of paralysis. Thankfully that was 27 years ago and fortunately everything worked out. Morale: Somehow, from this point forward in my life – nothing seemed impossible, nothing was too hard. Too many people shy away from success for fear of failure. If you can overcome this fear of failure and rise to the challenge, great things are possible. If you have never failed – then you have never truly lived!
In my case, I had 12 months off school following the brain surgery and, at 14 years of age, started developing video games. Once I returned to school, every Friday afternoon, my parents would pick me and take me to various meetings I had arranged. I can assure you that no one suspected that they were meeting with a 14 year old! Well after around 30 different meetings – many of whom threw me out of their office – eventually, by some miracle the CEO of Philips Electronics in New Zealand, took pity on me and agreed to distribute the video game that I had developed. The game was an outstanding success – I still remember the contract like it was yesterday; $11 per copy up to a maximum of $15k. The only issue was that in the week the game was launched I received a check for the full $15k. Morale: Persistence and passion pays off. Unless you have passion for what you are doing, wait until you find that passion. Running a business is tough – very tough – you go through great times and tough times, sometimes during the tough times any rationale person would simply give up and move on. If you want to survive and achieve great things, you must have the passion to succeed. Be passionate in everything you do – your enthusiasm is contagious
Early on in my career I was fortunate to be selected to develop another video game – this time, instead of the traditional video game it was a life sized shoot ‘em up titled “Q-Zar” or “Quasar” as it was known at the time. The game was eventually divested to the internationally acclaimed rock group U2. At the time my employer asked me what “R&D” stood for. Naively I very proudly stated, well “Research & Development of course!” – My boss stood their shaking his head, saying “no, no, no – Replicate & Duplicate!”. Well, whilst there is an element of truth to “Replicating & Duplicating”, true innovation is born from the convergence of multiple perspectives. Innovation is universally regarded as the driver of economic growth and West Australians are genetically engineered to take on the world and beat it.
At CommtechWireless I had a relatively simplistic business philosophy, but one that has survived multiple start-ups and demonstrated some substantial turnarounds in the businesses I have been involved in. At a very high level, we maintained six core principles;
I have recently been involved with another business – Azure Healthcare, an ASX listed company which my Private Equity firm, Allure Capital recently acquired 10% of. Following these principles, in 9 months we have managed to turn this $20m revenue business around from losing $2m annually to make a small profit of $920k and bolstering revenues by 8.26%. AGENT TIM, THE PRESIDENT, AK47’s & A 7 DIGIT CHEQUE In 2007, the technology we developed gained the attention of the United States Secret Service, where they asked us to adopt our medical alerting platform for a mobile deployable duress platform for the President of the United States and the first family. Obviously, I am unable to go into the details of the project, however it did inspire my family and I to relocate across to United States at the end of 2007.
Three months after we arrived, my business partner and I were at a tradeshow in Orlando and Zane had arranged a breakfast meeting with the CEO and CFO of a company called “Amcom” – about half way through the meeting, the CEO jokingly said “hey, we should just buy you guys”. After a month of haggling over the price, we went straight into Due Diligence – doing our normal jobs by day and preparing the due diligence by night.
Finally, in October 2008 – right in the midst of the Global Financial Crisis, we sold the business. If I recall correctly, it was a Friday night when we actually got paid – 22 investment banks had collapsed the month prior and the purchase of Commtech was being funded by the Canadian Investment Bank – so we were a little nervous as to if we were actually going to get paid or not – obviously the cheque didn’t bounce. As soon as we sold the business, we knew that we wanted to return to Perth – it was just a case of biding our time and getting through the next couple of years.
In 2011, Commtech’s largest customer in the United States, USA Mobility, acquired Amcom for $163 million dollars in cash. This might seem like a spectacular number, which it is, but it did teach me another lesson. Morale: Most valuations are typically calculated as a multiple of EBITDA – and with good reason, investors are looking for a return on their investment within a selected time frame, but if your business addresses a particular need, that represents and much larger threat or opportunity to larger business then these traditional valuations go out the window. In this case, the acquisition was 45x the EBITDA of the business. I was under contract to continue to manage the CommtechWireless group for 18 months following the acquisition, at which time; we packed up our bags and returned home to Perth.
Entrepreneurship is synonymous with life, with spirit, with growth, with challenge and, of course, with risk. Now, not all Entrepreneurs are successful. In fact, statistically, most Entrepreneurs aren’t. But, the good that is done by so many who step up and take risks, exercise their leadership, generate commerce, create jobs is what the Australian Dream is all about and has been critical to the growth and the success of the Australian economy.