Wednesday 28 September 2016

From Wall Street to superyachts: Meet the Irish man who's making his millions

From advising governments, banks and corporates, the Trinity graduate now makes millions backing medium-sized firms

John Reynolds

Published 07/08/2016 | 02:30

Alan Dargan by Jon Berkeley
Alan Dargan by Jon Berkeley

When he first saw James Bond driving his famous Aston Martin in the Swiss Alps in the film Goldfinger, Dubliner Alan Dargan dreamt of a life where he had that kind of scenery on his doorstep.

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Today the 63-year-old veteran of Wall Street is the co-founder of Lansdowne Capital - investment advisors to governments, sovereign wealth funds and the likes of Kingspan. Dargan is also the co-founder of investment firm Lonsdale Capital, and owns a Kildare stud farm, a home beside Lake Geneva, and another in London where his companies are based in a Mayfair office.

There is a small collection of cars in the garage - though not supercars or classics, and no Aston Martins, he laughs.

With investments in business and financial services firms, packaging, industrial, superfoods and a superyacht maintenance business, Lonsdale closed a €130m fund earlier this year.

"From that, I expect we'll make 10 to 12 investments of €12m to €14m. We might only do two or three deals a year. We look at Irish deals regularly as it's similar to the UK in terms of its dynamics and we look at investments farther afield as well."

In March, the firm backed Global Yachting Group (GYG), owned by three British former sea captains and based in Palma, Majorca, which services and maintains superyachts.

"As in that case, sometimes we'll invest by backing management buy-outs, and the deals tend to range from €25m to €60m in value. We focus on profitability, a strong, defensible market position, good growth potential and firms that aren't part of a commodity group or something, but stand out on their own, in sectors Lonsdale is familiar with. It helps if their market is growing, because a rising tide lifts all boats. We won't do deep technology, chemicals, biotech or pharma because if we don't understand it, we won't invest in it.

"If we're able to become familiar with the business, its fundamentals and that of the market after two or three months of intensive due diligence, then we're interested. We don't do turnarounds either. We look for three to five times our money over three to five years. We want the capacity to grow the businesses using only moderate leverage, and we'd try to buy at a sensible price. You won't find us paying seven to 15 times earnings. Other people understand those kind of risks better."

Its most recent Irish deal was with CJ Fallon, the educational publisher, where Dargan and his team backed founder Brian Gilsenan in 2013, cashing out two years later. "It was one of my favourite deals, and I learned a lot from Brian and enjoyed working with him. We looked ahead three or four years, spotting the trends in the US and Europe and ensuring the firm would be successful here in Ireland. We bought a schoolbook publishing company, but what we sold was a provider of learning materials in book and digital form for both pupils and teachers."

The plan for GYG, meanwhile, is to grow it perhaps through acquisitions in Europe or the US and easily double the size of the business within five years or less, increasing the sales in the tens of millions.

"It's a fascinating business because of the insight you get into the customers and some of the products the company deals with. The finish on a superyacht is probably better than a new Rolls-Royce. It'll have about 12 layers of epoxy topped up with three or four further coats of paint. Superyachts tend to be the place where their owners feel their most secure. When they're on their yacht, only those they invite are allowed on there. I've yet to be invited onto one though," he laughs.

Though circumspect about the level of his own wealth, Dargan's firms - in which he owns sizeable stakes - have been growing steadily ever since 1997 when Lansdowne made a name for itself as an advisory firm working on a $5bn paper industry merger. Business is embedded in his genes as the son of Dr Michael Dargan, a stalwart of Irish business having founded the Irish Management Institute and chaired both CRH and Aer Lingus, in a house where business matters were often discussed at the dinner table.

It stood him in good stead when he worked on deals in the 80s with the likes of Tony Ryan (who worked for his father at one stage) and more recently on another deal with Dermot Smurfit, though he declines to mention other names. To thank him for his work on a GPA refinancing deal, Ryan gave Dargan and his wife tickets to fly home to the US on Concorde, he recalls with a smile.

The conversation is peppered with the names of Wall Street legends and renowned Irish businessmen as he remembers starting out in accountancy with Stokes Kennedy Crowley (which later became KPMG) in Dublin. At Blackrock College, Bob Geldof was a contemporary, while these days, his work sees him meeting business and investment contacts throughout the US and Europe every week, scouting out deals and investment opportunities.

Another friend is Hans Hufschmid, who featured in Michael Lewis's book Liar's Poker having worked on Wall Street for Salomon Brothers and Long Term Capital Management, from which a firm called GlobeOp was spun out. Dargan invested in it personally and "did very well", he adds.

Continuing the story of his early career, after several years at SKC, in 1979 Dargan got his first job on Wall Street working on mergers and acquisitions at the investment bank SG Warburg.

After a stint in London, where clients included the government and banks and corporates here, he returned to New York, later meeting his American wife Kyle there who was working in the money markets, and with whom he has four sons.

He later took a job with First Boston, where he worked with a duo who were seen as M&A gurus at the time, Bruce Wasserstein and Joe Perella. The former is estimated to have worked on 1,000 deals in his lifetime and became a billionaire in the process, also conceiving the so-called 'Pac-man defence', where a takeover target turns the tables and attempts to buy its potential acquirer.

"The culture was so cut-throat that when you had to fly out from New York to visit the takeover target's headquarters, your competitors would often use various ruses to cancel your plane tickets or hotel rooms," he laughs.

"Everything that was happening at the time on Wall Street seemed to involve Bruce and Joe. Every time a corporate raider funded by another bank on the Street, Drexel Burnham, which became infamous for its aggressive backing of hostile takeovers, attempted one, we at First Boston would be hired to defend against it. It was an exhilarating time, sometimes you had to work through the night for a week or two, which I didn't mind at that age."

Having crossed the Atlantic every second week to market the bank in Europe, it then sent him back to London in 1987, and he arrived a few months before 'Black Monday,' when the stock market crash saw markets plummet by 30pc.

"For two years afterwards, there was no business, but I still had to visit clients. During that time, I steadily focused on building the relationships. You wined and dined clients and just listened, really. Then, when the markets picked up again, the US investment banks had taken the business from what used to be the more traditional merchant banks in Britain and Europe. That was how they took over Europe."

The US banks also operated differently by visiting their clients in their offices and factories, taking them new ideas about funding opportunities and so on. The more traditional bankers in London and elsewhere had perhaps a lunch and one other outside meeting a day, otherwise having their clients visit them in their offices, he recalls, something fairly simple that nonetheless contributed to their demise.

That US-rooted culture also saw the trading mentality portrayed in the film Wall Street emerge, which further led to the 2008 crash, he admits.

"One of the reasons I got out of banking was that I could see how in time the kinds of conflicts would arise in these huge banks. It had its roots from earlier in the 80s when big banks refused to honour anything unless it was written down, which in turn led to a culture of litigation and an attitude of 'I'll see you in court and my company is bigger so can bully you or wait it out until then', as opposed to honouring a handshake, valuing your reputation and a culture of your word is your bond. The majority of people working on Wall Street are decent and hard-working, though that's less well-reflected in films."

After becoming a managing director at First Boston in 1990, he later returned to Warburg, but was made redundant along with his team in 1997 and then started Lansdowne Capital, of which the new entity SBC Warburg became his biggest client - and thanks to which the firm made a number of millions working on the aforementioned $5bn merger of the paper divisions of an Asian and a Finnish business.

"With that, Lansdowne earned a name for being an independent and trusted advisor to CEOs and CFOs, as opposed to investment banks, who largely used their advice as a way of generating fees from other areas of their businesses. Even those that still went with them came to us for a second opinion."

A later milestone for the firm was its work with Dermot Smurfit on the acquisition of Powerflute in 2004. Dargan put the financing together, helped execute the deal and took a seat on the board. When it listed on London's AIM in 2007, some of the investors earned 27 times their money.

When not working or travelling in the pursuit of such deals, Dargan enjoys spending time with his family, rugby (he was President of Trinity Rugby Club for 2014/15), advising his alma mater Trinity College's' student-managed investment fund - "soon to amount to €100,000," and breeding and racing his horses.

He's also an avid reader and follower of current affairs. Theresa May is the right woman at the right time for Britain. Brexit will take three to seven years to resolve, but London will hold on to a lot of the rainmakers like him, many of whom won't move elsewhere, and the City will continue to prosper, he reckons. The outcome of Brexit for Ireland is still an unknown, but he's not surprised at the level of support for Trump becoming the US President, driven by anger with the elites.

He collects art too, some of it by Irish artists is on the walls of his offices in London and at home in Geneva, but more quirkily he bought some of Margaret Thatcher's personal belongings when they were auctioned off after she died. Among them are signed books, and a notebook and gold pen that she used to keep on her desk. "I was a great admirer of hers, which I appreciate is a strange thing for an Irishman. Though she put the 'Great' back into Great Britain in some ways, she of course alienated a lot of people too, including many in Ireland."

As you might expect, now and again he enjoys taking in the scenery on a drive near his home in Switzerland as well.

'I lost money early on in investing'

The books I've enjoyed reading recently are...

"The Versions of Us by Laura Barnett and The Maximalist, Matt Cooper's biography of Tony O'Reilly."

My greatest indulgences are...

"Good food, red wine, collecting paintings and a good work-life balance that allows time with my family."

The best piece of business advice I ever heard is...

"As Kingsley Aikins and Tony O'Reilly said, you don't necessarily have to originate a good idea. You can copy other people's and apply them in your own venture."

I was at my most skint when...

"After school, my parents sent me to live on a kibbutz [farm] in Israel for several months, as they thought it'd toughen me up. That was an interesting time!"

My worst moment in business was...

"I lost money early on in investing, where I had no control over what other people did with the money and some of them did very silly things."

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