Business Irish

Sunday 18 March 2018

Who will deliver as 'Postman' says adios to Paddy Power Betfair

Breon Corcoran and Patrick Kennedy celebrate the launch of their Spanish-language betting website in 2007
Breon Corcoran and Patrick Kennedy celebrate the launch of their Spanish-language betting website in 2007

Paul Sommerville

Seinfeld fans will know, through the legendary character George Costanza and probably funniest TV show of all-time, that it is better to try to leave on a high note.

His hilarious thesis being that if you say something funny or clever, you enhance your standing by immediately removing yourself from the situation.

It is comedy gold, but also very true in real life. Last Monday morning the shares of Paddy Power Betfair (PPB) plunged 5pc on the announcement that its ceo Breon Corcoran was stepping down.

There is nothing more disheartening and more damaging to the ego of a ceo than to be removed or forced to step down only to see your stock price rally on the news the market celebrating your departure.

This was not the case here. His decision was his own and the market paid him the ultimate compliment by marking down the shares sharply. PPB shares were the largest faller in the FTSE 100. The stock market verdict was clear and unequivocal: Corcoran was doing a superb job and will be sorely missed. Before leaving for Betfair, Corcoran was the chief operations officer of Paddy Power (PP) and part of the impressive management team led by Patrick Kennedy which transformed PP and moulded it into the beast it is today.

Their success and extraordinary return of shareholder value are well documented. Their one slight blemish in that time was their foray into financial spread trading and financial products in general. If they had persevered, it is conceivable they could now be a powerhouse in passive investment funds which are now so popular with retail investors across the globe. After a trial period, they abandoned this route and again it is a sign of strong leadership and ruthless regard to maintain shareholder value that they pulled the plug.

Strong and strategic decision making are what sets the likes of Kennedy and Corcoran apart. So often mediocrity (and less) is celebrated and rewarded in Irish boardrooms. Inflated ceo salaries are widely and correctly criticised. But Kennedy and Corcoran are worth every penny and more: their performance and returns for shareholders prove it .

In 2011 Corcoran left PP to head up Betfair in what was a fractious departure.

The PP management were disappointed to lose such an integral part of their team. But it was an inspired and correct decision, and once which demonstrated the drive and ambition of the man. He could have stayed in his role and been handsomely rewarded but choose a more challenging route.

The fortunes of Betfair immediately improved on his arrival and continued to accelerate under his stewardship, culminating in the merger of Paddy Power and Betfair. I mention the fractious departure above as this, I surmise, gave Corcoran considerable motivation and satisfaction to ultimately "take over" and become head of his old stomping ground. This guy has the killer instinct. Readers may be forgiven for thinking my gushing praise for Kennedy and Corcoran means we must be friends (or owe them money).

Neither is the case: my interest is purely a monetary one on behalf of shareholders.

If Corcoran believes it is a good time to exit this organisation, then shareholders need to take note. If you are a holder of these shares it may be a good time to at least take some chips off the table.

More importantly for investments in the future, I would suggest that Corcoran is demonstrating all the qualities necessary in an exceptional ceo. He is likely to be on the shortlist as a potential ceo of much larger global companies. Crucially for investors, he has bloodied himself in the world of M&A with the transformational PPB deal.

I would suggest his next role will involve even more sizeable deals. In short, Corcoran has delivered considerable shareholder value wherever he has gone. His tenacity and cunning are becoming increasingly evident.

This guy is a street fighter. Investors will do well to note Corcoran's next appointment as there will sure to be shareholder value to be had. The nickname 'The Postman' for Corcoran is well deserved as he always delivers for investors. Much analysis is being done this week about why he chose to depart now in this surprise move.

My theory is he is just a big fan of George Costanza - his timing is impeccable.

Forget North Korea, it's Jackson Hole investors need to focus on

The annual gathering of the superstars of global finance at Jackson Hole is drawing near. This year it will be imperative investors of all asset classes take note.

The two major heavyweights of Central Banking, Mario Draghi and Janet Yellen, are due to speak.

These new rock stars of global finance (idolising investment bankers is so 2007) are rumoured to be planning to use the event to clarify major changes in central bank policy.

Since the 2008 collapse of Lehman Brothers, central banks have purchased nearly $11trn of assets; truly extraordinary and worrying. Total global debt has increased from $149trn to $220trn. Both speakers will attempt to explain the exit path from these policies. Indeed, the recent strength in the euro can be fully attributed to hints Draghi has made that the ECB will end its QE programme soon.

But Draghi has learnt much from the USA playbook and will be fully aware a similar type of announcement in 2015 by the Federal Reserve caused shockwaves and the 'taper tantrum' in global markets.

He will not wish to repeat that mistake. It would be no surprise if he retreats from his recent "hawkish" tone and sooths fears by announcing an exit path much slower than expected. Meanwhile, Yellen will try to explain how the Federal Reserve will try an orderly transition or "tapering" of policy.

She is likely to be less precise and play for time - her tenure is up soon and she is likely to be replaced. For investors, the stakes could not be higher. Central bank policy is the only driver of financial markets currently and policy announcements at Jackson Hole are likely to have a profound effect on returns in second half of 2017. Markets could not care less regarding North Korea. They just do not want central banks to remove the punchbowl and halt the global debt tsunami.

'Ice-9' book is summer must-read

Those who are lucky enough to still have a break scheduled may be inclined to pick up the new book by Jim Rickards, The Road to Ruin. Not the cheeriest of titles, but it is a very good and easy to read thesis on the current situation regarding global finance. If nothing else, you will get to fully understand the term "Ice-9", a phrase you are likely to hear being used more frequently in the future.

Richard Curran is away

Sunday Indo Business

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