Thursday 14 December 2017

Putting share options on a global stage

An interim job as a chief financial officer led Tim Houstoun to become a shareholder, and then boss of the company

Tim Houstoun and Sean Gallagher at the Clonakilty HQ of Global Shares
Tim Houstoun and Sean Gallagher at the Clonakilty HQ of Global Shares
Sean Gallagher

Sean Gallagher

In recent years, we have all heard stories of how employees became millionaires overnight when the company in which they worked and had been given shares, was sold or floated on the stock exchange. The most famous of these being Facebook. While not all cases are as dramatic or life-changing as this example, the practice of offering share options to employees has, for many companies, increasingly become part of the package required to attract, retain and motivate key staff.

"In fact, in the US, as many as 98pc of firms now offer some type of employee share options to their staff," explains Tim Houstoun, CEO of Cork-based firm Global Shares, as he welcomes me to the company's offices in the town of Clonakilty.

"Global Shares specialise in developing software and service solutions that allow companies around the world manage their employee share plans," explains Tim.

Only two months ago, Tim and Global Shares were in the news when the company announced the creation of 80 new jobs on top of the 70 staff the company currently employs. So what's driving the company's success?

"Many companies use share options as a way of attracting and retaining skilled and loyal staff. By offering compensation that goes beyond a salary, a company is demonstrating that they want their employees to feel engaged, motivated and above all, committed to the company's overall success," explains Tim.

But first I get a quick education in how these share options work.

"Shares or stock options give employees the right to buy a specific number of shares in the company they are working for. The price is usually discounted. These options are not normally exercisable for some time in order to encourage staff to stay with the company for a set number of years.

"The hope is that the price will go up over time and that when the employee eventually decides to sell them at the new market value, they will realise a profit in recognition of their loyalty and commitment to the company," explains Tim.

"The challenge for many employers is which type of share-option scheme to choose. In addition, because many companies now have staff in different countries, they end up having to manage different currencies as well as dealing with a myriad of different tax regimes and legal obligations. This makes the job of managing these schemes even more complex."

To address these problems, Global Shares has developed a one-stop software solution for companies that synchronises the entire process and eliminates unnecessary paperwork, reduces the risk of manual errors from Excel spreadsheets and assures that a company's chosen scheme is fully compliant from a regulatory perspective. And it's a solution that is quickly catching on.

To date, the company has over 150 clients in 14 separate countries - 98pc of all company sales are outside of Ireland, with 70pc of business coming from North America and the balance from Canada, Brazil, Argentina, the UK, Europe, the Middle East and Asia. Most of the company's clients are firms with more than 5,000 staff and are in key sectors that span everything from pharmaceutical and medical devices, to construction and property, IT and software.

The company's story is an interesting one that started back in 2005, when two industry professionals - one a California-based woman, Carine Schneider who had a second home in west Cork; the other, Irishman Maoiliosa O Culachain - spotted a gap for a business that could specialise in managing share plans for companies around the world, and so set up Global Shares.

While the idea was certainly a good one, the company struggled to differentiate itself as a service-only based business, as it had no proprietary software and instead relied on using software developed by other competing firms.

Like many start-ups, the company had been funded largely by the founders, their families and friends. As it developed though, it quickly became apparent that the pair needed additional cash, and so, outside investment was secured from a group of 30 private investors (including the company's current chairman, Richard Hayes, who came on board in 2007). A chartered accountant by profession, Richard was the founder and CEO of IFG Group, a leading London and Dublin-listed pension provider and financial-advisory business.

In 2009, Tim Houstoun joined the company as its interim chief financial officer. Having grown up in London, he had moved to Cork with his wife, Maire, some 15 years earlier but had continued to travel to the UK for several days each week. During this time, he set up and successfully exited a number of UK-based distribution-type businesses, the first of which became a fast track 100 firm while he floated a second on the stock exchange.

Tim recalls developing an interest in business from an early stage when helping his father in their family stationery business. After school, he attended Manchester University where he studied economics and statistics before going on to train as an accountant with BDO.

"I almost died of boredom working as an accountant. It just wasn't for me," says Tim with a laugh. "I left to join an ailing distribution company and helped turn it around before selling it on," he adds, something he developed a skill at doing.

The desire to spend more time with his wife and family in Ireland saw him take on the temporary role with Global Shares. While he had not initially intended to stay beyond a few months, he soon realised that the business was losing about €200,000 a month, and so he got to work on helping to change the fortunes of the then struggling company.

"After about 18 months and much cost-cutting and restructuring, we eventually turned a profit," explains Tim proudly.

In 2012, Tim, along with the staff and a small number of original investors decided to buy out the founders and to take the business forward themselves.

Once in control, they began implementing major strategic changes. Their first decision was to move away from a service-only model where the company managed share options for clients based on using software platforms developed by other share option management companies.

"Up to that point, we had been using numerous third-party software providers to service our clients. We paid high fees to access this software and were increasingly frustrated by the lack of control over such things as software errors and key functionality issues. We believed that we could develop our own technology that would be better than anything on the market," explains Tim.

However, it was a move that was more challenging than anticipated - as IT developers were hard to find in Ireland at the time. To address these challenges, the company set up two offices in India, hiring 30 software developers to help build out their software.

The Indian operation proved less successful than expected due to a combination of issues with quality, as well as the challenges of dealing with different time zones and different cultures. So after only 18 months, Tim and his colleagues, made the brave decision to close down the Indian office and moved the entire operation back to Clonakilty. It turned out to be a smart decision.

"We brought some of the best Indian developers back to Ireland with us and recruited a team of IT wizards from Portugal, Spain and Germany, as well as the US, the UK and Ireland," explains Tim.

"The move gave us greater control and also allowed us to build an outstanding and highly motivated team that took pride in their work while still having fun and enjoyment," he insists.

Meeting the staff, I can easily get a sense of energy and vibrancy in the place.

Now that they had their own proprietary software, they were able to migrate their customers onto their new platform - and having their own software proved more profitable than ever before. This SAAS (Software as a Service) model - where clients paid an annual licence fee - also enabled them to begin licencing their software to other firms in the sector under a distribution reseller model, which helped generate an additional revenue stream for the business.

Recently, the company applied to the Central Bank to become a full investment firm where they will be able to take commission for trading the shares they are managing, rather than have them traded by a third-party broker.

"Such a move will allow us grow our current turnover from $5m to over $20m within the next five years and we expect our staff numbers to double to over 150 over the same period," explains Tim confidently.

"I love what I do," says Tim, "In particular, I love the idea that we can write software here in Cork and then sell it to millions of people around the world. Now that's a great business model," he says with a knowing smile.

Tim Houstoun joined an ailing company and, along with the staff and investors, turned the company around. Their courage to change direction and strategy enabled them to develop their own proprietary software solutions and to target new markets and new channels.

With much of the ground work done and the hard yards already won, something tells me that there are going to be some exciting times ahead for Tim Houston and Global Shares.

For further information: Global Shares, West Cork Technology Park, Clonakilty, Co Cork. Tel: (023) 88 33062. Web:

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