The players' club

Yorkshire Business Insider, November 2001

Bring Yorkshire's two most acclaimed dealmakers together for a friendly game of snooker and the conversation soon turns to the fine art of negotiation, teh evolving regional market, the nature of rainmakers and musical ambitions. Tim Chapman reports

The elegant surroundings of the Leeds Club snooker room have probably never seen a clash of talent quite like this. Facing off across the green baize are two of the brightest stars of the city's thriving corporate finance community, the Insider Dealmaker and Young Dealmaker of the Year, as elected by their peers.

For Martin Jenkins, who successfully calls the coin toss and breaks, it's his first time inside this bastion of professional Leeds. Since coming to Leeds in 1989, Jenkins has worked his way up through the Andersen ranks to become a partner two months ago at the age of 32. The one-time choral scholar boasts of advising on 16 completed deals worth more than 540 million in the past five years, including this year's MBOs at Findel and Ellis Fairbank.

His opponent for the night is slightly more familiar with the venue, despite having spent less time in the city. David Forbes crossed the Pennines to join the newly established Leeds office of NM Rothschild & Sons in 1995. He rapidly established himself as a shrewd and bullish operator, advising on many of the region's largest deals including the record-breaking take-private at Peter Black. True to form, he pots the first ball of the game.

Forbes' tough reputation comes to the fore when, a few shots into the game, he leaves a touching ball. Jenkins is less familiar with the technicalities of the game and doesn't realise the benefits of the situation, and Forbes isn't telling.

"This is the man who has an advantage and doesn't know what it is," he declares. "If I tell you what you could do, I'd be disadvantaged so I won't tell you. Why on Earth would you give the opposition an advantage or tell them what their advantage is?"

Forbes' reputation, according to Jenkins, is of being a very clever negotiator. Forbes meanwhile says Jenkins is known for being quite tenacious.

"I think I've probably got a reputation of being fairly tough but negotiation isn't just about being tough - you've also got to be shrewd," Jenkins points out. "You've got to known when to be tough and when not to be tough, read the circumstances, read the situation and understand people dynamics in negotiation. Claiming to be a tough negotiator for me is not what the skill of negotiation is all about. It's knowing when to be tough."

"Generally you do learn that skill," adds Forbes. "You can be taught so much but the rest of it is almost psychology and people watching, and understanding how they're going to react."

But how much of the skill of dealmaking is in understanding people, and how much in a more intellectual grasp of the financial and commercial considerations? "You do need both but in my view the people element is a very significant part of it," Jenkins says. "There are people who have the intellect to understand the issues and the financial dynamics, but there are fewer expert negotiators. The people element of negotiation is absolutely critical."

Forbes believes that the people skills are also the hardest to learn. "You make mistakes in the early days," he says. "You read a particular person in a particular way and you can just get it wrong. It might take you a week or so to recover your position. If everyone did everything right all the time it would be very dull. It's all part of the learning process. That's actually the fun bit as you don't know how people will react."

There's also that often underestimated element of creativity in dealmaking. "The thing about a deal structure rather than a negotiation is you almost start each deal with a blank piece of paper," Forbes explains. "No two deals are the same so you have to be creative in the sense you start with a blank piece of paper and different people have different needs, and the guy at the other end of the table has priorities different to yours. The whole beauty of structuring is he concedes what's very important to you and you concede what's very important to him. That's the win-win scenario as they call it, unlike this game which is more lose-lose.

"I think it's our job to take risks, to give advice, and to try and make things happen. It frustrates the hell out of me when people think their job is just to hide behind others."

Jenkins agrees: "You simply cannot be a corporate financier unless you are prepared to give advice. You've got to have the courage to stand up and do that, not in an arrogant way but you have to have the courage of your convictions. Ultimately, that's what your clients are looking for.

"In our game, what goes around comes around. Sometimes you have to give advice which may be unpalatable from the point of view of your immediate fee, but ultimately you've got to stand up when you're dealing with the chief executive or someone who's well connected in their market place, and ultimately people like David and myself stand or fall on reputation at the end of the day. You can't get results without your reputation. You have to have that in mind all the time. People will have confidence in you because they know ultimately you can give your advice with absolute integrity, even if that means you have to take a long-term view on a relationship."

"That's the stuff that comes around," Forbes adds. "If you've got a reputation for giving tough advice but standing by it, work will come back to you. If you have a reputation for being compliant, there's no value added and no benefit."

Fortunately for both players, their market reputations don't depend on their performance on the snooker table. Although there are no drastic miscues, Jenkins admits he isn't very good at long shots, while Forbes follows several of his strokes with some rather unprofessional, if mild, expletives.

Talk turns to the changes in the Leeds market. Much like the balls on the table, deals are becoming fewer and harder to close. "Ten years ago you had people around who were doing plain vanilla 20-30 million MBOs - there were loads of them, they were relatively straightforward to do, and people made reputations on the back of them," Forbes says. "There are much fewer deals there to do now and they're much tougher to get away. The volume has gone down, the size has probably gone up, and the complexity has certainly gone up. The projects are bigger and longer, and they have got to be more complex and therefore more creative."

"The other thing about the mature marketplace and the increased complexity is to be successful in your market you have to have proprietary deal flow," Jenkins adds. "Ten years ago you could build a reputation on the back of quite a buoyant marketplace. Now, you've got to develop your own deals. You can't rely on once you've done deal A and deal B, someone's going to pick up the phone and say 'Here's a deal, can you do it for me please?'

"The vast majority of deals that get done now have taken some putting together. You develop your proprietary deal flow by making sure you have the right relationships with the right people doing the right things with your knowledge.

"Rainmakers is a phrase often attached to people like David. I have a fairly cynical view of rainmakers because it implies that one person has created a deal. One person may be particularly significant, but our job is about having good knowledge and industry understanding and a good network of people. You've got to leverage those things to create opportunities and create deals."

Forbes agrees that the magical-meteorological analogy is much abused: "I don't think there are that many 'rainmakers' around. If the definition of a rainmaker is someone who has the real creative flair to see a deal where other people don't, there are relatively few of those around. There's a lot of people around who will execute a transaction, but there's very few who can create ideas out of nothing, and that to me is the real value added and the real skill."

But as well as the skills and the knowledge, there's also the sheer graft. Both men say they work 60 hour weeks on average. "I do 12 hours a day - it's what clients expect," Forbes says. "They expect to ring you up at eight in the morning and eight at night and get you both times. The one thing you do need to do in this job is know how to relax."

Both relax with music, and both say they would go back to being failed musicians if they weren't doing corporate finance. Jenkins plays guitar and bass, while Forbes plays clarinet and saxophone and wants to play piano like Elton John, if only he had time to practice. Both also declare a passion for the classic heaviosity of Led Zeppelin, with Forbes boasting of being at their last giant concert at Knebworth in 1979.

The Zep's swansong may have been at least three recessions ago, but the global economy is currently looking decidedly dazed and confused. Forbes however argues that for the M&A market, the song remains the same.

"I think you have to draw a distinction between economic levels and M&A levels. All the M&A market needs is stability and consistency of valuations. We might well be getting into a recession, certainly globally if not in the UK, but that in itself is not a problem for M&A. So long as you get to a stable level, and it doesn't matter where that level is, you can do M&A.

"The problem we have at the moment is that the market is still all over the place," Forbes continues. "It needs to find a level, then we're fine. Even if you are facing recession for two years, that won't actually stop the M&A people from doing deals. The pessimists out there might be pessimistic about the economy, but it doesn't mean that we're going to be shutting down."

"The difficulty we've got at the moment is because of the instability and the uncertainty, I think we've effectively lost three to six months," Jenkins adds. "A lot of the transactions which were in the pipeline, while some of them will disappear, the vast majority will still happen, but it's a question of timing. It means this year is going to be a challenging one for the advisory community, because we all get measured on a 12 month window."

"But we've all got the same six or three months out," says Forbes. "It'll probably be three, because I think people will come back after Christmas with renewed vigour and enthusiasm. I'm not pessimistic about next year, but I'm not hugely enthusiastic about the period between now and Christmas."

On that note, the frame enters its final stages. With two balls left on the table, Jenkins narrowly leads with 33 points to 31. Jenkins pockets the pink but misses the black, giving Forbes an easy finish. They declare a gentlemanly draw.