I sat down with Peter Warnøe in his office next to Kastellet (September 2008).

A big exit; Running a roll-up strategy; Valuing companies

Alex Farcet (Q):  Were you part of the Navision story?
Peter Warnøe (A): No, although I’m good friends with Preben Damgaard.  I started Complet-Data in 1989, a PC hardware and consultancy business.  I was about 26 years old and a partner and I ran this company with a total of 3 other employees.  The company grew to app. 300 people and 1 billion DKK of revenue by 1997.  We were then approached by MerkantilData, a Norwegian company that had a big presence in Norway and Sweden and wanted to buy their way into the Danish market.

MercantilData was a publicly listed company so working for them was a new experience for me.

(Q):  Did you have to stay?
(A):  No, although a great part of the payment was made in shares which I could exercise at three different times over a 36 month period.  I learned a lot about running publicly listed companies and I also understood better what I had achieved – by observing my boss make his good and bad decisions.

After two years I started having some disagreements with the Norwegian management.  I had been approached by CVC (one of Europe’s biggest equity funds with something like 15 billion EUR under management) several times by then and they convinced me to join and help them establish a footprint in Scandinavia.  We created the Aston Group which was built using a roll-up strategy, making more than 55 acquisitions in a very short period.

(Q):  What does roll-up mean?
(A):  A roll-up strategy is when you build a large company by buying many small ones.  The idea is that the whole is worth more than the sum of the parts.  We planned to have 1000 employees within 1000 days and things went so well that we even doubled that target to 2000 employees.  I really stepped up during that period from being a manager to being a deal-maker, learning a lot about how deals are structured financially and I became a lot more ambitious.  This was at the height of the bubble and we were set up for an IPO with a valuation of about 2 billion USD.  I made road shows in New York, London and Paris but of course the bubble burst right then.  There was no IPO, and CVC basically decided they couldn’t make money doing this and pulled out. 

(Q):  What was it like to go from being a superstar to going through such a visible failure – the Aston Group crash was covered heavily in the press and one bank lost a lot of money?
(A):  Well, first of all I learned that equity funds are ice-cold!  They’re interested in returning 10-15% to their investors and they don’t care about the people behind projects.  But I grew from the process and I actually still have good relations with the bank in question.  You know, in the US people who are really admired are those who have had big successes AND big failures.  You learn a lot from periods like that.

(Q):  Have you been following what happened to Morten Lund and what’s your view?
(A):  I saw his interview on TV.  He has a big heart and he really wants to change the world but I think somehow he’s been naïve or young in a positive way.

(Q):  Do you find that Denmark has a few people at the top and that you’re not allowed to fail?
(A):  I don’t think so.  Yes Denmark is a small country with 5,5 million citizens so by default things are smaller than in London or Paris but I find that people are open, it’s not a closed circle at the top of society.  Anyway, I’ve always been a rebel so I’m not that concerned about that.  I have a huge network both here and outside Denmark. It has much to do with your own personality 

(Q):  What do you do now?
(A):  I run two companies, one is a real estate company and the other investing in IT companies – I’ve got investments in 4 IT companies at the moment. 

I’m not a technical person, what I’m good at is growing companies.  I can’t tell if a technology in its early stage will be big in 7 or 8 years.  So I’m not really interested in early startups.  My criteria are: I have to understand the business model; there has to be an existing product with customers generating revenue; it has to be scalable; and there has to be potential, especially a market outside Denmark.

(Q):  What kind of due dilligence do you do, do you have a team of lawyers and accountants?
(A):  You have to look closely at what you’re buying. I had been on the board of Axcess before I bought a 25% share with Preben Damgaard but I still ran a due dilligence, it was big acquisition for me. Entrepreneurs aren’t always on top of everything, there could be a hidden VAT issue or some commitment hidden in a clause.  I do have a group of people I work with regularly.

(Q):  How do you value companies?
(A):  Valuation is hard, there a few standard approaches, with multiples of 5 or 10.  But I’ve made probably 150 deals so I can get a feeling within 15 minutes of looking at a company.  I look at the track record of the company; I look at the entrepreneurs and the main shareholders; and I look at the size and the revenue.

(Q):  Do you hunt for companies or do they come to you?
(A):  I don’t hunt, they come to me.  For example this morning I got a call from a founder-CEO who thinks he has bad investors who aren’t helping him.  He wants to bring in a new CEO who can help the company make a profit, and he’s asked for my help. 

When I get involved with a company I usually pick a few key things to focus on at the start and then I get involved on a ad-hoc basis.  But I also support people, for example one company I’ve invested in is a Microsoft (ex-Navision) consultancy and I meet with the CEO every other week to talk about growth strategy and what to go for next.

(Q):  You don’t have to work, how do you decide what to do? You could go in so many different directions.
(A):  Well I wouldn’t say I don’t have to work.  I love what I do, I love coming to the office everyday and working on deals, seeing how I can make money on something.  All my money is locked up in investments and I’ve lost a lot of money on paper inn the share market now.

I still think there are such great opportunities for entrepreneurs in Denmark.  Some years ago, when I was building my company for example, there weren’t anywhere near the same number of sources of money.  Now you have Business Angels, Venture Capitalists and so on. Another thing is I don’t think that ‘Janteloven’ is relevant anymore – it isn’t looked down on to be rich and succesful in Denmark anymore.

I am very focused in what I do, and I’m a very bad loser (even just playing tennis). But another thing is that, since my divorce, I’ve really balanced my life.  I have my two daughters every other week and I’ve decided to give them the time they deserve.  I don’t want them to grow up and ask me ‘where were you?’