I was walking down the street in the States a couple of years and twenty years ago and my phone, my mobile phone. I didn't recognize that. I picked it up, and this guy said, hello, is that sign of Freeplus? I said, I said, no, this is Richard Branson here, because I'd never met him before in my life. So I said, is that Richard Branson Richard Branson, who said yes, I'm Richard Branson. Richard Branson. So he said, I have a my friend has a problem, and I'm told that
you're the person that can solve it. And so I laughed and said, You've no idea how many times people say that to me, Richard, that my friend has a problem. It turned out that George Michael had bought what he thought was John Lennon's piano and paid a vast amount of money for it, millions of pounds for it, to only find that it was just any old piano and it wasn't John Lennon's at all, And so he's trying to get George Michael's five million pounds bag.
Where did you buy it?
Like brought to an auction house? And did you get it back? We did? Yeah? I did, No, No, we did No, it was a complete fraud.
But how did you so what you call the auction house and say, well, we just.
Did the profdance on the piano and good that it wasn't the right piano.
What a story.
It was a bizarre moment.
I must say, that was a story there from our guests this week, Simon Freakley, who's the chief executive officer of restructuring group.
Alex Partners now Dave. To be fair, we caught the anecdote just as he sat down in the podcast studio, but frankly was too good nut to keep and he kindly let us keep it in the podcast because it's a story about problem solving.
That's right, you know, Elton John Pianos. I mean, we always get the best stuff beginning right before we actually start talking. But luckily he's happy for us to keep it in. But you know, as you say, this is a story about fixing problems. Chief executives across the globe turned to Simon and Alex Partners for help when they are facing some of the biggest hurdles that are happening in the world right now.
Yeah, it's not all about Pianos. I think maybe at the moment. It's more about market volatility and inflation, how you deal with all of that, but really how you also communicate your vision more effectively.
I'm David Merritt and I'm Francine Laqua and this is in the City, Bloombo's podcast, connecting you to the conversations at the heart of the City of London.
Now this week, Dave, what advice are city leaders seeking from the boss of one of the biggest restructuring firms.
That's right, we ask Simon Freakley, chief executive officer of Alex Partners, an international business advisory firm known for its work in corporate turnarounds.
And we've seen the name Alex Partners quite a lot around the potential sale of the Telegraph newspapers and Spectator magazine.
In our conversation we talk about how the challenges CEO's face have changed over the last twenty years.
We're joined by Simon Freakley, chief executive officer of Alex Partners. Simon, thank you so much for joining us. So when you introduce yourself to someone new, what do you say. I'm like the restructuring guy. I advise on all matters. There's nothing I can't fix.
I don't do anything as grand as that. I just say I'm run a consulting firm that specialses in difficult problems, often problems that need to be solved at speed, and we're somewhat industry and geography agnostic. We just tackle difficult.
Things, talk us through those difficult things on at the moment. How does how difficult is the economy at the moment, and the sort of problems that are crossing your desk.
The UK, of course has had the triple calamity of Brexit, then the pandemic, and now of course this awful human tragedy which is the Russian invasion of Ukraine. So I think those three things have had individually a massive impact on Europe generally and the UK specifically. And these disruptions layer on top of each other. And of course it isn't as if nothing else has been going on. You know, we've come to the end of a thirty year supercycle,
so everybody's been forecasting a recession. It looks like a small R rather than a big R recession, and it's yet to really bite. But here we are with double digit core inflation. It's a very challenging time.
Your industry has come under quite a lot of fire. Right there's this new book by Mariana Matsukada, how the consulting industry weakens our businesses and fantalizes our governments and warps our economies. Do you feel like you're included in that? Have you had to justify consultancy firm fees and just your work?
In general, everybody's entitled to a point of view, and I think how you use consultants, of course is tailored to the circumstances. But consultants who don't deliver value for money are always wide open to those accusations. And of course there are many stories of people talking about being infested with consultants and ones then they can't get rid of them. But I think ultimately the way in which consultants make a difference is to make things happen with
clients that they can't get done on their own. And ultimately we're only as good as our last job.
You mentioned the triple whammy that's hit Britain, the problems harder to fix right now, And are you having the success with these restructurings with the consulting that you're doing with companies?
Well? Interesting David, Probably restructuring is only twenty percent of what we do. Eighty percent of what we do is helping healthy companies reposition themselves or grow faster. And we talked about those three specific disruptions just now, but there are profound shifts going on around technology, around environmental pressures, and it's the multiplicity of these pressures that are so challenging for executive teams and chief executives because they layer
on top of each other. These disruptions are getting quicker in terms of the cycles that companies need to go through to respond to them. And so what we're finding is that the companies that do best, the leaders that do best, are ones that don't wait for perfection. They do it nearly right, but do it now. They have a preponderance to move to action because the markets are changing so quickly. If they don't move to action quickly, they will simply be left behind.
Do you think Simon that the consultancy industry is sometimes used as scapegoat, so even if you add value, it's easier for each executive rather than taking the hard decisions, say look, I'm going to have a third party tell me this, and so it keeps me popular within my company.
The challenge Francine, I think with a description of the consulting industry is a very very broad description of what are really quite different offerings. So clearly there are the strategy consultants, there are operational consultants, there are crisis consultants. So I think, depending on the nature of the problem to be solved, you know, some of these challenges are fair.
But ultimately a consultant pointed at a problem where they can really make a difference, will give speed to insight, to understand what the choices are and therefore inform the executive teams what their real choices are, and then, having
focused on their best choice, speed to execution. And it's the speed to execution that really makes a difference, because for whatever reason, it's very difficult to do surgery on yourself, and so companies do find it hard to pivot in their operating models, or carve out non core activities, or do difficult things, and often it is helpful to have a catalyst to change agent to make that happen.
So something this would be like what an Elon Musk calling you and saying, I've lost half of my advertisers.
What do I do talking about self inflicted injuries. I mean, I think that appointing an independent chief executive is probably the most sensible thing that he's done in the last few weeks. And of course, you know, bringing in an expert who has seemingly made in a relatively short time a difference. So I mean, obviously Elon Musk is an exceptional person, an exceptional business leader, but he's not a specialist in advertising, he's not a specialist in social media.
So oftentimes the consultant's role is to work out what the real choices are and then to support teams move to action and make the critical things happen on a schedule.
What are the biggest challenges that you think CEOs have at the moment or what's on their mind? Is it how do we harness AI?
Is it?
How do we cope with rising interest rates? What are the problems of twenty twenty three the most kind of front at center of people's minds?
Well, David, it's all of the above. And this is the big challenge for business leaders now because everything is moving so quickly. We do this survey every year three thousand executives around the world. We ask them what's top of mind for them. One of the interesting stistics that came out this time round from those interviews, at ninety five percent of all three thousand respondents felt that they had to fundamentally change their business model in the next
three years. Seventy five percent of them felt they weren't making swift enough progress and doing it. So to give you a sense of the velocity of change that's going on, which is the compounding effect of all of these different forces and pressures, it's overwhelming for CEOs.
And sorry, is that stat much higher than it was a few years ago.
Significantly higher than it was a few years ago. Another stet which you'll be interested in. I think we also ask, you know, CEOs, what's top of mind for them? What are they anxious about? Well, seventy percent of them this year were anxious about losing their jobs, up twenty points from last year. So I rather joke that we should call our disrupt index the anxiety Index, because that anxiety is becoming real.
I'm going to play Devil's advocate that if ninety five percent are wondering about their business model and the fact that they need to radically rechange, are these companies that should even.
Survive, well, some of them won't, but some of them will thrive. What our work in this area is also demonstrated is that there are winners and losers at times of profound disruption, and the winners use those disruptions to capitalize on the opportunities that those disruptions present. And so we talk a lot about technological disruption. When you look
inside that and look at connectivity. For instance, the connectivity that's facilitated by the three billion or so smartphones and tablets around the world allow consumers to create their own ecosystem of news of products by reference to values of organizations. And so it's an example of how using new technologies companies can pivot and actually thrive on the back of these disruptions. But sure there'll be winners and they'll be losers.
Disruption to be or can be a good word. Can't say, you know it must probably cause himself a disruptor. But then married with this anxiety that actually the disruption is going to possibly see the end of their firm that fills. What's different at the moment are the levels of anxiety higher in Britain than in the rest of your global clients.
I don't think so, David, I mean, I think it's a general it's a general condition for CEOs. I mean, let's just sort of put a fine point in it. The job of CEO now is much more demanding that's ever been. Why is that. Well, the corresponsibilities of revenue growth and earnings growth dividends to shareholders remain, but there are additional pressures that simply weren't there twenty years ago
or even ten years ago. The need, for instance, to have a voice about the values of the organization, the purpose of the organization, and to comment on important issues of the day. You know, whether it's social justice issues, or whether it's Row versus Wade if you're in the US, or whether it's voting changes. CEOs are expected to have a voice on the things that are relevant not just to their companies, but to their customers, to their employees,
to their other stakeholders. And so it's overwhelming for executives.
But at the same time, they have a lot more data than the twenty years ago, so that presumably also makes their job easier.
Well, funnily enough, we found it makes it more difficult because often people are data rich but insight pau So back to David's question about you know, in the UK and maybe more globally, is the pressure on chief executives higher than it was? It absolutely is, and.
This is not because the quality of leaders is inferior to twenty years ago.
It's not because the quality of leaders is inferior. In fact, I think one could argue that it gets better all the time.
So do you help these anxious chief executives through this process to advise on things like how to communicate a political point of view?
That example, David, would not be something that we would advise on. They're a specialists that do that and that's not in our field of expertise. But we would absolutely advise chief executives and executive teams about, you know, how their market is moving, where the opportunities in that market might be, how they capitalize on those opportunities, and how they move quickly to action, how they do it nearly right,
but do it now. Because what are analysis and in fact all of our stories from the front line of working with our clients have demonstrated, is that the people that have a preponderance for action, even if they change their mind and pivot the strategies, on average, do much better than those that actually are more careful and deliberate and bake out strategies without moving to action quickly.
What's the biggest most common mistake that chief executives make.
There are a number of things one could point to. I mean, the days of the hero CEO are over. You know, it takes a team. You know, group heroics will always always try and triumph over individual heroics. So clearly it's important to have a team. It's important to
have a diverse team for diverse perspectives. And that isn't just gender and ethnicity, it's also in terms of age group, having an environment, a culture in which challenge is encouraged so that there isn't group think, ensuring that people do have not just the data, but the insights, which of course requires digital tools to be able to read where their customers are going, read what their employees want in
terms of quality of work experience. That helps them then inch ahead of their competition.
So the hero CEO is a thing of the past. So which is the other most important role? Is the chief financial officer more important these days than they were in the past.
I mean it's difficult to rank people, you know, whether it's this CFO chief financial officer, whether it's a general counsel or there are different roles of course in different businesses. It takes a team. The CFO of course is very important in public markets, you know as a public company or has public debt. But the team composition, I think is the most important thing rather than just the individual position.
So how does it work concretely? So I'm a CEO, I have, you know, a disaster on my hands. I have to respond to the price, I have to fix something. Do I call you and then you build a team for me? Do you have like lead partners in industries? And actually what kind of servers do I get?
What we aspire to be is on people's speed doal So when people have a problem, we may not know exactly what they should do in that given moment, will have a good set, good idea as to what they should do to assemble a point of view. And of course we all have these speed down numbers we reach out to for different types of problems. Some problems, of course, don't elegantly fit into something one should phone a lawyer about,
or someone something one should phone a consultant about. But I think that a trusted business advisor is critical in those moments, and we aspire to be that for our clients.
Can you give us an example.
The pandemic, of course gave us some very real challenges and urgent challenges. So the pandemic profoundly disrupted supply chains, and so when people find that these wonderful just in time supply chains of course no longer worked. It then became a matter of how do we have a strategy that's just in case, not just in time, and so how to very quickly second source materials critical for a
production facility to continue. So an example would be an automotive client of ours found, as with so many people in the automotive sector and others, that they couldn't source enough of the right silicon chips for their production process, and so asked us to help with what became a very urgent and important matter because they were literally going
to end up with stall production. And so we ended up using generative artificial intelligence to analyze all of the import data into the US to identify not just where the which the countries were to produce the necessary chips, but narrowed it down to the factories we're able to model by triangulating different public source information what we thought their surplus capacity might be, and then in a matter of days managed to book that surplus capacity and those
factories in multiple countries to be able to second source for the automotive manufacturer, and indeed they didn't have a delay or an interruption to their production facility.
How do you think Britain's doing in the to kind of assimilate AI into corporate life, do you know?
I don't think there are any further ahead than anybody else. I mean, tragically, I think that the UK hasn't been relevant in the technology race. If you look at UK public companies compared, for instance, to US public companies, we're sort of nowhere in technology. We missed that boat. Now.
I think there's all sorts of reasons for that. I think that there's been a better availability of venture capital in the US, particularly on the West Coast, to sort of seed so many of these enterprises that have now become unicorns. Whether that mistake will be repeated with AI, I don't know the fact that Rishisuna went on to the front for to talk about regulation. I think it's a good thing, but I think it's very difficult to
know how to regulate AI. I don't think people have a clue at the moment, and I'm always very suspicious when the industry itself starts to tell governments that they should take the lead on regulation.
Samon, if you think we've missed the boat on technology in the UK, I mean a's UKPLC cooked. I mean all of our economies is based on technology and how we use it.
Well, it's so interesting when when looks at UK public companies as a certainly in the major exchanges, we are overweight in things like mining, we're overweight in energy, We're really nowhere in technology. Now why is that? Well? I think that the UK markets, UK investors have largely prized dividends rather than growth. The US exchanges of prioritized growth. The US has a much much larger pool of liquidity.
Valuations tend to be a little higher over there, so it's been an inevitable pool of companies from the UK to the US exchanges. Now is that reversible? Probably not. I don't think that UKPLC is dead, but I do think that, you know, Brexit hasn't helped us. I think that you know, we have lost significance in terms of
being a world financial center. Notwithstanding, by the way that you know, financial and professional services set generated sixty four billion pounds worth of surplus last year, larger than any of the other developed Western nations. But notwithstanding that, I think that we have lost our footing.
And you divide your time between New York and London, simon looking forward a few years, do you see London continuing decline in relative importance versus New York as a financial center?
I think so. Unfortunately. I think that my own view is that Brexit was disastrous. I think that we lost some significance in the eyes of the US as it related to our position in Europe. Is no mistake. I think that President Biden's first international visit after he was elected president was to France, not to the UK. I think that we talk a lot in the UK about the special relationship with the US. Boris Johnson always used to say that that sounded rather needy, and I think
he was right. We are in the Five Eyes from an intelligence and security point of view, along with Canada, Australia and New Zealand. But I think when you look at the flow of commerce and the significance of London's financial center, I think we have lost our footing and I don't think that's reversible.
So what happens next? As a consultant, like, what would you advise UKPLC to do well?
I think UKPLC has got to make sure that its regulatory environment is attractive for business. Obviously, a robust regulatory environment, a regulatary environment that encourages business to keep on building their foundations here. I think that there have to be tax strategies that make that attractive for people. I think that we have to make sure that our talent is
fit for purpose. We know we talk a lot about the being the shrinkage of talent, but the talent war is actually not nearly as significant as the skills or the skills that people need. Particularly in a digital environment that's accelerating fast. The skills war is critical. So how do we make sure we have enough people of the right skills to be able to keep the business in the U.
Are there any particular sectors that you've got your eye on in terms of stress where you feel like there might be more restructurings or maybe you know household names going out of business in the next year.
Well, I mean retail of course has been profoundly disrupted now for quite a number of years, and that's not going to slow down anytime soon. So I think we'll keep on seeing real challenges in the retail sector. Energy I think will continue to be a challenge, of course, and that's even before the profound disruption cause by this humanitarian disaster over in the Ukraine. And so I do think that those two sectors will be high up on
the list. But I think that you know, in an environment where food inflation is still in the mid teens and we've got significant industrial action now all around the country, where you know, understandably people are resisting small single digit pay rises in what is a double digit and core inflation more than just double digit inflationary environment, I think is a very very challenging time.
Do you ever think that I guess M and A between two distress companies is a good idea, or even one distress company and one healthy company.
It can work, of course, I mean it's the old sort of adage of two drowning people trying to hang on to each other to float, but sometimes it can scale can make a difference in a market. So if the putting together are two companies, does course scale that fundamentally changes that market position, then of course that is a good thing.
Like the rest of the world, here at Plinberg, we're obsessed with a lot of the distressed MNA happening in the finance sector. How do you see those deals now a couple of months down the line. I guess the mother of all the stressed MNA was the Credit Swiss UBS deal. I mean, how is that panning out? Do you think?
I don't know specifically how is panning out? I clearly Ubs was the right partner. But you know, if you also look at you know, Jamie Diamond and JP Morgan, I mean, they are the solution of choice for the FED in the US, and of course they have to make sure or they buy at a price that is good for their own shareholders. But the profound disruption that's been going on with regional banks and community banks in the US, you know, not just Signature Bank or or
others like that, it is ripe for consolidation. So in the US I think we'll see real consolidation in the banking industry. In the UK, of course we've seen that consolidation already, but you know HSBC, it is it a UK bank, Is it a Chinese bank? I mean, there's a big discussion now as to really where the center of gravity of HSBC is, and so I think the banking industry is in a period of profound change. Actually, what's the.
Most exciting piece of business you've ever worked on?
I remember being dropped in as interim chief executive of a very major Eastern European bank some years ago, and we had sixty days to work out, you know, where the money had gone and was the bank saveable? And so that was an extreme, ordinarily intense period, a team of sixty people working night and day to get to the answer, which we did. But often that is an adrenaline fueled period and very satisfying if indeed one can
get to an answer and execute it. Oftentimes, of course, things aren't quite that intense, but the speed to insight is important because the time really matters in these situations to working out what the best move isn't taking it. And it's very rewarding actually to partner with clients when they're in those moments.
Simon, Frankly, thank you so much for joining us.
Thank you very much for having me, David.
It's really interesting almost listening to Simon Freakly with a blueprint of, you know, the most common mistakes that chief executive make which they should look out for. I don't know whether it's like a thirty page document that he presents a lot of these chief executives with. Of course, it's long term planning. He talks about, you know, being able to build a team, and what really struck me is the fact that he thinks it's much harder being a chief executive now than it was twenty years ago.
A lot of people may disagree with him, because we're also helped by being able to recruit talent across the world, which maybe twenty years ago was much more hard because people didn't work from home.
That's right.
I mean, it's always obviously supposed to be the toughest job as chief executive. And I'm not sure there'll be huge amounts of sympathy out there for the anxiety levels of these the fifteen hundred bosses. But I thought it was fascinating how it seems those levels of anxiousness are getting much worse in the current climate, and kind of how these bosses don't seem to be able to navigate all of these challenges being thrown at them. At the same time, I.
Think the question is how do you measure success. Does a consultancy firm or a consultant only become really good at their job when the chief executive no longer employs them? Yeah, exactly once you can do it internally.
Yeah, which is why I thought it was interesting about AI. I mean, I think it's part of the chief executive's job, of course right now, to understand how to harness artificial intelligence to make their job, but they don't seem to be capable of doing it. They have to phone a consultant to get that kind of insight.
Yeah, it was an interesting conversation also, just him not being very optimistic about the future of the UK, saying that actually New York is so much better at doing these things, and him asking for a better regulation, certainly in London, to help the City of London thrive.
I know, when when you're going to get someone on this podcast, Francine he's optimistic about I'm just you know, I'm feeling a bit maybe we should just all move to New York.
What do you think.
I can't live without guinness and fish and chips, Dave or fair enough.
Thanks for listening to this week's in the City.
We'll be back next.
Week, but in the meantime, if you like our show, please head on over to Apple Podcasts or wherever you listen to podcasts, and rate review on Subscribe.
This episode was hosted by Me David.
Merritt and Me Francis Lackwell.
It was produced by Sersadi and Moses Andam additional editing by blake Mate and special thanks to cyber Freakly