Tangent Communications: Nicholas Green
Nicholas Green explains how buying a business 50 times its size has worked out
When David bids for Goliath you risk ridicule, but as Tangent Communications’ Nicholas Green explains, the company’s attempt to buy a business 50 times its size has worked out just fine.
When a company makes a bid for one with a turnover 50 times its own, it’s bound to hit the headlines. Last November, marketing firm Tangent Communications did just that. The £8m turnover AIM-listed company made a bid for printing giant St Ives Plc, with revenues of £420m, clients such as IPC Media and upwards of 4,300 staff. The offer was rejected.
What were they thinking? “With St Ives we felt we had a clear way to change the business,” says Nicholas Green, Tangent’s joint chief executive along with brother Tim. According to Green, mass marketing has had its day, and following Tangent’s success in delivering data-driven, targeted campaigns for clients such as Sainsbury’s, the brothers saw St Ives as an opportunity to re–focus the business for the benefit of both parties.
However, St Ives didn’t see it this way, rejecting the offer of 272.5p a share (valuing the company at approximately £282m). Bullish? Certainly. Foolish? Perhaps not. According to Green, St Ives has since hinted at implementing some of Tangent’s suggestions. “I don’t think it would be fair for me to take the credit, but recently St Ives suggested they might sell or dispose of some aspects of their business, which is something we’d talked about. They’ve also had a big focus on digital.”
The publicity put Tangent on the radar of countless businesses and investors. In March, the Greens raised £6m for award-winning supplier of on-demand print services for estate agents, Ravensworth. The deal was 100% over-subscribed. “Our free float went up to 60% and this was the first time anybody had had the opportunity to buy significant equity in Tangent,” says Green.
Tangent’s growing success has appealed to investors. The company has successfully integrated two businesses and delivered operational and revenue synergies, and the advent of new technologies has increased its operating profit to £1.07m from £0.63m last year.
Tangent has achieved impressive growth since 2002, when the Greens took the helm of the then private printing and direct marketing business Tangent Ltd, owned by their uncle, former Carlton Communications chairman Michael Green. With extensive experience in sales and marketing, they re-focused the business: Nicholas sold ad space at the Daily Telegraph before managing display sales at Teletext and then launching the European arm of performance-based marketing company advertising.com; Tim sold space at Euromoney before joining the commercial launch team at Ask Jeeves and then co-founding internet sales house Unanimis Consulting Ltd, with eBay and lastminute.com as clients.
With this combination of experience, they realised that data-driven, intelligent marketing was the way forward. In 2004 they secured a win with Nectar and Sainsbury’s, using data to launch an award-winning personalised mailing. “We took the redemption rate from 17% to 54%,” Green recalls. This breakthrough put the company in a position to attempt its first ambitious takeover. In 2005, Tangent Communications plc was formed when Tangent reversed into the larger, technology-driven marketing business Documedia.
The deal made sound business sense, generating savings of £400,000 by downsizing to one location. It has also played a pivotal role in Tangent’s growth strategy. “We were very fortunate to have Michael associated with our business,” says Green. “He gave us insight into going public and the importance of responsibilities to shareholders,” – a lesson Michael Green had learned the hard way, after being fired by the board at Carlton following the ITV Digital fiasco, which cost Granada and Carlton shareholders a reported £1.2bn.
Green senior remains a key adviser and a 33% shareholder in Tangent, and shares in Documedia rose from 5p to 10p when the markets learned of his stake.
Two subsequent acquisitions have enabled Tangent to focus on better serving existing customers, such as Proctor and Gamble and New Look. In July 2006, Tangent acquired marketing technology business C360 UK for £4.5m, funded out of internal resources.
Taobase, which enables data to be analysed and used for targeted and tracked campaigns, now forms the centrepiece of the rebranded Tangent Labs C360’s business. Clients such as Ted Baker use it to run email marketing campaigns, where conversion rates are monitored. This business has grown by more than 100% in two six-month periods.
The acquisition of Ravensworth has added yet more sophisticated technology, used by 20% of UK estate agents. “A big differentiator is our proprietary technology,” says Green. The company even enables clients to create advertisements using customisable templates online. The Greene King pub chain uses it for menu building and margin analysis.
According to Green, Tangent has no direct competitors but this is not necessarily a good thing. “It would be great it we could cite from a financial perspective when we’re talking to investors, but that’s almost impossible.” They seem to get by, however. Tangent often finds itself facing up to heavyweights, and recently won a pitch against IBM.
The company now has 160 staff in London, Newcastle and Cheltenham and Green is positive about continued growth. For now, he insists: “Our focus is integrating Ravensworth and delivering on expectations.” But he’s always on the look-out for the next big opportunity.
As well as its technology, Green feels that his business partnership with brother Tim has also been a key driver of Tangent’s success.
“There is complete trust and mutual respect and we’re entirely different people, so it has allowed Tim to focus on running the operations of the business, and our existing clients, and for me to focus on the sales, business development and where we’re going.” He adds that their relationship leads to shorter, more honest board meetings.
“There’s no pretence. Around the board it’s quite common that other members will be careful about how they talk to their board colleagues. With my brother and I none of that exists. We can talk to each other candidly so decisions happen swiftly. This has been a huge advantage.”