Unwinding Opportunities - PAS

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UNWINDING OPPORTUNITIES SRI LANKA Nishan Sumanadeera is a Sri Lankan Entrepreneur, businessman, director and co- founder of Frontier Capital Partners, a boutique investment consultancy rm specialized in Investment Banking services and innovative investments in Sri Lanka. He together with his companies have invested into various industry sectors through private equity participation with foreign and local investors Mr Sumanadeera during his 25 year career has served as the chairman, board director, country manager and legal & nancial consultant for many companies in Sri Lanka and overseas. www.sumanadeera.com 1  fi . fi Having started as a small stock brokering company in the year 1990, Asia Securities, soon encountered an opportunity that would change the course of business forever; an opportunity that would be ineffectual if it was not utilised and merely existed in the ether, disguised as a thought. That opportunity was to expand its business into the investment banking sector in Sri Lanka. Seizing this opportunity, the company founded in early 90’s under the name Asia Capital PLC (ACAP) and was subsequently listed on the Colombo Stock Exchange in the year 1994. And yes, it was a massive success and ACAP raised over Rs 1 billion from the stock market through the IPO. The company saw an exponential growth. ACAP grew into a reputed, sought after company for investment management and wealth creation opportunities in Sri Lanka. To this day, ACAP has secured more than $500 million in Foreign Direct Investments (FDIs) with international, high net worth corporates and individuals. The success of this company cannot be attributed to one man; it was a team effort. However, it would be an offence if the story of this individual goes untold. It was the year 2008 ACAP was doing better than ever with Nishan Sumanadeera as the Vice President of Investment banking triggering a string of corporate acquisitions with the aid of Dr Sena Yaddehige then Chairman and owner of Richard Pieris Group. ACAP acquired Finance and Land Sales a Finance Company from Sellamuttu family and snapped Capital Reach leasing a leasing company from Vanik through swift legal action. Further attempted to restructure Pramuka Bank and takeover Union Bank of Pakistan. With the addition of leasing and inance business to its Stock brokering, Insurance and fund management business ACAP was on track to become one of the leading investment bank in Asia with a commercial banking license in sight. 2  f That was the time, QI group, headquartered in Singapore, reared its head to acquire ACAP to grab the opportunity to bene it from post war development. Qi group is a diversified multinational entity with subsidiary companies in nearly 30 countries. Having realised the true long term potential of Sri Lanka and ACAP, QI group, headed with Vijay Eshwaran and Joseph Bismark, bought the controlling stake in ACAP in year 2009. That was the toughest year for Velupillai Prabaharan as well as Nishan Sumanadeera. The decision to takeover ACAP put him in a predicament; a predicament where having the smartest brain in the company would bring dissolution to oneself. Sri Lanka is a country rooted from where a son killed father to become the king and nepotism is seen as righteousness; not as someones gluttonous attempts to consolidate his/her power. Greed has a special place in the blood of every Sri Lankan. Greed is not always a bad thing. It drives everyone to achieve higher and higher. Ironically, someone’s achievement would bring another’s demise. That is the case of Nishan Sumanadeera and ACAP. With the acquisition of ACAP by QI group, Nishan Sumanadeera was pressured to resign. The resignation was pressured by other members of the management, purely on the basis of being a threat to Mano Nanayakkara’s egoistic pursuit of money and fame. At the time, Nishan Sumanadeera was working on the acquisition of C.W. Mackie PLC by the Lankem group, on behalf of ACAP. The pressurisation, lack of support and vision displayed by other members of ACAP, inally lead him to resign from ACAP. A man with such honour and integrity to his name, left all behind and resigned respectfully from ACAP in 2010. As gratuity, he was given Rs. 600,000 and a car to his name. This was the toughest of times for Nishan Sumanadeera, especially at a time where the economy was booming after the defeat of LTTE, the end of 30 years of civil war. The best time to be an investment banker is at the time of economic growth. Nishan Sumanadeera did not have that opportunity. Instead, he was left without a job and with just Rs. 600,000 in his bank account. However, he had one ray of hope. Before the resignation from ACAP, Neil Da Silva had requested Nishan to come and work for him at Swarna Dweep for $5000. Story has that he joined Swarna Dweep to help to develop 150 acre property in Dutch Bay Kalpitiya, worked every day, never had an of ice and never received a single paycheck. He was left devastated from Neil Da Silva’s failed promises. 3  f f f Although he didn’t have a job, he had one thing that many others did not have. He had time. He did not have the burden of working from paycheck to paycheck. That is when he realised something very important that lead to his success. “I’ve spent my whole life working from paycheck to paycheck. This is the irst time I actually have time to re lect on myself”. Although he did not have much money to spend on lavish things, and his bank account was slowly draining, his mind was as clear as a bell. He’s now left with just Rs. 700,000 in his bank account. His family members and relatives say: “He was the go to guy if anyone needed a loan. He’s the type of person that never says no”. “He’s a rich man. He’s always the guy that has money”. During this tough time, his sister asked for a loan. Asked for Rs. 500,000, unaware of his resignation from ACAP and the tough situation he was in. As the man that never says no, he agreed to it, knowing very well that giving that sum of money would make his life even tougher at a time like that. Before writing this book, we interviewed Nishan and asked why he decided to give that loan at a time like that. This is what he said in his own words: “If I am to help someone, I must help now; not when I have or if I have, but what I have”. Now he’s left with just Rs. 200,000 in his bank account. Having not enough money would mean he has to ind a job. Getting a job would be to revisit his old life of working from paycheck to paycheck. Just like a hamster on a wheel. Nishan was frustrated with the recent occurrences in his life; from being pressured to resign from ACAP, failed promises of Neil Desilva, and spending on a tight budget. That is when he decided to clear his mind from all this frustration by going for a walk in the morning. It was 5 a.m in the morning of November 2009. He drove to Marine Drive, parked his car nearby a shop, got out and started walking like it was his God given right. 4  f f f As he walked, he wondered “What have I done wrong to be in this situation? I’ve dedicated my whole life to bring value to this company, only to be pressured to leave for no apparent reason. What have I done to deserve this?”. That is when his phone rang; a call that changed the trajectory of his life forever. He checked his phone. It was Johnny Anderson lawyer for Aarhuskarlshamn AB (PUBL), Johnny Anderson was the lawyer who was working on the sale of C.W. Mackie. Nishan answered the phone in disappointment, knowing very well that he would not be able to work on the sale of C.W. Mackie, now that he had resigned from ACAP. Nishan quite frankly said “Sorry, I have resigned from ACAP. I’m unable to work on the sale of C.W. Mackie, on behalf of ACAP”. That is when the story took an unexpected turn. Jonny Anderson was renowned for being an astute lawyer. He understood that Nishan was the brains behind ACAP. He realized that if Nishan did not work with Aarhuskarlshamn, Aarhus would have a cat in hell’s chance of selling C.W. Mackie. Nishan’s reputation for ability and integrity as an investment banker cannot be traded with anyone else at ACAP. So Johnny Anderson replied with “That’s okay. We will work with you independently. I will send the mandate to you”. That was the moment Nishan Sumanadeera had an epiphany. He realized something very important, or perhaps the most important lesson that lead to his success. “I have the skill set and the network to work independently. I do not have to work for ACAP or other investment banks. I could be an independent investment banker. Now is the time to work less but work smart”. Nishan Sumanadeera keenly 5  accepted the mandate to sell and sent the inancial due diligence requested by Johnny Anderson. Before the resignation, Nishan was communicating with Anushman Rajaratnam from Lankem Ceylon PLC, who showed a keen interest in acquiring C.W. Mackie. As Nishan said in his own words “Anushman’s interest in C.W. Mackie was not based on any potential growth or decline of the company; it is purely on the basis of substantiating his worth as a bigwig for Lankem Ceylon PLC”. His interest in C.W. Mackie was a manifestation of his grandiosity. Anushman wanted to prove that he was a better businessmen than his father. As Nishan said “the mentality of grandiosity is something prevalent in Sri Lankan culture. If you can identify this, you can use it to your advantage”. Nishan was astute to identify this frame of mind in Anushman. He understood that Anushman was the type of guy who would go on a debt, just to substantiate his worth. If someone was to acquire C.W. Mackie, it has to be Anushman. Nishan contacted Johnny Andersson at Aarhus to convey Anushman’s interest in acquiring C.W. Mackie. Johnny Andersson was optimistic to hear the news. Knowing Nishan’s reputation as an investment banker, all that he needed was Nishan’s word as a mark of con idence for this transaction to be a success. Johnny Andersson was from Sweden. If he was to come to Sri Lanka, he would have to spend few nights at few different airports. Nevertheless, Johnny Andersson, along 6  f f with other members of Aarhuskarlshamn AB (PUBL), scheduled to meet Nishan in Sri Lankan. This was one of the saddest moments in Nishan’s life. As Nishan had already resigned from ACAP, he did not have the luxury of meeting in an of ice. So Nishan wittily convinced everyone to meet at the Wok restaurant at Hilton Colombo. On 14 December 2009, Nishan met Johnny Anderson and Morgens Stoustrup of Aarhuskarlshamn AB (PUBL), at Hilton Colombo. The meeting was a success. Everything went as discussed. After concluding the meeting, Johnny Andersson, along with the team, wanted to meet the buyer, Anushman Rajaratnam from Lankem Group. This meeting took place on Tuesday at the Jaic Towers. On this day, Lankem Group, along with Anushman Rajaratnam , agreed to purchase the controlling stake at Rs. 35 a share. Lankem Ceylon PLC agreed to purchase 80% of C.W. Mackie. The meeting was successfully concluded and the transaction was scheduled to take place in a few weeks after concluding this meeting. Johnny Anderson lew back to Sweden on a positive note. One week passed. Everyone was anticipating on celebrating on this big day after the transaction completes. If this transaction was to happen, Nishan would be in a much better situation in terms of inance. It was his shining beacon of hope that would release his inancial stress. It was 9.00 a.m in the morning when Nishan heard his phone ring. It was Anushman Rajaratnam. That was an unusual time for Anushman to call Nishan. 7  f f f f Nishan knew something was wrong. He answered the phone in resentment. This is what Anushman said: “I’m sorry to be the bearer of bad news. Price of Rs. 35 per share is too high. I will reconsider for a price of Rs. 30 per share”. Nishan was extremely displease to hear that from Anushman. He almost bawled out at Anushman. Retracting on what was agreed upon would frustrate everyone involved in the transaction. However, Nishan knew that if he bawl out at Anushman, it would land him no deal. So Nishan replied calmly with “That’s okay. I will let them know”. After long hours of talking on the phone and strenuous effort in the art of negotiation, Nishan convinced Arus to sell C.W. Mackie at a price of Rs. 30 per share. Nishan was a dexterous negotiator. His unique set of skills in the art of negotiation was one reason for the success of ACAP. Someone that worked for ACAP said “Nishan could cut your throat with a song”. This was excellent news for Anushman, Nishan and everyone else involved in the acquisition of C.W. Mackie. The acquisition was rescheduled to take place on 22nd January 2010. Everyone and everything was perfectly in order for this acquisition to happen. Johnny Anderson and other members of Aarhuskarlshamn AB (PUBL) visited Sri Lanka on 20th January 2009. The acquisition was to take place on 22nd January and team to ly back on 23rd Morning. Everyone was once again optimistic about the acquisition and anticipating on celebrating on this big day. That is when Anushman phoned Nishan again. Just like a devil on Nishan’s trail, Anushman said “I’m sorry. Lankem can only purchase 56.56% of C.W. Mackie. We do not have the funds to purchase 80% of C.W. Mackie”. The acquisition was to happen in just 3 days. Nishan thought to himself “what a devil of a time to be in. The acquisition was to happen in just 3 days. I only have 8  f two options left at this point. Find a buyer to buy the balance 24% or call it off. If I call it off, all the effort I have put in would be for nothing. I might as well give it all in if I was to call it off”. That is when he contacted Dinal Wijemanne and Sriyan Gunasinghe to get in touch with Dr. Senthilveil. Dr. Senthilveil had also shown his interest in C.W. Mackie. If Nishan could convince Dr. Senthilveil to purchase 24% of C.W. Mackie, the deal would still be on the table. Nishan used all the tricks in his bag to convince Dr. Senthilveil to purchase 24% of C.W. Mackie. And it worked. His unique style of negotiation and persuasion made a stance that day. Dr. Senthilveil agreed to purchase 24% of C.W. Mackie. The only problem was that Dr. Senthilveil was on a 28-day spiritual retreat in Thirupathi, India at the time. And the acquisition was to take place in just 2 days. The acquisition was to happen on 22nd January 2010 and the last day of 28-day retreat was on the same day. Dr. Senthilveil had agreed to purchase 24% of C.W. Mackie on the phone but he still had to sign the papers of agreement. If Nishan couldn’t get Dr. Senthilveil to sign the papers before the day of acquisition, the deal would be off. The day of acquisition has arrived. The meeting was scheduled to take place in just 3 hours. Dr. Senthilveil was on his way to Sri Lanka from Thirupathi, India. Nishan contacted Dr. Senthilveil to ask his estimated time of arrival. This is what Dr. Senthilveil said: “I have come on a spiritual retreat to experience spiritual renewal. I haven’t cleansed myself with soap or other chemicals, but I have cleansed my soul. I must not have the luxury of lying in irst class. I shall ly economy class just like the rest. So, I would be a little late than expected”. Nishan and Sriyan drove to the Colombo International airport (BIA) to meet Dr. Senthilveil. They had all the paperwork necessary to get Dr. Senthilveil to sign the papers at his earliest convenience. Acquisition was to take place in just 2 hours. 9  f f f At a distance, Nishan saw Dr. Senthilveil, looking frail and tired, exciting the airport. Nishan and Sriyan ran towards Dr. Senthilveil. When Dr. Senthilveil met Nishan and Sriyan for the irst time after 28-day retreat, this is what he said: “I shall not sign anything until I visit the Kovil in Peliyagoda and have been blessed and anointed by the priest”. Nishan and Sriyan wouldn’t want to frustrate Dr. Senthilveil at the last minute. So they drove Dr. Senthilveil to the Kovil of his choice. Story has that he smelled like a dead ish when they took him in their car. 28-day spiritual retreat has turned him to a dead ish. They dropped Dr. Senthilveil at the Kovil and waited an hour for his return. Still no sign of him. Now it is just 37 minutes before the meeting. That was the exact time Nishan heard his phone ring. It was Dinal Wijemanne. As he answered the phone, Nishan could see Dr. Senthilveil approaching the car. Dinal: Nishan, where are you? Everyone is seated and ready for the acquisition. Nishan: I’m with Dr. Senthilveil. I’m getting him to sign the papers. Dinal: Okay. Do it quick. We only have few minutes left. Dinal was on the line with Nishan as Dr. Senthilveil got in the car. Sriyan handed over the agreement and the pen to Dr. Senthilveil. He spent 19 minutes reading the agreement. As he was about to sign the papers, one line in the agreement caught his eye; a line he would disagree with and would want to change. Dr. Senthilveil said: 10  f f f “I cannot sign the papers unless this line is changed”. Nishan and Sriyan knew that if he was to change the agreement, it would take a few more days and the acquisition would never happen today. We only have a few minutes left to get his signature. That is when Nishan remembered something he learned in law school, like someone whispered in his ear. “Something amended on an agreement with someones bear hand is valid and a strong indication of one’s intentions than what is typed on the agreement”. Nishan explained this to Dr. Senthilveil and asked him to amend the agreement with the pen. After amending the agreement, Dr. Senthilveil inally signed the agreement. Dinal: Nishan, we only have 4 minutes left. Did you get his signature? Nishan: Yes! We got him. Dinal: Should we press the sell button? Nishan: Yes! Press it. Transaction was a success. On 22nd January 2010, Lankem and one of Lankem’s subsidiaries, Kotagala Plantation PLC bought 56.56% of C.W. Mackie and the remaining 24% was bought by Dr. Senthilveil The payment was due in 3 days after the transaction. Months of hard work and long nights have inally paid the price. Nishan made $200,000 in fees. Now it is time for celebration. Their venue of celebration was Hilton Colombo, where they met for the irst time. Everyone drank till they can’t drink anymore. As for the inal round of drinks, Johnny Anderson ordered a bottle of Dom Pérignon. Story has that he opened the Champagne and sprayed it on the live music crew like a Formula 1 driver celebrating victory after a long race. The bill was Rs 800,000 that day. 11  f f f f The drinking spree did not end there. Johnny Anderson and Nishan Sumanadeera met Anushman Rajendra and the team at Cinnamon Lakeside, Colombo. Ordered a few more bottles of Champagne and drank till it is the last day on Earth. The payment was due in just 3 days. 2 days before the payment day, Johnny Anderson had mysteriously disappeared. He didn’t answer his phone or reply to any text messages. On the payment due day, Nishan expected a call from Johnny Anderson, con irming the payment from Anushman. Finally, Nishan heard his phone ring. But surprisingly, it wasn’t Johnny Anderson. It was Anushman Rajendra. He picked up the phone and this is what Anushman said: “Sorry, I do not have the funds to make the payment. I’m trying to pledge the bought shares in the bank and send the payment”. Nishan was furious with that comment. Just like an albatross around Nishan’s neck, Anushman had led him down again. At this point, it is out of Nishan’s control. It is up to the bank to decide. Few minutes later after Anushman’s call, Nishan heard his phone ring again. This time it was the bank manager of the bank Anushman was trying to pledge his shares. Bank manager was concerned about what Anushman was trying to do. Anushman had already sent him the paperwork to pledge his shares in the bank. Bank manager wanted to speak to Nishan before the bank decides on the decision. Nishan cleverly explained the bank manager, why it is in their best interest to go ahead with Anushman’s pledge. The bank decided to accept the pledge merely on Nishan’s word that day. Anushman inally made the payment and the sale was inally closed. Now it is time for Nishan to collect his fees. Payment was to be collected from Tom Ellawela, the Chairman of C.W. Mackie. Nishan went to his of ice and waited for him to write the check. When he handed over the check to Nishan, this is what he said: “Nishan, I have been working in this company for 15 years. I have never made this amount of money in a day. You have made 15 years of my salary in just one day. I must also do what you are doing. Good luck to you. You are a brilliant man”. 12  f f f f That was the day Nishan’s epiphany of not having to work for an investment bank again was imbued. Few minutes after receiving the check, Nishan heard his phone ring once again. It was Johnny Anderson. When Nishan picked up the phone, Johnny Anderson said: “I’m sorry Nishan. I couldn’t answer the phone or reply to texts because I was on my way to Sweden. I didn’t want to miss the light. I have successfully received the payment. Thank you for doing business with me”. Before writing this story, we met Nishan and Jithendra. We decided to include this snippet of what Nishan said, that we think is really a golden nugget for anyone reading this book and dreaming of becoming an investment banker. “If you want to do business in Sri Lanka, you must spend the majority of your time building relationships. Sri Lankans value who you are, your status, and who you are related to, than the best deal you are bringing to the table in terms of numbers”. The sale of C.W. Mackie is just a piece of news article you read on a Sunday’s newspaper. This is the unheard story of how Lankem Group bought C.W. Mackie. At the time of writing this story, 10 years after the sale of C.W. Mackie, Nishan Sumanadeera is appointed as the inancial and legal consultant for ACAP. Nishan was someone who was pressured to resign from ACAP, then to be hired by the same people that pressured his resignation. At one point, Nishan was left without a job, walking on the street with frustration, wondering “what have I done wrong?, then to be appointed as the inancial and legal consultant as a redeemer, at a time where ACAP was about to ile for bankruptcy. With Nishan Sumanadeera as the inancial and legal consultant, Asia Capital is once again on track to become the leading Investment Bank in Sri Lanka. 13  f f f f f “It's good to have a special price to pay for the future and it will pay you in return, in the exact way you would wish to be paid”. Auliq Ice - Founder and CEO of Icetratt Capital Management. Nishan Sumanadeera is a Sri Lankan Entrepreneur, businessman, director and co-founder of Frontier Capital Partners, a boutique investment consultancy rm specialized in Investment Banking services and innovative investments in Sri Lanka. He together with his companies have invested into various industry sectors through private equity participation with foreign and local investors Mr Sumanadeera during his 25 year career has served as the chairman, board director, country manager and legal & nancial consultant for many companies in Sri Lanka and overseas. www.sumanadeera.com 14  fi . fi