Creative Solutions

• Initiated the establishment of a subsidiary in Nigeria as the first Avon executive entering the country and was the first Avon executive to enter the country and to establish relationships with “Oxbridge educated” potential investors from the leading Hausa, Yoruba, and Ibo tribes.
• Since Avon could legally only own 40%, the board of directors wouldn’t approve this investment because the board required a minimum of 51% ownership by Avon for approval.
• I developed an “ersatz” number: Avon’s 40% of the projected profits divided by 100% of the anticipated revenues. This produced better “operating margins” than any other subsidiary worldwide.

Result: The board approved the investment in Nigeria, which generated significant income.

• Developed a relationship with Campbell’s Soup. A leading investment bank was representing Underwood Deviled Ham in the sale of that company. However, even though that bank had an existing relationship with Campbell’s, it wouldn’t send the sales memo to Campbell’s since Campbell’s only wanted to purchase the domestic business and not the entire company.
• Developed a relationship with Ralston Purina. Ralston Purina was only interested in purchasing the international operations of Underwood Deviled Ham. Therefore, this same investment bank where Ralston was an existing client wouldn’t send Ralston the sales memorandum.
• I arranged for Campbell’s and Ralston to place a joint bid for Underwood so that each company received a copy of the memorandum and could make a combined offer.
• Although their joint bid wasn’t successful, I pursued my relationship with both companies and with Campbell’s Mrs. Paul’s subsidiary, which produced frozen fish entrees for consumers.
• I considered how to reduce Mrs. Paul’s cost of goods. It occurred to me that Mrs. Paul’s should source its fish from the South China sea, since labor costs for Chinese companies to catch, clean, and debone the fish would be significantly less than for Mrs. Paul’s existing operations. At that time no American companies had any relationships with companies in the People’s Republic of China.
• My colleague, Richard Holbrooke, had been Kissinger’s assistant on Kissinger’s initial trip to China, so Lehman obtained China International Trust Investment Corporation (CITIC) as a client, which provided an entrée. After five trips, we signed the first joint venture between the PRC and a Fortune 500 having created partnerships with the Chinese government and the leading fisheries.

Result: Mrs. Paul’s significantly lowered its costs by importing frozen filleted fish from the PRC.

• I led the initial public offering for Gibson Greeting Cards, the first IPO for a management buyout.
• The leading institutional investors wouldn’t participate because:
  + Former Secretary of the Treasury, Bill Simon, was a major selling shareholder and they concluded that if Simon, who was considered to be astute, were selling, they shouldn’t be investing, and,
• + Gibson was the #3 greeting cards company in terms of market share. They only wanted to invest in a company that was one of the two market leaders.
• I explained that:
  + Simon was in a different business than were Fidelity, Putnam, etc. Namely, Simon was an aggressive investor in risky companies where he earned returns of 40%+, whereas these institutions targeted returns in the mid-teens. Therefore, when the rate of return for an investment declined to the mid-teens, Simon sold and redeployed his capital into new, higher return, and riskier investments.
  + Consumers didn’t purchase greeting cards by brand name but by the attractiveness of the design and the availability.
  + + + Gibson’s CEO de facto sold increased EPS to retailers because Gibson had the best sales per square foot of any greeting card company. Gibson “rack jobbed” the merchandise and, consequently, had fewer “out of stocks” and fresher inventories.
  + + + Gibson’s CEO called on the CEOs of retailers which would initially give Gibson a trial group of stores, and then turn over the rest of their stores to Gibson when they saw the results. Consequently, Gibson experienced rapid growth.

Result: Lehman increased both the pricing and the size of the offering which was very successful.

This group originated, financed, and executed investments for corporate clients, financial sponsors, and significant family offices.

• A CEO wanted me to sell his multi-billion business because, in his opinion, “I was good at getting people to overpay for businesses.”
• This CEO was in his forties, loved operating his company, and planned to add multiple new plants that would significantly boost profits.
• His unstated goal was to achieve financial security for his family, since “all of his eggs were in one basket” because his entire net worth was in the stock of his company.
• Instead of selling the company, I suggested that we take the company private, so the CEO could achieve liquidity for 80% of his stock, thereby attaining financial independence and leave the remaining 20% as his investment in the recapitalized company.
• However, the markets deemed the proposed MBO as too risky, and we couldn’t sell the debt.
• Therefore, I proposed that we make the most junior debt convertible into equity so that one of the five potential likely foreign acquirers (who couldn’t enter the US market for EPA reasons) would purchase this junior debt so they could pay the least for the initial 20% of the equity when they converted this debt into equity—and thereby pay the most for the remaining 80% of the equity when the company was eventually sold, outbidding their competitors.
• That foreign company’s ownership of the junior debt would “morally guarantee” the Issuer’s overall debt, since the potential acquisition was too important strategically to the purchaser of the junior debt for it to let the issuer go bankrupt. This implied guarantee reduced the perceived risk sufficiently so that the traditional buyers then purchased the remaining debt that was senior.

Result:

• The MBO got done. The CEO continued to run the company and made far more from the 20% he left invested than from the 80% he originally sold.
• Drexel’s initial fee on the proposed sale would have been about $15 million as compared to $100+ million in profits that Drexel earned on the overall transaction.

• CCaaS (contact center software as a service in the cloud, before people even know about “the cloud”)
• T@W’s lease was expiring, so we had to move. We found a new location which required a letter of credit for $750,000. T@W was pre-revenue and had only $200,000 in the bank.
• I obtained a $3 million equity investment at a $100 million pre-money valuation from a hedge fund with no documents on a handshake. I subsequently raised an additional $9 million on the same terms from other investors.
• I recruited the former President of American Express as President of T@W to provide direction and credibility. I also recruited the VP – Marketing, the VP – Sales and the VP – Finance.
• I initiated a relationship with the “grassroots” level of AT&T’s engineering team at a trade show. I leveraged this by arranging a lunch for the co-founder/CEO of T@W with a member of AT&T’s board of directors, who was sufficiently impressed with T@W’s software that he then called AT&T’s CEO to recommend T@W. Because of this call, AT&T evaluated T@W in its senior labs within two weeks and became a client.

Result:

• Oracle acquired T@W in 2006 for $100+ million.
• I’ve known T@W’s core management team for 20+ years. Five9 acquired this management team’s second firm, SoCoCare, in 2013, which expanded Five9’s “voice only” product to a multi-channel offering, enabling an IPO in 2014 at a valuation of about $320 million. Five9’s current market capitalization is $4.2 billion for an annual return of about 38%. The same management team then launched their third version, Thrio, in 2019, where I’m an investor, an advisor and raised the A round financing. Thrio was named as the best company in its space by Frost and Sullivan twice: 2020 and 2022.

• One of the companies Comstock advises represents athletes and entertainer celebrity clients in China by developing customized brands and intellectual property which provides the celebrity with perpetual ownership.
• The Financial Times recently announced that China was investing US $3.8 billion in a campaign to attract international businesses back to Hong Kong.
• I initiated a dialogue with the Chinese commercial attaché in Washington DC to explore how this company’s clients could assist in publicizing Hong Kong’s business development effort because of these individuals’ universal recognition.