Putting the M&A in romance

London. Summer, 1998. A meeting room in HSBC’s Vintners’ Place offices. A tall, blonde Australian woman. An Englishman with a slight paunch. Their eyes meet. Marriage, three children and a business together follow.

Cassandra Kelly, 39, and Nigel Lake, 45, are the wife and husband team of Pottinger, an M&A, strategic advisory firm that shies away from the “mongrel” attitude characteristic, Kelly says, of the investment banking world. “All the people here are here for reasons more than money,” says Lake.

Pottinger’s offices in AMP’s skyscraper near Sydney’s Circular Quay has no receptionist, no modern art or old masters paintings on the wall. Visitors press a buzzer and are ushered into a room with a long table and chairs arranged around it from which one can sometimes hear Lake’s voice penetrating through the walls as he talks on the telephone.

But don’t let the modest furnishings fool you. Kelly travelled with Prime Minister Julia Gillard on her most recent trip to China. Pottinger, named after the street in The Rocks where Lake and Kelly once lived, is on the Federal, Victorian and NSW finance and infrastructure advisory panels. It has developed its own hydrological modeling on Queensland so as to assess the water needs for interested buyers in the cotton farm, Cubbie Station.

Pottinger advised Suncorp on the sale of its credit card business to Citigroup and its purchase of $7.9 billion purchase of general insurer Promina. The firm also advised on the sale of LJ Hooker, the formation of Queensland Urban Utilities, a $4.3 billion, five-way merger of council water businesses. Pottinger was ING’s adviser on the sale of its fund management business to UBS. It advised RACQ when it bought out a joint venture partner.

But Kelly, who says she couldn’t care less about league table rankings, is almost as proud of the business she has advised companies not to do. One has been told by Pottinger on seven different occasions not to pursue an acquisition. The former McKinsey consultant says 92 per cent of the firm’s business comes from repeat customers. Pottinger does not disclose its annual sales, profits or the salaries it pays its 15 staff.

What sets Pottinger apart from rivals perched near their offices, is that the firm marries strategy with M&A, says Lake. “One is about how an organisation grows and another is how to make it happen. We both felt that happened in isolation,” the former Baring Brothers banker says.

After quitting their jobs in the UK in 2002, Kelly and Lake travelled and thought about what they wanted to do next. When they came to Australia to start a new life they decided to set up a firm in August 2003 that would be “focused on the long-term outcome; building a reputation and building relationships before short-term profits,” according to Lake.

He says Wall Street has not changed its stripes. “We work for one company, not the competition,” says Lake. “We’re not trading against them. We’re not managing conflicts of interest. We simply don’t have them.”

Pottinger, Lake boldly says, also has better talent than its rivals. Among its staff is one with a PhD in economics, an astro-physicist, a winner of the Eureka Prize for Science and computer programmers that can create more valuable quantitative models than typical discount cash flow analysis. 

Kelly is more touchy-feely. She has instituted a “morning huddle” in which staff talk about whatever interests them and are also encouraged to share ideas that go on a whiteboard full of post-it notes called “the oven”. Kelly is big on notes. She encourages people to write thank you cards to colleagues. Kelly writes a monthly newsletter to chief executive's on Pottinger’s perspective of what opportunities there are for businesses.

Most of all Kelly wants staff with a “moral compass” and to give to charity. “I want them to have the mindset to part with money,” she says. “I want staff with a true understanding for what feels correct, ethical, decent, humane, authentic behavior. People who have the courage to say ‘no’ to clients.”