AS THE boss of a company best known for its credit checks, Don Robert is at home talking about hazardous spending decisions.
“Arguably if every investment we made was brilliant we’d have to ask ourselves the question: are we taking the right amount of risk,” he says of his expansion drive since taking the reins at Experian in 2006.
Sitting in Experian’s head office in Victoria last week, Robert seems unbowed by a six per cent slump in the firm’s shares, prompted by his decision to spend $850m (£531m) on Passport Health Communications, a US software firm that helps hospitals get paid.
His team started researching US healthcare about a decade ago, when he had recently joined the firm from First American. While they have had Passport in their sights ever since, “we thought for our first investment in this space we shouldn’t do something that chunky”, he says.
Instead, the group picked up two smaller firms before making its tilt at Passport, which has left some analysts scratching their heads over the value of a company that turned over $121m last year and earned just $30m.
However, Robert insists that the firm will make a success of the purchase.
“Strategic buyers have the ability to create a lot of value from the right deals and we have done that with the first two [health deals]. That doesn’t mean that we just got lucky; there was a lot of technology and information inside of Experian that made those acquired companies much better competitively and financially. We see things I think an analyst wouldn’t see and we’ve got a few tricks up our sleeve. There’s no question in my mind that this is the right deal at the price we paid and is going to end up being a great deal.”
He brings up the purchase of credit report provider Consumerinfo.com in 2002, back when he had recently joined Experian. The acquired firm was loss-making “and we got a lot of criticism for it”. Today, Robert said, that part of the business makes around $260m in annual profits. “So, you know, it’s our business and it’s not the analysts’ business and we shake it off and move off.”
Investors are broadly supportive of the firm’s acquisition strategy, Robert says, and he holds hundreds of meetings with them a year.
“One of the most valuable things I’ve ever heard from Warren Buffett is, ‘You get the shareholder you deserve’. And boy, is that true.
“The worst thing that a management team can do is be neglectful of investing for growth and sometimes what we do may not be immediately popular with every constituency... I think that if we were investing outside of the company’s core business then that’s another debate but when we’re right in the sweet spot of what we do and what people expect us to do, and if we’re investing prudently, sometimes aggressively to drive very, very significant growth in the future, those are things that we have to do.”
The effect of the deal-making drive on Experian’s results has gone a long way towards winning around investors. In the last financial year, Experian generated $4.7bn in sales and $1.25bn in earnings. This compares to $1.7bn revenues and $388m earnings in 2006, when parent company GUS split into Experian and Home Retail Group.
The company now makes less thant a third of its revenues from financial services, generating the rest from an array of marketing, corporate consultancy, public sector contracts and fraud prevention services as far afield as Colombia and Taiwan.
Experian is nominated for business of the year at Wednesday’s City A.M. Awards in part due to its innovative expansion strategy.
But not every deal the firm has made was a triumph – a symptom of Robert’s goal to take “the right amount of risk”. Price comparison site Pricegrabber, for example, was sold off in a protracted sale last year for around a quarter of the $485m that Experian paid in 2005.
Experian’s high street clients had expressed an interest in a platform that could reach their customers online. “And then the space changed very, very rapidly with things like Google shopping coming online and so the competitive landscape changed in a way that we hadn’t been able to predict.” Robert installed new management, but soon realised it was “time to raise the white flag and we had to move on”.
“Overall, the investments we have made since we became an independent company in 2006 in aggregate are yielding well into the post-tax, double digit return range, which at minimum is a hurdle that we expect,” he says.
Robert says the firm will take time to bed in its recent purchases and he has “nothing of that size and scale” in his sights when it comes to acquisitions in the near future.
Experian’s other banner deal this year has been the $324m purchase of 41st Parameter, a firm that prevents fraud by identifying the devices a customer is using to shop online.
“Fraud is probably the largest single global opportunity we have in front of us right now… The opportunity is that the bad guys keep getting worse in finding new ways to rip off perfectly good companies. This trend is literally an explosion of fraud all over the world, driven by e-commerce and the increasing use of mobile phones for all sorts of transactions.”
Eight of the largest US banks have already signed up to the technology, and Robert says the first UK bank has recently come on board.
Robert is keen to praise his team, including finance boss Brian Cassin, who joined from Experian’s corporate adviser Greenhill last year: “He’s a superstar, period, full stop. He’s great, at every level.” He hopes to announce the firm’s new chairman within a few months, ahead of Sir John Peace’s departure at next summer’s AGM.
Robert himself, however, shows no signs of leaving the firm he has worked for since 2001; when it comes to lingering ambitions, the most he will admit is “to be a better skier”.
“My focus and my love and my passion is Experian – it’s a great company,” he concludes.
CV DON ROBERT
Born: 1959 in Oregon, USA
Education: Benson Polytechnic, Portland, then Oregon State University
1980s: Starts his career at US Bancorp before moving to financial and real estate group First American
2001: Joins Experian, which was at the time part of the GUS conglomerate, as head of its North American business
2006: Promoted to Experian chief executive, oversees the group’s split from GUS and London float
2009: Adds a non-executive post at Compass Group
Skiing - he hopes to take to the slopes in the US over Christmas.
Yoga - in 2011 he revealed that he was going to classes three times a week.