Episode Transcript
[00:00:02] Speaker A: Welcome to the Dealmaker Uncut podcast where we speak to some of the UK's most exciting entrepreneurs and hear their investment journeys. We'll discuss the challenges, successes and lessons they've learned along the way with expert deals commentary from Jonathan Boyers, head of Alvarez and Marcel Corporate Finance, and me, Chris McGuire, executive editor at Business Cloud.
Welcome everyone to the latest episode of the Dealmaker Uncut podcast with Alvarez and Marcel. As always, I'm joined by the multiple award winning deal maker himself, Jonathan Boyers. Jonathan's been involved in deals totalling more than 5 billion pounds during his long and illustrious career and he's a managing director and head of Alvarez and Marcel's corporate finance practice in the uk. Big welcome to you, Jonathan.
[00:00:46] Speaker B: Thanks, Chris. Really looking forward to this session.
[00:00:49] Speaker A: Yeah, this plays to all the things you love in life. This is the podcast that gets you inside the deal. In the first part of today's show, we're going to be interviewing our very, very special guest after then after that we'll have a short break and in part two, Jonathan will be leaning on his 35 plus years working in corporate finance to answer your questions from the dear listener. So we're in London today, but who Jonathan are we speaking to today?
[00:01:12] Speaker B: Well, Chris, you know how much I like the music industry and so I'm really excited about this. And look at the studio we're in as well.
It's an LED wall studio. So today we're going to be talking to Fernando Kufa who is the CEO of a global technology company, Disguise, and which is an industry leading platform that covers the visual experiences sector.
Under Fernando's leadership, Disguise has won two Emmy awards and a Queen's Award for enterprise and innovation. So welcome Fernando.
[00:01:49] Speaker C: Thank you, Jonathan. Great to be here.
[00:01:51] Speaker A: Okay, I'm going to start off with a couple of warm up questions. So first things first, Fernando. I'm going to leave the deal stuff to the experts, Jonathan, but I think you speak seven different languages. Very intrigued where your accent's from.
[00:02:03] Speaker C: I grew up in Argentina and my family is German and Italian and that's where the accent comes from.
[00:02:08] Speaker A: That's good news because the Dealmaker Uncut podcast has got listeners all over the world. So hopefully, hopefully we'll be playing to those areas now. I always think there's they talk about serendipity and those life changing moments, those sliding doors moments. You went to a Glastonbury in 2014 and you watched Massive Attack. Jonathan here will tell you all his Glastonbury stories if you've got a Couple of hours. But you had this moment where you watch this set and it changed the direction of your life. Can you tell us what you saw and what happened next?
[00:02:35] Speaker C: Yes, absolutely. So, like you said, I was at Glaston Marine watching Massive Attack, completely taken away by the content and the technology and the LED world and obviously the music.
And then I came back to London and saw LinkedIn that the company behind that content and that show, which at the time was called D3 Technologies, and United Visual Artists was looking for a general manager. So I definitely applied for the role and then the rest is history.
[00:03:02] Speaker B: So I think a lot of the listeners will know that I love Glastonbury. Every year it is my favorite place. So I was really excited to hear. Do you. That's great.
So I suppose it's fair to say that going to Glastonbury changed your life.
I think you applied for the job, but you didn't get it initially. Do you want to just tell the story of how you started working and. And the beginning of your career with Disguise?
[00:03:30] Speaker C: Yeah, absolutely. So I applied for the job. I had loads of interviews with the three founders and it got to the last interview, which ended up being a whole day. I think I came at 2pm they used to tell so many stories about the business and the opportunities and get carried away. So we ended up going for dinner and for drinks. So Monday morning I was like, this is absolutely my job. And then at 6pm, they call me and shyly go, hey, sorry about these.
You are the better candidate, but we're going with someone else because they're from the industry. And like we just said, I'm half Argentinian, half German, so I just call it how it is. And I went, I think you're making a mistake. You need a disruptor. You need someone who comes from outside the industry. You are amazing and you're constantly being told you're amazing, but that's limiting your growth.
So bringing people from the industry is just going to replicate what you've done. You need an outsider. And then three, four days later, the guys called me again and said, hey, sorry, we've made a mistake. Do you want to come for lunch and discuss the role? And I said, absolutely. And that's how I didn't get the job, but ended up getting the job three days later.
[00:04:36] Speaker B: So I think when you started the business was D3 Technologies, wasn't it? You led the rebrand into to make it Disguise, and then the.
You then looked at a private equity investment to, I think, to refinance out some of the original shareholders and you ended up with livingbridge on board. Could you just tell the story about that deal and how it came about?
[00:04:59] Speaker C: Yeah, absolutely. So as I said, I joined in 2015.
My first objective was to productize the offering and structure the go to market. I then realized there were three founders with three different interests. There was an art studio which was the origin of the technology business, and on top of it was the three technologies.
[00:05:18] Speaker B: So.
[00:05:18] Speaker C: So understood that some of the founders wanted money and wanted to get on with their lives. So ended up doing a management buyout, got bdo, which were our accountants and advisors at the time to help us with the process. So we did a thorough process, got about 20 interested parties, and then ended up selecting LivingBridge as our first private equity partner at the end of 2017.
[00:05:40] Speaker B: And my understanding is that the business went pretty well. You grew the business quite rapidly following the Living Bridge investment.
Staff numbers grew. You had to build an exec team. Presumably the founders had left the business at that point.
Do you want to just talk about the growth phase and what happened then?
[00:05:59] Speaker C: Yeah, absolutely. So end of 2017, leaving bridge, comes on board the business. Like you said, two of the founders leave the business and we start our professionalization journey, institutionalization. So in 2018, I built my first ever exec team for the business.
We opened in Shanghai, we opened in la, so accelerated the international growth, got our first banking credit line. All of the grown up business that you get with private equity. So got to the end of 2019 with record growth for the business, record number of employees, ready to roar, so to speak. And then the pandemic came and, well, the story changed.
[00:06:40] Speaker A: I'm going to talk to you about the pandemic in a minute as well, but I want to ask you one question I should have asked at the start for the benefit of our listeners. We've got a lot of viewers as well, but for the benefit of our listeners, they can't see where we are. You know, we're in this amazing LED wall. Just explain what you do, because when you go to concerts and you see those great big walls, you know, and it brings the concert to life. This is effectively where we are, isn't it?
[00:07:00] Speaker C: Yes. We are sitting in an LED studio on an LED stage and this is four or three walls and floors of led. And what this guy does is we create the software where all of the shows get visualized. So you visualize your show, you create the show, you timeline it, and then you play it in your stadium, be it Twickenham or the O2 arena or whatever it is. And this technology started being used for live music 20 years ago with U2 and the Patch mode. And then we've evolved the technology to apply to location based entertainment, broadcast, virtual production, and now sports. So as the technology keeps advancing, it's all converging into one big 4K cinematic, immersive, interactive experience, which is what you see when you go to a concert or when you go to a theater. Everything now has led and has content that needs to be timeline controlled. And so the creation of the show, of the experience is, is what you can do in our software.
[00:08:01] Speaker B: So give us a few examples of big events you've done this year.
[00:08:05] Speaker C: Yeah, this year. Well, let's start with obviously Glastonbury, Coachella and Middle east, which are the three largest festivals in the world. Glastonbury here, Coachella in the US and Middle east in Saudi Arabia, Oasis, Coldplay. I was yesterday at Radiohead here at the O2.
So most of the big British and also international bands are running on these guys. Currently Bad Bunny is doing the residency and the Latin Grammys all out using our technology, obviously the Sphere, but also Clippers, the Intuit Dome Stadium in la, espn, the broadcast studios are using our technology.
[00:08:44] Speaker A: So you could get, you could get a job application from Jonathan Boyers.
[00:08:49] Speaker B: That Oasis gig was probably the best one I've ever been to and I've been to a lot.
[00:08:53] Speaker C: Yes.
[00:08:54] Speaker A: Anyway, they're going to go back to 2020. You mentioned Covid. You know, the Carlyle Group offered to buy Disguise and then the pandemic comes along, which as we know, decimated a lot of industries. But the live entertainment industry completely like, you know, plummeted.
That must have been incredibly tough. Just explain what effect it had on the business and also what it had, you know, from investor appetite from the Carlyle Group.
[00:09:17] Speaker C: Yeah, it was really tough for everyone. I think for us, we moved one week to the other to lose 94% of our clients and receipts because the business was mostly focused on life events. We had a few location based entertainment clients and that was it. So we had to fully focus on, okay, we've got a crisis, we need to deal with the crisis. So unfortunately, the first effect is losing 40% of your cost base and of your, of your staff base and shrinking the business to the new size. And then the second thing which we did, which obviously saved and transformed the business, was launch a new technology that we had in development called XR or Extended Reality, which is the basis of the LED stage that we're sat in today. So that technology, what we did is connect with game engines like Unreal Engine to enable everyone at the pandemic, when no one wanted, was able to create stories or tell stories or show any content. With our technology, you were able to do CEO interviews, your product launches, concerts, broadcasts, live events, and also movies and visual effects. So very quickly we move from having no business to launching this new technology. So that's March. In June, we launch XR to the market.
By December, we had 200 of these stages in 45 countries, creating content every day and every week and using Unreal Engine as well as a 3D content engine linking it to games. So quite a transformation and really great to look back on it, but quite tough to do at the time.
[00:10:58] Speaker B: A lot of businesses had a torrid time during the pandemic, but you were really facing into a difficult environment, weren't you?
So that sounds like it must have been a really difficult time handling that with a private equity investor.
You took on a new investor during that phase in the form of Epic Games and they took a minority stake in the business. Would you just talk a little bit about that? Presumably that was linked to the new product development.
[00:11:27] Speaker C: Yeah, absolutely. I think in June we did the integration for XR and for virtual production with Unreal Engine. Epic Games got interested in the opportunity of us providing the last mile in the connectivity between the virtual world and the software and the life events and the real world that we were delivering. So the discussion with Epic Games was like, we could now connect our technology to yours. You can power the stages. And so Unreal Games is now available for music, for location based entertainment, and obviously for films and in camera, VFX and broadcast, which was that were already present.
[00:12:04] Speaker B: But it's a good example of bringing a strategic investor alongside a private equity investor. So that's not that common, but presumably was perfectly timed given the situation where you must have needed some more money.
[00:12:18] Speaker C: Yeah, absolutely. And I think we're innovative in everything, not just in the technology. And so I think also grateful that we had a PE partner that was open to that, to bringing a third party with technology and with market access, which was Epic Games.
[00:12:35] Speaker B: Okay, so you got through that and then there was another refinancing opportunity and Carlyle Group acquired a majority stake in the business.
So could you. I'm really interested in how that went and how you took the business on from that stage.
[00:12:55] Speaker C: Carlyle was interested to buy the business just before the pandemic, like a week before the pandemic. We were discussing how to do the deal with Carlyle and other private equity partners, but Carlisle was the frontrunner. Obviously, we had to put the deal on hold, go and save the business, pivot the business. And then by March 20, January 21, I went back to Carlisle and said, hey, guys, the good news is we've got a business which is half the size because we had to downsize it. We now have access to four more markets, and we've got a minority shareholder in Epic Games.
Carlisle said, great.
We like the proposition. We like that you've pivoted the business and entered new markets like virtual production.
And so on the back of that, Carlyle decided to invest. And part of the investment thesis was, we've now inverted the pyramid of power with our clients. We have access to Sphere, to Verizon, to Clipper. So the IP owners and those people need more than just software and hardware, which is we provide. They need a turnkey solution. So we need to do some M and A, and we need to continue building the ecosystem around our platform of technology. So, Carl, I like the idea. And then, am I going too fast or can I keep going? In 2022, we did two acquisitions in the US, one in Atlanta and one in New York. Those were services companies with some ip, some of them with some cloud products, and others just simply services companies.
And then we bought two small cloud companies, one in the US and one in Canada, to then have a full turnkey solution where you've got the software, the hardware, the services and the cloud, to manage the content and store the content.
[00:14:36] Speaker B: So when you did the acquisitions, the funding came from Carlyle for those acquisitions, did it?
[00:14:44] Speaker C: Yeah, the funding came from the bank. So as part of having Carlisle as a backer, means that we get access to better financing terms. So I think our bankers are Santander. So that's the credit line that we got with Santander to help us with the M and A.
[00:14:58] Speaker B: Okay, and so you've grown Disguise's turnover to 70 million, I think, roughly at the moment. And I think you're partnering now with Pinewood Studios.
So I'm really interested to hear about what that's involved and what comes next for disguise.
[00:15:19] Speaker C: Yeah, I think as part of our innovation around virtual production, one of the key developments that we did, and I think the UK is ahead on these compared to all the other markets. There is an organization called CoStar, which is about the convergence of screen technology, fun, engagement, broadcast, and it's the new way. I was talking earlier on about how everything is converging into being an immersive experience that is interactive, that is 3D. So CoStar, it's a government program that links academia to business to universities, and that's starting to build virtual production and XR stages like the ones that we're sitting in, enabling universities to all work on the same technology and sort of build the technology and the content for the future. So we're already doing that with Royal Holloway. And the second stage is the Pinewood Studios and there is a program to open eight across the uk. They're all going to be connected. And that program is now being studied by Spain, by Singapore, by other countries that are looking at ways to incentivize the interaction between academia and business towards content and new technologies. Maybe too long of an answer, but.
[00:16:34] Speaker B: It sounds like you've got a visionary business in the industry that is. Is bringing the UK across into a global platform.
[00:16:44] Speaker C: Yes, absolutely. We like to think so. We have about.
We have users in 115 countries, we have actual physical installations in 90 countries. And the company and the software and the product is very international. So almost any country you go to, you will be seeing a show or attending an event that is using our technology to convey the story and show the picture, so to speak.
[00:17:09] Speaker A: Fernando, I'm going to ask a couple of questions. You spoke about getting investors on board. How easy or difficult have you found it to get investors?
[00:17:16] Speaker C: Oh, it's such a long time now that I'm going to tell you. It's all been easy, but I think it's always a process and it is a helpful process if you have the right partners alongside, guiding you and helping you, because you have to run the business and you have to keep bringing the results at the same time as going and telling the story and meeting a lot of people in finding the right partner. So it's quite a process.
It's an enjoyable process, I think at the end, if you get the right partners and if you're ready to move with the next stage of your journey.
[00:17:48] Speaker A: The Dealmaker Uncut Podcast. This will come as a real shock to you. Fernando is yet to win the big podcasting award, but I think it's a matter of time now that we've got you as a guest. But you've won two Emmys and you also got the Queen's Award for Enterprise as well, I think. Just tell us about that. You know, what difference does that make to your business?
[00:18:05] Speaker C: Yeah, I think it was a great recognition to receive both of them.
Both a surprise and both great for our teams. Those both came on the back of the pivot that we did in 2020 that I told you about with virtual production. So we first got the Emmy for virtual production, which was incredible because as a recognition that the technological pivot that we had done was now recognized by the Emmys for our overall contribution to virtual production. So it wasn't for a specific movie or TV program, but for the overall contribution to the industry.
So that was like an incredible award to receive. And then the second Emmy we received was for content in the broadcast sector that was together with MSNBC in the US where we did the 2022 election and created a whole White House in 3D with all the graphs coming in AR so slightly different. This was for a specific use, not the more valid, but the more exciting was the first one we got, which was for virtual production. And then shortly after, also in 2022, we got a Queen's Award for Enterprise innovation. So that wasn't for technology per se, but for how we had innovated on the business. And so it was a great validation of all the hard work that we and the management and the whole company team had done. So it does open doors and it does help at the bottom of your emails and invitations to say that we've got those awards and that recognition.
[00:19:32] Speaker A: Is that your experience, Jonathan, when you're dealing with companies that are buying and selling, if they've won some prestigious award, does that put an extra naught on the end number or does that get you through the door?
[00:19:42] Speaker B: I think if you're preparing a business for sale, one of the things you've got to think about is what the trail of information looks like. And if winning awards is inevitably a strong story, new products, the deals like the Pinewood Studio effectively you create.
The information memorandum is being written in the years in the run up to a deal, whenever there's a new bit of news flow or news story, that's part of effectively the sales message. So awards, yeah, definitely help, but it's all part of the journey.
[00:20:20] Speaker A: We're talking about the importance as well before affair about UK companies need to shout a bit louder as well. Obviously you mentioned yourself, your background, Argentina, German, etc. Just explain what you think the UK business sector needs to do.
[00:20:35] Speaker C: I think be more American, be more proud and loud. And I think especially in what we do here in 3D in content and creativity.
The UK leads so well ahead all the other markets, you know, you only have to go to America and L A New York, half of them is British people. But obviously the national culture is understatement and toning down what you do. But I think for business we have to be a bit more outspoken, we have to be a bit more proud and push the national champions. I think I was telling Jonathan when we first met, if you think of this fear and the first show at the Sphere, which was U2, we're like, okay, the company enabling all that content, the content is produced by Esteb Lin, British artists by Treatment Studios, an artist studio based in London, around the corner from here. The technology that runs all of that and makes the visuals possible is disguised is a British company. So when you look and you can do the same with Adele, with Beyonce, with any sort of artist, it's very British and it's very British made. And I don't think that we shout enough about it. And I always give the example. I think I was interviewed by the FD in America and I'm like, the FD is 400 meters from us here. And so every time I have to be asked to give a speech and they're like, what would you advise? I'm like, let's be prouder, let's speak louder and let's celebrate our champions in the world that we live now. I think that's necessary.
[00:22:07] Speaker B: So what's next for disguise, Fernando?
[00:22:11] Speaker C: Continue growing.
That's always next. And I think what we're seeing, we're seeing a lot of growth coming from the Middle east, from Southeast Asia and of course from the US which is our largest market. And the growth comes from location based entertainment and sports. So stadiums are converting. It's not anymore. You're not going to watch the football or the rugby or whatever. You're going to see a sports event and also enjoy entertainment around it and enjoy an experience. So it's music, it's corporate events and it's all sorts of sporting events in a stadium, for example.
The other thing we're seeing lots of immersivity in terms of museums, retail, corporate spaces. So anything to do with physical spaces encompass any building is becoming a canvas. So you. Any building now has LED or projection mapping. And that's music to our ears because that's what we, what we do in power.
[00:23:11] Speaker A: Listen. Amazing story, amazing venue, amazing success story, Fernando. So thanks very much for inviting us down here to London as well. Time for a quick break. When we come back, Jonathan and I will be discussing the interview that we've just done with Fernando and answering your listener questions.
[00:23:26] Speaker B: Thanks Fernando. Great. Thank you very much. Really interesting.
[00:23:37] Speaker A: Welcome back to the second part of the Dealmaker Uncut Podcast. We've just interviewed Fernando Cafour, the CEO of disguise. Fascinating man. What did you think, Jonathan?
[00:23:46] Speaker B: Well, what an amazing business. I mean, you know how much I like the music industry. So I'm fascinated to hear about this business.
I thought he's a force of nature, isn't he? Very direct.
He's driven this business really effectively. Obviously a lot of it is on the back of technological change and it seems like they are cutting edge in what they're developing. But even the story of how they got through Covid, when it must have been pretty hairy for a while, I just thought the whole story was a really great example. But just particularly the technology development, just great.
[00:24:30] Speaker A: I think success isn't a linear line. It doesn't go like that. You have peaks and troughs. And you mentioned Covid. The way they switched to different verticals during that period I thought was fascinating. I love the word serendipity and those sliding door moments. I mentioned it in the first part of the show as well. If he'd not watched Massive Attack at Glassbury in 2014, we probably wouldn't be sitting here now. So yeah, absolutely fascinating.
The final section of the show is called Ask Jonathan. It's when listeners can ask Jonathan any questions they want. I might squeeze a couple of questions in there as well. Jonathan, I saw a post you did recently and you spoke about two speed M& A market.
What do you mean by that? Forward and reverse.
[00:25:09] Speaker B: Yeah, so what I was trying to say then, people ask me regularly about the M and A market and people sometimes think that, well, the M and A market is quite tough at the moment and has been for the last year or two. And what I was effectively saying is that it depends what the business is. If you've got a fast growing, well performing business in a sector that is attractive to particularly to the private equity community. So software, tech enabled services, technical services, then if you run a process, you will get a really well attended process and you'll sell the business for a good value.
And so for businesses in the fast lane, if you like, the market is as strong as it ever has been. It's a great market.
If you're a less attractive business, maybe an old school business, not tech enabled, then the market has been a lot tougher and buyers are a lot more wary of problems in those types of businesses. So you have to lean in a lot harder to get deals done. And so those deals, it's just a tougher market. So it feels like it is a two stage market.
It's still very strong for good businesses in good sectors. But for older businesses, businesses in older style sectors, it's then it is quite tough. It has been tough.
[00:26:37] Speaker A: You, Alvarez and Marcel, that is, have closed seven deals in the last few weeks as well. Does that mean the good times are back?
[00:26:44] Speaker B: So in the corporate finance business, I think we have had a successful run and the pipeline is really strong.
We've been completing three deals last week.
So the run up to the budget helps. But I think that as we said, if you lean into deals, you can still get great deals done and good outcomes.
We remain optimistic about the market.
We think that there's lots of economic factors which have been difficult, but if you've got a good business, you'll still sell it and we remain bullish about the next 12 months.
[00:27:27] Speaker A: Final question, bit left field. You hosted a high performance coaching session recently with Professor Damian Hughes, best known as one of the hosts of the high performance podcast. How important is continuous development for business leaders?
[00:27:40] Speaker B: Yeah, that event was great, actually. Damien was fantastic. We had a number of CEOs. We had 15 or 16 CEOs of good, good entrepreneurial businesses and they really enjoyed the session. I enjoyed it and I know that they enjoyed it. Just the opportunity to share peer stories and share issues and do some learning as well about how to from each other, about how to deal with problems. I think that type of forum is great. And I think nobody, nobody gets to the point where they can't learn anything, do they? So I think continuous development for people is really important. But I also think that networking in groups like that is a really valuable thing to do. And like I said, Damien was fantastic.
[00:28:35] Speaker A: I've met him. He's a wonderful man. That's all for this episode of the Dealmaker Uncut podcast, powered by Alvarez and Marcel. Massive. Thank you to you, Jonathan.
[00:28:43] Speaker B: Thanks, Chris.
[00:28:43] Speaker A: Yeah, and don't forget to subscribe to the podcast, tell your friends and family and follow us on social media.
