Episode 18: Massive Attack helped me build a multi-million pound business

0:02Welcome 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 & 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 & Marcel. As always, I'm joined by the multiple award-winning dealmaker himself, Jonathan Boyers. Jonathan's been involved in deals totalling more than£5 billion during his long and illustrious career.

0:40And he's a managing director and head of Alvarez & Marcel's corporate finance practice in the UK. Big welcome to you, Jonathan. Thanks, Chris. Really looking forward to this session. Yeah, this plays to all the things you love in life. This is a 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 that, we'll have a short break. and in part two, Jonathan will be leaning on his 35 plus years of 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?

1:12Well, 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, 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. Thank you, Jonathan. Great to be here. Okay, I'm going to start off with a couple of warm-up questions. So, first things first, Fernando, I'm going to lead the deal stuff to the experts, Jonathan, but I think you speak seven different languages.

2:01I'm very intrigued where your accent's from. I grew up in Argentina and my family is German and Italian and that's where the accent comes from. That's good news because the Dealmaker Uncut podcast has got listeners all over the world, so 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 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 watched this set and it changed the direction of your life.

2:33Can you tell us what you saw and what happened next? Yes, absolutely. So, like you said, I was at Glastonbury watching Massive Attack, completely taken away by the content and the technology and the LED wall and obviously the music. and then I came back to London and saw on 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 So that, you know, I think a lot of the listeners will know that I love Glastonbury It is my favourite place so I was really excited to hear Do you?

3:12That'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 the beginning of your career with these guys 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 we 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 6 p.m.

3:52they called me and shyly go hey sorry about these you're the better candidate but we're going with someone else because they're from the industry and I 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 that 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.

4:27Do 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 then ended up getting the job three days later. So I think when you started, the business was D3 Technologies, wasn't it? And you led the rebranding to make it disguise. And then 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? Yeah, absolutely. So as I said, I joined in 2015. My first objective was to productize the offering and structure the go-to-market.

5:08I 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. So I understood that some of the founders wanted money and wanted to get on with their lives. So I 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. And my understanding is that the business went pretty well.

5:44You grew the business quite rapidly following the LivingBridge investment. Staff numbers grew. You had to build an exact 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 yeah absolutely so end of 2017 Livingbridge comes on board and 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 started It accelerated the international growth, got our first banking credit line, all of the grown-up business that you get with private equity.

6:29So it 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. 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 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.

7:23And 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 what you can do in our software so give us a few examples of big events you've done this year yeah this year well let's start with obviously Glastonbury, Coachella and Middle Beast which are the three largest festivals in the world.

8:13Glastonbury here, Coachella in the US and Middle Beast 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. You could get a job application from Jonathan Boyers. That Oasis gig was probably the best one I've ever been to, and I've been to a lot. Yes. Anyway. Now, can I go back to 2020?

8:56You mentioned COVID. 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 plummeted. That must have been incredibly tough. Just explain what effect it had on the business and also what it had from investor appetite from the Carlisle Group. 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 live events. We had a few location-based entertainment clients and that was it.

9:33So 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 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 launching 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 was able to create stories or tell stories or show any content.

10:18With our technology, you were able to do CEO interviews, use your product launches, concerts, broadcasts, live events, and also movies and visual effects. So very quickly we moved from having no business to launching this new technology. So that's March. In June we launched 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. A lot of businesses had a torrid time during the pandemic, but you were really facing into a difficult environment, weren't you?

11:06So 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. Yeah, absolutely. I think as 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 live events in the real world that we were delivering.

11:46So the discussion with Epic Games was like, we can 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 broadcasts, which were already present. 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. 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 a big game.

12:35OK, so you got through that and then there was another refinancing opportunity and a Carlisle 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. Yeah, Carlisle 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 Carlisle and other private equity partners, but Carlisle was the front runner. Obviously, we had to put the deal on hold, go and save the business, pivot the business. And then by January 21, I went back to Carlyle and said, hey, guys, the good news is we've got a business which is half the size because we had to downsize it.

13:23We now have access to four more markets and we've got a minority shareholder in Epic Games. Carlyle 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 &A and we need to continue building the ecosystem around our platform of technology.

14:06So Carl, I like the idea. Am I going too fast? 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. So when you did the acquisitions, the funding came from Carlyle for those acquisitions, did it? Yeah, the funding came from the bank.

14:45So as part of having Carlyle 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 that helped us with the M &A. 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. 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 this compared to all the other markets, there is an organization called CoStar, which is about the convergence of screen technology, fan engagement, broadcast.

15:39And it's the new way, or I was talking earlier on, about how everything is converging into being an immersive experience that is interactive, that is 3D. So CoStar is 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. 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.

16:19And 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... It sounds like you've got a visionary business in the industry that is bringing the UK across into a global platform. Yes, absolutely. We like to think so. 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.

17:09And Fernand, I'm going to ask a couple of questions. You've spoken about getting investors on board. How easy or difficult have you found it to get investors? 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 and 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.

17:48The 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 an out 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. What difference does that make to your business? Yeah, I think it was a great recognition to receive both of them. Both a surprise and both great for our teams. you know 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 there's 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 and 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 the not the more valid but the more exciting was the first one we got which was for for virtual production And then shortly after, also in 2022, we got a Queen's Award for enterprise innovation.

19:12So 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. 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 nought on the end number or does that get you through the door? 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.

19:49And 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 a news flow or a new story, that's part of effectively the sales message. So awards, yeah, definitely help. But it's all part of the journey. We're talking about the importance as well before off-air about UK companies need to shout a bit louder as well. Obviously, you mentioned yourself, your background, Argentina, German, et cetera. Just explain what you think the UK business sector needs to do.

20:34I 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 LA, 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 The Sphere and the first show at The Sphere, which was U2, we're like, OK, the company enabling all that content, the content is produced by S.

21:21Devlin, 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 as 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 FT in America and I'm like, the FT 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?

21:58I'm like, let's be proud of that. Let's speak louder and let's celebrate our champions in the world that we live now. I think that's necessary. So what's next for these guys, Fernando? 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.

22:40So it's music, it's corporate events and it's all sorts of sporting events in a stadium, for example. and the other thing we're seeing lots of immersivity in terms of museums retail corporate spaces so all anything to do with physical spaces and and canvas any building is becoming a canvas so 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 it's an 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.

23:26Thanks Fernando. Great, thank you very much. Really interesting.

23:36Welcome back to the second part of the Dealmaker Uncut podcast. We've just interviewed Fernando Kufour, the CEO of disguised fascinating man what did you think Jonathan well what an amazing business I mean you know how much I like the music industry so I'm fascinated to hear about about this business I thought he he's a force of nature isn't he very direct he's driven a lot you know 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 uh you know even the story of how they got through uh covid when it must have been pretty hairy for a while um i just thought the whole story was a really great example but just particularly the the technology development just great i think success isn't a linear line it doesn't go like that you have peaks and troughs and uh you mentioned covid you know the way they switched to different verticals that during that period I thought was fascinating.

24:41I love the word serendipity and those sliding door moments. I mentioned it in the first part of the show as well. And if he'd not watched Master of Attack at Glastonbury 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 yeah so what i was trying to say then um people ask me regularly about the m &a market and people sometimes think that well the m &a market is 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 in the fast lane if you like you know the market is as strong as it 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.

26:14So 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 brilliant. It's still very strong for good businesses in good sectors. But for older businesses, it's our businesses in older style sectors. Then it is quite tough. It has been tough. You, Alvarez and Marcel, have closed seven deals in the last few weeks as well. Does that mean the good times are back? 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.

26:57So, yeah, 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. Final question, a bit left field. You hosted a high-performance coaching session recently with Professor Damien Hughes, best known as one of the hosts of the High Performance podcast. How important is continuous development for business leaders?

27:40Yeah, that event was great, actually. Damien was fantastic. We had a number of CEOs, 15 or 16 CEOs of 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 from each other about how to deal with problems. I think that type of forum is great and I think 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.

28:32And like I said, Damien was fantastic. 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. Thanks, Chris. Yeah, and don't forget to subscribe to the podcast, tell your friends and family and follow us on social media.

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