#26 Vanity and Learning - Building Decima

(Part IV - Merging Decima and PAI)

For all the ups and downs of the first two years of operations, by the end of 1981, I was pretty sure that Decima was going to survive.

After the defeat of the federal PCs in 1980, I had been able to play a major role in two successful provincial campaigns in Ontario (See series #19 and #20) and Nova Scotia and was gearing up for a third in Saskatchewan (See series #25).

Rick Anderson and I continued to sell subscriptions and do presentations of the findings from the Decima Quarterly Report to both corporations and governments across the country (See series #17).

The business community was growing increasingly hostile towards the Trudeau government and were looking for ways to manage the public opinion landscape, both to avoid regulation and grow acceptance for their goals. In tandem, the work we were doing on the Canadian Petroleum Producers’ advocacy and reputation campaign was seen as a state-of-the-art model to follow.

My profile was rising, I was in high demand as a public speaker and television commentator and was the subject of numerous feature newspaper articles (almost all flattering – but almost all more focused on the length of my hair, the number of earrings I had or the colour of my shoes, than my skills as a researcher).

And Decima was now most emphatically a full-service research company with an advanced computer facility and software, phone banks which were manned by hundreds of (low-paid and over worked) interviewers and a full staff of research analysts, programmers and consultants.

But while the firm no longer seemed in danger of drowning, because of all the investments that had been made in these resources and infrastructure, we were still only treading water.

Foster Advertising was now owed over $1 million and, under the terms of our partnership agreement was first in line to be repaid from any profits the firm might generate. Dick Wirthlin was revelling in his status as the #1 pollster in America, fully emersed in the workings of the White House and the Republican Party and had little time (or interest) in our success or struggles north of the border. And for all the attention and adulation I was receiving, I was increasingly coming to the conclusion that I would be receiving my first dividend cheque from Decima at around the same time I would be eligible for Canada Pension Plan benefits.

But the other real upside that Rick Anderson brought to Decima was that he also started to forge a closer relationship between me and Mike Robinson and David MacNaughton at Public Affairs International (PAI).

Because they were now my full partners in the Quarterly Report – and it was beginning to generate some profits – we started to meet regularly to discuss business prospects and sales strategies.

By this time, I had known Mike for over a decade and considered him not only a good friend but also something of a mentor when it came to navigating the business shoals of the (relatively new) discipline of public affairs and corporate-government relations.

I had met MacNaughton during the 1979 election campaign but before we struck the deal on the Quarterly Report had little more than a “Hi, how are you?” relationship with him. Like Mike, he was only a couple of years older than me and had cut his teeth in politics on Parliament Hill as an Executive Assistant to a Liberal Cabinet Minister. His father was an executive at Dofasco in Hamilton and while he had attended private high school at Ridley College, he was anything but the silver-spoon type. He was easy going, affable, obviously smart and – over time it became very apparent to me – extremely shrewd and far more focused on the business side of our affairs than either Mike or me.

As part of his shrewdness, he had struck up a relationship with a guy named Rob Bryden, who was providing both funds and advice to advance MacNaughton’s considerable ambitions.

Bryden was a former professor at the University of Saskatchewan who had been recruited to take a senior position in the Department of Finance but quickly pivoted to business. He had bought a small company called System House and had grown it into one of the first and largest tech companies in North America. Using the proceeds of that start-up, he had gone on to buy paper plants and numerous other unrelated businesses and controlled them all (including PAI) through his personal holding company, Kinburn Capital.

Because of our regular get-togethers – and my growing trust and friendship with both of them – Robinson and MacNaughton knew exactly what was going on with Decima and my frustrations with my partners (and as I suspected, their growing frustration with a small company that they increasingly saw as a money pit or an irritation). Out of these conversations came the idea of merging Decima with PAI.

Working with Rick, I had developed first-hand knowledge of the powerful synergies and one-two punch that came by combining public opinion insights with an intimate knowledge of the workings of governments. In as much as public opinion represented both opportunities and guardrails for government decision-making, understanding one helped you anticipate the direction of the other and visa versa. That the marriage of these two disciplines might also solve my financial problems made the idea of putting our two companies together extremely attractive.

The only snag in the arrangement was that Bryden liked to be in control of everything. Rather than merging Decima and PAI into a single, stand-alone company, with Bryden as our silent financial partner and backer, he was insisting that we roll up the two companies into his holding company. Instead of owning shares in the new company we would be operating, this arrangement meant that we would have (the smallest of minority) shares in Kinburn. None of us thought that this was ideal, but David was convinced that Bryden was going to be the Elon Musk of the 1980s and even if we didn’t have direct control over our business, we were going to ride his coat tails and become super rich.

But within months of merging, the 1981-2 recession was starting to reek havoc.

Like most high growth companies – then and now – System House was seriously over leveraged. As rates began to skyrocket, the interest costs on the company’s debt started to exceed System House’s cash flow. It was only a matter of time before the bailiff was going to be knocking on Bryden’s door.

The three of us knew this, and our vision of financial grandeur was now being eclipsed by the realization that – if System House went down – we would go down with it and risk losing everything we had built to that point.

Bryden had never meddled in the internal workings of our newly combined business and, all things considered, had been a good and reliable partner. Consequently, we felt a little guilty about appearing as fair-weather friends by severing our relationship and bailing on him, but knew we had no alternative.

Ever the steely professional, Rod didn’t blink when we told him this was our desire. He said business was business and he understood we had to do what we were proposing. But then he added – also, because business is business – we would have to pay him $1.5 million if we wanted to buy back Decima-PAI.

$1.5 million! I had just turned 30. Mike and David were barely any older and if our three bank accounts, combined added up to $10,000, I would have been surprised.

But MacNaughton was not only shrewd, he was also an unwavering, never-say-never optimist.

As part of his optimism, he had also never had any hesitation in overextending himself financially because he always assumed that in the end, everything would work out. Applying that philosophy to his own personal life, he had purchased a massive house which carried with it an oversized mortgage.

So, while Mike and I were wringing our hands and snivelling in our sleeves about our imminent demise, MacNaughton went straight to his bank, informed them very bluntly that he was facing bankruptcy, and they were going to have to take possession of his house. Needless-to-say, this was not an ideal situation for the bank either. David then offered that there was one way that might save them both from this mutually disagreeable conclusion – and that was for the bank to lend him another $1.5 million. If agreed, he and his partners would then put up their respective homes as collateral, buy back Decima-PAI from Kinburn and repay the bank, over time, with the proceeds of the newly, independent company.

To our surprise and relief, the bank caved, and we gave Bryden his money.

MacNaughton, Robinson and Gregg were now the masters of our own destinies ….. and seven figures in debt!

Learning – Find partners with different skills than yours