Tuesday, May 24, 2022
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“Acquisitions are not something you can train for”

Secret Diary of Ajit Isaac — Part 3

“Acquisitions are not something you can train for”
“Acquisitions are not something you can train for” RA Chandroo

In 2004, JP Morgan had moved its fund offshore and wanted to monetise some of its India investments. We hired Rothschild as an investment banker to sell the company. At the same time Adecco, the world’s largest HR solutions company came calling, so we did the transaction. It was a terrific summit to reach, like if you had built an IT services company and IBM came to buy it. There’s a certain pride in selling to the leading player in that space.

As per the deal, I would have to stay on for three more years and join their executive committee in Zurich. During that time, I realised that if one had to grow in the competitive 1% net margin Indian market, one had to move beyond supplying people and manage processes.

I sold and moved on from Adecco in 2007. I was 40 and decided to take some time off. Like gentlemen of leisure, I tried to golf but didn’t quite take to it, or to sitting at home. I also realized that the house has place either for you or your wife, and only one of you can occupy it full time.


My new found prosperity had led me to buy a BMW but I could not tell my father for six months about it. I knew he would reprimand me. When I did tell him, he asked, “What is the need for this? Isn’t a smaller car good enough? Or the house that you bought, why do you need so many rooms, three rooms would have been fine!” His frugality, though, in no way interfered with him being large hearted. He always used to remind me, “Let nobody go away empty handed. If somebody comes and tells you my son is studying engineering and needs Rs.70,000 for fees, if you can’t give him Rs.70,000, give him Rs.7,000. If you can’t yourself, connect him with somebody who can.” His counsel still fuels our initiatives at Careworks. To him integrity, frugality and generosity were intertwined. He always used to tell me ‘areyum chadikyam padilla’, meaning ‘don’t cheat or don’t let anybody down. Keep your word, always’.

That’s been important for me in terms of how we have built our relationship with investors. The JP Morgan connection has been a constant throughout my entrepreneurial journey. In the beginning, it was Bharat Kewalramani and Anil Ahuja. They had four investments in Bangalore — Planet Asia, Microland, MTR and us. We were the smallest, so Gaurav Mathur from JPM joined us and helped us with board issues. I got to know him fairly well in the process.


By 2009, I was looking forward to develop a business services platform for human resources. Gaurav, too, had quit JP Morgan to start India Equity Partners and had invested in Ikya Human Capital Resources. So when I had the opportunity to work again with Gaurav, I was most happy to do it. Another JPM connection would soon come into play when India Equity Partners would seek to exit Ikya. Gaurav had committed $8 million in Ikya and then I bought about half the company and became the CEO.  The market was coming out of the global financial crisis, so it was not easy but we grew the HR business and quickly added facilities management. With facilities management, we got the first bit of a business services company and then added professional staffing company Magna.

Earlier, we had added another HR service company called CoAchieve. So we did three, four acquisitions over the span of say two to three years. And suddenly the platform was beginning to take shape and by 2012, we were heading to becoming a business-services platform, which meant that we would do non-core activities of organisations. We got Fairfax to buy out India Equity Partners, and they put in fresh capital and became the largest shareholder. Gaurav knew the then-MD of Fairbridge Capital, Harsha Raghavan, due to their stint at Indocean.

In 2012, I had decided we should go public in about three to four years. The preparatory work in run up to listing is daunting and that lead time I thought would be good enough. I was yet to hear Woody Allen’s quip, “If you want to make God laugh, tell him about your plans.” Ikya’s origin was in the Sanskrit word aikyam, meaning oneness. It got much identified with the human resource business and there was also a running trademark dispute with a marquee furniture retailer. We did not want to IPO with a name that was under dispute and also wanted our brand to encompass more than just the HR business. Quess Corp came up as an option as it seemed to suggest solidity and strength. Trivial as it may sound, what also went in its favour was the availability of the domain name.

We seemed on course and, in the third week of June, 2016, RBI Governor Raghuram Rajan resigned. The market took a knock and then some as Brexit followed soon after. Of our three investment bankers, one was sure that we should not go ahead, one sat on the fence and the third left the decision to us. But we decided to go ahead.

One of the best decisions that we have taken is to become a public listed company. We raised Rs.4 billion, at Rs.317/share. And the issue was oversubscribed 145x. I still remember watching the screen in my office on the last day wondering if it is for real. We listed at about Rs.500, and went on to hit a market cap of almost $2 billion.

Amma passed away due to cancer in April 2016, three months before the IPO. But when we decided on the IPO, I told her about it and she was happy. That was one of the last serious conversations I had with her before she went away. Her presence lingers in the lamp that rests just outside my office. When we inaugurated the Quess HQ in 2014, she had brought it from Madras to bless the office. She had something about lamps and lighting. For every important event, she would call in the morning, wish me and say a prayer. And then she would always call back to check what transpired.

When she was around, she would pamper me silly. I like non-veg as well as thoran (vegetables cooked with coconut). Every time I went to Madras, regardless of what time of the day it was, she would make seer fish.

One of the things in life is to be wanted, whether it is in a company, family or among friends. The biggest joy of life is to belong to something, and mothers and parents do that very well. My most memorable moments with my father were of visiting him in the last five years, when he still had a good memory. We would sit and talk, and that one hour of conversation cheered him up. He would always sit up, ready for longer chats.

During his final years, he never asked how well the company was doing, instead he would ask, “kadam indo?” (Do you have debt?). I had to be truthful every time we met. So at our company, debt became a four-letter word. Even now, we are fairly hesitant and gearing is 0.2x. If my father knew that we now employ 350,000 people, he might have simply frowned, “Oh, you have that much responsibility now? Then you can’t take any decisions foolishly, because it impacts so many people.”

Looking back over the years, our acquisition spree is a clear standout. I feel it evokes skepticism, curiosity and admiration in equal measure. Financial and commercial due diligence was initially a bit of a challenge but over time it became natural for us to assemble, either externally or internally, the type of skills that we needed to comb through anything.

Coming from an HR background, I realised that to be an operating manager, you need a good hold on finance. And that rigour has contributed a lot towards building Quess. Acquisitions are a tough business, they first happen at the people level and it’s not something you can train for. I run a couple of tests when I am evaluating an opportunity. One, is this somebody whom I would like to take home for dinner? And if I can’t, it’s fairly clear that this is not somebody I like to associate with. Your house is your private space. You don’t want that to be polluted in any way by people that you don’t relate to. Second: If you go to sleep, for say five years, will this business still be around? If it won’t be, then you should not be in that business.

I think there were one or two situations where we could have done better. In those situations we did spot personality conflicts, but were driven by deal dynamics. That’s one thing that I have now hardcoded in my head. If the deal is looking a lot better but if the person is not someone that fits the bill, I give it a pass.

In fact, we have copied a page or two from the Fairfax playbook. I don’t know if many are aware that Fairfax expands to fair friendly acquisitions. That’s something even we have imbibed. We also do friendly deals, have never used investment bankers, build for the long term, are cash-flow focused and like to do deals with people whom we have a certain comfort with.


Now that I have mentioned Fairfax, Prem Watsa can’t be far behind. Over the past five to six years, Prem has been an outstanding influence. In a manner of speaking, he has become a father figure in my life.

I met Prem for the first time with my CEO Subrata and Chandran Ratnaswami, who looks after his India business. Given that we were pitching for capital, he asked me, “What is it that you want to do?” I replied, “I want to create an institution that has deep impact socially, is run with the highest ethical standards and creates a lot of value for shareholders, and I want to do this in my lifetime. I want to do it with people that I am comfortable with, and with a speed and pace that all of us agree with.”

Besides my idealism, I was looking for long-term proprietary capital rather than a fund which would seek an exit in five years, I had a successful exit for JP Morgan during PeopleOne and now I was about to ensure one for India Equity Partners. Even though the valuation that Fairfax offered us was lower than other investors, I decided to go ahead because I liked Prem and, in retrospect, it is one of the best decisions I have taken. That day I knew I had not just a partner, but an inspirational partner. Somebody who — after you set the bar at five — without saying anything, but through his actions and behaviour, would inspire you to raise it to six. He effectively invested $45 million that is perhaps worth, today half a billion, at peak it was worth a billion or so.

I trust his judgment in many matters. On almost every acquisition, post Fairfax coming on board, I send him a note saying this is what we are working on, what do you think? Once we are in agreement, that is when I take it forward. “We just got started” is a favorite line of his. I remember telling him that we are now 300,000 people strong, and he just patted me on the back and said, “You just got started young man, you just got started”. He’s such a warm guy and he makes you feel wanted. At the cost of repetition — you always like to feel wanted.

I love the way he has decentralised operations and yet is available should the need arise. I remember the Fairfax AGM had just gotten over and there was one pending acquisition issue to be sorted out. He had been on the stage for three hours and had barely finished. Next thing, his secretary calls me asking if I want to come and talk to Prem about the issue. It was sorted out immediately. All these guys Prem, Deepak are decisive, people-oriented and encouraging. They are not stoppers, they are pushers.

I am quite fortunate to be still in touch with Parekh as he is on the board of Fairfax India, our largest shareholder. At IDFC, Parekh was a tough taskmaster. He’s very demanding because he himself is sharp, all the time. I remember once he had to present a paper on power sector reforms and comparative reforms in India and South America. Strangely, he called me to help him put some notes together. I realised that was his way of training people to work on something more. Also, to communicate that you are in his scheme of things, that he has an eye on you.

He trusts people implicitly. He assigns you something and would not call you back until the date is due. This also taught me later in my life that you can pick ordinary people for extraordinary jobs. Lots of people have grown with me since my first entrepreneurial venture. Some who joined me as management trainee are now heading businesses and operations.

There is Chief Operations Officer for India Guruprasad who has been with me from PeopleOne till now. Then there is Vijay Sivaram who heads our South East Asia operations. He’s been with me since 2002. Amrita Nathani who handles Search joined us as management trainee in 2002. My secretary Pratibha has been with me since 2006. Subrata, our CEO has been with us since 2008. Lohit, who heads our staffing business, has been with us for the past 10 years. Anand, who heads our facilities business, was with me in PeopleOne and then he joined us three or four years later.


When you recount life, I think a good life has a lot of pleasant memories and I have been fortunate to have many. My time in Bombay turned out to be life changing for a couple of reasons. It built my career and, through mutual friends, I met my future wife Sarah. We got married in 1995. I can’t fathom life or any of my success without Sarah. When I turned entrepreneur, our income dropped to a fifth, just enough to run home. I essentially went out on a limb but she stood by me.

As a first-generation entrepreneur, when you set out to build a company, your life gets pretty one-dimensional. Everything revolves around getting the service, process and customer right. Focus on family takes a backseat and it needs to be compensated by a partner who takes charge. That’s what she did for me. Sarah was a certified cost accountant but gave up her career to ensure that our daughter’s upbringing and education did not fall short in any way. She stepped up to the task even when both, her and my parents needed medical attention. Her parents were cancer patients; my mom was a cancer patient and dad a heart patient. They all needed hospitalisation at various points of time, and she was with them through it all, attending to their needs. The most outstanding thing about Sarah — despite all that pressure — she never complained or made any exorbitant demand. She provided me with a centered and well-cared for family. If you have some debris at the family level, it is difficult for you to get completely organized at work. It is from your nest that you take flight.

My daughter Tanya’s life has been coincidental with many changes in my career. Two years after she was born, I turned an entrepreneur. Quess went public the year she went to college in the US and now as she will graduate, Quess is morphing into a global business services company. Her “Hello Papa” over the phone line, 9,300 miles away, is worth all the journeys that I have undertaken in my life.

 This is Part 3 of a three-part series. Click here for Part 1 and Part 2.