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02 May 2004
Scotland on Sunday
Answering the call

IN THE bowels of a former Inland Revenue office, now a busy call centre at the foot of Glasgow’s Bath Street, Pearse Flynn naturally wants to talk about income and expenditure. He has shifted a lot of money in his time, buying and selling companies, investing in anything likely to make a return, though he admits to a weakness for football.

Flynn put £1m into his beloved Celtic Football Club - hardly a gilt-edged investment, but perhaps a lower risk than Livingston, which he and his Lionheart consortium are hoping to acquire.

Last weekend the stories linking him to the club, which had been circulating for a few days, were confirmed and, in an interview with Scotland on Sunday last week he admitted his involvement had raised some eyebrows. "My friends asked me if I had totally lost my marbles. I told them emphatically: No!" he said.

Others may choose to disagree, but Flynn is adamant he can turn the loss-making West Lothian club into a viable "small entertainment business". He teamed up with Bill Nixon, a senior figure at Aberdeen Murray Johnstone, to look at the deals they might do and they opted for Livingston (Flynn says others are in the pipeline).

Flynn will not seek a position on the board, nor will he get involved in day-to-day management. He is looking at it as an investment that will make a return, and he will restrict his involvement to being the largest shareholder. There will be a lot of people who will wish him luck.

What can be assured is a stream of back page and City headlines as the financial pressures are either cleared or compounded. In the true style of a football investor, Flynn will be hailed as either the Midas man or biggest mug since... well, since the last man invested his fortune in pursuing a dream. Ask Dominic Keane, the outgoing chairman.

Flynn has a reputation as a flamboyant Irishman with a love for the big deal and the lifestyle that goes with having famous friends such as Formula One team owner Eddie Jordan. He exudes the sort of ‘can-do’ attitude beloved of fellow tycoons and made his debut as a speaker at the Entrepreneurial Exchange conference at Gleneagles last week.

But despite playing a key role in the $7.1bn deal to sell Canadian telecoms group Newbridge Networks to French giant Alcatel, which made his fortune, he is yet fully to make his mark in his adopted country, and until now he has been known well only to those in his circle of colleagues and business associates. The emergence of Flynn as Livingston FC’s would-be saviour has thrown the spotlight on the Cork-born entrepreneur, who is also involved in rescuing a loss-making call centre company in Glasgow, less than a year since departing from the debacle surrounding the phone services company Damovo.

Until now Flynn has maintained his silence on what prompted his departure from Damovo, created from a 525m buyout. It was hailed as excellent news by politicians when he decided to base the former Ericsson subsidiary in Scotland. It attracted £1.5m from Scottish Enterprise and took up residence at 123 St Vincent Street - one of the most expensive properties to rent in the city, providing the sort of profile Flynn regarded as suited to a company going places.

Damovo looked like providing Scotland with a global company that it yearned for. Flynn had big plans to raise the stakes and went back to his fellow Irishman Jordan to strike up a sponsorship deal. He was seen with the racing team captain and the usual F1 girls on the race circuit. The Flynn bandwagon was gathering pace and he promised to bring a bit of glamour to the sometimes dour world of Scottish business.

Next came his investment in Celtic football club, along with Jordan, the club’s billionaire majority shareholder Dermot Desmond, and Celtic manager Martin O’Neill. Flynn took a 4.4% stake at a time when the club was embarking on its most successful period for a generation.

But within two years of taking over at Damovo, his plan to double turnover and create a world-beater was in tatters. Flynn left last August, refusing to say why.

Scotland on Sunday has learned that income expected from a number of contracts at the time that Apax Partners acquired the company from Swedish firm Ericsson never materialised, prompting a cash flow crisis.

Flynn and former Arthur Andersen executive Graeme Bissett were head-hunted to run the company shortly after the buyout, but found there was not enough cash in the business to support the acquisitions strategy they had been promised.

Flynn admitted last week that he had been "really angry" when he was told he could not expand "because there was too much debt in the business".

Scotland on Sunday understands that a number of companies had their contracts cancelled as they were costing Damovo more to run than the firm was earning. Flynn declined to comment, but admitted: "I wasted two years of my life."

The implications of the profits shortfall were that Apax may have overpaid for the company, and at an operational level was unable to release funds for further deals. Flynn told the Entrepreneurial Exchange conference last week: "The profits we thought were in the business quite frankly were not there. After 14 months I realised it was never going to be anything because we overpaid for it at the time of the deal. That was a very bitter pill but one I learned from."

Scotland on Sunday tracked down David Fitzgerald, the former Apax director who did the deal, but he also declined to comment, referring all calls to Apax, which again refused to comment.

One source close to the Damovo crisis said last week that it might have been unsurprising that Apax paid top dollar, given the mood of the time.

"We are talking about mid-2000. It was deal fever and with private equity firms falling over each other it would be understandable for the one in the lead wanting to stay head of the queue," he said. Another said: "There were problems. They were not life-threatening, but once the rocks were turned over there were issues."

The Jordan sponsorship was pulled and Damovo, effectively under Apax control, has been scaled down and probably put on the market.

Flynn has moved on and in January he acquired CallPoint Europe, a business delivering third party call centre operations for a number of blue chip clients, with a view to reversing the current trend in outsourcing operations.

It is another challenge and once again Flynn has big plans. He inherited a company which had lost £1.5m last year on a turnover of £2m. "That takes a lot of doing," he said. He has teamed up with Jim Park, the former associate of Herald and Daily Record executive Liam Kane.

Flynn, with typical bombast, says he is "fighting two major evils": the first being that the call centre industry "is the worst run business in Britain" that treats its people badly; the second is that the government is "insane" to allow jobs to migrate to India.

He says the industry’s poor image as a sweatshop sector has been brought upon itself; by its working practices that cause a high turnover of staff. "The key asset in a call centre is its people, and how do we treat them? Like shit," Flynn said.

He says he can raise CallPoint’s revenue to £8m and the payroll from 450 to 1,000 in a year’s time. "There is no doubt about that," he said, emphasising that these will be full-time, permanent jobs, not the temporary posts which are a characteristic of the sector.

Flynn’s confidence comes from a view that "there is brand erosion" associated with those firms outsourcing call centres, and that these firms will eventually bring the work back.

He is also on the acquisitions trail, and the language is no less compromising. "We will buy call centres. I have seen so many under-performing businesses. I feel I could build a powerhouse," he said.

He criticises the government for its "stupidity" in allowing the off-shoring of jobs to India, claiming it is unpatriotic. "It is insane. One of the biggest issues facing us is whether we can get support from the government," he said.

He will also be hoping for more support if he is successful in his bid for Livingston. A loyal but small following cannot be relied on to provide the platform for growth.

Turnover at the club is only £4m, while total debts are £13.5m.

The plan by former Bank of Scotland managing director Gavin Masterton to exploit the commercial property at Livingston’s Almondvale stadium, as well as at Dunfermline, was another failure.

Of growing interest in the financial world is how Bank of Scotland came to back Masterton’s project, which fell to earth not long after launch.

Scarborough Property Group, which is buying his controlling stake in Stadia Investment Group, will take over the offices at Almondvale and settle the £10m of debt owed by Livingston Stadium Management to the bank.

The other debts are also likely to be cleared, enabling Flynn and his entourage to walk in and start afresh. Then it’s just a question of how he raises money to keep the club going and the creditors at bay - and realise another of his ambitions.


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