Kevin O'Leary, mean dragon, is nursing his first glass of Antinori Tignanello 2006 within the comforting confines of a striving Yorkville restaurant.
The "Ting," as O'Leary calls the Tuscan vino, is 56 bucks a glass. "Nectar from the nipple of Aphrodite," he says approvingly, which sounds like a bit of shtick, a practised line, to complement the cultivated persona of Kevin O'Leary, whose raison d'etre appears to be the non-stop development of the Kevin O'Leary brand.
"It's not a shtick," O'Leary says of his public self, identifiable by his caustic, sometimes belligerent, determinedly high-profile fire-breathing performance on CBC TV's hit reality show Dragons' Den. Also by his appearance each weeknight on the Lang & O'Leary Exchange, through which he gets to bat about his unbending economic/political views with Amanda Lang.
"The CBC was a platform for journalists," O'Leary says. "Now it's a platform for a right-wing Attila the Hun guy." He's referring to himself. "There's only one side with me. You get the right side. You get the correct version of the facts."
What you see is what you get.
O'Leary is explaining himself, sliding under the microscope in advance of a special Dragons' Den episode March 17 which ever so gently explores the back story of each of the five dragons who sit in judgment of always eager, sometimes anxious and occasionally weepy entrepreneurs driven to dig into the dragons' pockets in order to further their entrepreneurial dreams.
Recall Stacey Kelley and her six-foot-high pet tethering device, which allows cats to securely roam and, bonus, escape up the pole to a small platform when a nasty neighbourhood dog approaches. "Why bother with a pole?" was O'Leary's curt query. "Put the cat outside. If it's not around in the evening, get a new one." (The device, by the way, can be viewed on Kelly's website, www.ihatekevinoleary.com.)
Kevin O'Leary tough guy. "I'm not a tough guy," is his response to the obvious characterization. "I'm just delivering the truth and only the truth and if you can't deal with it, too bad. Next. You're not an entrepreneur. You're a loser."
O'Leary is a winner, which is how he gets to be a dragon, though how much of a winner he is in financial terms is a mystery. "I think it adds to the mystique," he says of his refusal to quantify his net worth.
Certainly the O'Leary aura is burnished on next week's Dragons' Den episode in which he revisits the site of an Ottawa ice cream parlour where, as a young man, he was ordered to get down on his knees and scrape gum off the shop floor as part of his ice cream scooping job.
O'Leary refused and was abruptly fired. "I have never, ever in my life worked for someone again," he tells the camera before tearing up and dabbing his eyes softly with a tissue. "I can't believe I'm so emotional. S–t."
That I-will-always-be-my-own-man epiphany is book-ended by Softkey International Inc., a software company O'Leary co-founded in the basement of a midtown Toronto house with $10,000 in seed capital from his mother. The short story is that Softkey was transformed into the Learning Co. Inc. (LCI), making its mark as a seller of such educational software as Reader Rabbit.
LCI secured a listing on the New York Stock Exchange – an exchange that requires real assets prior to listing, O'Leary feels compelled to note. The listing provided the leverage to go on an acquisition binge, gobbling up the likes of Broderbund Software, which brought with it the monster gaming title, Where in the World is Carmen Sandiego? ("Ate 'em alive," is O'Leary's snappy description of the Broderbund takeover.)
What made Kevin O'Leary rich was the moment he calls the "massive liquidity event," that is the sale of LCI to toymaker Mattel Inc. for $4.2 billion (U.S.). O'Leary wasn't the company's largest shareholder, not by a long shot.
According to 1998 securities filings, Thomas H. Lee Partners, a Boston-based private equity firm, held nine million shares. The Tribune Co. was next up with five million. Bain Capital had 3.4 million. O'Leary, the company's president, had just over a million shares. O'Leary says he had more than that.
Within months of the deal, announced in December 1998, Mattel issued warnings of unexpected losses at LCI. In late October, 1999, the toymaker announced that the Learning Company division incurred an after-tax loss of about $105 million in the third quarter as opposed to what had been a projected profit of $50 million.
As much as O'Leary proclaimed that he would never work for anyone again after the gum-on-the-floor debacle, he was, at the time of the disastrous Mattel numbers, an employee of that company. As part of the merger, O'Leary signed a three-year employment agreement that included a base salary of $650,000, 1.7 million stock options to be converted to Mattel shares and a reporting line to Jill Barad, the first woman to ascend to the CEO's chair at Barbie Inc. O'Leary calls Barad "the best marketer I ever met."
O'Leary didn't make the three years. In November, a month after the earnings release, he was fired. "She just whacked me," O'Leary says of Barad, who followed O'Leary out the door three months later.
O'Leary, who blames the serial bad corporate news on a host of factors, including the pending tech meltdown of spring, 2000, received the maximum severance payment of $5.25 million. He says he didn't bother returning to his office on firing day. He packed no boxes. He headed to the Caribbean island of St. Bart's instead. To think.
Here's a thought: "Being an employee is a bad outcome," opines O'Leary. "You want to avoid that. Being an employee is never a good outcome. That's just an opinion."
It's an opinion that jibes nicely with Dragons' Den, a show whose very essence is to promote the entrepreneurial spirit. The hopeful ones pitch their business concepts to the five dragons and seek a fixed sum of money in exchange, commonly, for a piece of the business.
In the dragon lineup, the CBC casts O'Leary as the "ruthless" one with a knack for one-liners. "You can't cry your way to success," is catchy. "I'm the merchant of truth," is heard a lot. "You can't regulate a soul into a business," is O'Leary's rejoinder to the corporate social responsibility movement. "I'm not trying to make friends, I'm just trying to make money," speaks for itself.
In this way O'Leary plays against Brett Wilson, the dragon who made his fortune financing oil and gas deals and Arlene Dickinson, a marketing guru. Both Wilson and Dickinson evince a soft spot for, or at least an interest in, the people behind the pitches. For O'Leary it's about the money.
On that point, there appear to be few deals that O'Leary actually likes. "What can I say? Kevin is tight with his wallet," says Tracie Tighe, the show's executive producer. "But he's come through every year and has closed a deal or two. This year he did the Dig It ladies."
The Dig It ladies are Wendy Johannson and Claudia Harvey, based in Etobicoke and creators of a company that sells, among other items, gardening gloves specially designed with pillow-topped nail protectors to preserve expensive manicures. In November, Dragons' Den aired the episode in which the ladies sought $50,000 for a 10-per-cent stake in their company. The episode was actually shot in May, during one of the marathon filming sessions the dragons are subjected to.
O'Leary liked the gloves and was willing to invest, with one whomping condition; he wanted a 3 per cent royalty payment on sales of the gardening gloves in perpetuity. The ladies said yes, causing Wilson to rebuke O'Leary thusly: "You are a crook," a sentiment echoed by Dickinson with the less pejorative, "You suck."
The Dig It ladies were not born yesterday. "I knew that what you shake on on the show doesn't really mean anything," says Johannson. "I had done my research about what the closing rate is and what the due diligence process is after the fact." (Tighe says the six handshake deals in season one resulted in a single deal closing. Of the approximately 40 deals struck this year, 10 have survived the due diligence process.)
Johannson says she fully expected O'Leary to drop the royalty demand once he became informed of the full range of Dig It product, including Eye Dig It safety sunglasses. In the end, O'Leary did let the royalty go in exchange for 10 per cent of the whole company rather than the one gardening glove. The size of the deal? Fifty grand.
Meanwhile, O'Leary featured Dig It, ladies in tow, on the Lang & O'Leary Exchange the night after the Dragons' Den airing. At heart, O'Leary is a marketer, in this instance downgrading what is supposed to be a high-octane business show to the shilling of gardening wear.
"What we can tell you is when we say to people Kevin O'Leary is our business partner, their ears perk up and they're much more likely to come on board as one of our retailers or business partners," Johannson says.
The Dig It gardening gloves are now in approximately 120 retailers across the country, a fourfold increase from just before the televised exposure. Johannson says a prominent retail chain is close to an agreement to carry the product nationally.
Who's the smartie? As it happens, that 50 grand was extended in the form of a line of credit. On that line of credit Johannson and Harvey have drawn not a single penny. Question for Johannson: "So it's conceivable that O'Leary won't have to pay anything for that 10 per cent?" Johannson: "Correct."
Of the myriad deals he has not touched O'Leary has no regrets. "Once I pass on them, they're dead to me," he says.
You sense that it really doesn't matter. What does matter is the televised exposure of Kevin O'Leary. He's unquestionably pleased and somewhat surprised by the brand-building power of TV. It'll come in handy. Two years ago, O'Leary launched the O'Leary Funds, which today has 10 investment funds, run out of Toronto.
O'Leary is chairman – he does not manage the funds himself. Assets under administration: $860 million. The company's branding line: "Get paid while you wait." Investment philosophy: never buy a security that doesn't have yield. (O'Leary's mother had one hard rule about money: never touch the principal.) End game: take it public. Target market: you.
"I have a very simple objective in life," says O'Leary, relaxing now into his second glass of Tignanello. "I want to go to bed richer than when I woke up. It's that simple"
Posts
