with Martin Anderson CEO Triton Group
Please give our readers an introduction by way of the history between you, the Triton Group, and Perry Slingsby Systems.
I was appointed as the CEO of Perry Slingsby Systems (PSS) in the middle of 2003, which was a staff appointment within Technip. At that time, I was in a senior management position within a large MNC, and was probably at the stage in my career where I had done all I could within the group. I saw the opportunity that there was a small, niche, fairly specialized business I could do something with, so I volunteered to take the helm of PSS. This presented an opportunity, and I took it on. My remit was to first make sense of the business, stabilize it, and find a way forward, to come up with a plan for Technip. While PSS had a very strong brand for a very identifiable set of products, i.e. underwater vehicles, as a manufactured product, the business’ core skill was controls technology, which is effectively software that can serve as the centerpiece for many applications. Throughout 2004 and 2005, PSS developed in a position to have a business plan going forward including some acquisitions and add-ons to balance the business. There were still some basic weaknesses of the company to be addressed. Irrespective of how the technology came together, PSS was still effectively selling products into the strategic capex market, in other words, selling assets to service companies who would then deliver their service. This is quite a cyclical market, so the basic weakness was the reliance on one particular product in one particular commercial model, and that market it sold into was quite cyclical, with long gaps between capex, assets, and replacement. In trying to find a way forward in Technip, I developed what became the foundations for Triton.
The key things considered were how to smooth out cycles, and I doing so build a business that rides the waves that come along, but at the same time when that wave eases off, find another one to go on. Because PSS was selling equipment to service contractors, another basic flaw in the model was that effectively, on any individual piece of equipment, there was only one chance to earn money on it, and if this wasn’t done right, there was no going back. On the other hand, if service-based companies don’t perform well on a given job, there are always subsequent jobs from which to recover. PSS started to ask itself, “How could we continue to earn money on a given piece of equipment after it was delivered? The existing ongoing business was just spare parts, and PSS looked at developing training programs for customers, in addition to providing operating personnel, equipment service, and support; otherwise, clients take equipment for service to far-off places like Asia or Brazil. PSS started to develop solutions to help our customers make better use of their equipment, without going into the operator space to avoid competing with those customers. PSS had a basic idea of how to develop this further, and I took some of these ideas to Technip, which wasn’t able to invest further funds. It came to a point where the only way these ideas would progress would be to take PSS independent. By this time, the company was in good shape, the market had picked up again, and Technip could get good value for PSS. We found an investor who shared in the ideas going forward and was prepared to invest in that growth, and in February 2007, PSS found a private equity partner to share in the vision and plan. Subsequently, the company was able to move quite quickly, because the actions had all been theorized over the prior two years., and quite a number of the building blocks were just about there, as evidenced by looking at the history of Triton.
PSS was taken independent from Technip in February 2007, and formed Triton as the umbrella holding company. Triton signed a heads of agreement on the first acquisition of SubAtlantic the week after the deal closed, because the agreement was essentially already in place, and it was just a matter of waiting for independence. The second heads of agreement for UKPS, Triton’s personnel division, was signed in April of that year, because the discussion had already taken place in late 2006. In fact, having the initial pieces already lined up was one of the compelling factors for the private equity investor, in that there were already many steps in the hopper, and the pieces could be put together very quickly.
How do the complementarities within Triton Group’s individual companies contribute to the advancement of the whole?
SubAtlantic was the case of filling a straight product gap: PSS vehicles are powered by hydraulics, whereas SubAtlantic’s are powered by electrics, offering a lighter, quicker, and different application. SubAtlantic also produces a lot of components, thruster packages, and hydraulic components, which in terms of adding to the mix allowed to bridge a range of underwater vehicles, going from one size and application, from the bottom through to the top end. The subtle aspect that made the difference was that SubAtlantic also provides hydraulic components to many others, so in the end Triton gets two bites of the cherry, and a much wider available market for a given range of products.
The personnel market is very straightforward. People who buy vehicles need operating personnel, and have a balance between their own staff and freelance. Therefore, Triton acquired UKPS, a freelance offshore personnel business, which provides principally ROV personnel but also in survey and other specialist disciplines. Personnel is very much a demand business at the moment, but PSS had not been developing training programs just for that sake, but rather had been developing training programs internally on an ongoing business. In the current climate, it’s difficult for our customers to make time for people in training. They all love to do it, but they just don’t have the time. Therefore, one way of liberating a return on investment in training was to put the training into our own people. Triton has a personnel division, alongside a division that does training programs, which is effectively building its own database. The business return for Triton is in creating more people who can then offer into the market. It’s also important to realize that it doesn’t matter if a customer is operating PSS, SubAtlantic, or anybody else’s vehicles; the ROV business needs a good community of competent personnel. If there aren’t good people in the market, then service companies don’t do their business and nobody buys. Having an offshore personnel division ensures there are individuals of a certain competence and skill, and Triton does its bit to ensure that there is a well-trained community out there, that helps keep business buoyant.
In your view, how does Triton capitalize on Aberdeen in terms of it being a global centre of excellence?
I’ve worked in the US and Brazil, and spent 75% of my time in Aberdeen. I’ve been in the industry for over 25 years, and when I came out of university I was initially in the diving industry, and got a lot of responsibility early on. It was just the way the industry was in the 1980s: young men and women coming in to take things on. Compared to other industries like shipbuilding, which may have more traditional hierarchal organizational structures and is rather slow because of it, what Aberdeen gave everybody in the early days was opportunity. In a sense it was the pioneering days, and was really exciting for those who had their grounding in that. Having people in their early 20s being responsible for offshore projects, going out on boats, and building things underwater; I can’t think of anywhere else where one could get that experience, straight into the deep end, so to speak. The culture created in Aberdeen in the 1980s and 1990s was a “we can do it, and overcoming challenges with technology. So what has happened, over the last 30 years, is the creation of a kind of box of expertise, and also a drive that we’ve been able to export that around the world. Some of the basic business models of project management and engineering have been developed locally, and now it doesn’t matter if projects are done in Aberdeen or Brazil, because they involve the same principles on how to executive a subsea construction project, and the same offshore assets, boats, and people.
Why Aberdeen has been successful is a combination of factors. To continually grow a business, one must always look outside borders. There’s never a shortage of people willing to take things to the next level. But the way it is now, if businesses are run only with regard to Aberdeen and the North Sea, they will be contained by that. If you want to grow a business, you have to look outside.
Speaking to Triton specifically, how would you describe the importance of the group’s international focus?
Triton is international just by nature of the different businesses in the group. PSS is international, initially their customers were principally North Sea and Gulf of Mexico, but as the customers’ businesses expanded into Asia or Brazil, PSS had to move there as well and adapt. While PSS has had equipment manufactured in certain locations worldwide, it turns up in Singapore, Norway, Aberdeen, or Houston. For Triton at the moment there are three growth areas: Brazil, Far East Asia, and the Middle East. It doesn’t matter where equipment is manufactured or supplied from, it matters that wherever our customers use our equipment or require a service from us, they have that available locally. The Triton template, whether in maintenance, spares, engineering support or people, will have the same standard, quality, and network if customers are in Singapore, Houston, Brazil, or Aberdeen.
To develop Triton internationally through a global infrastructure of engineering and service centres, which are all around supporting projects and use of products, and helping customers access Triton’s services and enhance the use of equipment they already have. Principally, as a customer-focused service package, and as a form of creating some form of competitive advantage, Triton is the only independent equipment supplier investing in infrastructure in each of these regions to such an extent.
If Triton has an infrastructure whose function is equipment support, then that provides the ability to put other businesses in there. A good example is a facility in Houston opened April 2007 of 30,000 sq ft, which is almost as big as the company’s Florida factory. Initially opened as a PSS service centre, it serves as a sales and shop window, in one of the key operational cities in the oil and gas industry. Triton now has four group businesses in the building, having more or less filled out that space, going from, in 18 months, $0 to $10m in revenue with a complete fresh-start facility.
There’s a template when Triton look at companies for acquisition. For example VisualSoft, which is an Aberdeen-based business. They’ve got product and systems throughout the world, but no presence beyond that. One of the compelling reasons for them coming into the group is that we can immediately open a presence for them in Singapore and Houston, and continue to bring in companies with potential for organic growth through a regional infrastructure.
In this way, can Triton act as a sort of value-add mechanism, by bringing in companies and actualizing any unlocked international organic growth potential that may not be actively exploited?
That’s one of the key elements of the sales pitch when Triton wants companies to come in and join the group. All the companies acquired have the potential for organic growth and expansion, and have generally all had the characteristic that the existing management has taken the business as far as they can, and they need some help and further investment, whether resources in the form of finances or management assistance. Yet another example is DPS, which was acquired in March 2008. They are a very busy, customer-focused group, and the key to their competitive advantage has always been to be first to deliver. They’ve an agency network, but the managing team has limited time available to develop the business internationally. And Triton can help with that. Triton looks at businesses that are on a growth path, and where the management is aspiring to grow even more. Triton has not brought in companies where the owners are not keen on growing; they’ve all rolled over to take equity in Triton and are remaining shareholders, and looking for someone to help grow their business model,
Can you comment on your individual management stile in growing all of Triton Group’s companies in concert?
Triton is organized on a Regional Basis, and in fact has recently hired a new COO to beef up the organization. Triton has been focused on the last 18 months in developing the group, and putting the pieces in place. Triton also has had a number of initiatives in parallel to the acquisitions; it’s easy to focus on acquiring somebody when you’ve got a big building to fill, and Triton has been building infrastructure in Aberdeen, Houston, Singapore, and elsewhere. The last 18 months have been about putting building blocks in place. To use a Churchill phrase, “we’re at the end of the beginning. I call this phase 1, and we’re now entering phase 2. For the last few months, Triton has really been working on how to bring all the companies together to maximize the benefits, market it together, offer this to the customers in an integrated way while keeping individual brands. My stile has been very much about being clear on what the vision is, and having a group of key people who understand that vision. I try to be conscious to not bog everyone down with process. Triton has been fortunate to operate in a busy market, so all the companies have come in and done well subsequently. In fact, the biggest issue has merely involved tidying up financial reporting, since the majority of companies had been previously owner-managed.
Other than that, the management stile has been pretty informal, with regular discussions, conference calls, and get-togethers for everybody. I found it quite interesting and reassuring that people who have been entrepreneurial as individual have now got cousins. Anyone who has been a leader and built something up understands how lonely it can be as the last one in the decision-making process. Now they have other people to bounce ideas off. Triton talks about instilling the group idea and sharing the group vision. The rest is really about getting the structure right, and not putting too many layers in. With the new COO coming on board, Triton is moving toward a more regional structure with a regional director responsible for all Triton business in that region. As the businesses grow their subsidiaries around the world, they will report up on a regional basis, continually developing and looking for ways to improve.
You mention the importance of having and communicating a clear vision. The last 18 months have been busy, but in the next five or 10 years what is your vision in bringing Triton forward?
I don’t think the vision will change much going forward. Triton is a group positioning itself to provide what we consider to be the best technology products based around a remote-control base for subsea applications. On the service side, Triton will offer a range of complementary added-value service businesses which complement the use of that equipment. The company wants to stay as a prime supplier of equipment, and a provider of those specialist services, but not coming together in a complete package as an integrated service involving vessels. Triton wants to stay in the level where the group is able to provide equipment and service in an independent way to maximize a customer base without competing against them. Triton has a group of competitors who are on the product side, and another on the service side. I don’t know of anyone who does the two in the same way as Triton. Under that header, Triton will look to continually evolve its products and technologies. The continuing theme in the technology side is that the company will continue to look for smarter and smarter applications of technology equipment, and invent new uses for the equipment. Looking at the evolution of what ROVs have been used for over last 10 to 20 years, they started as basically underwater cameras “ cameras on a string “ and have evolved into something that is now quite robust in terms of its construction capability. ROVs have come to the point now of being built with automation and semi-intelligence, and are becoming more clever and are therefore able to perform more applications. On the service side, the key will be to find and create good businesses which create positive cashflow while minimizing risk and maximizing complementary uses, while continuing to grow the company’s international footprint. That’s quite a solid platform and that’s how I see it evolving: to maximize opportunities and customers, and continually try to smooth out industry cycles.
What is your final message to OGFJ about how Triton Group will continue to maximize those opportunities?
First of all for the customers: Triton’s underlying strategy, and everything that I’ve described, is all about being able to offer to the customers the latest technologies and the best performing products, with a robust support for the equipment, whether via regional service centres or other resources
If we do these two things right, then our customers will perform their business better and come back to us, and know they can get what they want from us. It’s very easy to say “focus on customers, but Triton is very clear on what that means: focusing on performance and equipment support and how customers can have better use of it.
What drives me goes right back to when I took on the initial task in 2003, that the business must be sustainable. We need to create something to last, and no matter how good things are, I’m always thinking about where things can trip up, never underestimating what can happen, and always thinking ahead. It’s not about a current shareholder or current investor saying we’re driving toward having a good exit, because their exit is another’s entry. Maybe it’s another private investor, or maybe it’ll be a public market. But each time you do that, you keep raising expectations because you benchmark everything again. It’s important to keep looking ahead and keep evolving. Although I’m now in a different position, I can’t get the project manager out of me. Previously 99% of my job was about anticipating for what could happen and preparing for it. With that in mind, I’m continually looking to develop Triton Group and have a sustainable business that can grow and be robust enough to defend itself against whatever happens in the world market.