April 22, 2011 10:03 pm

No ordinary Guy

Financier and investor Guy Hands lost control of EMI, but not his confidence
Guy Hands

There is a moment halfway through my marathon four-hour meeting with Guy Hands when I realise he sees me as a competitor. Clearly the contest is not one of strength: the private equity chief is at least 6ft and on the heavy side. Nor is it one of wealth. Even after losing two-thirds of his own money in his disastrous £4bn acquisition of EMI, he is rich enough to shrug his shoulders vaguely when I ask how many houses he’s got, as if there are too many to count.

Instead, the competition is over which of us did worse at school. Hands, who is famously dyslexic, tells me that at A-level he got an A, an E and a fail. When I mention that I did equally badly with a B, a C and a fail, he looks put out. But then, quick as a flash, says: “That means you got seven points. I only got six. An A and an E is five plus one – six.”

Yet still he looks troubled. The contest is given added potency by the fact that Hands and I are exactly the same age, were at Oxford at the same time and both studied PPE.

“So how did you get in?” he asks, the very question I had planned to ask him. I say I talked my way in, and suggest that he must have done the same. But he says no, he finds talking difficult too. “I use a very selective vocabulary. I had speech therapy all the way from the age of seven through to Oxford. I got in because they thought I was different.”

In that, of course, they were not wrong. A couple of hours earlier, I’d flown into Guernsey’s little airport and had taken a taxi along the country lanes to St Peter Port. It was driven by a woman who told me she knew everything there was to know about the island. But when I mention Guy Hands and his company, Terra Firma, she looks blank. I say that he’s the one who has been in the news a lot recently for unsuccessfully suing the mighty Citibank; for fighting with pop stars; for being a financial rock star himself. She looks unimpressed. Then she says: “Hands, eh? Are his brothers called Knees and Bumps-a-Daisy?” – and screams with laughter.

At Terra Firma’s offices, the surreal mood continues. In the big, empty boardroom I wait with one of Hands’ minders and inspect the triumphant displays of newspaper articles, tombstones and souvenirs from Hands’ past deals, all of which seem piffling set against the view through the picture windows of prehistoric rock and the eternal meeting of sea and sky.

Even Hands, when he finally tears himself away from his meeting, seems not quite right. Less rotund than in his pictures, and oddly hesitant. Only his hair, a luxuriant mop of bright yellow curls, is just as I had hoped and expected.

He apologises for having kept me waiting and sits down, good as gold, to have his picture taken. He lowers his chin when told to do so and bares his large teeth obligingly when the photographer asks him to smile.

Yet what he has done in moving to Guernsey is not obliging at all, neither to the Inland Revenue, nor to anyone else who desires an audience. Hands has not set foot on British soil since he moved to the island as a tax exile two years ago, which means that every Monday morning his team from Terra Firma in London slogs over on the early flight out of Gatwick and remains there for much of the week.

“They like it because they get full attention from me for five to six hours at a time,” Hands says, his voice surprisingly soft and high. “We get a lot more done.”

This is possibly true. The only thing to do, other than work, is to stare at the sea. But isn’t it strange being so cut off from his family? His wife (who he met at university) still lives in Tunbridge Wells in Kent, in a house once owned by Winston Churchill, with their four children, aged from 13 to 25.

“It’s like reverse boarding school,” he says. “I see as much of the children as people who send them away to boarding school do, and my wife, Julia, is here 30 weekends a year. So it isn’t that strange.”

It still strikes me as pretty rum, but Hands insists that the arrangement is an excellent one. “What my investors want is for me to think calmly. I’m not a naturally relaxed person, so it’s been very good for me.”

Instead of starting the day with a long commute, as he used to, he does an hour’s Pilates or yoga. These are girly exercises for an alpha male, but Hands says he’s giving up the macho stuff, and these days is spending more time in bed.

“I decided that trying to prove that I could survive on four hours’ sleep wasn’t necessarily achieving very much. It was a sort of macho badge of honour. Now I get at least five hours, maybe six.”

One result of being less tired is that he doesn’t lose his temper quite so much.

“I don’t think I’ve lost it at work since I left the UK,” he declares, which is remarkable given that there’s been a lot to be angry about. He could have been furious to have lost control of EMI to Citibank in February this year. Furious to have written off £1.75bn – or 30 per cent – of one of his funds. Or furious with himself for having embarked on a deal described in the press as Europe’s worst private equity deal ever.

Hands doesn’t flinch as I raise the subject. “Where things went wrong was the great credit crunch – which left Terra Firma not being able to syndicate down the equity, and Citibank not being able to syndicate down the debt. Our operational thesis was correct. The execution of that operational thesis, I think if you look at the numbers, was technically great.”

He says this, and then he says it again and again, to make sure I get it: the price was right; his plans for rationalising EMI and dragging it into the digital age were spot on. The only thing wrong was the timing. Later, however, he grants that one other thing was not perfect.

“The PR wasn’t right. Frankly, I would give myself a D minus for it, maybe even an E.” In a deeper voice he declares: “Master Hands needs to realise that when he speaks, people sometimes do listen to what he says.” And he gives a strange gurgling giggle.

Indeed, Master Hands managed to offend almost everyone with his blunt pronouncements about the music industry; in particular, he caused a storm when he implied his artists were lazy.

“I never meant the artists should work harder. If I had been talking to people who knew me, they would have understood what I meant. With hindsight, I see it would have been better to have done what a lot of people in the music industry do – sugar-coat things rather than actually tell the truth.”

This, it emerges, is Hands’ stock explanation for all his non-successes: he is too truthful. He later tells me that the reason he never made partner at Goldman Sachs – where he spent 12 years as a whizz-kid bond trader – was that he gave honest appraisals of his colleagues, pointing out the ones he thought ought to be fired, which went down badly with his bosses.

Yet even his dedication to honesty is winning back those very people it once offended.

“Now, three-and-a-half years on, what is interesting is the enormous number of e-mails and letters I got from artists, artists’ managers and people at EMI, saying that they respected us for the fact that: (a) we really cared, and (b) we had actually told the truth.” Not all artists love him, though. I mention Lily Allen, who put it rather simply to the media: “I hate Terra Firma.”

Hands looks a little soft at the mention of the lippy singer. “I had a great meeting with Lily, I like her songs, she’s a great artist. But my guess is probably she was a bit confused by me.”

She is not the only one. I find I am also a bit confused by Guy Hands.

He talks in a such a gentle, reasonable way that one almost feels he is a diffident sort of fellow, yet the words themselves suggest otherwise. His Wikipedia entry says that he played the part of Lady Macbeth in a school play; at the back of my mind lurks the idea of the innocent flower and the serpent under it. I ask him if he can remember his lines.

“No, I can’t,” he says. He thinks for a moment and then says, “There was something about a spot? Out, out, damn spot…?”

. . .

 
Guy Hands arrives at a meeting to announce the restructuring of EMI

Hands arrives at a meeting to announce the restructuring of EMI in January 2008

Forty years on, this seems rather apt. The spot in his case is EMI. Hands is engaged in an awful lot of hand-washing to get them clean. I ask if he has been left with a blemish on his confidence.

“No,” he says. And then as if that weren’t enough, adds: “No, no definitely not. No, definitely not. The frustrating thing is that the other investments were doing very well. We had an almost perfect portfolio.”

And so I ask about the stain on his reputation, and whether he thinks it is unfair.

“It’s no more unfair than in an exam when you don’t get an A because you got 69 per cent and if you’d got 70 per cent you’d have got it, and the reason you didn’t is because you dropped some ink on your paper or something.”

But, I point out, it wasn’t 1 per cent or an ink blot. It was £1.75bn of his investors’ money, and £200m of his own. He agrees, and explains that that was why he took the extraordinary step of taking Citibank to court for allegedly tricking him into thinking that another company was just about to bid for EMI and thus making him bid earlier than he would have done.

To sue was a pretty strange thing to do; the court found he had no evidence and the world was treated to three weeks of needless public slanging between Hands and his erstwhile close friend and adviser David Wormsley.

“It did feel really horrible to sue a friend, but, you know … The friendship, to some extent, had probably gone anyway.” He pauses and then goes on: “There was an e-mail I was shown by the lawyers, where basically Wormsley was laughing at me. I felt completely betrayed.”

So is this why Hands really went to court, because he couldn’t bear being laughed at?

“No, it was because my investors had lost an enormous amount of money. I don’t see what choice I had. I couldn’t have looked at myself in the mirror if I hadn’t done it. I never thought for one minute that we would actually lose the case.”

But they did lose, and Hands’ lawyers are still fighting to get the decision overturned, so he can’t say anything more about it. Instead, I ask him about his dyslexia. Every profile of him says this is what motivates him, but it sounds pat to me.

“There are a lot of things I was very bad at as a child – sport, reading, writing – anything that involves motor co-ordination and anything that involves language. That’s an awful lot of things. What I found I could do was make money. I also found I could work hard.”

He tells me that when he arrived in England from his native South Africa as a small child he felt he didn’t belong. “One just felt odd. I was happy with my family but I hated school. I was 31 out of 32 in class. I remember walking out on the last day at school saying, frankly, two fingers. I’m going to prove these bastards wrong.”

Does he still feel odd? “I stopped feeling odd at Oxford. There are a lot of people there who are a lot odder than me. Actually I found it very confidence-building. Most of the people were incredibly bright, but had real personality flaws. So, they weren’t going to be out there in the real world, competing with me. I wasn’t too worried about them.”

And so Hands went out alone into the real world, where he has been competing ever since. After Goldman Sachs, he moved to Nomura, where he started buying up pubs and securitising them, made a killing, set up on his own with Terra Firma, and has done a succession of deals from cinemas to service stations, wind farms to insurance.

But that wasn’t enough. There is nothing private about Hands’ approach to private equity. He has been so much in the spotlight that when he bought EMI his detractors sneered that it was because he wanted to be Mick Jagger.

When I ask if there is any truth in this, Hands looks surprised and seems to think I mean it literally. “No, I couldn’t be Mick Jagger as I can’t sing,” he says solemnly. “Though when I do karaoke I do occasionally do ‘Brown Sugar’. I put a lot of energy into it.” I’m distracted by the image of him belting out “Gold Coast slave ship bound for cotton fields”, but doggedly persist: I meant does he like being the centre of attention? “No, not at all. The bit I really like is transforming companies. It’s seeing a company change and become more efficient and ­effective and sometimes go on to new areas.”

I ask if investors have been so burnt that they may refuse to give him more money in the future, limiting his ability to go on doing what he loves. For the first time, Hands gives an incoherent answer. He talks about painting and creativity and rules and draftsmanship in a way that quite loses me. But then he says that he is confident that he will be able to raise another fund, though it might be a bit smaller – £3bn or so. And this time there will be a new rule written in saying that he can never again put more than 15 per cent of the fund into one company.

And anyway there is enough going on with his existing funds to keep him busy for now. There has been an offer for Odeon cinemas, which Terra Firma bought in 2004 for €650m. He is also expanding further into green energy, and is now the biggest private equity investor in wind farms.

Is he a true believer in green, I wonder, or merely an opportunist? “Oh, I’m a hypocrite,” he says cheerfully. “I like my Kenyan beans in the middle of winter. But I can’t stand plastic bags. I met a woman who doesn’t use shampoo to wash her hair, just water once a month. I admire that, but I couldn’t do it. I wouldn’t want to do it.”

He gives another giggle. I glance at his curls, which look as if he’s had an old-fashioned shampoo and set with rollers at the hairdresser.

At this point Hands’ PA puts her head around the door. It is 7.30pm, and she has been waiting while her boss talks for two-and-a-half hours without disturbance, his concentration total, his energy unflagging. We are due to have dinner, but first he needs half an hour to make calls and I need a break from the intensity of his company.

Later in the restaurant, a slightly 1970s affair serving the best fish on the island, Hands orders a bottle of white wine, which he tastes, declares good and then drinks rather more slowly than I do.

I wonder what else he does, other than work. He doesn’t read. He doesn’t watch TV. He doesn’t play poker any more, because “my wife doesn’t like me losing” (which makes me wonder how she felt about her husband losing £200m in the casino of private equity).

The answer seems to be not much. “I work 14, 15 hours a day,” he says. The difference is that these days he stops at weekends when his wife arrives, and what they appear to do mainly is eat.

“Julia arrives on Friday and we have dinner. Saturday we walk down to a pub on the seafront, have a fish-and-chip lunch, walk back. Then a dinner party in the evening with friends. On Sunday we go to a restaurant with seafood. Julia’s rules for me being here were very, very simple: her plane touches down, I get off my BlackBerry. The plane takes off, I can get back on it. For the two of us, it makes the relationship intense, a bit like when we were at university, and I was at Oxford and she was at Cambridge.”

Over the meal we discuss all sorts of things: the vagaries of the tax regime; how hard it is to bring up children; how clean the toilets are at his chain of motorway service stations in Germany; his tradition of spending each wedding anniversary at an island or capital city beginning with a successive letter of the alphabet; deforestation in the island of Unst, where they celebrated a couple of years back; the waste of having too many clever people in banking; and how our single friends in their fifties are not enjoying dating.

The conversation flows along, Hands talking at length on whatever topic I propose, yet somehow we don’t quite manage to connect. I can’t shake off the suspicion that what he really would rather be doing is working.

Before I let him go, I want to ask him if he feels bad about avoiding paying so much tax. I have delayed asking this because I can predict the answer: he will surely tell me that he already gives away as much as the taxman would take, and that the world gains because his charities spend it more effectively than government.

But he says nothing of the sort. “I will give it away,” he says doubtfully, as if the thought had never occurred to him before. “The question is when. You can’t take it with you. And I don’t think it would be good to give huge lumps to the children. So it will go to charity.”

Only not yet, it seems; there is more investment to be done in the meantime.

As we say goodnight I tell him about Knees and Bumps-a-Daisy and the taxi driver who couldn’t give a toss about Guy Hands.

“Ah yes,” he says. “No one is impressed by anything, unless you run the corner shop. I had been here for over a year before anyone mentioned EMI to me. It’s really rather nice.”

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