Talk about baptism by fire. For most dealmakers, heated negotiations are confined to the boardroom, the law office and maybe the factory floor or the courtroom. For Juan Figuereo, it got a lot hotter. Working at the time for PepsiCo, Figuereo was dispatched to São Paolo, Brazil. It was 1995, a time of economic tumult in Latin America. Pepsi-Cola Engarrafadora Ltda., the soft drink giant's biggest bottler outside the U.S., was close to bankruptcy. Under an unusual provision in the bottler's shareholding agreement, after the chairman threw up his hands and resigned, his supervoting shares reverted to PepsiCo, which suddenly found itself in control of the board. Figuereo was tasked with attempting to salvage the company. "This was by far the most difficult thing I have ever done," he recalls.
After Figuereo and his team sold some smaller assets, they attempted to stabilize operations and cut the labor force. There were huge risks. Unions were notoriously militant. A few months earlier, the company's finance director had been murdered, and the union was suspected. Nonetheless, union leaders agreed in a meeting to cut payroll by 30%, as long as Figuereo personally pledged that the remaining workers would be paid promptly and completely.
"When I got back to my car," he says, "someone had left a handwritten note on the windshield that said, 'If the company doesn't pay, you die.' After that, I always made sure we made payroll first thing."
As he recounts his tale, Figuereo lets go with a nervous laugh. Then he adds with pride: "We restructured the business. We made it profitable. We sold it, and sold it successfully."
Figuereo is full of such stories. He built a career as the ultimate road warrior, tackling difficult assignments in emerging markets, living and working in challenging environments. After 15 years with PepsiCo, Figuereo moved to Wal-Mart Stores Inc., where he fashioned overseas acquisitions as the retail giant's vice president, mergers and acquisitions. He's now the CFO of Canadian beverage manufacturer Cott Corp. the world's largest supplier of retail-brand soft drinks (basically, a private-label bottler). It supplies more than 200 brands in 60 countries and owns RC Cola. At Cott, Figuereo finds himself once more trying to right an operation in trouble. The company brought him in to help it face daunting challenges, especially in the U.S. market, where sales have fallen about as dramatically as the company's share price. It was forced to amend a debt covenant early this year. Most recently, Cott announced that Wal-Mart, Cott's biggest customer, would sharply curtail purchases.
If Figuereo, now 51, is a specialist in anything, it's probably tough business problems rather than M&A. "I'm not your expert, experienced dealmaker," he maintains. "I'm more of a generalist."
Yet it's hard to match the variety of his deal experience, both for geographic diversity and for the way it's blended with his work in finance and operations. The story of his time in overseas markets provides a unique glimpse at both the challenges of developing-economy transactions and the kinds of processes necessary to make those deals happen.
"You learn to be flexible. You learn to learn really, really fast," he reflects. "Different countries, different operations, different stages of development, different microeconomic issues. After a while it gets to the point where you have seen almost everything that can be thrown your way. It really prepares you for just about anything."
Patience is also key. Figuereo left Wal-Mart a year ago after concluding six deals in Latin America and Asia. But that might not be the final tally. "Some interesting stuff I left in the pipeline," he says. "It will probably take a while."
Figuereo looks back with pride at his stint doing M&A for the retail giant from Bentonville, Ark. And for all the complexities he encountered, he has a simple explanation for why he was successful. "I think it was largely because I did not approach dealmaking as a dealmaker," he says. "I approached dealmaking as a businessman." By this he means that he fashioned transactions that made sense, not only for Wal-Mart, but for the target's business, its structure and its strategy.
This kind of an approach, Figuereo believes, allowed him to structure deals that otherwise wouldn't have happened. In September 2005, for example, Wal-Mart signed a $318 million deal to take a 33.3% stake in Central America Retail Holding Co., or Carhco, from ailing Dutch retailer Royal Ahold NV. Carhco is Central America's largest supermarket chain, with operations in five countries. Under the agreement, Wal-Mart purchased an additional 17.7% in 2007 for $212 million, with an option to acquire up to an additional 24% beginning in 2010.
Wal-Mart wanted a presence in Central America, but gaining it was easier said than done. Ahold itself was retrenching internationally after a period of global overexpansion ended in an accounting scandal. It had sold a northeastern Brazil supermarket to Wal-Mart for $315 million a year earlier. But Ahold's two local partners in Carhco were another matter. "These were people who didn't want to sell," Figuereo says. And they had a structure that made a deal difficult. Carhco was formed in 2001 as a three-way, equal-parts joint venture with a rotating board chairmanship. No one was in control.
Figuereo says he first had to "paint a picture for [the Central Americans] how they could create more value, more staying power ... with a different structure with Wal-Mart." At the same time, he had to convince Wal-Mart senior management and the board that a controlling 51% stake "is better than nothing."
Figuereo's solution was the three-step agreement that left both Wal-Mart and the Central American owners feeling comfortable. "In Central America, we have a situation where the old owners in essence run the Wal-Mart business." Wal-Mart has voting control, but the partners have performance incentives. "They can make a lot of wealth for the family if they do a good job for Wal-Mart."
Figuereo maintains that kind of approach was necessary. "That was one example of a deal that would never happen had somebody gone in with just a dealmaker mentality that I buy you out or just take options."
Then, there's China, where Figuereo structured another creative deal. "After that deal, Wal-Mart is the No. 1 foreign retailer in China. Before it was No. 11." The stakes, he believes, are huge. "I believe that one day Wal-Mart International will be larger than Wal-Mart U.S. and one day China will be the largest business unit in all of Wal-Mart. I think I left them in a position for that."
The acquisition was structured like this: In February 2007, Wal-Mart bought a 35% stake in Bounteous Co. Ltd., China's largest hypermarket chain, for $264 million. The price and timing for the other 65% was locked into the agreement. The transaction will conclude by February 2010, according to Wal-Mart financial statements. During the interim, Figuereo says, "you allow your Chinese partners to accelerate growth of the store base, because the Chinese can get licenses faster than any foreigner."
Of course, Figuereo readily admits Wal-Mart isn't your average Western company. It has the kind of clout with the Chinese government other companies can only dream of. He quotes Wal-Mart CEO Lee Scott Jr., who has been known to point out that if Wal-Mart were a country, it would be China's eighth-largest trading partner. And Wal-Mart executives practice a level of diplomacy befitting that status. Scott himself would make it a point to travel to China three or four times a year, Figuereo says, meeting the highest-ranking officials rather than local bureaucrats.
That kind of respect pays off. When Chinese officials were drafting their antitrust regulation, Figuereo recalls, they asked him how Wal-Mart deals with antitrust issues in other countries. "Basically, we got the best lawyers, the best minds, including Wal-Mart's in-house counsel, and helped the Chinese with the drafting of the antitrust regulations."
Were the Chinese were concerned Wal-Mart would craft something advantageous to itself? That wasn't a problem. "The Chinese are very polite, so in their roundabout way, they basically told us that if we did that, they would make us pay. We told them that should not be a concern. Wal-Mart is a company of high integrity. We would never do that."
To Figuereo, acquisitions involve first articulating an overall business strategy and then deciding how M&A fits in. In the case of Wal-Mart, the overall strategy is that international business must one day be 30% of total business. So, he explains, the thinking goes something like this: "What is it today? How much is organic growth? What is the upper end of the range of organic growth? What is the gap? How do we fill this gap?"
The process meant drawing up a list of potential countries where the Wal-Mart business model would work successfully. "Most people think of Wal-Mart as a chain of stores. But Wal-Mart really is an unbeatable supply chain. Wal-Mart can source and move products more efficiently than anyone on the face of this earth. They translate this into lower prices at the store."
For the supply-chain machine to work well, he explains, a country needs several characteristics. After distilling those to a set of metrics, he says, "we took the entire world and came up with a fairly small number of countries where the Wal-Mart model would work."
Next, he says, he ranked the countries (which he declines to name), including such aspects as regulatory issues and barriers to entry. Then Figuereo and his colleagues chose three investment bank advisers -- Credit Suisse Group, Goldman, Sachs & Co. and UBS -- on what he termed a "preferred-provider basis." "We shared the strategy with them, so they knew the strategy and would only go and source deals based on the strategy. ... It helped a lot. It made deals happen."
During Figuereo's time, Wal-Mart, in addition to deals in Central America and China, made a major acquisition in Brazil. According to SEC filings, Wal-Mart bought a Southern Brazil retail operation called Sonae Distribuição Brasil SA for $720 million. The purchase was completed in December 2005.
As it turned out, focusing on the overall strategy and the role in that strategy for the M&A department meant divestment as well as acquisition. Most notably, under Figuereo's direction, Wal-Mart sold its 16 South Korean stores to Shinsegae Co. Ltd. in 2006 for $882 million. The reason? "It would be difficult for us to reach the scale we desired," Mike Duke, the company's vice chairman and head of international said at the time in a statement.
"If you have a drag, as was the case with Korea, we saw it was perfectly within our charter to push for the company to get rid of that [drag] so that the company could focus resources where it could better leverage the business model." Figuereo explains. Again, he reiterates, it gets back to how these acquisitions fit into the overall strategy. "We tested everything we did against the strategy. So, we saw a role not as acquiring companies, we saw a role helping to accelerate growth."
A year ago, Figuereo left Wal-Mart to join Cott. He got a call from an old friend from Pepsi. "They were looking for someone who knew how to turn a business around," he says, adding that he bit because of personal reasons as much as professional. The company was moving from Toronto to Tampa. "I always wanted to get back to Florida," he explains. He went to school in Miami and has family there. The oldest of his three daughters lives in Tampa. He also has a son.
At Cott, Figuereo has his hands full. The company lost $73 million on revenue of $1.78 billion in 2007. Its international revenue jumped, but North American sales continued to decline.
Will he put his dealmaker skills to work as well?
After all, Cott built through acquisitions, including a $135 million purchase of Britain's Macaw Soft Drinks Ltd. in 2005. It reportedly was part of a bidding consortium for the American drinks division of Cadbury Schweppes plc before Cadbury aborted the sale in December and decided to list instead in New York.
Figuereo takes a dim view of Cott's past acquisitions effort. "The company has made acquisitions in the past; none have been successful," he starts, then adds: "As we complete the turnaround, we probably will start making more acquisitions."
Sitting in a Tampa office, Figuereo reflects on his career. Geographically, he's gone full circle.
Born in the Dominican Republic, the son of a dentist, Figuereo moved to Miami for college. He graduated from Florida International University, became a certified public accountant, then spent eight years with Arthur Andersen in Miami, after which he joined PepsiCo. After straightening out some control problems in PepsiCo's international division, Figuereo was named comptroller of the Latin America division and dispatched to Rio de Janeiro. When he arrived, inflation was running 35% a month. "Managing a budget in dollars in a hyper-inflationary economy ... that was a huge learning experience for me," he says. "The things that you study in business school, you think you understand. You don't really know until you live in that type of environment."
There were calls from suppliers with prices good only for two hours. "You'd have two hours to buy tons and tons of sugar for a month. You don't know what the selling price will be at the end of the month for your product. You have no idea of the price of raw materials at the end of the month."
After two and a half years in Brazil, Figuereo was promoted to finance director of Central America and the Caribbean, based in Fort Lauderdale, Fla. He and the president were charged with accelerating flagging sales. This gave Figuereo an opportunity to dive into operations. "I learned a lot about the nuts and bolts of the bottling business," he says, adding that he gained further experience in repair and relaunch. This proved key to the double-digit growth he accomplished during his two years there.
Figuereo was then named CFO of PepsiCo Latin America, a vast expanse of 35 countries. That led to his stint with Pepsi-Cola Engarrafadora and his encounter with the unions.
After that monumental workout, Figuereo sought a change of scene. He went to Barcelona, first as the CFO of PepsiCo's Frito-Lay Inc. division for the Mediterranean, then as PepsiCo's vice president for business integration for all of Europe. In both jobs, he integrated what had formerly been independent business units.
Figuereo was scheduled, he says, to become the CFO in North America of another large PepsiCo unit, Tropicana Products Inc. But another overseas job came up, one he couldn't resist: He returned to the Dominican Republic, where he had spent the first 17 years of his life, as Frito-Lay's general manager. He was a big fish in a small pond. "I was on a first-name basis with the president," he recalls. "He would call me at home on Saturday."
In 2003, Figuereo's two younger daughters were entering high school. "We wanted to go to one place where we would stay," he recalls. "In 15 years, I had moved jobs nine times." PepsiCo, however, wasn't interested in bringing him back to the U.S. So he began to look around.
When Figuereo was in Brazil restructuring the bottler, one of his creditors recommended him to Wal-Mart to help turn around a problem company there. He declined the offer but kept in touch. He contacted the retailer again. "They immediately called me over to Bentonville," he says. Negotiations were progressing for a CFO job, but the unit in question was being restructured.
"They asked me, 'Would you do something different, like M&A?' I said, 'I haven't done M&A. I have people who do M&A report to me as a comptroller, I have done acquisitions for PepsiCo but couldn't say M&A is my expertise.' They said, 'We feel comfortable with your skills; if you'll take the job, it's yours.' That's how I got into dealmaking."
Does he miss it, now that he's a CFO again?
"No," Figuereo responds. "I frankly found dealmaking interesting, but it was kind of boring for me." He compares it with his time as general manager of PepsiCo in the Dominican Republic. It was a small business unit, "but that makes it even more fun. ... You have to be everything. In dealmaking, you have to be creative, have to be focused, but it's a fairly narrow space. You do your deals. Someone goes and runs it. I was used to being in the thick of it."
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