12:01AM BST 23 May 2004
Comment
What's the rap on Jules Kroll, who went from failed
politician to setting up stall as a corporate snoop? It worked: he has
just sold his 'risk mitigation business' to Marsh & McLennan for
£1.1bn
Here's a poser for you. You meet a man who describes his
business as one that "delves beneath the surface and beyond the obvious,
applying intuition, critical analysis and a perceptive understanding of
human behaviour to obtain a true picture of key events, transactions
and business dealings".
Is he: a) a mildly deranged journalist spicing up business
profile copy with psychobabble? b) a brilliant businessman who has made
hundreds of millions of dollars from a combination of intelligence
gathering and cod psychology? c) a pretentious egomaniac?
All answers are potentially correct, of course. But today we
are dealing with option b), in celebration of the magnificent deal
pulled off this week by Jules Kroll, the founder of Kroll Associates.
Kroll has sold his company, which he defines as a "risk
mitigation business" (itself a masterful piece of marketspeak, designed
to distance the investigative activities of his company from the world
of seedy private snoopers and spooks). And the buyer is the giant US
insurance services conglomerate, Marsh & McLennan, which likes to
call itself a "provider of risk services".
Marsh has spent a meaty $1.9bn (£1.1bn) on the "risk
mitigator". It's a cash transaction, and Jules Kroll, now in his early
60s, has nearly $110m in his own name - before taking account of the
holdings of the Kroll family trusts. Not bad for a man who was once so
broke he had his car repossessed.
Kroll's new job title is vice chairman of Marsh. But what has Marsh let itself in for?
Here's a Kroll-style due diligence report.
Subject
Jules Kroll
Background
The subject grew up in a close-knit New York Jewish family of modest means. His father worked in the printing industry. He is married (to the same woman, for 36 years), and has four adult children (ages 26 to 33).
A good scholar, the subject graduated from Cornell University, subsequently passing his bar exams at Georgetown university in 1966.
His initial ambitions were directed towards public service. He says: "I had always been an aspirant for public service either of an appointed or elected nature. The six months prior to my starting the business, I was a candidate for public office in New York for the city council. The campaign centred around corruption in Queen's.
" In September of 1971 I lost my chance for office, and, ironically my colleague Mike Cherkasky, our president and CEO, had done the same thing [which was failing to be elected as district attorney for Westchester County]. Here we are the two losers, the two political failures."
Career highlights
The early pursuit of political goals caused the subject acute pecuniary embarrassment, culminating in his wife's panic-stricken discovery one morning that the couple's car was no longer in the driveway. She was about to report the theft to the police, when the subject intervened. "I paused and decided to confess that I'd run out of money during the last couple of months of the campaign. Our car hadn't been stolen. It had been re-possessed. I was basically broke. My wife began to acquire quite a few canned goods."
The subject then set up Kroll Associates. "The business began in April 1972 as a purchasing consultant, dealing with how to save companies money on their purchasing and to ensure that their purchasing departments were run more ethically.
"The original days of the business were all devoted to helping companies buy more intelligently and/or more honestly. It then evolved through the 1970s from being a consultancy to being more of an auditing stroke investigations business. But I didn't want to call it an investigations business. Investigations in those days had a bit of a tacky reputation.
"The way I got round that was not calling it investigations but special auditors and to begin to use the expression of being risk mitigators."
Apart from cleverly using language to calibrate the public image of his business, the subject now began to realise some of his social goals, as the business expanded rapidly through the 1970s and 1980s. "I was using my little business to carry out some of the things I'd hoped to be doing in public life. In fact, many of my colleagues have a sense of public service or have had public service and have a desire to affect public policy and societal change in a constructive way."
The subject's stated goal is "fighting corruption in a corporation, making sure that when people submit figures that they're accurate".
But not only did he legitimise investigation (which he refers to as "special auditing") for business, he created a new market, "a field that we invented is for the private sector to go after corrupt former heads of state. We've done almost 35 of them now. We're probably doing Fujimori [formerly of Peru, now in Japan] and Daniel arap Moi in Kenya."
"Baby Doc" Duvalier of Haiti and Saddam Hussein have also been investigated, and enquiries into Osama bin Laden are in progress.
The subject has presided over phenomenal corporate growth. The business originally turned over $44,000, rising to $1m by the 1980s.
Three years ago that had become $200m, rising to $485.5m in 2003. Net sales in the first quarter of 2004 were $165.3m, a 60 percent increase from the same period in 2003. Analysts say that the figures, and the rapid expansion represent a classic "fattening up" of the company ahead of its acquisition by Marsh.
Other influences and personal connections
The subject is acutely aware of his responsibilities to shareholders, more so since he floated the business as Kroll Inc. in 1997. He is sensitive to the suggestion that the need for transparency is incompatible with the many highly confidential arrangements it has with those it employs to garner intelligence.
Our perceptive understanding of human behaviour leads us to think he may even be defensive on this point: "When we became public, people in the investigative field went to our clients and said that as a quoted company their confidences wouldn't be maintained. Of course, it was complete rubbish.
" The sensitivity of the things we deal with is no less than the big investment banks, the publicly held consultancy firms. All sorts of public enterprises deal with things that are confidential, and we do as well.
"The reality is that there's not a lot of that stuff that goes on. But when it does go on we make sure that we comply not only with the regulations in the places that we do it, but we also try to do it with as much taste as we can manage."
Personality drivers
Delving beneath the surface, our critical analysis leads us to identify a measure of latent anger at the subject's early failure in politics.
While the subject has moved on to grief and acceptance of the loss of political goals, he has found displaced objects of vengeance by pursuing those he believes to be corrupt. The choice of the Old Testament as his favourite book gives us a true picture of a nice Jewish boy with a streak of neo-Puritanical witchfinder.
The subject can be ruthless in hiring and firing, but is thought of as a charismatic and charming man. He is driven but modest, and has a self-deprecating charm that endears him to colleagues and competitors.
Conclusion
Smart, the inventor of a whole sector, still motivated and excited by the job. Slightly scary.
Kroll's new job title is vice chairman of Marsh. But what has Marsh let itself in for?
Here's a Kroll-style due diligence report.
Subject
Jules Kroll
Background
The subject grew up in a close-knit New York Jewish family of modest means. His father worked in the printing industry. He is married (to the same woman, for 36 years), and has four adult children (ages 26 to 33).
A good scholar, the subject graduated from Cornell University, subsequently passing his bar exams at Georgetown university in 1966.
His initial ambitions were directed towards public service. He says: "I had always been an aspirant for public service either of an appointed or elected nature. The six months prior to my starting the business, I was a candidate for public office in New York for the city council. The campaign centred around corruption in Queen's.
" In September of 1971 I lost my chance for office, and, ironically my colleague Mike Cherkasky, our president and CEO, had done the same thing [which was failing to be elected as district attorney for Westchester County]. Here we are the two losers, the two political failures."
Career highlights
The early pursuit of political goals caused the subject acute pecuniary embarrassment, culminating in his wife's panic-stricken discovery one morning that the couple's car was no longer in the driveway. She was about to report the theft to the police, when the subject intervened. "I paused and decided to confess that I'd run out of money during the last couple of months of the campaign. Our car hadn't been stolen. It had been re-possessed. I was basically broke. My wife began to acquire quite a few canned goods."
The subject then set up Kroll Associates. "The business began in April 1972 as a purchasing consultant, dealing with how to save companies money on their purchasing and to ensure that their purchasing departments were run more ethically.
"The original days of the business were all devoted to helping companies buy more intelligently and/or more honestly. It then evolved through the 1970s from being a consultancy to being more of an auditing stroke investigations business. But I didn't want to call it an investigations business. Investigations in those days had a bit of a tacky reputation.
"The way I got round that was not calling it investigations but special auditors and to begin to use the expression of being risk mitigators."
Apart from cleverly using language to calibrate the public image of his business, the subject now began to realise some of his social goals, as the business expanded rapidly through the 1970s and 1980s. "I was using my little business to carry out some of the things I'd hoped to be doing in public life. In fact, many of my colleagues have a sense of public service or have had public service and have a desire to affect public policy and societal change in a constructive way."
The subject's stated goal is "fighting corruption in a corporation, making sure that when people submit figures that they're accurate".
But not only did he legitimise investigation (which he refers to as "special auditing") for business, he created a new market, "a field that we invented is for the private sector to go after corrupt former heads of state. We've done almost 35 of them now. We're probably doing Fujimori [formerly of Peru, now in Japan] and Daniel arap Moi in Kenya."
"Baby Doc" Duvalier of Haiti and Saddam Hussein have also been investigated, and enquiries into Osama bin Laden are in progress.
The subject has presided over phenomenal corporate growth. The business originally turned over $44,000, rising to $1m by the 1980s.
Three years ago that had become $200m, rising to $485.5m in 2003. Net sales in the first quarter of 2004 were $165.3m, a 60 percent increase from the same period in 2003. Analysts say that the figures, and the rapid expansion represent a classic "fattening up" of the company ahead of its acquisition by Marsh.
Other influences and personal connections
The subject is acutely aware of his responsibilities to shareholders, more so since he floated the business as Kroll Inc. in 1997. He is sensitive to the suggestion that the need for transparency is incompatible with the many highly confidential arrangements it has with those it employs to garner intelligence.
Our perceptive understanding of human behaviour leads us to think he may even be defensive on this point: "When we became public, people in the investigative field went to our clients and said that as a quoted company their confidences wouldn't be maintained. Of course, it was complete rubbish.
" The sensitivity of the things we deal with is no less than the big investment banks, the publicly held consultancy firms. All sorts of public enterprises deal with things that are confidential, and we do as well.
"The reality is that there's not a lot of that stuff that goes on. But when it does go on we make sure that we comply not only with the regulations in the places that we do it, but we also try to do it with as much taste as we can manage."
Personality drivers
Delving beneath the surface, our critical analysis leads us to identify a measure of latent anger at the subject's early failure in politics.
While the subject has moved on to grief and acceptance of the loss of political goals, he has found displaced objects of vengeance by pursuing those he believes to be corrupt. The choice of the Old Testament as his favourite book gives us a true picture of a nice Jewish boy with a streak of neo-Puritanical witchfinder.
The subject can be ruthless in hiring and firing, but is thought of as a charismatic and charming man. He is driven but modest, and has a self-deprecating charm that endears him to colleagues and competitors.
Conclusion
Smart, the inventor of a whole sector, still motivated and excited by the job. Slightly scary.
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