Shadow Account

by Stephen Frey

  Hammond sniffed. “I think it would have been appropriate for Gavin to come to this meeting. Baker Mahaffey is one of the biggest accounting firms in the country, and, as I told you, I’m one of the top earning partners. I’m sure there’s plenty we could do together, but I’ll need to meet the man in charge. No offense, Conner.”

  “None taken,” Conner answered calmly. “Gavin was hoping you would come to lunch with us next time you’re in New York City. Our treat, of course.”

  “I’m not up there very often. I don’t like New York. I make my New York clients come here. They seem to like it that way.”

  “Or we can come back down here,” Conner continued.

  “Fine. Well, I’ve got to get going,” Hammond said, standing up. “You can arrange that lunch with my assistant on your way out. Get her to give you one of my business cards, too.”

  “I was hoping we could talk about a specific transaction we’re working on at Phenix before we finished,” Conner said, staying seated. “One that could be very profitable for both of us, Vic.”

  “I really am running late.”

  “We’ve been retained by a large, precision manufacturer of equipment components.”

  “Oh?” Hammond sank slowly back down. “What’s the name?”

  “As I’m sure you can understand, I’d need you to sign a confidentiality agreement before I could tell you.”

  “Give me the agreement,” Hammond said, picking up a pen and motioning at Conner’s briefcase sitting in an empty chair beside Conner. “I’ll sign it right now.”

  “I don’t have it with me,” Conner said quickly. “I’ll fax it down tomorrow when I get back to New York.”

  Hammond put down the pen. “What exactly have you been retained to do for this company?”

  “Explore strategic alternatives,” Conner explained. Which anyone even remotely connected to the financial world knew was code for one thing: Sell it. “I noticed on your Web site that one of Washington’s big clients is Global Components.”

  “That’s right. In fact, Global ismy client.”

  “Really?” Conner asked innocently.

  “I personally brought Global in-house five years ago,” Hammond bragged. “I took it away from Deloitte and Touche. Global is the most profitable client in the Washington office.”

  “Congratulations.” Conner paused. “I also noticed on your Web site that Baker Mahaffey has started a consulting practice. Like a lot of big accounting firms.”

  “The managing partners want us to get our share of that business. It’s tough, though.”

  “I couldn’t find much information about that side of the business on the site. What kind of assignments is your consulting practice looking for?”

  “Typical stuff. Business practice. Industry studies. Strategic initiative directives.”

  “What about investment banking work?” Conner asked.

  Hammond shook his head, frustrated. “We’ve tried to get those kinds of deals and we’ve had some limited success with smaller companies. But the big companies,Fortune 25 companies like Global Components, still want to deal with firms like Harper Manning and Morgan Sayers.”

  Morgan Sayers. The name rattled around in Conner’s head, reminding him of why he was sitting in Hammond’s office. Liz Shaw. “Does Baker Mahaffey have a mergers and acquisitions practice?”

  “Yes, but it’s tiny.”

  Conner needed to take a chance if he was going to get anywhere. “Just between us, the company that retained Phenix would be a perfect fit with Global Components. Any chance you could arrange for me to meet with someone in your mergers and acquisitions group while I’m here? Or are those people all in New York?”

  “No, we have M and A people here. But I thought you said I had to sign a confidentiality agreement before you could tell me the name of the company you’re representing. Given that, what could you say to them?”

  “I could give them a couple of quick sound bites to see if there might be any initial interest.”

  “Why don’t you give them to me?”

  “Well, I . . .”

  Hammond’s expression turned steely. “Look, if this deal makes sense, I can get you in front of someone at Global Components this afternoon. The company is just a thirty-minute cab ride from here.”

  Anticipation surged through Conner. He’d been hoping to see someone at Global by the end of the week, but Hammond was going to get him in right away. He had no idea what he’d find when he got there—he didn’t really even know what tolook for. But just having a connection to someone at Global Component’s headquarters might be all he needed. “It’s just that—”

  “There’s no reason to involve our consulting people,” Hammond said confidently. “Especially the M and A guys. I hate to say it, but they’re not very good. If they were, they’d be at an investment bank, like you, earning a lot more money. I’m the senior person on the Global account. You should feel comfortable discussing the opportunity with me. Like I said, I’m more than happy to call someone at the company. But you’ve got to give me some details first.”

  Conner nodded. “Okay.” Phenix hadn’t really been retained by a precision manufacturer of machine components, so he had to play this carefully.

  “Is your client public or private?” Hammond asked.

  “Private.”

  “How big is it?”

  “I can’t say exactly. That would violate the confidentiality agreement we’ve signed with them.”

  “Is it over five hundred million in sales? If it isn’t, the guys at Global Components won’t be interested. Buying companies smaller than that doesn’t make sense for them because they’re already so big.”

  “It’s over five hundred million,” Conner assured Hammond.

  “U.S.-based?”

  “Yes.”

  “Why do the owners want to sell?”

  “Estate planning issues.”

  “And Phenix has an exclusive mandate to sell this company?”

  The risk here was that Hammond might call Gavin to confirm the mandate. It would be a convenient way for him to initiate a direct relationship with a legend. Then there’d be a problem because Gavin wouldn’t know what in the hell Hammond was talking about. Hammond would find out this was a sham, and Gavin would find out where Conner had been. Which, for some reason, Conner didn’t want yet.

  “Yes, we have an exclusive.”

  Hammond reached for the phone and punched out a number. His call was answered immediately. “Jenny, this is Vic. Right, right. Where’s Jim?” A pause. “At the Miami facility today?” A chuckle. “Third time this month, isn’t it?”

  Conner glanced up. Miami again.

  “Terry down there, too?” Another chuckle. “Of course he is. Why wouldn’t he be? What about Glen? He ought to be in the office. He doesn’t get into all that.” Hammond nodded at Conner. “Good. Let me talk to him.”

  A few moments of silence.

  “Glen? Yes, it’s Vic. I’ve got a guy in my office from an investment bank in New York who has a mandate to sell a company you guys might be interested in. Yeah, it’s a precision parts manufacturer. Uh huh, sales are over five hundred million. Sounds like a good fit. What? Phenix Capital. No, it’s not bulge bracket. It’s a boutique shop run by a guy named Gavin Smith. Yeah, that Gavin Smith.” An irritated expression twisted Hammond’s face. “What?Because Iwant you to see him. Jim would, too.” Hammond nodded. “Conner Ashby. He’ll be out there within the hour. Okay?Good. ”

  Hammond hung up. “You’re all set, Conner. You’re seeing Glen Frolling. Glen’s the treasurer of Global Components. He can take a first look at what you’ve got, then report to the senior guys.”

  “Thanks, Vic. I really appreciate you setting this up.”

  “Don’t forget that I did,” Hammond warned. “When the guys on our consulting side try to get their hands on this thing, you tell them to pound salt, you hear me? You keep dealing with me. I want the fee for my group.”

  “Of
course. By the way, who were the other people you were trying to hook me up with?”

  “Jim Hatcher is Global Component’s chief financial officer. He’s the person I really wanted you to see because he’s the ultimate decision maker. The other one is Terry Adams. He’s head of corporate development. But don’t worry, Glen will be helpful. He reports directly to Jim.” Hammond laughed. “Glen doesn’t have much personality, but don’t be put off. It’s nothing personal, just the way he is.” Hammond stood up once more. “Now, I really do have to get out of here.”

  “Where are you going today?” Conner asked, standing up, too.

  Hammond reached across the desk to shake hands. “Minneapolis.”

  Minneapolis. Again, Conner thought back to the e-mail. Suddenly he needed an excuse to come back. His eyes drifted to his briefcase. “Well, thanks for everything, Vic, and have a safe trip,” he called over his shoulder, heading quickly for the door.

  An hour later, Conner signed the Global Components visitor register at the front desk and was escorted to the third floor. Then down a long hall to the lobby of the senior executive offices.

  “Wait here,” the woman instructed, pointing at a comfortable looking couch. “Someone will be with you in a few minutes.”

  “Thanks.”

  Conner sat down and glanced over at a woman sitting outside a door markedJIM HATCHER in bold black letters. She was young and extremely attractive. On her desk was a nameplate,JENNIFER HUGHES inscribed on it. She was on the phone, giggling as she squeezed the receiver between her ear and shoulder while she filed her nails. She didn’t seem busy. And, from what Conner could see, she was provocatively dressed. Her chest was all but spilling out of her top.

  Conner’s eyes shifted left. Beside Jenny was Terry Adams’s assistant, and it was the same story here. Young, beautiful, and not busy.

  He glanced around the large lobby. It was filled with artwork, and the furniture was all leather. On the wall to his right were three flat-screen televisions—turned to CNN, ESPN, and the Weather Channel. The volumes were off, but words scrolled across the bottom of the screens. On a table to the right he spotted a Bloomberg terminal, so he got up and checked Global Component’s share price while he waited. It was up to sixty-seven.

  “Mr. Ashby?”

  Conner looked up from the terminal. This woman was older. In her fifties, Conner guessed. “That’s me.”

  “I’m Mr. Frolling’s assistant. He’ll see you now.”

  “That’s quite a crew back there,” Conner said quietly, following Frolling’s assistant into a hallway that led out of the senior executive lobby.

  “Yes, we call that the ‘stable,’ ” the woman replied icily. “All full of fillies.” She took an exasperated breath. “Some of us wonder exactly what it is they do all day. We end up doing most of their work.”

  The hallway opened up to another lobby, but this one wasn’t as plush as the one they had just left. Decorations here were scant and the office doors around the perimeter were much closer together. These guys were subordinate to the alpha dogs. No doubt about it.

  “Go on in,” the woman said, stopping at one of the doors and gesturing. “Would you like anything to drink?”

  “No thanks,” said Conner. A stout man with gray hair and glasses sat at a small table in one corner of the office, studying a report. “Mr. Frolling?”

  “Yes,” the man responded, not taking his eyes off the report. He nodded at a chair on the other side of the table. “Have a seat,” he said gruffly. “Close the door, Alice.”

  “Yes, sir.”

  As Vic Hammond had warned, Frolling wasn’t going to win any congeniality contests.

  “I’m Conner Ashby.”

  “Yeah, sure.” Frolling stared at the report a few more moments, then turned it over. “What do you want?” he asked, finally looking up. He had the alcoholic look. Blue spider veins ran through his red cheeks and his large nose.

  “As Vic explained on the phone, I’m with Phenix Capital,” Conner began. “We’re a mergers and acquisitions advisory firm based in New York City. We’re representing a company for sale that manufactures precision machine components for a wide variety of industries,” Conner explained. “It would make a nice fit for Global. Vic thought that, since I happened to be in the area, it would make sense for me to sit down with someone at Global to start a dialogue. That turned out to be you.”

  “My lucky day.” Frolling rubbed his wide forehead. Acting as if this was the last thing he wanted to do right now. “I know most of the companies in the industry. Which one is it?”

  “I can’t say. We’d need you to execute a confidentiality agreement first.”

  “Then why are you wasting my—?”

  “I’d just like to ask you a few questions. That’ll help me determine whether or not the company I’m representing really would fit into Global as well as I believe it would.”

  Frolling shrugged, obviously irritated. “We’re publicly held. There’s lots of information available about us from lots of different sources.”

  “I’ve been through all the public stuff,” Conner assured him. “Your annual reports for the last few years and the SEC docs.”

  “I’ll answer what I can,” Frolling said. “But there are rules about what I can and can’t say.”

  “I know,” Conner agreed. “Okay. Global has a facility in Miami, correct?”

  “Yeah.”

  “What kind of facility? I couldn’t tell from the 10-K.”

  “An import office. We have several plants in Central and South America and we bring a lot of that stuff in through Miami. Mostly work-in-process inventory. But some finished goods, too. It helps to have a local office, if you know what I mean. It’s good to have people on the ground if there are paperwork problems at the docks.”

  “How many people in that office?”

  “Twenty.”

  “How many employees total at Global Components?”

  Frolling thought for a moment. “Two hundred and fifty thousand.”

  A small import office staffed by twenty people and the company’s chief financial officer had visited the facility three times this month when he had almost a quarter of a million other people to worry about. That didn’t make sense.

  “Why do you want to know about Miami?” Frolling asked.

  “The company we’re representing has a facility down there, too, but it’s a manufacturing plant. I was thinking that if you acquired our company, you might be able to save money folding that operation into yours. But I guess not.”

  “No.”

  “How long has Jim Hatcher been the CFO?”

  “Seven years, and that information is definitely in the 10-K.”

  “Right.” Now for the money question. “I understand from a friend that Global Components has an operation in Minneapolis. But I couldn’t find any mention of it anywhere. Not in the company’s annual report, the 10-K, or any news articles I pulled up. I was hoping you could tell me what that Minneapolis operation does. The company I’m representing also has a plant in the Twin Cities, and again I was thinking that there might be some synergy opportunities available if Global made the acquisition.”

  Frolling stared intently at Conner for several moments before answering. “Global Components hasno operations in Minneapolis,” he finally said. “Whoever told you that we do has no idea what he’s talking about. You got that?”

  Conner stared back. “Sure,” he said slowly.

  “Now, you’ll have to excuse me. I’ve got work to do.” Frolling snorted. “Somebody around here has to.”

  Conner stood up. Frolling wasn’t going to be as helpful as Vic Hammond had promised, but maybe that didn’t matter. Maybe he’d already gotten what he needed. “One more question, Mr. Frolling,” Conner said when he reached the doorway.

  “What is it?” snapped the other man.

  “I believe one of the SEC reports lists you as secretary of Global Component’s board of directors.”

&
nbsp; “That’s right, I am.”

  “Do you attend all board meetings?”

  “Yes.”

  “But you aren’t actually amember of the board.”

  “No.”

  “How long have you been the board’s secretary?”

  “Eleven years.”

  “And in that capacity, are you responsible for taking and keeping the minutes of the meetings?”

  “I am.”

  “Do you take extensive minutes when you’re in those board meetings, Mr. Frolling?”

  “Veryextensive.”

  Conner nodded. “Yes, I’ll bet you do.”

  Frolling’s eyes narrowed. “Why do you ask?”

  “Here you go.” Vic Hammond’s executive assistant handed Conner the briefcase.

  “Thanks,” he said, trying to laugh self-consciously. “I’m such an idiot.” He was on his way back to Union Station. “I was almost to the train station when I realized I’d forgotten this thing.” He’d mussed up his hair and pulled his tie way down, trying to look as pitiful as possible. “I apologize for the inconvenience.”

  “No problem.” She smiled, as if she felt sorry for him.

  “Well, see you later,” Conner said, heading for the elevators. He’d seen the compassionate smile. “My cab is waiting.”

  “Have a safe trip,” she called.

  Conner snapped his fingers. “Oh, one more thing.”

  “What?”

  She seemed eager to help. He wasn’t getting the cold shoulder he’d gotten this morning. Perhaps because Hammond was gone, or because the pitiful routine was working. “Vic mentioned that he works with a young person here at Baker Mahaffey named Rusty. Vic said that if I had any questions about what we’re working on, I could call him. But I spoke to someone at the front desk, and they don’t have a record of anyone named Rusty.”

  She laughed. “That’s because Rusty is his nickname. He’s got kind of a squeaky voice. Like it needs to be oiled or something. So Vic started calling him Rusty a while back. It caught on pretty fast around the office. His real name is Phil Reeves.”

  “Is Phil here today?”

  “No. He went to Minneapolis with Vic.”