AIRLINE RESCUE STORY

1. FLYING HIGH BY STUART MANSELL ACCOUNTANCY AGE MAGAZINE (AA)
Ian Herman enjoys taking on challenges that would daunt lesser men. Stuart Mansell profiles a man
who has recently left British World Airlines and is still a highflying troubleshooter looking for a big
show to run.
When Chartered Accountant Ian Herman approached Deloite Touche with a view to buying insolvent
carrier British Air Ferries (BAF) (renamed British World Airlines [ BWA]) he was so to speak shown the door.
But if the front door approach to the administrator would not work Herman was just as happy to try the
back door. And in the process he was able to structure a bid strategy that outflanked his rivals for one of
Britain's largest aircraft charter and maintenance businesses.
Within 15 months he had, as he explained to AA, fashioned a strategy to keep BWA flying high through
the 1990s. He exited much later a seriously wealthier man. By taking a £10,000 option on all the share
capital that Deloite Touche had apparently said was worthless, Herman effectively scuppered rival
alternative take over plans and landed a much coveted and potentially extremely profitable prize. The
problems that brought in Deloite Touche were the result of disastrous property dealings by the parent
group of which BWA used to form a part. Deloite Touche partners Christopher Morris and Nigel Atkinson
came in as administrators in a year when the company notched up losses after a £893,000 net interest
bill.
Herman took over the reins and in his first year the pre-tax profits rose to £2,050,000. Although taking
over BWA might make plenty of sense to managers with experience of the industry, the logic might seem
less obvious for a complete outsider such as Herman, who freely acknowledges that in the beginning he
knew next to nothing about the industry. He recalls that his interest began as a result of a conversation
with John Corre, managing partner of the company’s auditors Auerbach Hope.
According to Herman, Corre said “Do you want to buy an airline”. I laughed and said “Is British Airways for
sale?” He said: “You're close! – British Air Ferries is for sale”.
Corre had no doubt about Herman's suitability. He said: “It seems to me logical to think in terms of
someone who could both run the business and find the money to get it out of administration”. But
Deloite Touche were distinctly cool. Herman revealed that "at the time I originally approached them they
ignored me. I wrote to them expressing interest. They didn't provide me with the information others got.
I was just Ian Herman, individual.” Deloite Touche’s Atkinson retorted: “Right at the beginning we were in
serious negotiations with another party and there was a period of exclusivity at the time he came
forward”.
Atkinson accepts that Herman shrewdly maneuvered himself into an invincible bidding position. The
administrator commented "We certainly did not advise anybody that the BAF share capital was worthless.
It was, however worthless in terms of the balance sheet." But there was a ransom situation. Herman had
discovered through his discussions with BAF management at their airport headquarters in Southend that
the usual take over mechanics were not possible. He said: "I found one fact that the others had not
understood. With an airline you can't do a hive down, that is shake out the assets into a new company
and leave the debts in the old company. The reason it can't be done is because the licenses are personal

2. to the company – routes, air operating certificates and engineering licenses are all personal."
He continued: "what the competition did was to set up a subsidiary and then go to the creditors and say
we will offer you more. I asked them at the creditors meeting how long will it be before you're operating?
They said six months. I knew it would be at least 12 months. I went to the shareholders and said I'd offer
them £200,000 on completion and I paid £10,000 for an option there and then. Deloite Touche had told
them that the shares were worthless. I had locked up the company. By the time they took on the point it
was too late. I'd got the shares."
In seeking to get the licenses transferred to their new company other purchasers would have to run the
gauntlet of protracted objections from all and sundry in the aviation industry – with Herman among the
main objectors.
But while Herman might be a fast learner, the vital question was whether he could learn fast enough to
run a complex business of which he had no previous experience. But it may also be an advantage to be
inexperienced, he thinks. Herman commented:” there is no doubt there is a learning curve in every
business. But County NatWest when I brought the opportunity to them said “one of the reasons we like
the proposition is because you don't know the industry”.
“The key to running a business you don't know anything about is you must build around you a team of
experts. You cannot possibly pretend to be an expert in every industry or company. I make it a rule to look
at the personnel very closely when I go into a company. The key is never the product or the market. It's
the people. If you have not got the people, you don't stand a chance at all”, said Herman.
Herman has wide industrial experience. After qualifying with Coopers and Lybrand in Leeds and some
post qualification experience at their Gutter Lane offices in the City of London, he spent three years in
Zambia running the financial side of Lonrho's brewing interests – the biggest industry in the country after
copper mining.
Then after a spell in the US working as a consultant he was headhunted by the US conglomerate Schlegel
textiles rubber products and plastics organization to sort out its ailing British/European operations on a
highly incentivized contract. He recalled that four companies had lost over £2,500,000. We turned them
round so that we made a profit of £2,000,000 pounds on over £15 million turnover. There were tough
decisions to be taken, including making several hundred employees redundant. He explained: "It was
difficult but absolutely necessary. The business would not have survived. We were supplying products to
the automotive and building industries, which lay at the heart of the then economic storm. It was the most
difficult of my career."
His subsequent activities have included starting Birmingham Technology and the Aston Science Park, a
joint venture between the city of Birmingham, Aston University and Lloyds Bank, which included running a
VC fund.
He also spent time in his own consultancy business when, he said:” I was really looking for a Buy In
situation. I was fortunate in having made money to invest from the Schlegel turn around. And in
eventually assembling the finance to buy BAF. He had impressed County NatWest who had approached
him to see if he could do a turnaround for the public company the Imtec Group.

3. This was a business involved in computer processing engineering data with the use of a laser plotter
known technically as micrographics. Imtec had old technology. The crucial move was to link it up with
another high tech business Laserscan. Herman commented: "We packaged it up with Imtec and sold the
businesses on to Britain & Commonwealth. It was the only way it was going to work. I have been in and
out of high tech and low-tech."
Whatever happens to BWA, Herman is braced to take on still bigger challenges. He is already in
discussions that seem certain to see him back industrial troubleshooting very soon. And he clearly has his
sights set on bigger things.