Where to from here, page-57

I came across one who had the "balls" to speak the truth but she had to "move on"

LONE VOICE OF A DISSENTER

In the middle of the capital raising, on April 14 of 2015, a broker dissented. Bank of America Merrill (BAML) Lynch's young analyst Nadya Nilova published an explosive report that questioned the price agreed by Slaters for Quindell and its ability to generate growth in its existing businesses.

Nilova, in her mid-20s, was relatively new to the role but, with the apparent backing of her senior supervisors, showed courage and risked the ire of her larger clients to break with consensus, particularly part-way through a capital raising.

Quindell had put its professional services division together through 20 acquisitions over a three-year period from 2011 for an outlay of £265 million – but Slaters forked out £637 million. Nilova also questioned the extent to which Slaters had generated organic growth in earnings compared with profits that had effectively been bought through deals.

Grech and his finance team had long since counted on the support of the sell-side analystssuch as Nilova at BAML.

Slaters had been among the best-performing shares in the ASX 200 and become a favourite among small-cap fund managers such as Colonial First State and Wilson Asset Management. It was a high-growth emerging company generating high returns for buy-side clients (fund mangers) and feeding the street with potentially lucrative investment banking work.

As Slaters had grown in size, it had attracted the attention of the big brokers such as BAML, Deutsche and UBS, which began to follow and rate the stock, naturally assigning "buy" ratings.

The BAML April 14 report was unusually blunt in an analyst community that has few reasons to question company management. Rival brokers dismissed Nadya Nilova's work as that of an inexperienced analyst possibly out to sabotage a capital raising.

The reaction among the big buy-side clients was ferocious, and expensive for BAML. The biggest buy-side funds write the biggest orders and sources said they were openly hostile towards BAML, threatening to boycott the bank over its research.

Nilova resigned from BAML in July to join market trading firm Optiver.


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