Stephen Polk has never been afraid to do things a little differently when it comes to dealmaking. Two of the most successful acquisitions he made while leading R.L. Polk & Co. began with a minority investment.
“These were deals that had aligned objectives for what we were trying to do with the company,” says Polk, who served as chairman, president and CEO of the family business. “They had strategic value. In both cases, we started with a minority partnership interest that was significant, but we were not fully in control. We were involved in the early-stage growth, proving the product process and then acquiring 100 percent of the business and running from there. Those deals were very significant in supporting our growth as a company.”
Polk is the great-grandson of Ralph Lane Polk, who founded the automotive data company in 1870. The younger Polk played a key role in continuing the company’s legacy of success, making an estimated 50 acquisitions to facilitate continued growth. Then in 2013, he closed a $1.4 billion deal to sell the company to IHS Inc.
We spoke with Polk about the sale of the business, his Highgate family office investing platform and his continuing love for data-driven processes.
Timing is everything
The first step toward the eventual sale of R.L. Polk came in the fall of 2012 as Polk was entering into some strategic planning for the business.
“We recognized some of the future challenges that we had in the business, which led us to look at a broad range of business succession plans, as well as people succession and ownership succession,” Polk says. “I was the only family member in the business at the time. At that point, it was a brief consultation with one of our investment bankers that I knew. He asked if we were ever considering selling the business, what was the timing for it? Timing is everything.”
Polk wasn’t committed to any particular type of transaction in doing a deal.
“A strategic buyer like the one that found us was ideal because they were looking to use us as their platform foundation in the automotive arena,” Polk says. “That’s certainly best for the employees and, as it turned out, for the shareholders. It was an ideal situation.”
The deal was an emotional experience, admits Polk. But he has no regrets.
“We had some business needs that were evolving and we needed to raise capital,” Polk says. “Coming up with strategic acquisitions was going to be much more expensive than it had been historically with where valuations were headed. I just got over the emotional hump. It was the right thing to do. The majority of the family interest was not located here and didn’t have the same emotional ties.
“When we went up for sale, we didn’t have to sell. That’s always the best time to go to market. As a private business, we had done a very good job with our accounting and the way we ran the business was by the book. It helped us negotiate a deal that was not cumbersome.”
Follow a deliberate process
Once the deal was done, Polk says he was counseled to not just jump right into his next endeavor.
“There is no reason to try to occupy all your time day one,” he says.
Still, when you’ve been in business making deals all your life, it’s hard to stay on the sidelines for too long. So Polk launched a family office, Highgate LLC. Polk leads the private investment company based in Birmingham alongside a support crew that has made for a smooth transition.
“There’s no single model to run a family office,” Polk says. “They are all different. It depends on where you’re coming from. One of the keys is making sure you don’t go too fast. You want to be deliberate about your process.”
Much of Highgate’s success is built around a steady approach to strategic planning around private equity investments.
“We’re not really in the deal business,” Polk says. “It’s more investing in and waiting for a number of private equity investments. They go through their own process of maturing.”
As with the sale of R.L. Polk, one key to investing is trying to take the emotion out of the process, Polk says.
“Make sure you keep an objective view on what’s happening,” he says. “Coming out of a family business where you’re very much focused in your expertise area, success as a family office is about being diversified so you’re not overly committed to any one strategy. That’s a significant change. Other than that, it’s just making sure you have good people to support what you’re doing and that you stay disciplined.”
Enjoy the journey
Polk continues to be fascinated by the process of identifying data points and using that information to drive more informed decisions.
“Using data to make business better is exciting, wherever you happen to be,” Polk says.
As valuable as data can be, Polk says there will always be a place for human instinct and judgment, as well as the willingness to take risks.
“It’s about understanding how to let data support your ideas that really creates a lot more value,” he says. “At some point, any brand new venture is about understanding what data could validate your assumptions. That evolves as your business grows. At the end of the day, no one knows for sure whether something is going to work. There are very few guarantees.”
