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Intrapreneurship: Entrepreneurship in the Corporate World
June 10, 2013
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What Investors Look For – A Robust Business Plan
July 22, 2016

A Good Deal Won

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As we are discussing on how Entrepreneurs should think with their hearts, we share an instance from Mr Inderjit’s Book – The Art and Science of Entrepreneurship, where thinking with his heart, he was able to make a very great business decision. 

“When I started United Test and Assembly Center (UTAC), I wrote a business plan requiring 200,000 square feet of building space in Singapore, which could last the company at least its first five years of business before it expanded its operations. When our company began, my team started looking for a building of the size we had planned for, something in the range of 200,000 to 250,000 square feet. We had looked at a number of buildings, and most fitted excellently with our plans.

Just as we were negotiating the purchase of a building, a new opportunity arose. Micropolis, a disk drive maker, had gone out of business, and the company’s liquidators were looking to dispose of all the assets. They had a 400,000 square feet modern, fully fitted factory, which I estimated to have cost the owners at least S$60 million to build. I went with several of my team members to look at the building, and I had a special feeling about it. Somehow, I could sense it would be a perfect fit for what I hoped to achieve for UTAC. But there was one glaring problem I had to contend with – the Micropolis factory building was just too large for our plans – double the space we had initially planned for. In addition, we also expected it to be double the price we planned to pay for our intended building.

Many of my team members opposed my plans to make a bid for the building, because they thought we would be overdoing things and there was no way we could afford the building. Some of my shareholders were very uncomfortable because of the size and also the fact that the building was “bad luck” since Micropolis had failed in it. However, my gut feel told me the building would be a perfect fit, and the detailed analysis I did to come out with the 200,000 square feet building requirement did not have to be correct. I also felt we could get a very good price for the building, and my gut feel was that we should bid for the whole 400,000 square feet by paying about the market price of a 200,000-square foot building. Some thought I was crazy and that there was no way we would win the building.

At that time, we were in the advanced stages of negotiating for a 200,000-square foot building, and if we wanted to bid for the Micropolis building, we had to employ some delay tactics with the building owner so we would still have an opportunity to acquire the building if we failed in our bid for the Micropolis building. Of course, my feel was not just based on empty considerations. I thought if I could offer cash for the building, the liquidator would be pleased because the liquidator’s job would be made easier with an upfront cash deal. My heart was telling me this would be a very good deal, and a very good way of jumpstarting our new company. I was quite fixed on getting the bid done. With the agreement of a couple of my major shareholders – the entrepreneurs among my shareholders – who must have also “sensed something in their bellies” about the Micropolis building, my team started preparing for the Micropolis building bid. We kept things very secretive and even submitted the bid just five minutes before the closing of the tender.

To cut a long story short, my feel of what the liquidator was looking for and the price we needed to pay turned out to be correct. We got a 400,000 square feet building for the price of a 200,000 square feet building, so my shareholders had no reason to block the deal as we would be acquiring a very cheap property, which would allow the company to start quickly. My team members were happy because we had obtained a very well-fitted factory, which would make our job of starting our operations much easier, without draining too much cash by buying a large building, and more importantly, we would not have to worry about expansion for the next five to eight years.

Had I gone with my logical thinking and thought with my head, there would have been little reason for us to bid for the Micropolis building. My heart told me it was the best building, that I could get it despite the odds, and despite many people telling me it was impossible. My heart was right, and today, that visionary decision has allowed the company to expand to beyond our original plans. In addition, the value of the building must be much more than what we paid for in 1998.

Today, UTAC has moved into another building since the original Micropolis building became full.”

Found this Story Interesting? Want to read more? Get Your Copy of The Art and Science of Entrepreneurship Today.

 

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