UK: FAST-BUCK FRATERNITY.

UK: FAST-BUCK FRATERNITY. - Much of what Jim Slater espoused in the '60s and '70s could have provided a blueprint for the get-rich-quick Thatcher years. Indeed, many of the beneficiaries of his credo are still prominent members of the Tory Government.

by Chris Blackhurst.
Last Updated: 31 Aug 2010

Much of what Jim Slater espoused in the '60s and '70s could have provided a blueprint for the get-rich-quick Thatcher years. Indeed, many of the beneficiaries of his credo are still prominent members of the Tory Government.

Once a year in a City wine bar, a group of middle-aged men meet for a reunion. They could be from any one of the myriad banks, brokers and professional firms that fill the Square Mile - except this group is different. The talk, as with many such gatherings, is of the past and old colleagues. But there is one name for whom members reserve special affection, a name which crops up time and again but whose owner is never there in person: James Derrick Slater, to those assembled, always Jim.

He was their boss, someone whom, to a man, they worshipped and who, even now, at least 21 years since they all worked at Slater Walker together, is still their hero. Back then, Slater was an intensely charismatic figure, a superstar, 'the cleverest man in the City', who took the business world by storm. Now the group that meets every year is what remains of Slater's boys.

The swashbuckling swagger of yesteryear has long gone. Gone, too, is the fear factor. No captains of industry live in dread that their company might be next on the boys' shopping list, might be about to be 'Slaterised', City code for having their assets stripped. For Slater's creed was short-term gain, piling in, making a quick profit, then piling out again just as quickly. Long-term investment, sustained organic growth, capital injection, were not his bag. Constant rising earnings fuelled by more and more acquisitions were what he sought. He borrowed heavily, chose a company with a good track record that was now down on its luck and was in and out. Cut and run were his watchwords, cut your losses and run your profits.

But that was not the half of it. With a confidence verging on arrogance, Slater played the stock market as well, and managed money for others.

He started, for example, a unit trust, maintaining it would not invest in Slater Walker itself, and yet, within months, Slater Walker was its third largest investment. Another scheme was the investment trust which was run by Slater Walker, invested in companies in the Slater Walker empire and sold its shares to ... unit trusts run by Slater Walker.

While Slater's star was in the ascendant, none of this mattered. After all, his heyday was well before the days of the Financial Services Act, independent advisers and Chinese walls. This was all about the old, little regulated City, all about playing the game and making a killing.

Disturbingly, perhaps, given their prominence, a lot of senior politicians are eligible to attend the Slater boys' reunion, among them Jonathan Aitken, former chief secretary to the Treasury, Alistair Goodlad, the Government chief whip, Tony Nelson, trade minister, and John Butterfill, the Tory backbencher.

Slater's one-time partner, Peter, now Lord, Walker, who went on to become Welsh secretary, can also go. In the past, the late Sir Peter Morrison, Margaret Thatcher's parliamentary private secretary, could also have attended.

No company, not even N M Rothschild in the first flush of privatisation under Thatcher, has ever been so inextricably linked with one political party. For a time, it seemed Slater and his all-conquering Slater Walker and the Conservative government of Edward Heath went hand in hand: Slater ruling the City, Heath ruling the country.

Then, it all went horribly wrong. In 1973, Slater Walker shares stood at 284p; in 1975, by the time Slater suddenly resigned, they were at 35p.

The £200 million empire (£1.5 billion at today's prices) that Slater had built from scratch fell to pieces. Profits had plummeted from £23.4 million in 1973 to £14.5 million in 1974. And, in the six months prior to Slater's hasty departure in October 1975, to £2.2 million. A depressed stock market, exposure to the property and secondary banking crashes and an official enquiry in Singapore into one of Slater Walker's offshoots combined to bring the empire down.

In truth, Slater was not forced to go: Singapore was an excuse. Slater had been looking for a way out for years and this was it. He told friendly journalists he wanted to retire, that he'd lot his zest for the game.

He was also concerned about the attentions of hostile journalists, notably Charles Raw, who was researching the book, Slater Walker - An Investigation of a Financial Phenomenon.

Soon after Slater's exit, the whole pack of cards came crashing down.

Publication of the group report and accounts in 1976 revealed Slater Walker's indebtedness to be far higher than publicly realised. Slater Walker Securities was taken over while Slater Walker Bank was put under the care of the Bank of England before finally being liquidated. And the great man himself came under the scrutiny of the British authorities. After a Department of Trade investigation, Slater was prosecuted on 15 charges under the Companies Act. He was subsequently cleared on all counts but ordered to pay his own costs.

Investors who had regarded Slater with reverence were left to count their losses. Few of his friends and acquaintances, however, were left stranded: they had made their profits in the good years and left before things turned sour. Such friends included Edward Heath, who held shares through a nominee account at Brown Shipley, the merchant bank where he was a director prior to being elected Tory leader in 1965. When he became prime minister in 1970, he had had to get rid of his shareholdings. While Heath made no profit on the shares he held in Slater Walker, his sale of shares in Ralli and Tokengate, two Slater vehicles, to a Slater Walker nominee netted him a profit of £21,500 or £215,000 in today's prices (around three times the salary of the current occupant of Number 10).

Such profit margins were typical, and go a long way towards explaining the loyalty Slater commanded. His own fortune, in 1967, was estimated by the Financial Times at '£2 million plus' or over £20 million at today's rate. The returns he was making were colossal and fast. Slater Walker Securities bought Cork Manufacturing, for example, for £1.1 million and by selling off all the assets realised a clear profit of £450,000 within six months.

The rewards for Slater's boys were immense: they could buy share options up to four times the size of their salary, to be exercised after three years' service at the market price in force on the day they joined the company.

When Slater decided to make a major move, the satellites were expected to join him. Assets were sold to them, sometimes they took strategic stakes themselves. All that interested Slater and his boys was risk-taking, the next deal, or as they called it, the next share 'ride'.

Anyone who was anyone had connections with Slater. Nowhere were those connections more apparent than in the higher reaches of the Conservative party. Set against the radicalism and vigour of Labour, in the shape of Harold Wilson and Tony Benn and their promises of technological revolution, the Tories had begun to look old-fashioned and past their sell-by date.

That changed, in 1965, with the elevation of a new leader who did not belong to the old, land-owning class of a Douglas-Home or a Macmillan, and who espoused promotion on merit.

In the first flush of its election victory in 1970, Heath's government was even labelled 'the Slater Walker government'. There was, wrote the New Statesman, an 'unprecedented nexus between the political and business ethics which the country has still barely comprehended'.

One obvious common tie was Walker, Slater's partner. It is difficult now, looking back, to realise just what an inspirational figure he was. Anthony Sampson has described him as 'the most obvious prodigy of the New Toryism. Brash, successful, Walker stood for a new, thrusting, young generation of Tories who cared little for past results or reputations.' With Walker as his partner, Slater asserted: 'We are money makers, not thing makers.'

Some of those ways of making money have since raised eyebrows. Again, the political link was strong. In 1962, Nigel Lawson was a Tory MP and also City editor of the Sunday Telegraph, when Slater contacted him suggesting he penned a monthly share-tipping column. The column that he created, Capitalist, has since passed into City and journalistic folklore - for all the wrong reasons. Slater tipped shares all right, but omitted to tell readers he owned them too or that his friends did. In the two years he wrote Capitalist, he tipped 21 shares altogether and, according to Raw, Slater was in 11 of them.

One journalist who was taken with Slater was Jonathan Aitken. In his book, The Young Meteors, Aitken relates, wrongly, how Slater had turned an initial £2,000 stake into £50,000 before he started writing his newspaper column. Aitken was so star-struck by Slater that he went to work for him, leaving a successful career in journalism to head Slater Walker's fledgling Middle East operations. This all happened during Slater's overreaching ambitious period and, not long after, the business went down. But not before Aitken had secured some valuable, extremely useful Arab contacts who were to serve him fantastically well in later years.

Another fan was Alistair Goodlad who, as Walker's personal assistant, was better placed than anyone to see the Slater Walker operation at close quarters. He also profited, doubling his money on shares held in Rodwell, a property company which was linked to Slater Walker.

Goodlad went on to work for Malcolm Horsman who headed Ralli. Ralli was broken up, with Ralli Brothers merchant bank becoming Slater's banking arm, and Ralli International, its commodity trading division, being floated separately. The Ralli flotation was pure Slater. Ralli had a remarkable flotation price earnings ratio of 15.8, compared with 9 for other commodity groups. The whole thing was justified on the basis of promises of acquisitions from Horsman. In fact, there was nothing in the company. Horsman later admitted it had 'no liquidity other than banking facilities and overdrafts necessary to sustain its profit level'.

One of the main beneficiaries of the Ralli hype was the company Tokengate. It sat on shares worth over £1 million which had cost it next to nothing. Tokengate was a vehicle for Slater Walker employees, clients and friends - including Heath himself - to cash in on the company's deals.

Perhaps not surprisingly, most of those who left Slater Walker for politics are not keen to discuss the extent of their involvement, so how much they made, or their state of knowledge of Tokengate, say, are unknown. One MP who will admit he 'did well' out of Slater Walker is John Butterfill.

He goes to the reunions unfailingly but, for most of his colleagues in politics, Slater Walker was a long time ago and is no longer relevant.

That is true up to a point. For much of what Slater espoused could have been a blueprint for the Thatcher years: improving efficiency, keeping managers on their toes, removing non-performing assets, paring back to the bone. Roger Young of the Institute of Management, who remembers him from the '60s and '70s, describes Slater as 'one of the first industrialists who, as a qualified accountant, bothered to look at the report and accounts'.

There was, though, a downside. More than someone who could read a set of figures, Slater was a manipulator of their worth, of share prices, of stock market sentiment, of investors and their faith in him. He was, says Young, 'the first greenmailer, the first to focus attention on redundant assets, to promote a get-rich-quick culture.' The rest came with the successive Conservative governments from 1979, many of whose members served under, or knew and admired, or even made their fortunes from, Jim Slater.

Nine steps to success

Slater's 'Nine Essential Requirements for Success', delivered to a group of industrialists in Liverpool in 1967:

- Very strong financial central control

- A strong team, free of day-to-day routine

- Each acquisition to fit well into an existing division of the company or to be of sufficient size to form the nucleus of a new division

- All acquisitions to be 'financially orientated', as well as making general commercial sense and providing scope for substantial organic growth

- Acquirers should take a stock market-orientated approach Industrial companies to be managed in the same way as an investment portfolio

- Acquisitions, in general, to have good asset backing

- Acquisitions, in general, to be substantial in size

- Central management to be free to tackle trouble-spots and to assist in selling off loss-makers.

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