As he hands over the reins at law firm MBM Commercial, Sandy Finlayson reflects on the need to look over the horizon for ‘the next big thing’ while still maintaining a firm hand on the tiller, writes BQ editor Peter Ranscombe.
A quick glance at the CV of lawyer Sandy Finlayson reveals his links to a veritable Who’s Who of the Scottish technology ecosystem. He introduced Mike Rutterford to Barry Sealey, which led to the creation of the Archangels business angel syndicate, and then brought the investors together with inventor Douglas Anderson to finance the foundation of eye scanner maker Optos.
Finlayson’s greatest hits also include being present at the births of both Business Forum Scotland and Connect, the role of which has since been taken over by Informatics Ventures, as well as introducing Sandy McKinnon to Edward Pickard to finance the expansion of energy consultancy McKinnon & Clarke. More recently, he has also been involved in the creation of six of the UK’s 17 enterprise capital funds, including Seraphim Capital, which was the first to launch.
Yet for a man who has forged a reputation as something of a godfather figure in Scotland’s cutting-edge technology sector, Finlayson clearly finds inspiration from some very traditional sources. Whether through serving on a minesweeper with the naval reserves or teaching his grandson how to play the bagpipes, he clearly hasn’t forgotten his roots, despite spending a career operating at the top levels of corporate finance for tech companies. Those roots have also influenced his ethos for business.
“We frequently talk about our moral compass – ‘doing the right thing’ is more important to us than ‘doing things right’ and there’s a big difference between the two,” explains Finlayson, who stood down as senior partner at MBM Commercial over the summer to make way for Stuart Hendry, with whom he founded the law firm in 2005.
To illustrate what he means, Finlayson points to “Repo 105”, the now-notorious accounting trick that Lehman Brothers used to make its balance sheet look stronger than it truly was in the months and years leading up to the 2008 global financial crisis.
“Repo 105 was an example of ‘doing things right’ because it didn’t break any rules but it’s wasn’t ‘doing the right thing’,” he says, highlighting that his firm also doesn’t deal with alcohol, firearms or tobacco. “We play the game according to the rules – the tax breaks in this area are so generous that there’s no need to break the rules. All we’ve got is our reputation.”
Born and brought up in the village of Aberfeldy in Highland Perthshire and educated at Morrison’s Academy in Crieff, Finlayson’s father was a chartered survey and land agent working with estates, instilling in him the values of hard work and integrity.
“I remember my father telling me that the life of a writer to the signet in Charlotte Square was probably a bit easier than the life of a chartered surveyor so maybe I should try a law degree – and so that’s what I did,” laughs Finlayson. “I am sure I made the right choice because life in the country has changed out of all recognition. Writers to the signet have also had to work much harder, but I have enjoyed every minute.”
Finlayson studied law at the University of Edinburgh, but he believes that his “holiday jobs” also had a big influence on his development. He worked as a labourer on building sites and busked as a bagpiper in the South of France, as well as serving at sea with the naval reserves, first on the lower decks as an ordinary seaman and then later as a junior officer.
“Looking back on it, the environment of being part of the crew of a minesweeper taught me the importance of discipline and teamwork and the need to be positive,” he remembers. “I still regularly – to the annoyance of my partners – using nautical analogies when it comes to our business planning.”
Joining the naval reserves and learning to play the pipes both meant following in the footsteps of his father, who had served in the navy during the Second World War and continued to be part of the naval reserve after he was demobbed. Sailing with the reserves and playing the pipes in the South of France instilled a love of travel into Finlayson, an interest that subsequently spawned family trips to many far-flung corners of the world, including Australia, the Caribbean, Kenya, Peru and Tibet.
“I’m endlessly curious,” he admits. “I get enormous pleasure from being in the company of other people. I enjoy meeting new people and going to new places and doing new things.”
That desire to do new things is reflected in his career. After graduation, Finlayson undertook his apprenticeship with Ketchen & Stevens. “There I met a wonderful guy called David Pearson who was a trainee with me and who was a big influence on me,” he says. “He was also very much a businessman as well as a lawyer and so it was through David that I learned about the world of business.
“I qualified and decided that I wanted to learn more about commercial law and so I spent a year at McGrigor Donald in Glasgow, where by the time I had paid my mortgage and my train fare from Edinburgh, I only had a one pound left over – so what I earned over the weekend from the naval reserves became very important.”
After a year in Glasgow, Finlayson transferred to J & R A Robertson, which was the Edinburgh court correspondent of McGrigor Donald, where he met lifelong friend John Stewart, a lawyer in Campbeltown and coxswain of the local lifeboat. The pair still enjoy sailing together in Argyll.
By now Finlayson was married and had a young family and so he needed to “start earning a living and get ambitious”. He became a partner at Fyfe Ireland, a boutique law firm that specialised in commercial property. “Looking back over the threads of my career, I’ve always been involved in new things: at Fyfe Ireland I got involved in out-of-town retailing,” remembers Finlayson.
“Through the offices of another very old university friend – Robin Finlayson, who was a partner at EY in Edinburgh – I was introduced to Mike Rutterford. Robin and I spent several months working with Mike to raise a modest amount of money for his company, Stuart Wyse Ogilvie, which grew very quickly and was sold 18 months later and gave a 19-times return to its investors.”
The sale of estate agency chain Stuart Wyse Ogilvie to General Accident in 1981 for £16m marked a sea change in not just Finlayson’s story but also in the creation of Scotland’s thriving tech ecosystem.
“Because I learned how to play the bagpipes, I met a chap called Professor Stuart Hamilton, who was the secretary of the Royal Scottish Pipers’ Society. Through Stuart, I got to meet people at the Industrial & Commercial Financial Corporation (ICFC) as it was then – and is now 3i – and I got involved in the management buyout of the Dundee part of Ferranti, which became a company called Albacom. It appointed Barry Sealey as a non-executive director and so I got to know him as well. For my sins, I introduced Barry Sealey and Mike Rutterford to each other.”
Rutterford and Sealey founded the Archangels business angel syndicate in Edinburgh in 1992, which has gone on to invest more than £90m in 80 Scottish companies, which have together turned over at least £1.3bn and created nearly 3,000 jobs. This summer’s Archangels impact evaluation report compiled by the Hunter Centre for Entrepreneurship at the University of Strathclyde painted a fascinating and very honest portrait of the syndicate’s activities, not shying away from the 36 businesses that have failed as well as celebrating the 22 companies that are still active and the 18 that have moved on through trade sales, initial public offerings (IPOs) or a management buyout.
“David Simpson, who brought Hewlett Packard to South Queensferry, was the one who told me what a business angel was,” explains Finlayson. “He had come across them in America, where he had turned Gould Electronics from a US$100m company into a US$1bn company over a period of about nine years and then came home to Scotland because he wanted to give something back.
Barry and Mike had both wanted to be business angels but they hadn’t expressed it in those terms because that phrase didn’t exist in Scotland up until that point. Then it all came together with Douglas Anderson.”
Finlayson had met Anderson at a Scottish Enterprise networking event in Fife and had been struck by his story. His five-year-old son had become blind in one eye after his detached retina was spotted too late to save his sight, and so Anderson invented a patient-friendly machine that could spot such eye problems.
“Douglas told me that he had this great business idea, which had been rejected by 200 venture capitalists,” Finlayson says. “I told him that he needed a business angel and so he phoned me the next day and asked me to find him a business angel. So I introduced Barry and Mike to Douglas and he got his money within a month.
That led to the start of the Archangels business angel syndicate. That was a lucky break for me. Mike and Barry got on like a house on fire. I had the great good fortune to introduce them to some of their early transactions because the market had begun to hear about this and the syndicate had been good enough to credit me with coming up with the name ‘Archangels’.”
Anderson’s business was launched in 1992 as Optos, which floated on the stock market in 2006 and delisted earlier this year when Japanese camera giant Nikon bought the company in a £259m takeover deal.
Through the offices of Murray Burns, another university friend, Finlayson found himself doing part-time tutoring on the legal diploma course at the University of Edinburgh, Finlayson met fellow lawyer Ruthven Gemmell. Finlayson’s firm, Fyfe Ireland, had been amalgamated with Bird Semple and Gemmell invited him to build up a commercial division at Murray Beith Murray in 1993.
“While Ruthven set up a very successful private client investment management business, I was given complete latitude by my partners to build up the commercial division,” says Finlayson. “The firm was also a founder shareholder in a private client stockbroker firm called Law Share, which was successfully sold in 2003.”
Finlayson was also involved in two key conversations triggered by Scottish Enterprise chief executive Crawford Beveridge. The first concerned the birth-rate for businesses and led to the formation of Business Forum Scotland to help ambitious entrepreneurs to meet potential mentors and customers. The second asked how the nation could commercialise its science base, from which emerged a body called Connect, the role of which has now been taken over and greatly expanded by Informatics Ventures.
The energy sector supplied another of Finlayson’s best-known successes, “In 1995, I had the good fortune to meet Sandy McKinnon, who set-up a company called MacKinnon & Clarke,” he says. “I introduced him to an old friend called Edward Pickard, who had just cashed-out as finance director of Invergordon Distillers. That enabled us to do a financing, which allowed MacKinnon & Clarke to grow from 50 people to 350 people, prior to a very successful exit.
“Then the dot com boom came along and I can’t think how many dot com companies we got involved with starting up,” adds Finlayson. The ensuing dot com bust made Murray Beith Murray start to re-evaluate its strategy, which in turn led to Finlayson and Hendry spinning-out the commercial department in 2005 as MBM Commercial.
Hendry and Finlayson set the business up with David Calder, who suggested having an out-sourced information technology (IT) system and cash room, the facility in a law firm that handles financial functions. Out-sourcing its IT function has given MBM Commercial a “cost advantage” over its competitors.”
Since 2005, Finlayson has been involved in setting up enterprise capital funds, which are a major initiative of the British Business Bank. His work has taken him to London, Milan and other exotic climes, and has helped him to appreciate what Scotland has developed in its tech ecosystem.
While Finlayson plans to remain as a partner at MBM Commercial until the end of its current financial year on 31 July 2016, he still aims to play a role with both the firm and the wider tech ecosystem. “I certainly won’t be retiring,” he laughs. “I just love working in this whole area and I’m keen to continue to be involved in it for as long as I can make a positive contribution.”
Having been married to Helen for 40 years and being surrounded by three children and six grandchildren means there’s “never a dull moment”.
Although he’s clearly still on the lookout for “the next big thing” on the horizon, there’s also a project closer to home that Finlayson plans to begin. “My grandson has just started playing his first chanter,” he smiles. “So hopefully I’ll be able to teach him how to play the bagpipes too.”