J. Roy Pottle, BComm 81, MBA 85
One of the first lessons business schools teach — Concordia’s John Molson School of Business included — is that a product’s life cycle consists of four phases: debut, growth, maturity and decline.
While often meant to serve as a cautionary tale, the lesson has a different takeaway for some students: where some see excessive risk, others see opportunity based on calculated risk.
That’s what Campaign for Concordia donor and university volunteer J. Roy Pottle, BComm (marketing) 81, MBA 85, did when he left a job on Wall Street in 1994 to become vice-president of finance at Jones Intercable, Inc., a publicly-traded cable television company based in Denver, Colorado.
Pottle, who grew up in a working-class family on Montreal’s West Island, knew the world of subscription-based telecommunications businesses well, having spent 10 years as a managing director at the Bank of Nova Scotia, managing large media and telecom portfolios first in Toronto and then in New York.
‘A calculated, worthwhile risk’
When he left Jones after four years, however, to become executive vice-president and chief financial officer of Arch Wireless, Inc., a provider of nationwide paging services located in Boston, many friends and former colleagues were skeptical.
The company was overleveraged and growth prospects were beginning to slow as broadband internet services and smartphones proliferated.
“I thought the combination of excess debt and slowing, or declining growth, would lead to industry consolidation which would allow me to leverage my prior experience while simultaneously providing the opportunity to become the CFO of a large public company,” says Pottle. “It was a calculated, worthwhile risk”.
Over the next seven years Pottle successfully restructured Arch on multiple occasions. He also led the acquisition and subsequent integration of two of its largest competitors, creating the largest paging company in the United States with more than 11 million subscribers, 10,000 employees and an annual revenue of approximately $1.1 billion.
He subsequently led Arch through a pre-packaged Chapter 11 (a form of bankruptcy) process. Two years later Arch merged with its next largest competitor and Pottle decided it was time for a new challenge.
“I didn’t really know what I was going to do next,” he says. “For the first time in my career I had the financial flexibility to be picky.
“Initially, I was considering a few CFO opportunities while helping a friend at a small hedge fund, again focused on media and telecommunications companies.”
‘Tail to this business is much longer than most people think’
Three months later Pottle received a call from a boutique investment bank that provided a unique opportunity — Southwestern Bell (now part of AT&T) was selling its paging subsidiary and interested parties were being invited to submit bids.
“Spok Holdings, Inc., which was the successor to Arch, was pre-occupied with integrating the two companies, hence I thought they were unlikely to bid,” Pottle recalls. “Moreover, other industry participants or institutional investors were also unlikely to bid as the industry was clearly in decline.”
Pottle knew of two very important facts about the business, however. First, the cost structure was more variable than most people thought and second, despite double-digit decline rates, large medical customers, who comprised 60 per cent of total customers, were stable as pagers were deeply imbedded in their critical messaging and code-blue processes.
These customers were not leaving, Pottle recalls. “The fundamental observation was, there is a tail to this business that is much longer and more valuable than most people think.”
Based on this belief and his intimate knowledge of the business, Pottle surmised that if he could buy it at the right price, that tail would generate strong returns with minimal downside risk.
In November 2005, Pottle formed American Messaging Services, LLC and with five additional investors purchased Southwestern Bell’s paging assets for $14 million USD.
At that price, and given recurring monthly cash flow, Pottle was confident he could return invested capital within 14 or 15 months. As it turns out he was correct. “Not only has the traditional paging business lasted longer than anticipated, but we were also able to consolidate the industry through 35 acquisitions while simultaneously expanding our product suite.
“We have now returned just over $240 million to shareholders, generating returns on a $14 million investment far greater than expected.”
From grateful student to generous donor
Today American Messaging is the second-largest critical messaging company in the United States. Using proprietary and third-party networks together with proprietary secure mobile applications, American Messaging serves over 650,000 subscribers delivering approximately five million critical messages every day.
Pottle leveraged his knowledge to ensure the industry’s survival — a durability many doubted when he left Wall Street almost three decades ago.
The gamble has paid off handsomely for fellow shareholders and for students at the John Molson School of Business. The two-time graduate, who says case competitions were pivotal to his success, has funded several scholarships at his alma mater.
“I’m very grateful for the opportunities resulting from my Concordia education and pleased to give back and facilitate the same opportunity for others,” says Pottle.
“When I was running around Riverdale High School in Pierrefonds, I never thought I would have the opportunity to give back in this way. If not for my parents underlining the importance of education and Concordia providing a very good education, my life would be very different. This was never more apparent than when I was in New York, competing with graduates of Harvard and other Ivy League schools.”
