We re-tell the story of how legendary Aberdeen Entrepreneur Robert "Bob Keiller" took over a Halliburton company and made himself one of the richest men in Scotland, selling his company to Aberdeen's Sir Ian Wood for £1bn.

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Extracted from the Book - Sir Ian Wood Aberdeen's Billionaire.

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Born and raised in the Scottish Borders town of Jedburgh, nestled in the heart of Scottish Rugby Country, Robert (Bob) Keiller emerged from a region renowned for rugby. Despite the town's fame for rugby, the area's most celebrated figure internationally was Jim Clark, Formula 1 World Champion of 1962 and 1965. During his childhood, Bob distinguished himself as a diligent and hard-working student at Jedburgh Grammar School, and didn't necessarily stand out. However he exhibited early signs of entrepreneurial spirit by starting a paper and magazine delivery business in the local area. The venture flourished, expanding as his customer base grew. Eventually, Bob had a team of 15 paper boys and girls delivering magazines and newspapers across the community. After completing his education at Jedburgh Grammar School, he departed from his beloved hometown and embarked on a journey to the bustling bright city lights up north in Edinburgh. There, he pursued a degree in electrical engineering at Heriot-Watt University. Despite being a highly motivated young man, Bob did not display overt signs of grand ambitions to ascend the corporate ladder or lead his own company. His focus lay more on developing a career rather than getting lost in the clouds of lofty ambition. In his youth, Bob initially aspired to study graphic design, harbouring a fascination for the art landscapes of Brueghel, the dark works of Hieronymus Bosch, and Picasso's war painting Guernica. However, his dreams of artistic design did not materialise, leading him to embrace engineering as the next best pursuit. After completing his studies in Edinburgh, and having his first few small electrical engineering jobs, Bob got a major career opportunity, joining BP as a graduate electrical engineer in 1986. His initial role with BP involved working at the Easington Oil Terminal in Humberside, followed by an offshore assignment on the Magnus Oil & Gas Platform. In 1989, he transitioned to the BP Forties Artificial Lift Project. Bob's talents did not go unnoticed, and he soon attracted the attention of headhunters. He was subsequently recruited by TFCW and later by the renowned U.S. Oil & Gas company, Amerada Hess. 

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Bob's initial role at Amerada Hess was “Loss Prevention Supervisor”. His responsibilities included identifying and preventing employee theft, addressing financial inefficiencies, and conducting internal audits and investigations to pinpoint preventable company financial losses. Within a span of just nine years, Bob climbed the corporate ladder with six promotions. He faced a crossroads moment when offered the chance to relocate to Amerada Hess's global headquarters in the United States to join the senior management team. However, given his commitment to his family in Aberdeen, the prospect of an overseas assignment did not appeal at all. Bob declined the opportunity and chose to leave Amerada Hess, a decision that, while difficult, set the stage for one of the most compelling business adventure stories in Scottish Business history.

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As he exited the Aberdeen headquarters of Amerada Hess in 2002 for the final time, little did he envision the life of adventure and excitement that awaited him. Bob secured a position with a subsidiary of the powerful U.S. Oil & Gas service company, Halliburton (KBR Aberdeen). Later that year, he was promoted into the top position as the company Managing Director. Founded in 1919, Halliburton had been involved in the Oil Industry since its inception and entered the UK market in the'70s just as the industry was taking off. Its primary focus was supplying engineering and personnel services to the UK offshore Oil & Gas Industry, involving the construction, repair, and maintenance of Oil & Gas platforms, very much always a direct competitor to Sir Ian's Wood Group. In the mid-'90s, Norwegian company AOC International was acquired by Halliburton, and it later became KBR. Bob had proven himself highly capable at KBR. His warm and engaging personality was successful not only with employees but crucially with clients. His open, non-hostile management style endeared him to the workforce, often choosing to sit in the company canteen at lunchtimes, he would approach and ask a random staff member if he could join them for lunch, starting conversations and showing genuine interest in their work and life. A very hands-on CEO, often found at staff members' desks sorting out relatively minor issues to ensure they were closed out properly. In sharp contrast, Sir Ian Wood's management style was more distant. Although among the most approachable managers in the Oil & Gas Industry, Sir Ian maintained an air of superiority setting him apart from the shop floor. Mingling with staff on a personal level, as Bob did at KBR, was less prevalent. Wood Group, by 2004, was a much larger company, with many more layers of management that kept Sir Ian from dealing with issues directly at the coalface. The culture and management structure at KBR meant there were only four people between his pay grade and any other pay grade in the company.

Bob had grand ambitions for the company, but soon realised that these aspirations were unintentionally hindered by the very company he worked for. KBR's head office in the United States, into which Bob reported, wanted to bid for large-scale projects with high profit margins, exceeding those available in the UK Oil & Gas offshore maintenance market. Bids and tenders submitted by Bob and his team had to be approved by KBR head office in Houston. It became common for tenders reviewed in Houston to be rejected for submission as not "profitable enough," or Bob was asked to increase the profit margin, risking pricing the company out. KBR Houston also imposed unsustainably high overhead demands, essentially using it as a profit centre for KBR in Houston. KBR Aberdeen had to buy office space rental, desk rental, IT services, and a whole host of other services and pay substantially inflated prices through an Internal company. Bob and his team reached a point where they no longer bid for certain work, knowing they couldn't meet the KBR head office bid pricing structure, making it highly unlikely they would win anyway. KBR in Houston had little understanding of loss leading or undertaking small scopes of work for small margins, to engage and develop client relationships, hoping they might deliver larger and more profitable work scopes in the future.

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The company was also losing much of the work they bid, and barely holding onto what they did have. Bob and his Chief Financial Officer, Duncan Skinner, felt they were merely an afterthought within the overall KBR group, very much at the bottom of the food chain. KBR Aberdeen was consistently seen as a poor performer for KBR in terms of sheer profit and margin percentages, which was nonsense. The Aberdeen division boasted a robust portfolio of clients, a healthy order book, and had a great reputation. Contrary to the perception at KBR's head office, the Aberdeen division contributed 15 percent of the company's total income. 

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By early 2000, it was widely known Halliburton was considering spinning out KBR as a separate company from the Halliburton group. Upon learning of Halliburton's intention to spin out the company, Bob and his CFO, Duncan Skinner, devised a plan. They reached out to Halliburton KBR's global CFO, Chris Gaut, and organised a trip to Houston to present an intriguing proposal.

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Bob gathered the Aberdeen board of KBR Production Services, which included CFO Duncan Skinner, Peter Brown (UK Operations Director), Alistair Green (Business Development Director), Dean Hunter (Human Resources Director), John Kearney (Technical Director), Zeffrey Lucas (US Operations Director), Jerome Lynch (International Operations Director), and Bill Nicholson (Commercial Director). He ran through a presentation and walked the board through, he continued to press home what his board already knew—that KBR Houston was overly focused on unachievable profit margins, and costing them contracts they felt they could win. Bob continued, they couldn't expand or progress as a company while remaining within the Halliburton group. He outlined his intention to buy out the company if he could assemble the necessary financing. The reaction was a moment of silence mixed with a hint of disbelief, yet an undercurrent of optimism and new hope. Several factors were complicating the prospect of buying any segment of KBR's business at that particular juncture. The parent company was entangled in large asbestos-related litigation spanning numerous years, carrying substantial financial and legal ramifications in the United States. Concurrently, KBR Worldwide had ambitious plans of its own for a substantial stock market flotation to disentangle the company from the broader KBR business.  

Bob feared that discussions in Aberdeen might leak back to KBR in Houston or worse still, to the press before he could officially communicate with KBR management. Bob enlisted industry finance experts and lawyers from Simmons and Company to oversee and navigate the buyout process, providing the necessary guidance to allow him to understand how the process could work. During the initial meeting at Simmons and Co, Bob presented a basic overview, outlining how liberating the company from Halliburton would provide the autonomy he needed to competitively bid for contracts he was currently losing. Simmons and Co were impressed and inquired about the required funds for the buyout. Bob, uncertain about what he would have to pay, humorously mentioned he had little to no personal capital for the project himself.

Having compiled a comprehensive business plan projecting revenues for the next five years, Bob presented an impressive outlook. However, before progressing with financing for the buyout, crucial milestones needed to be established, including one of the obvious elephants in the room, securing an agreement from KBR to sell the company. Despite the promising business plan, the entire effort would be futile if the owners were unwilling to sell. Behind the scenes, Bob and his KBR Aberdeen management team worked on crafting two investment pitches. The first, to showcase the financial robustness of his buyout proposals to potential investors, the second designed to persuade KBR in Houston that the Aberdeen business unit had no strategic value to the overall Halliburton company, and that they should sell the company to him. 

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Some weeks later, Simmons and Company provided feedback to Bob on his buyout proposal. After extensive due diligence, they expressed that his proposal represented one of the soundest business opportunities they had encountered for many years. If Bob was genuinely committed, they were prepared to advance his proposals. Simmons & Co had discreetly assembled a portfolio of high profile and extremely wealthy corporate and personal investors. The initial estimate to buy the company was around $400 million – $250 million for the business and an additional $200 million working capital.

In early 2005, media outlets reported parent company KBR had resolved its protracted asbestos litigation suit, a legal entanglement that had placed the company under a virtual legal embargo for the preceding eight years. Bob saw his chance to strike. Waiting another six months could mean that KBR would pursue its own IPO, squeezing him out. Bob prepared to meet Halliburton CFO Chris Gaut in Houston to present his case for a buyout. Despite the realisation that making such a pitch might result in both he and Duncan Skinner, his CFO being sacked, they were fully committed. They arrived at the KBR headquarters and were shown straight into the boardroom. When Chris arrived, pleasantries were exchanged before the meeting delved into business. Without hesitation, Bob and Duncan boldly presented a proposal to buy the Production Services segment of the business. Surprisingly CFO, Chris Gaut, was immediately intrigued, catching the duo off guard. Chris recognized an opportunity to divest a business asset that was better positioned outside the Halliburton portfolio of companies. Halliburton never really cared much about it, and had wanted the business unit sold long before. The atmosphere in the meeting room shifted dramatically, becoming positive and upbeat. Bob and Duncan, who had initially braced themselves for potential employment termination, found themselves receiving the commitment they had hoped for, Chris agreed to put this to the board of Halliburton immediately. Now, the challenge for Bob was to secure the necessary funds and negotiate an offer price, a dream that had seemed impossible months earlier had now transformed into a tangible and serious possibility. 

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Upon returning home, Simmons and Co successfully assembled the group of investors to listen to Bob and Duncan's investment pitch. The group comprised reputable entities such as the renowned HBOS integrated finance team and other notable investors. Adding to the pressure, Bob learned beforehand, the odds of securing investment from this group were approximately 40-1. Fully aware of the challenging odds, Bob and Duncan understood the importance of delivering a flawless pitch with a sound and realistic business proposal. They were, after all, looking for $400 million. Despite the daunting statistics, Bob's nerves dissipated as he stood in front of the investors. He began by urging the group to close their eyes and imagine navigating through a forest of Giant Redwood trees, envisioning a small sapling of Scots Pine struggling in the shadow of the towering trees. Bob painted a vivid picture of relocating the sapling to a clearing, allowing it to thrive without the overbearing oppressive shadow of the redwood—a metaphor for their business plan. Bob laid out what he believed the acquisition of KBR could achieve—the successful emergence from the shadow of Halliburton. Clarifying the project wasn't about magic beans and tree growth, he emphasised the core focus: a business doing what it has excelled at for many years—building and maintaining oil rigs for Oil & Gas companies, only better. Bob told the panel there was an untapped waterfall of clients and business opportunities beyond KBR's current reach. The investment group, having already reviewed the robust financials, recognized quickly the potential for continued growth as demand and oil prices increased. Unlike a speculative startup with uncertain prospects, this was a solid investment proposition. Three questions remained, whether Halliburton would actually sell, the finance could be sought, and could Bob convince the company's existing clients to transition their contracts to the new company entity.

 

A week passed, and Bob received no communication from Simmons & Co about the pitch, causing anxiety. If investors were impressed, why the silence? However, about a week later Bob's phone rang, Simmons & Co asked if he could visit their offices to discuss the proposal and presentation. Bob and Duncan hurried to their offices, fearing the worst. He was informed the investors were hugely impressed and willing to proceed with the investment after completing full due diligence. Bob was ecstatic. It had been a monumental journey to reach this point. This would mark the largest management buyout funded by the investment group to date, and they described the proposition as 'straight down the middle of the fairway’. Bob, guided by Simmons and Co, began drafting a formal offer for the company's purchase.

The buyout successfully went ahead, initiating one of the most complex company sales in Scottish legal history, resembling more a billionaire's divorce settlement than a conventional company takeover. The $400 million purchase raised initial questions about what they were actually buying. Ultimately what was being bought, amounted to approximately 6,000 employees, 60 contracts, an office block in Aberdeen, several desks, and a number of computers. The business had to be disentangled from over 720 Halliburton-KBR registered legal trading entities worldwide. In addition, investors required commitments from KBR's clients to transition their business to any new company formed, and fortunately, they did. As part of the financing deal, Bob and Duncan had to take on significant personal borrowing, of approx £19m each which they would need to repay from salaries, bonuses, and eventual sale proceeds. Despite media portrayals of Bob and Duncan roaming the city as multi-millionaires post-buyout, the reality was, they were asset-rich and cash-poor, with all their earnings now dedicated to covering loan payments and servicing personal debt.

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The PSN Management buyout was a huge local success story for Aberdeen, elevating Bob's status in the business community. Following the successful completion of the buyout, Bob received a call from one of the company's new investors. This investor had noticed a clause in the original banking documents that allowed for the resale of the newly formed company at a price that could potentially leave the investor out of pocket by £35 million. Although this scenario was unlikely, as it would also result in losses for Bob, Duncan and others, this particular Investor was not happy. Responding to the investor's request, they promptly had the contract redrawn to appease their disgruntled investor and assurances were given the company couldn't be sold without their agreement. After the deal was finalised, Douglas Crawford, lawyer and close friend of Bob and Duncan, described the PSN buyout as one of the most intricate deals in Scottish legal history. 

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This book wishes to acknowledge the PSN contribution to the buyout process of the below listed individuals. 

Peter Brown (UK Operations Director), Alistair Green (Business Development Director), Dean Hunter (Human Resources Director), John Kearney (Technical Director), Zeffrey Lucas (US Operations Director), Jerome Lynch (International Operations Director), and Bill Nicholson (Commercial Director) and others uncredited.

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EXTRACTED FROM THE NEW BOOK - ABERDEENS BILLIONAIRE

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