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About two dozen dealmakers in sombre suits file into a private room at Toronto’s George Restaurant. They’ve come for a takeover ritual known as the closing dinner. But for most of the diners, the gathering could be more aptly called a surprise party.
After all, almost all of the guests arriving on this April night had repeatedly warned against creating the company they are about to celebrate.
“I thought you were going to have your head handed to you,” says Frank Clegg, retired head of Microsoft Canada, to the guest of honour.
“Everyone was telling you that you shouldn’t waste money trying,” says Rob Prichard, chairman of Bay Street law firm Torys LLP.
“I was afraid you were going to get squashed,” agrees Gerry Schwartz, chairman of Onex Corp.
With every “I told you, no,” the honoree throws her head back and offers a deep, tumbling laugh. Heather Reisman is happy tonight. Chef Lorenzo Loseto has prepared a special menu featuring pheasant-apple slaw, Cornish hen, venison, organic cheeses and coconut banana pie. The icing for Reisman is the satisfaction of having proven the world wrong.
The long-shot wager being commemorated at the dinner is a $31.6-million investment by Reisman’s Indigo Books & Music Inc. The retail chain put the money into the maker of an electronic book reader called Kobo (an anagram for book). And tonight, its sale is being celebrated.
There were many reasons to be skeptical about Kobo’s future. Indigo may be Canada’s dominant book chain, but it was a pipsqueak arriving late to an international digital battlefield ruled by vastly larger companies. Reisman’s company had never before manufactured electronic hardware—indeed, it had never manufactured anything more complex than a picture frame—and Indigo already had its hands full reinventing a 240-store chain battered by eroding book sales.
The dire circumstances only made Reisman more resolute. “If my business was going to be cannibalized, I was going to do the cannibalizing,” she tells the assembled diners.
That morbid metaphor seemed all too apt as Kobo burned through millions a month while Amazon, Apple, Sony and the giant U.S. bookseller Barnes & Noble dominated the burgeoning e-reader business. But at the cliffhanger moment in this tale, Kobo’s virtues matched the needs of a suitor from afar, attracting a surprise, and surprisingly rich, buyout. “Who would have thought, when we were putting the Indigo business plan together this past year, that we should have planned for a $165-million gain on our investment in Kobo?” marvelled Indigo’s chief financial officer Kay Brekken at the dinner party.
Reisman says she never doubted her contrarian stand on Kobo. She knew who had her back. She had a unique team of in-house advisers whom she was able to tap to oversee the e-reader’s development. She is married to one of the country’s richest dealmakers. She is coached by one of Canada’s top innovation scouts. And then, crucially, there’s her top Kobo lieutenant.
“I had my own rocket scientist,” Reisman says, grinning.
* * *
It takes a lot to keep Heather Reisman down. She has reinvented herself half a dozen times in the face of setbacks that would have been career-killers for a less determined entrepreneur.
In the 1970s, the mother of two left an unhappy marriage and a starter career as a social worker to learn the ropes as a management consultant. An assignment with a troubled distillery in 1977 attracted the attention of a potential acquirer named Gerry Schwartz, later to become the head of legendary buyout firm Onex Corp. Five years later, the two were married and Reisman moved her management consulting business from Montreal to her new husband’s home in Toronto.
One of her clients, and a close friend of Schwartz’s, Gerry Pencer, asked her to join the audit committee at Financial Trustco Capital Ltd. Within a few years, the trust company was engulfed by accounting and cash woes that ultimately led to a bailout. Later Reisman would concede in an interview that she was “not equipped” for the challenges of serving on an audit committee.
Her next stop was another Pencer venture, the private-label pop maker Cott Corp. A mere two years after she joined Cott as president in 1992, Reisman left abruptly as Pencer once again fended off criticisms about accounting practices. Reisman would later describe her messy departure from Cott as “a fiasco.”