At first, Ravi Saligram didn't know what to make of the executive recruiters.
Would he – a globe-trotting U.S. executive with experience in international hotels, food services, retail and, most importantly, turnarounds – be interested in moving to Vancouver to take the helm at flagging Ritchie Bros. Auctioneers, a seller of used crawler cranes, pile driver extractors, articulated dump trucks, boring machines, trucks, buses, frac tanks and other heavy equipment?
Mr. Saligram's immediate thought was that he knew nothing about any of those things, let alone anything about selling them. But he also had another, more central, concern. "To be very frank, I had never heard of Ritchie Bros. I said: 'You're crazy.'"
But Mr. Saligram, who had just masterminded a turnaround of retail giant OfficeMax and its $6.3-billion (U.S.) sale to rival Office Depot, was intrigued – partly because the recruiter suggested Ritchie Bros. "could become the eBay" of the industrial world. And it was already the largest seller of used equipment on the planet. Mr. Saligram was looking for something new, and figured doing this – after stints at well-known companies – had the potential to be a true legacy gig. That was important to Mr. Saligram, then 58, since the next appointment would probably be his last before retirement, "something of a last hurrah" lasting about seven years, as he puts it.
Mr. Saligram began his due dilligence, and attended one of the company's auctions.
"It was not a broken company by any means, but it was stagnant," Mr. Saligram says over breakfast at Vancouver's Fairmont Pacific Rim in mid-September, explaining that he also met the board's selection committee. "They wanted to make sure I wouldn't be an axe man, an Attila the Hun who would come in and raze the place. They wanted evolutionary change."
He decided to take the offer. He arrived at Ritchie Bros. in July, 2014, with the stock around $26.35 (Canadian) on the Toronto Stock Exchange. On Friday – after hitting highs around $40 in August – the stock had climbed to $35.66.
Back in 1958, Ritchie Bros. was founded by three brothers in Kelowna, B.C. The brothers quickly moved beyond furniture, raking in $600,000 at an industrial auction in 1963. By the 1980s, Ritchies was hosting auctions in the United States, Britain and Australia – and by the 1990s had expanded to Asia and the Middle East.
Today, Ritchie Bros. is the largest auctioneer of industrial equipment in the world: In 2014, the company sold more than $4.2-billion (U.S.) at nearly 350 auctions and through online sales (which totalled $1.8-billion). It has more than 1,400 full-time employees, and 40 permanent auction sites worldwide – including dozens in its stronghold of North America, as well as sites in Spain, the U.K., Germany, France, the Netherlands, Dubai, Singapore, Beijing and Japan.
The company's revenue comes from a mix of unreserved auctions (which are what most people would think of when they think of an auction), underwritten auctions (in which Ritchie Bros. guarantees the seller a certain minimum price) and growing online sales. There are also "full dispersal" auctions, where a seller is retiring – after, in some cases, a lifetime of buying and selling equipment through Ritchie Bros. – and wants the company to auction off every last piece of their equipment.
"Some owners have actually written in their wills, if they were to pass away – use Ritchie Bros. to liquidate," Mr. Saligram says. "We don't want them to pass," he adds quickly, "but that's the trust."
Over the decade to 2013, however, some felt the company suffered from strategic drift. It was still selling equipment, and revenue had soared: Gross auction proceeds went from around $1.5-billion (U.S.) in 2003 to more than $3.8-billion in 2012. But that wasn't the problem. As Raymond James analyst Ben Cherniavsky points out, revenue more than doubled but margins contracted 12 percentage points over the same time period. An expansion of physical auction sites led to rising costs, which outstripped revenue growth and pinched back at profitability, even as the recession ate into global growth.
"Costs had gone up, revenues had come down. And part of it was there was a myth that the company was impervious to recessions," Mr. Saligram says. "We were a little bit like an ostrich. We kept investing. The fundamentals are okay. But the execution was off."
Mr. Saligram was born in New Delhi, the son of an Indian Army officer, and grew up in Bangalore. His first love was English literature; he applied to study it, but his parents dissuaded him, and he reluctantly started an engineering degree at university. He didn't exactly slouch with his studies. "In India, with the population, it doesn't matter if you're good or great – you have to outwork everyone," he says.
Mr. Saligram's dream was to study in the United States. He had an aunt living in Ann Arbor, Mich., where he eventually enrolled in the University of Michigan's MBA program. He arrived in the U.S. with nine borrowed dollars in his pocket and his aunt had to take out a loan to help pay for his studies.
"The loan on my MBA was more than what my uncle was making at the time," Mr. Saligram says. "The pressure was really high. And if I didn't get a green card and I had to go back to India; there's no way I would have been able to pay back."
But the big bet paid off. Mr. Saligram started his career at global advertising firm Leo Burnett and then climbed the ladder. At what was then-SC Johnson Wax, he led efforts in South Korea, and then Asia and Latin America. In various roles at InterContinental Hotels Group, he was in charge of Holiday Inn, first in the Asia-Pacific region and then internationally, before taking more senior roles in the U.S. He went even higher at food services giant Aramark Corp., where he headed the Japan business before overseeing all territories outside the U.S. and Canada. After that, he joined OfficeMax as CEO.
Mr. Saligram considers himself a connoisseur of coffee, and is also a vegetarian, two things that make him an ideal "left coast" resident. At the Fairmont, he orders a plain vegetable frittata, but also asks for red pepper flakes to spice things up a bit. The server, instead of bringing him the dried chilis he craves, comes back with a bowl of chopped bell peppers. He politely clarifies.
During his first 100 days at Ritchie Bros., Mr. Saligram says he did very little but listen.
He heard from employees around the world, who told him the company was "too ivory tower," "Vancouver-focused," bureaucratic and that decision making was slow. Few knew what the high-level strategy was and they said the executive team was not cohesive, Mr. Saligram says. Investors told him they were frustrated by reduced returns on invested capital, and a lack of clear revenue growth, while clients told him Ritchie Bros. was great for full-blown auctions, but that there were other times they needed to offload equipment.
Mr. Saligram went to work. He re-ordered the executive team, hiring a former software executive to lead the integration of the online business and sending a Japanese speaker to head up Asia-Pacific operations out of Tokyo. He has a strategic road map that promised to diversify the types of equipment sold and refocus the business on the profitable Canadian and U.S. markets – which accounted for 82 per cent of second-quarter sales. (The oil patch crisis has been something of a mixed blessing for Ritchie's: Prices are softer for oil and gas equipment, but their Edmonton auction this year was still the best in the company's history – netting about $210-million – and 90 per cent of the buyers were Canadian, though Mr. Saligram figured that Americans would use the low Canadian dollar to sweep in and buy up assets.)
But the biggest test for Mr. Saligram was translating the gross auction proceeds into actual revenue growth. The main sticking point here was Ritchie's underwritten, or "at-risk," business, which accounted for between $800-million and $1-billion of sales in 2014. The company was miscalculating, guaranteeing higher prices than sellers were likely to get. And though it was making money, they were tossing cash right back out the door. Mr. Saligram sought the data and did analysis with his teams. They found the Canadians were better at calculating the proper minimum guarantees than U.S. counterparts, but also that most of the errors were being made on smaller deals between $100,000 and $500,000, below the radar of the company's valuation experts.
As with many business decisions, Mr. Saligram was trying to walk a fine line. He didn't want to stop his salespeople from being aggressive, and he knew first-hand how easy it is to get carried away with an auction: One of the first ones he went to was a mostly at-risk "full dispersal" in Tuscaloosa, Ala., that also had buyers bidding from Singapore. "It was intoxicating, it was exciting," Mr. Saligram says. "I fell in love with our business."
He decided to give the valuation group a veto over underwritten deals, regardless of size; and any underwritten deal higher than $5-million was brought to Mr. Saligram's personal attention – not because he was an expert evaluator, but because it provided a "psychological deterrent." Since the second quarter of 2014, revenue at Ritchie's has grown 20 per cent, and the revenue rate has inched up 2.25 percentage points to 12.3 per cent; in 2012, the revenue rate was 10.7 per cent.
In the end, Mr. Saligram took a company "where process was a bad word," implemented new controls and renewed a focus on execution. Elsewhere in the business, online transaction sales are up 7 per cent from last year, and the firm's financial services wing – which offers loans and leasing options for buyers – was up 37 per cent from last year.
"It's not like I came into the room and banged my fist," he says. "The CEO has to be a teacher, a coach."
Ravichandra (Ravi) Saligram, chief executive officer, Ritchie Bros. Auctioneers
Resides: Vancouver (Coal Harbour neighbourhood)
Place of birth: New Delhi
Education: BSc in electrical engineering from Bangalore University; MBA from University of Michigan
Family: Wife Nalini Saligram and two daughters. Nalini runs a non-profit that works on non-communicable diseases, such as diabetes and heart disease, in India. "She decided to do good. I'm glad one of us did."
What he likes about Vancouver: Walking along the sea wall and drinking Artigiano's cappuccino.
Favourite sport: Watching the Indian cricket team play in the World Cup when they don't lose
Guilty pleasure: Binge watching Downton Abbey, Suits and House of Cards with his wife
Favorite vacation: Experiencing great hotels and resorts around the world with his daughters
Favourite Books: Nelson DeMille's Charm School and Jeffrey Archer's Kane & Abel series
Favourite wine: Brunello Montalcino Riserva Madonna Del Piano
Favourite movie: The Good, the Bad and the Ugly featuring Clint Eastwood
Favourite music: Anna Netrebko singing Omio Babbino and other arias.