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August 25, 2004 

Tech Elect

 Q&A: Prairie Angels Founder Bob Okabe on Managing U.S. Subsidiaries 8/24/2004
The mission of Going Global is to educate and inform Midwest technology companies on what local technology companies are doing internationally so other firms can learn from the successes of like-minded peers.

CHICAGO – Bob Okabe, a founder of Prairie Angels in Chicago and a General Electric veteran, sat down with ePrairie international expert Michael Muth for a three-part Q&A on developing international ties, managing U.S. subsidiaries and balancing local needs with global expansion.

Okabe Background

Bob Okabe is a corporate executive whose clients have ranged from Fortune 50 companies to three-person start-ups. Over the last 20 years, he has worked in every aspect of financial and general management from cost accountant to CFO.

An active angel investor, Okabe is one of the founders of Prairie Angels Capital Partners, the manager of the first organized angel fund in the Chicago area. He has made six equity investments in the last five years with two reaching a liquidity event. As a business advisor, Okabe has worked with clients on all aspects of strategic and financial management.

Previously, Okabe was the CFO and senior credit officer for a privately held equipment leasing company. In this role, he managed all aspects of finance, accounting, tax, treasury, information systems, credit policy and collections through a staff of 23 professionals.

He also led the credit committee for the company’s Venture Leasing division, which provided more than $7.5 million in lease and mezzanine debt facilities for early stage companies during his tenure.

Having also acted as interim CFO, he has set up financial and business models as well as accounting systems and controls for three start-up companies. He has been a consultant and expert witness for institutional investors and the government in securities fraud litigation.

The core of Okabe’s background has been in corporate finance and financial services. He was an investment banker from 1988 to 1999. Most recently, he was a managing director and group head at BancAmerica Robertson Stephens (now Banc of America Securities). He also served as a senior vice president at Lehman Brothers and a vice president at Kidder, Peabody & Co.

He began his business career spending six years developing a wide range of core financial and accounting skills while on the fast-track financial management development program at General Electric. After leaving GE, he was a senior bond-rating analyst for Moody’s Investors Service for two years.

Okabe earned his bachelor’s of science in finance and organizational behavior from Boston University’s School of Management.

Michael Muth: When you were working with foreign multi-national clients to get headquarters support for U.S. subsidiaries, what was the need?
Bob Okabe: Each company has a different style it uses when dealing with its offshore subsidiaries. Some hold a short leash and some provide significant latitude.

We were dealing in large financing transactions with major manufacturers such as car companies. The size of the deals made coordination with HQ global treasury operations more critical so the subsidiary would not be out of step with headquarters.

We offered structured financings such as securitization and derivatives, which are things that are more developed in the U.S. Overseas markets have caught up, but back then, our process was facilitating and educating.

We were dealing in hundreds of millions of dollars and new products with which few foreign headquarters had homegrown experience. They had to be evaluated at the headquarters level.

MM: What were you “selling” to the HQ from the subsidiary?
BO: The educational part was how the product worked and why it would be an efficient form of financing. The selling part was why we were the best people to do it.

BMW is a perfect example. The vast majority of Bimmers in America are financed. Not many people can write a check for $60,000 for a car. Every car company has a financing subsidiary and they amass huge portfolios of loans to finance.

Securitization has proved an efficient way of financing these assets. At that time in Germany, legal and regulatory barriers made securitization almost impossible. There wasn’t anybody in the home country who had anything other than academic experience with the process.

At the U.S. subsidiary in New Jersey, they live in the U.S. capital markets every day. Still, the size and novelty of securitization meant the first transaction couldn’t be executed without HQ authorization. The laws have changed there since then and it has expanded significantly.

MM: What worked? What didn’t?
BO: These types of efforts were reasonably successful because most clients were hearing the same things from a number of competitors.

Understanding the home country culture and corporate environment as well as the difference between the mentalities in the headquarters and how each company staffs in the U.S. is what enabled business to be won. If the senior approving manager in the U.S. is in a two-year rotational job, you need to know that.

The reverse is true as well.

There are people who end up staying in the U.S. for an extended time. Their connections to the home country become weaker because they’re not repatriated into the flow and they’re not able to maintain the personal relationships that facilitate transactions.

MM: How did you learn that?
BO: Many types of services or financial sales are based on relationships. You can build some personal rapport if you don’t try to sell in one meeting. For most Americans, that’s not the way to do it.

It doesn’t happen the American way in Europe or Asia. The first meeting will be a feeling-out process. That information tends to come out. Organizational culture is relatively easy to find out if you are understanding and accepting of their process and culture.

MM commentary: Much of this is true in other sectors (including IT and financial services).

MM: Were your bosses patient enough and did they allow you enough time to get things done?
BO: My employers were also multi-nationals.

We had offices in major markets that assisted in understanding how things got done, which translated into dealing with those units in the U.S. True multi-nationals understand that it goes both ways. Having operations in other countries and having that knowledge transfer helps the process.

MM commentary: The problem is that small companies might not have the patience to work at a slow foreign customer’s pace.

MM: How autonomously did they allow their U.S. subsidiaries to operate?
BO: It depends on the company and how truly multi-national they choose to be. It also varies by culture.

Toyota has a reputation for integrating itself with the local culture. You’ll see Americans in senior positions where with other Asian companies you’d never see a non-Asian at that level. It varies by country and by company within a culture.

Toyota understands, Sony does as well and many other companies simply don’t. It’s the specific company. Some are integrated and some are separate.

MM: On what would you need to educate headquarters staff to support the subsidiaries initiatives?
BO: In a sophisticated financial transaction, there’s always an accounting issue. That’s often a significant unknown. There are different accounting standards, too. While accounting standards are getting more transparent, that was not always so.

Operational aspects of structured financings create new reporting and monitoring requirements. These often involve investments in systems and processes as well as a greater level of information sharing than in other countries.

There used to be off-balance sheet reserves that German companies could access. The ability to buffer bad years didn’t allow investors to evaluate a company properly. These aren’t factors that are normally a part of financing decisions.

MM commentary: I can affirm this off-balance sheet reserves issue. When I lived and worked in Germany, a Thunderbird friend of mine worked for a privately held investment fund. He let on that the reserves sometimes outweighed a number of the other more important financial variables.

MM: In extending banking or consulting products development in the U.S. to other countries, what products were you extending internationally?
BO: As another securitization example, GM liked securitization and wanted to extend it to Europe.

Every investment banker wanted GM’s business. At Lehman Brothers, we created an interdisciplinary team with local bankers in the countries to present a strategy on how to proceed. We presented what worked in the U.S. and adapted to the other standards.

Join us next Tuesday for part two of this three-part Q&A
where we delve into adapting products to meet global needs.

Michael Muth is managing director of GATA, an international business development consultancy that helps technology companies build international partnerships. He can be reached at mike@intlalliances.com.
Click here for Muth’s full biography.

Previous Columns:
Q&A: Origin Ventures Founder Steven Miller on Investments, Angels (8/17/2004)
Q&A: Origin Ventures Founder Steven Miller on the Canadian Way (8/9/2004)
Q&A: CPCP Founder David Baeckelandt on Multilingual Importance, Mentoring (8/3/2004)
Q&A: CPCP Founder David Baeckelandt on Japanese Disclosure, Due Diligence (7/27/2004)
Q&A: Chicago Pacific Capital Founder David Baeckelandt on Overseas Funding (7/20/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on the Art of Partnering (7/13/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on BP, AstraZeneca Wins (7/6/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on Global Software (6/29/2004)
Q&A: CEO Terry Howerton on Why Chicago, Ukraine Made FastRoot (6/22/2004)
Q&A: FastRoot CEO Terry Howerton on Blended Chicago Approach (6/15/2004)

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