Interview: Sir Michael Smurfit, KBE

 

Interview: Sir Michael Smurfit, KBE

The warm autumnal sun glistens softly on the still shores of Monte Carlo harbour. The

escarpment of the Maritime Alps looms dramatically overhead. A kingfisher struts elegantly

along the marina in search of its prey. It is perfection. How fitting a place then it would seem to

interview a man of such magnitude: Sir Michael Smurfit, KBE.

Born in St Helens, Lancashire in August 1936, Michael Smurfit joined his father's business,

Jefferson Smurfit & Sons Ltd. in Dublin, straight from school. Two years after the company

floated on the Irish Stock Exchange, Michael and his brother Jeff became Joint Managing

Directors, as Jefferson Senior took on the role of Chairman and Chief Executive. Then followed

30 years of acquisitions, as the Jefferson Smurfit Group became Ireland's first multinational

company and the largest packaging company in the world. In 2002, Dr Smurfit took the Smurfit

Group private, retiring as CEO but remaining Chairman. In this role, he steered a merger with

Kappa Packaging BV, which successfully refloated in 2007 as Smurfit Kappa Group. Dr Smurfit

now resides in Monaco and I began by asking him about retirement and his current life.

Current life and retirement

‘I had a good 10 years left in me’

“I hated retirement,” Dr Smurfit says. “I was totally unsuited to it. I retired probably 10 years too

soon - and I’ve told my son Tony [CEO of Smurfit Kappa] the same thing: work as long as you

can. The old 65 retirement age is all gone. Modern medicines, particularly statins, give people

with heart problems much longer active life. I found retirement difficult - not impossible -

because having a yacht like this is something to retire to, so it’s not all bad. But in terms of

actually visiting the factories, motivating people, and making regular speeches: I miss all that,”

he says.

Dr Smurfit admits however that he doesn't miss it as much in the last five years or so since he

entered his eighties, but that “between my seventies and my eighties, I had a good 10 years left

in me - productive years,” he adds.

Was retirement a shock? “The first shock I had about retirement was when I left Telecom

Eireann. I remember walking down the stairs at Telecom Eireann and one minute you were in

total power - then you leave the boardroom, take your sign off the board, walk out to the front

door and you were gone. And that was the first time I retired from anything. I remember my

final moment walking down the stairs at Clonskeagh - now I knew I’d be going back to

Clonskeagh to see my son or to see old friends. But, when you walk down the stairs and get into

your car - you’re gone. You’ve gone from all powerful to just another shareholder,” says Dr

Smurfit.

Entrepreneurship

‘We need more indigenous Irish companies that are growing on a world basis’

“I’m a major investor in many things. I invest a lot of money in start-ups. I helped some of the

next generation of people behind me. Denis O’Brien, for example, was one person I was able to

help with both advice and with capital and some other people like him over the years. And I

would hope that that generation is now looking after your generation because we need risk-

takers and entrepreneurs.

Entrepreneurs are what drive any economy. [For example] just growing a pharmaceutical

company is not the way to go. We need more Kingspans and Smurfit Kappas - indigenous Irish

companies that are growing on a world basis.”

What does he think of Ireland as an investment location and a place for doing business, I ask?

Ireland as an investment location

‘Ireland has many stresses on its system, particularly in the housing market’

“I think Ireland has many stresses on its system, particularly in the housing market. I know

there’s a huge shortage of accommodation for students. So Ireland is uniquely placed in Europe

because we are part of the EU; Britain is not anymore. But how much industrialisation do we

want? Ireland’s a small country with a growing population and I’m not sure if it was wise for us

to take on so many refugees filling up our hotels when we have homeless people in our society: it

seems to me to be a mismatch. But, I say that from afar because I haven’t been back in Ireland

for a few years. Ever since I sold the K Club I haven’t really come back,” says Dr Smurfit.

“For every nine failures, you get one success and that one success can often make you more than

the nine failures. I invested in something yesterday for example. And next week I’m investing in

something else - people from Ireland are coming down to see me. I’ll probably end up investing

a million or two. And [with investing] you can make twenty times your money, or you can lose it

all,” he adds.

Character traits

‘The first thing I look for is integrity’

One of the key themes of Smurfit’s book, A Life Worth Living, is the importance of reputation,

integrity and doing the right thing. These values permeate throughout the book and I believe is

eloquently summarised by one line in the book which reads: it all goes back to my father’s

simple code of honesty and the all-important reputation. So what traits does he look for when investing in people?

“The first thing I look for is integrity. When I’m interviewing someone for an investment: are

they honest, straightforward, call a spade a spade and not corrupt. There’s certain parts of the

world I won’t invest in because of demi-corruption - even though you wouldn’t be part of it

yourself, you could be associated with it. And we had to be very careful with our investments in

Russia, Venezuela and Colombia,” he says. Dr Smurfit adds he “couldn’t wait to get out of

Nigeria,” in reference to the failure of the Nigerian government to pay money it promised the

company for it taking over 60% of its interests by decree.

He continues: “You can afford to lose money, but not your reputation. And therefore, that’s the

first thing I look for. I can afford to lose the money I’m giving you, but I can’t afford to have my

reputation besmirched by being part of something that’s corrupt or not ethical.”

The underdog

‘We took on the establishment and then we became the establishment.’

When Smurfit first began acquiring companies, he was oftentimes met with stern opposition

from Protestant-run firms who were not enthused at the prospect of a Catholic like Smurfit

seizing power. Time and again Smurfit prevailed. This doggedness and determination is evident

throughout the book and I feel is encapsulated perfectly in his mantra-like motto: 'I must. I can.

And I will.'

Smurfit notes that the influence of his father was “massive”. He continues: “I only got to love my

father in my thirties when I started having children of my own. I began to realise just what he’d

done for me. That all those tough times and all those tough meetings with him and tough

moments; they were all part of his scheme to mould me into what I became. So I’m a product of

that upbringing,” he says.

“I instill the same ethics in my kids, but I didn’t bring them up the same way because they were

different times. My father wasn’t a huggy-huggy type of guy, we shook hands now and again but

that would be about it. Whereas, I am a very huggy-huggy type [of guy]. I remember walking

into his office on one of the proudest days of my life, if not the proudest day and saying we’re

now the biggest company in Ireland,” he says.

Smurfit’s father was from England and “had a very tough time when he first came to Ireland,”

says Dr Smurfit. “He was considered Jewish, or possibly Jewish,” Smurfit says. This is in

reference to a number of golf clubs who turned down Smurfit’s father’s application for

membership. “The name Smurfit was an unusual name, still is unusual. And if we were a Smith

or an O’Brien and our name was in the headlines anywhere, we would be anybody. But if it’s a

Smurfit, it’s a standout name. I never encountered any other Smurfits in the world,” he adds.

Did this give him an extra source of motivation and determination?

“Absolutely,” Smurfit affirms. “We took on the establishment and then we became the

establishment.”

Early career & personal growth

‘I found that I could run any business, so that began to give me a growing confidence in myself’

The personal transformation Smurfit underwent is also apparent in the book. In his own words

he had gone from being “a shy and retiring boy” into a confident and prolific dealmaker in his

thirties. How did this happen? “One of the things I learnt early on from the acquisitions that we

made (the first takeover in Irish history) was that I could run any business. Didn’t matter what it

was. The problems were the same: you had sales, you had costs of production, you had gross

margins and so on and so forth. And I found that I could run any business, so that began to give

me a growing confidence in myself. Now we still had a base business which was growing very

strongly, but we had all these peripheral businesses particularly after we acquired Hely Group.

We were in television sets, we were selling golf clubs, we were in printing, we were in carton

making with Irish carton printers for cigarette packages, etc, etc. - we were involved in all sorts

of things,” he says.

“All sorts of different opportunities came up with different problems and I found I could handle

them to my surprise. I surprised myself I suppose. I was always very numerative and I had a

head for figures. So I could read a balance sheet in five minutes and tell you how good a

company was and what to do about how to fix it,” he adds.

Dr Smurfit was diagnosed with tuberculosis at age 20 and confined to a sanatorium for nine

months. I put to him whether his business acumen was honed during this time spent reading

financial journals.

“It was very important,” Dr Smurfit says. “It’s where I learnt about takeovers from reading the

Investors’ Chronicle. Remember people don’t sell you good businesses. When things are going

well, it’s very hard to buy a business. It’s when it goes badly it’s easy to buy a business. And we

bought the Hely Group because it was going badly - confidence had collapsed in the board.They

tried to find a white knight, but they couldn’t - I had 25% of the company. It was a gamble: I

gambled the company, I gambled Smurfits,” he says.

Is gambling important to success I interject? “You need risk,” Smurfit affirms. “I was spending

over 100% of our equity. I was buying a company that was twice our size.”

Investing

‘Now would be a very good time to invest’

In terms of buying the right company, Smurfit mentions in his book how ‘the worse it is, the

better it gets’. “When you are attacking a market - and Smurfit [Kappa] has now reached such a

height that they can’t do it anymore. Smurfit couldn’t take over number two,three, four, or five

in the market because they’re already number one in Europe by far, so they wouldn’t be allowed

by the competition authorities. So Tony no longer has that opportunity that I had. I was such a

small peanut guy, that I was picking up all these guys who were making mistakes and turning

them around and making them better - and I had plenty more to go at. So I’d just wait for the

next downturn, move in, clean up the mess, get a lot of cash in the bank and then get ready for

the next one,” he says.

Is the current investment climate such an opportune time? “Yes it would be a very good time,”

Dr Smurfit says. “But unfortunately as I said Smurfit [Kappa] can’t do that.”

As for current industries which Smurfit would be looking to invest in, he cites an energy

company he is currently looking at investing in. The business involves “buying electricity at

night-time, storing it and then the electricity releases during the day when it is used. It seems to

be a no-brainer if you can get into that kind of industry because the energy crisis is not going to

go away - it’s going to be here for a long time to come” Dr Smurfit says.

“Germany taking 45/50% of their energy needs from Russia was leaving themselves wide open

for exactly what’s happened. And they were warned about this ten years ago. I remember when I

was on the board of the European Round Table that coming up and being discussed, that Europe

was becoming too dependent on Russian gas. What they say about Russia is: the Russian bear is

either at your feet or at your throat; he was at your feet, now he’s at your throat. That’s a good

quote by the way,” Smurfit adds laughing.

Advice for young people

‘Never give up; don’t worry about it if you can’t fix it; be prepared to have a go’

Smurfit highlights in his book that aspiring young business people should invest time in honing

their IT skills, finding a niche and filling it and to never give up. I put these to Smurfit who adds:

“the first thing is never be afraid of failure. It’s going to visit you in your lifetime a number of

times. If it happens just get off your feet and start again. Don’t be afraid of setbacks - they’re

going to happen in life: could be a medical setback, business setback, personal setback. Just

don’t let it bother you. If you can’t fix it, don’t worry about it. There’s no point worrying about

something you can’t fix. I think we sometimes go around like headless chickens worrying about

things we can’t fix.” In summary? “Never give up, don’t worry about it if you can’t fix it, be

prepared to have a go.”

He continues: “Everybody should have a go at something in life and not become a me-too guy

working in an institution. That’s 99% of people -you just join the herd. I was lucky to have a job

to go to. My father had a clear defined path that was to the future, but when I started at 16 I had

no idea I was going to be where I ended up in my life. I pinch myself sometimes to look back at

my own career and think by God, how lucky was I,” he says.

Good habits

‘Spend an hour or two a day reading things like the Financial Times’

“Knowledge is power. And you don’t get knowledge from nowhere,” Dr Smurfit says. “You get it

from somewhere else: either in written form or in spoken form. So I would be saying try to study

CNBC and get to know about markets and watch the trends. Spend an hour or two a day reading

things like the Financial Times and Fortune or news magazines and stay up-to-date with trends

particularly on corruption and things like that.”

“Stay well informed, it’s very important to be well informed. You can ask me about any subject

and I’ll give you an opinion on it. Do I think Liz Truss is doing a good job in the UK? I think

she’s had a disastrous start [Kwasi Kwarteng was duly dismissed as Chancellor the following

morning] and I think Boris Johnson for all of his faults was a far better prime minister,” Dr

Smurfit says. We may see Johnson return, I ask? “I hope so,” responds Smurfit.

Legacy

Smurfit believes over his lifetime he has created “10 to 15 billion of net worth for Irish

shareholders and pensioners.” He continues: “All the original employees, 220 of them in

Clonskeagh and in Walkinstown, nearly everyone of them were millionaires when they retired if

they held on to their shares. Some of the guys sold shares straight away - my father gave most of

the workers shares straight away. And a lot of them put their kids through college [due to their

shareholding]. Smurfit recalls the shop steward coming to him and saying “thank God for you

Smurfit, all my kids have graduated through college now and they were able to do that from the

dividends on the Smurfit shares,” Dr Smurfit says.

On that note we close. And I begin to write about a life most definitely worth living.

END