CDI taps ex-Sears, Lehman boss as new CEO: Update
Scott Freidheim moving to Philly from London
Scott Freidheim, a veteran European buyout investor (Investcorp), brand rebuilder (Sears' Kenmore, Craftsman and Diehard) and merger-and-crisis dealmaker (Lehman Bros.), has agreed to move with his family from London to Philadelphia to run CDI Corp., the $1.1 billion (yearly sales) engineering solutions and placement firm. Statement here.
Mike Emmi, the former SCT Corp. CEO who served on CDI's three-director search committee, explains the choice: "We met with 30 candidates for the position. A wide range of backgrounds, from very strong young entrepreneurial people, to operators of businesses similar to CDI. But no one quite like Scott."
CDI is in the people business. It ran the five finalists through layers of background checks, psychological screeing and testing, made them write 12-page essays. Emmi says CDI, aided by recruiter Gayle Mattson, weighed two possible CEO models: a strong operating manager who could boost profitability; or a turnaround-and-acquisition star. Freidheim, 49, was both, Emmi says.
Freidheim's status as Lehman Bros.'s chief administrative officer during the firm's 2008 collapse raised obvious questions: If this guy's so smart, how come his bank blew up? Emmi grabbed his big due diligence flashlight, and found Freidheim in the fatal fall of 2008 "worked 24/7 for a couple of months with regulators and Washington and the other management. It was a deeply troubled time. He was at the eye of the storm. Other executives were selling stock. He never sold a share. Some of the others went into U.S. Bankruptcy Court and claimed Lehman stock was compensation, they should get paid. Scott said 'No, it was to align us with shareholders, and if they took a bath we should too.' I thought that said a lot about his character. He did not quit. He showed a great set of values."
What about Freidheim's years with Sears, which has seen better times? "What he did at Sears was remarkable," says Emmi. Recruited by his former Lehman client, Sears controlling investor Eddie Lampert, Freidheim was charged with reviving the huge but ailing Kenmore appliance, Craftsman tool and Diehard battery lines. Emmi credits Freidheim with "taking Kenmore from third in the industry to first" by negotiating better supplier and product development deals. The lines reversed a sales drop. To Emmi, Freidheim "leveraged Sears' strength -- volume -- and really changed the world."
Freidheim resisted my pegging him as an investment banker-gone-to-industry. "For seven years out of Northwestern I was an investment banker," but most of his Lehman career put him squarely in strategy, administration and other executive posts, "looking at the universe of resources across products, industry groups and geographic regions," as Lehman grew from a U.S. bond house into a global investment bank.
For Lehman's ensuing collapse, Freidheim blames, not shaky products or undercapitalization, but the global financial crisis of 2008, and says there was growth even in failure: "You were dealing with so many issues so quickly that you learned a lot. About business, and about yourself, how you handle various situations."
His work at Sears was all about "assessing the environment, the competitive landscape, assets, points of leverage, coming up with the most attractive business model and strategy. Then getting everyone on the team to understand where we're going, how to get there. Making sure everyone has a fulfilling career in the process." He told the manufacturers Sears was terminating them (as their contracts allowed), then negotiated new deals with GE, Whirlpool, Samsung and others based on their new product ideas. "We improved in Consumer Reports."
I mentioned the ex-Lehman bond salesman who sold me a Sears oven in 2009 -- a good oven, though I had to help install it -- and my school friend the career Sears furnace sales supervisor who quit the company in disgust, he said, of rising quotas and falling benefits. "Once people start winning, it's a very exciting time," he said.
After Sears he joined Investcorp, a multinational private-equity buyout firm that invests Gulf states' Arab money in Western companies, best known for its 1980s buyouts of luxury brands Gucci, Tiffany, Saks Fifth Ave. He was recruited by a founder, at the Davos World Economic Forum, to head a Europe-focused group. With Freidheim's bond background he smelled opportunity in the way investors were indiscriminately deserting Irish and Spanish bonds without distinguishing between government and private debt. He did five deals in two years. (Revised)
But he missed running a company, heading a eam. "CDI sounds incredibly compelling," Freidheim told me. "They have a 60-year history as an innovator with core strenghts in project management for oil, gas and chemicals, aerospace and industrial equipment, infrastructure and government services" He is the fifth CEO in the company's history. The lagging share price and profits over the past 10 years belie "a history of deserving quality service and solutions. In private equity, we used leveraging operating assets is a way to create shareholder value. CDI's clients last decades; that's valuable. Then you can say, 'Let's chart a path that's exciting, that will get us there." Acquisitions are part of the job description, Emmi says.
He's ready to move from London to Philadelphia? "I've lived in Detroit, Chicago, New York, Sao Paolo, Paris. My wife is French. Philadelphia has everything you want: storied history, world class cultural institutions, world class universities, sports. Isabelle and our boys are really excited about being here." Scott Freidheim, a veteran European buyout investor (Investcorp), brand rebuilder (Sears' Kenmore, Craftsman and Diehard) and merger-and-crisis dealmaker (Lehman Bros.), has agreed to move with his family from London to Philadelphia to run CDI Corp., the $1.1 billion (yearly sales) engineering solutions and placement firm. Statement here.