The Apprenticeship of Irwin Simon

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"In 1991 I got married. The next 10 years of my life would be crucial. I had to establish myself. If I wanted to do it, I had to do it now, in my thirties. I had a severance package. If they fired me, I would get a year. I tried everything to get pushed out. So at the same time I was at Slim-Fast, I was looking for a job just in case, I was looking for a business deal, and I was looking to get fired, which you had to do right, because it couldn't be for cause. My plan was to find a business, find products, find brands, find money -- and '92 was rough times."

In the end Simon didn't have to find another job. He got fired -- his former boss was recently surprised to learn that that had not been Slim-Fast's idea -- and found his business. Actually, several businesses: a company making soy ice cream and soy "meat" pockets, a line of soy pizza, a tiny weight-loss competitor to Slim-Fast, and a company selling frozen kosher foods. Only the last was profitable.

"I thought, 'If I can put these [businesses] together and generate $3 million to $4 million in revenues, enough cash flow to pay the bills and take these brands and grow them....' So I took my own money and put down deposits on each one, and I went out and sold my story to these people, that I was going to raise money and build this big company, that I knew what I was doing, that I was a great marketer, that I was a great visionary, and I guess it worked because people liked me and had confidence in me, but really I didn't have a clue. I'd never before had to worry about money because I had worked for companies with deep pockets. I never had to raise money. I never had to meet payroll. But I convinced all four of these people that I had the other companies, and that I had the money. Next I had to go raise the money. Knocked on the doors of banks, VC firms, everywhere -- they all absolutely thought I was just whacked out."

Ah, the satisfactions of success: Fleet Bank, which wouldn't lend Irwin Simon $100,000 after he had risked everything he owned -- gutting his $106,000 in savings and mortgaging his apartment for another $150,000 -- recently competed to hand Hain Celestial a line of credit worth $240 million. That early period in the capitalization-free zone no doubt explains two things about Simon: (a) why his company is virtually debtless, and (b) why he spends up to a third of his time taking care of shareholders and the analysts/soothsayers who now consider Hain Celestial a buy but tomorrow might shift it to hold ... or worse. When he heard that one New York analyst was in a quandary about private schooling for her child, Simon invited her to call his wife: "Daryl's been through that -- she knows it all," he told her.

Simon knows what it's like to gasp for cash: when he finally got a small underwriter to do a public offering, all that was left after the costs of acquisition, underwriting, accounting and legal fees, and repaying bridge loans was about $235,000 -- a pittance. On aggregate annual sales of $3.8 million, the new company, with its four brands, was bleeding $600,000.

"Once I went public, I got rid of all these people, all this overhead, and in the first couple of months I turned it profitable. We needed to sell more, and tighten up. Meanwhile, I knew we had to get bigger -- so where was the next risk? There was a company called Hain Pure Food Co. -- a great name, around since 1926 -- which was up for sale by Pet Inc. Hain Pure Food had $50 million in revenues. Lo and behold, I was out there in St. Louis bidding -- and I was the last bidder. I convinced Pet, a $1.5-billion company, to sell it to me, me with this little public company, and I sold them that I can do it, I can raise the money. And all I'm thinking on the plane back is, 'How the hell am I going to get $21 million?' "

At this point the past rolls quickly into the present. "On Hain Pure Food, we sold bonds, and a bank put up $14 million when they shouldn't have given me 14?Simon says. With future acquisitions the technique would be the same, though the numbers would keep going up. Over the next six years, in order to acquire companies, Simon would sell equity or borrow, and then cut costs and sell off manufacturing facilities. Then he'd improve and expand the brand and push it into new markets.

That bank was right after all: Simon did know what he was doing. But each time he took a risk there was more at stake. "Every time I went out and did another deal, I risked the company, because I was borrowing $30 million to $40 million, and I never cashed out. The question that always came back, always, was, Do I just stay this small little company, do I have a bigger percentage of the company, or do I go out and take a risk by putting more debt on the company and become bigger, with the chance of it all blowing up?" he says. "And I always just felt bigger is better, and I always knew I was betting the firm."

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