You've got to hand it to him

Guy Hands has become a city legend, finding fortunes in the most unfashionable places. But will The Dome prove his downfall?

Guy Hands, the hugely succesful head of Nomura International's Principal Finance Group and the man who bought the Millennium Dome, has joined the ranks of the City's legends. Aged 40, he has built the PFG from nothing into one of the country's most dynamic private equity operators in six years, turning round some of the most unlikely industries.

Guy Hands, the hugely succesful head of Nomura International's Principal Finance Group and the man who bought the Millennium Dome, has joined the ranks of the City's legends. Aged 40, he has built the PFG from nothing into one of the country's most dynamic private equity operators in six years, turning round some of the most unlikely industries.

What is less known is that his inspiration comes not, he says, from money or the lust for power, but from the need to erase memories of a childhood scarred by underachievement and dyslexia. As a child with a strange accent from South African parents, in Sixties England, he was treated as a dimwit, languishing in obscurity, the one least likely to succeed.

"I really hadn't been successful in anything," he says. "I spent my childhood at the back of the class, coming bottom." Now, he says: "I would be dishonest if I didn't say there are times, when I'm feeling particularly down, when I tell myself, 'At least I've managed to do more than the people who looked at me when I was 31 in a class of 32 thought I could ever do'."

Mr Hands is credited with bringing America to the UK, with practices such as financing deals with bonds backed by the revenues of his purchases. He is a lone wolf. "The businesses we look for tend to be considered unattractive by the market," he says. "They are normally regarded as being badly run. Traditionally, they haven't had a lot of creativity and ingenuity applied to them. They are static."

Among businesses that contributed to Mr Hands' 60 per cent return rate at his investment bank have been the Thorn TV rental company, William Hill, Angel Trains (a BR rolling-stock company), some 5,000 pubs and 57,000 former Ministery of Defence homes. He is chasing Welsh water and power company Hyder for £2.4bn.

Mr Hands is believed to have made £1.5bn for his bosses in Tokyo since he defected from Goldman Sachs in 1994, and enriched himself by from £10m to £25m in the process. Exact figures are secret. As a person, he is unusual for "a big swinging dick", a term coined to describe Goldman Sachs high-flyers in the Eighties. He is slightly awkward and shy of photographs, yet passionate and laden with energy (and, reputedly, a fearsome boss), and he feels as if he is still proving himself.

Guy Hands is sitting in a conference room high in the Nomura heaquarters by St Paul's Cathedral. We have walked through a cavernous, minimalistic VIP reception area to get there, and the decor, with avocado chairs and walls, and pictures of Nomura directors with British royals in one corner, is deliberately austere, reflecting the bank's corporate culture. Nomura, a conservative and secretive organisation, is not known for wasting its money on frills, which, to some, made it all the more surprising that in 1994 it handed such responsibility to a man bent on making what seemed like the most unusual deals.

As a child, Mr Hands says he was so dyslexic his essays were unreadable. Sevenoaks secondary school, in Kent, near where he lives now, rejected him. That was when his desire to show a world as yet unaccustomed to dyslexia he was not a dunce was born. The desire has lasted. He is eager to make this clear. At the beginning of our interview he says he is hoping I am going to ask about what drives him.

His interest in merchant banking was born at what some would say was an unhealthy age. At 12, he became engrossed in a BBC TV series called The Brothers, about a family of merchant bankers. "I was fascinated by how one of the sons went into outside businesses, turned the companies around and moved them forward," he says. But at an age when most boys might dream of being racing drivers, Mr Hands says what he wanted was to "learn finance skills and go in to companies and make them a success".

He couldn't count on much help from his family. His father was an Oxford-educated lawyer and Mr Hands emerged from a childhood in South Africa aiming for the same centre of learning. But only after he got into Oxford, with an outstanding performance in a logic entrance exam (his A-levels had been mediocre), did he start to make links in the business world. While at university, the young Hands opened an art gallery which performed successfully, and bought flats from the proceeds.

One of his first tenants was William Hague, and he remains close to the Tory leader, he says that, contrary to rumours, he is not planning on a move into politics. Mr Hands says at university he was an avid student of John Stuart Mill's philosophy of utilitarianism. "I agree with Mill in absolute terms. Pleasure is the same whether you play pinball or go to the opera. You can't make value judgements on the way people enjoy themselves." It sounds a fittingly unsnobbish philosophy for a man who has made a career out of acquiring unfashionable businesses.

At the height of the dot.com craze, he negotiated the purchase of a chain of old-fashioned pubs turned the businesses around and made more than many dot.com investors. After he finished university, he says he thought of making a go of the art gallery, but the economy was down and he sought the more secure road of merchant banking. "I was probably the only undergraduate who applied to Goldman Sachs on the letterhead of his own company, and I suppose that's why they agreed to give me an interview," he says.

Mr Hands was flown to New York, put up in a five-star hotel, interviewed, and given a job on the trading desk in London.

"This guy gave me a several hundred million-pound trading limit and told me to make money. I took big risks, made them lots of money and at the age of 26 I was promoted to head of the Eurobond trading desk."

This was at the height of the yuppie boom in 1986, when traders were buying Porsches as fast as they drank Moet.

Soon afterwards Mr Hands started concentrating on structured finance and securitisation, methods he has used to devastating effect while at Nomura, and the seeds of doing unfashionable deals were planted in his mind.

In 1990 he was sent to Phoenix, Arizona, to do due diligence on a chain of trailer homes in the desert for "snowbirds", retired inhabitants of the icy northern States who fly south for cheap caravan life every winter. The trailers, unappealing to the market because of their "White Trash" image, were good, and undervalued businesses, he says.

"The cash flows were enormous and (as tourism was growing) there were options for redevelopment to resorts, and they were trading as if they were worthless, because they were so unfashionable."

Mr Hands asked his bosses at Goldman if they would buy the trailer parks and turn them around for a big profit. They declined, and the Japanese bank Daiwa did it instead, with a great deal of success.

"That annoyed me, to put it mildly," he says. "There were a lot of pride issues at Goldman, and they were also genuinely scared about doing something like that."

Four years later, a similar setback, in the UK, proved the last straw for Mr Hands, when he asked Goldman to buy a chain of pubs. They refused, he resigned and was snapped up by Nomura to head a new Principal Finance Group. With his superiors in Tokyo, rather than in the forbidding Nomura building where he worked in London, he was given almost free rein.

Six months after he joined he raised eyebrows by acquiring £250m worth of pubs. Nomura now has 4,300 pubs. "They were attractive in those days partly because they had lots of alternative uses," he says. "You could use them as homes or McDonald's, and there was also enormous cashflow.

"People said there wasn't growth but we found that by giving publicans a bit of straightforward help we got growth of 5 to 6 per cent over inflation." Nomura gave its publicans more autonomy and more freedom to choose where they sourced their beers "Our message to them was, 'You are the MDs of your own businesses'. It was tough."

Mr Hands was still proving himself in 1997, as he bid for for Angel Trains, a bureaucracy-bound former British Rail rolling-stock company. There were no other outside companies interested, and Nomura's only rival was a management bid for £550m, £150m less. Nomura got the deal. "I felt perplexed why everyone else felt it was such a bad deal, saying we were completely insane," says Mr Hands.

"I got the odd phone call from Tokyo saying, 'Have you really paid £150m more than anyone else, and is it true nobody else from outside bid at all?' I said, 'Yes, it's all true and I think that it's good value'. And Tokyo said to keep them informed.

"Angel had been set up by British Rail in an office block with each department split into separate floors, so people would not get on with each other. They even had separate canteens. So we moved them into one building into sales groups, so engineers, management, procurement, sales, legal and so on all worked with one another."

Securitising the company raised £550m immediately, and over the next two years Mr Hands got the remaining £150m back and made a profit of more than £400m. "It was all very straightforward, not rocket science," he says.

It's an ironic comment because Mr Hands has rocket scientists, and nuclear physicists, working on the enormously complex financial models set up by the 60-strong PFG. In the late Nineties he gained a reputation as a tough, tireless and intensely rational negotiator who always got what he wanted, and as an alchemist, a financial engineer who recon- figured how companies operated and sold them on for a profit.

Nomura is renowned for its thoroughness. Government sources say its proposal for the Millenium Dome came in several dozen phone directory-sized volumes, filled with charts, statistics, projections and analyses, more than 10 times the information of the rival bid.

This makes Mr Hands a difficult, if lucrative, man to work for. A former PFG employee says: "He expects you to work as hard as him, think as laterally as him, and come up with solutions like him, and he's not averse to losing his rag."

Mr Hands says he switches employees around continually, which creates creative tension and nervousness among his staff. "I will take someone who has been working on legal documentation for five months and say I want him to work on how we implement catering policy down at the Dome.

"And someone will say to me that person has no concept of how to do that, and I say, absolutely, so they're going in with a fresh mind, they can be really creative. The demands are high, sure, but so are their eventual rewards."

There are those who think the Dome, more of a white elephant than the businesses Mr Hands has acquired to date, could be a step too far. "It's an ego thing," an anonymous rival said last week.

Mr Hands is dismissive. "It definitely isn't an ego thing. Everything we've done has been high-profile. I'm not silly enough to say I won't like people knowing it's a great success, but if it is, it won't be on the front pages anymore, it will be buried in the business pages."

He has well-researched plans to make the Dome into an entertainment complex with conference facilities, a hotel, bars and amenities. But what if people don't want to go there? "People will want to go there, they absolutely will," he says. "It's just 15 minutes by tube from central London. One of the things the advertising has missed out on is no one is told how easy it is to go there. We have to change that."

Mr Hands agrees his 60 per cent returns are not sustainable. "I think those returns will come down," he says. "It's been quite amazing so far but if we can achieve 30 to 35 per cent in the long term I'd be very happy."

He is already looking forward to a very different future. "We haven't bought any internet businesses but we might, because they could be very cheap, when people get out of them and into cash-generative businesses."

All that time, at the back of his mind there will be a memory. "I remember walking out of my school with my A and my E (in A-levels), having been bottom of my class at times, thinking, 'OK, I may not have succeeded at school but by God I can be a success'.

"I don't feel I've done that yet. Now, the second I've succeeded with a project the challenge is gone, it's on to the next business.

"Each time, getting there is far more stimulating than having got there."