Evaluate the businesses in which you are involved
Hultgren’s task from that first day of work was to begin evaluating which of SWS Group’s businesses would be the best choices to
keep. He says he would have been open to keeping any one of the
company’s lines if he thought SWS could be a leader in that field.
Hultgren says he took his time looking at the options and didn’t
make any snap judgments. He and his management team examined
each business by looking at that segment’s performance for SWS,
and then they looked at the competition. In evaluating the competition, he looked at those companies’ market share; then assessed
whether or not the competition had any weaknesses that could be
exploited.
He also considered which segments SWS had been invested in
the longest and had the most expertise running.
“The approach was taking a look at the company and saying, ‘In
what businesses can I be a leader?’” Hultgren says. “That turned
out to be the three core businesses. And (then we asked), ‘In what
businesses could I not be a leader?’ That turned out to be the non-core businesses.”
For example, SWS owned an online brokerage firm called
MyDiscountBroker.com. The household names in online brokerages
at the time were E*Trade and Ameritrade.
“It was pretty obvious that E*Trade and Ameritrade were not
going to be beaten by MyDiscountBroker.com,” Hultgren says. “On
the other side of the coin, in the clearing business for example, we
are today one of the top five clearing firms in the country. That’s an
area where we can see that we can be the leader in an industry and
get a nice share of the market.”
Other businesses that seemed to pair well with the clearing business were the firm’s banking business and its brokerage, so those
were kept, while in addition to the online brokerage, it also exited
the general technology, subprime auto lending, investment management and trust services, and institutional equity and research businesses.
“It made sense to grow that bank, grow that clearing business
and grow that brokerage,” Hultgren says.