News - Midlands
Until the year before there had been 14 businesses until Finelist sold Maccess, the Yorkshire-based market-leading distributor of vehicle parts and accessories, to management in a £370m deal. The sale helped reduce Finelist's debt but analysts pointed out that it was also one of Finelist's higher-margin businesses.
The deal was backed by Barclays Private Equity (BPE) in a consortium that included two other venture capitalists, a mezzanine house and two banks. At the time, Maccess was primarily a cash and carry wholesaler for independent retailers, supplying 80 per cent of the aftercare market. It was profitable but the market was mature so the plan was to utilise its distribution network to shift emphasis towards being more of a logistics business.
But although Maccess picked up national customers such as Tesco, B&Q and Sainsbury's, the plan was never fully implemented. Management proved unable to adapt to the business's change in direction and trading was constrained by the amount of money the consortium put in.
"We overpaid," says BPE director Tony Hyams today. "The company was burdened with more debt than it could handle."
The necessary refinancing took place in a difficult nine months in 1999 and new management was installed. With sufficient working capital, the company is now "plugging away, though it's not a star performer". However Maccess does at least enjoy a distribution network that allows it to service the nationals.
"As with any investment we would sell it tomorrow if someone made the right offer but there is no urgency," says Hyams.
One of the most successful companies to come out of the receiver's sale was Stratford-based Motor World, the country's second-largest car accessories retailer. The company was founded in 1968 as Bradford Motorist Supermarket, changed its name to Motor World in 1986 and was bought by Finelist in 1996 for £348m. It was subsequently sold by the receiver to a buyout team led by managing director John Moussell. In the heady time that followed, Motor World added over 20 new stores to its 200-store estate. Clearwater Corporate Finance is currently advising on Motor World's expansion plans.
Private equity money rescued a number of Finelist companies. As well as Motor World, there were buyouts at First Line, LS UK, Ferraris Piston Services, Brackley Clutch, and Tuberex.
Eighty jobs were saved at Firstline, a distributor of engine, chassis and braking products, when it was sold to management backed by Aberdeen Murray Johnstone Private Equity (AMJPE) and Lloyds TSB Commercial Finance in early 2001.
The company, with sites in Bicester and Banbury, distributed more than 20,000 own-brand parts and was consistently profitable since 1984 when it was founded by Peter Joyner and John Madden.
At the time of its secondary buyout last month Firstline was turning over £312m and employing 90 staff and Joyner was still managing director. With AMJPE replaced by asset-based lender Enterprise Finance Europe, Joyner gained even more control of the business.
Enterprise Finance Europe believes that despite difficult trading conditions, which have seen a number of its competitors fail, Firstline has become a leading niche player in the market with a strong emphasis on service.
LSUK, formerly Lucas Varity, had revenues of £351m when management bought it from the Finelist receivers, backed by NBGI Private Equity. In the seven months between receivership and sale LSUK, a Sheffield-based parts and service business specialising in braking, electrical and fuel injection systems, only managed to keep going with the support of its suppliers.
NBGI invested £34m in the £39.5m management buyout (MBO). "There is always uncertainty when you buy out of someone like Finelist but there have been no surprises and sales have been consistent," says Howard Jennings of NBGI.
Two-thirds of LSUK's business is parts distribution, one-third commercial service and repair. The former is an increasingly competitive market as cars become more reliable and parts cheaper so the challenge for the business is to increase the latter. With the investment now four years old, Jennings says there is "half an eye on the exit".
Which is what ABN Amro achieved last year when it sold another former Finelist business FPS Distribution - formerly Ferraris Piston Service - to Lookers, the Manchester-based quoted car dealer, for £331m. That looks a handsome return for ABN Amro since the 2001 buyout was worth a reported £313m - and even more handsome considering Finelist paid Tomkins £362m for it in 1997.
Founded in 1934, Stratford-based FPS had 19 outlets at the time of the 2001 buyout, supplying branded engine and steering components to the likes of Delphi, Lucas TRW and Federal Mogul. It had 600 employees and a fleet of 280 delivery vehicles.
By 2003 FPS had increased turnover by 15 per cent to £360m. In July 2004, Ken Surgenor, Lookers chief executive, said the FPS acquisition was an important step in its strategy to broaden its revenue streams from the automotive industry. "FPS has an established track record and market position with excellent prospects for continued growth,' says Surgenor.
A less successful buyout was Tuburex, the exhaust manufacturer based in Hixon, Staffordshire. It was bought by managing director David Lunn, Suzanne Day and Norman Tuer in February 2001, backed by the Royal Bank of Scotland and Eurosales Finance.
Tuberex was founded in 1983 as a sub-contractor to major manufacturers such as Unipart, then going into direct competition with its customers in 1986 when it started supplying replacement exhausts for the aftermarket. Successfully building up market share, in 1995 it joined with Veco to form Independent Parts Group, which was bought by Finelist in 1998.
At the time of the buyout it had become the fourth largest maker of exhausts in the country but Lunn was hugely critical of Finelist's ownership of the company, claiming that he had explored a buyout even before the Finelist receivership.
He told trade publication Motor Trader that Finelist had "no interest and a lack of understanding of the requirements of a manufacturing company" and had benefited from Tuberex's cash flow without putting in any investment.
Because growth opportunities were missed and marketing support cut, Tuberex's first year free of Finelist would be one of stabilising the company. It was not enough. At the end of March 2005 Tuberex went into administration. Rising steel prices were the immediate reason for its administration but it was vulnerable anyway because it had won its place as the country's third biggest exhaust supplier to the aftermarket through low margins.
Nevertheless, PricewaterhouseCoopers administrators Matthew Hammond and Rob Hunt have been able to keep the company trading. They have been able to do so with the support of Tuberex customers including JCB and the buying group of nine separate companies known as the UK Parts Alliance.
"The trading strategy has also relied on supplier support which, given that Tuberex had a refinancing last year, was a difficult call for them, but in the main they have been supportive," says Hammond.
Seventy-four of the several thousand part lines have been discontinued and two phases of redundancies have brought the staff count down from 130 to 60. But painful though this is, the business is trading roughly at pre-administration levels and Hammond says talks with potential trade buyers are at an advanced stage.
Tuberex's fellow company in Independent Parts Group, Veco, had a similar rocky ride, going into receivership earlier this year after being bought from the Finelist receivers by a group of Finelist customers led by Fergus Reid. They also bought Autogem and together the businesses traded as Vegem from a base in Morley, near Leeds.
Both Veco, whose main product ranges are braking, chassis and engine parts, and Autogem, a specialist in exhaust components, tools and workshop consumables, had enjoyed a captive market when owned by Finelist - namely other Finelist companies.
Cut loose from this lucrative source of high-margin sales, and with the overheads of a large building, reality bit. The owners looked to sell but failed to find a buyer and put the business into administration on 4 February this year.
But Vegem's customers were loyal and it took only 19 days to complete an MBO, with backing from Cattles Invoice Finance. Some jobs have been lost but most retained, according to David Stafford, sales and marketing manager. "We are leaner, more profitable and adaptable - and we're in a strong position to look at new market opportunities."
There was a much less happy fate for Autela and Edmunds Walker, the two car parts distributors that Swan himself bought back from the Finelist receivers for a reported £32m in May 2001. Before the year was out, the receivers were called in again. Swan shut down most of the business in an effort to stave off insolvency. The receivers wound down what was left of Autela.
Three of the Finelist companies were snapped up by larger trade buyers. Each had its own strategic reasons for doing so.
Morelli became the country's largest independent distributor of car paints and refinishing products when it acquired Bancrofts. Swan had bought the Birmingham business from McLeod Russel, paying £315m.
Morelli closed down some of the 26 branches but rebadged the others as Morelli Bancrofts to give it a bigger presence in the Midlands and the west of the country. A different fate awaited Silencer Distributors (SDL), which was bought by Bosal in December 2000 in what was seen as a defensive move. Bosal, one of the world's largest manufacturers of exhaust systems and other parts, wanted to secure its sales. SDL had 25 locations, each holding over 5,000 stock lines.
Without SDL, Bosal's national distribution was seriously at risk.
SDL continued to run as a standalone business and Duncan Richards stayed as managing director. SDL seemed to have come full circle because it was Bosal that sold it to Finelist in 1997. But even at the time of the deal, Bosal did not rule out selling it on.
Since then, Bosal has either closed down or sold on to customers all the SDL branches, completing the last sale at the start of the year. Owning a distribution business sat uneasily with Bosal's strategy as a manufacturing business.
Finally, US company Delco Remy bought Droitwich-based XL Component Distribution and the associated Autostart brand. XL, which had four manufacturing sites in the UK and a workforce of 300, was a specialist in the remanufacturing, packaging and distribution of steering racks, brake callipers, ignition distributors, ignition leads, transmission components and rotating electrics.
Delco Remy, mainly a remanufacturer of rotating electrics, absorbed XL's corresponding business into its own. But XL, enjoying a strong brand name, also allowed it to expand its range of remanufacturing products. The consequence is that, although the less successful Autostart brand was dropped last year, the four manufacturing sites remain and have enjoyed "significant investment", according to managing director Tim Rahill. Indeed, Delco Remy is performing well in the UK, shifting its Lichfield HQ to a new one in Burntwood and opening a new steering rack and steering pump factory.
Out of the wreckage
Until the year before there had been 14 businesses until Finelist sold Maccess, the Yorkshire-based market-leading distributor of vehicle parts and accessories, to management in a £370m deal. The sale helped reduce Finelist's debt but analysts pointed out that it was also one of Finelist's higher-margin businesses.
The deal was backed by Barclays Private Equity (BPE) in a consortium that included two other venture capitalists, a mezzanine house and two banks. At the time, Maccess was primarily a cash and carry wholesaler for independent retailers, supplying 80 per cent of the aftercare market. It was profitable but the market was mature so the plan was to utilise its distribution network to shift emphasis towards being more of a logistics business.
But although Maccess picked up national customers such as Tesco, B&Q and Sainsbury's, the plan was never fully implemented. Management proved unable to adapt to the business's change in direction and trading was constrained by the amount of money the consortium put in.
"We overpaid," says BPE director Tony Hyams today. "The company was burdened with more debt than it could handle."
The necessary refinancing took place in a difficult nine months in 1999 and new management was installed. With sufficient working capital, the company is now "plugging away, though it's not a star performer". However Maccess does at least enjoy a distribution network that allows it to service the nationals.
"As with any investment we would sell it tomorrow if someone made the right offer but there is no urgency," says Hyams.
One of the most successful companies to come out of the receiver's sale was Stratford-based Motor World, the country's second-largest car accessories retailer. The company was founded in 1968 as Bradford Motorist Supermarket, changed its name to Motor World in 1986 and was bought by Finelist in 1996 for £348m. It was subsequently sold by the receiver to a buyout team led by managing director John Moussell. In the heady time that followed, Motor World added over 20 new stores to its 200-store estate. Clearwater Corporate Finance is currently advising on Motor World's expansion plans.
Private equity money rescued a number of Finelist companies. As well as Motor World, there were buyouts at First Line, LS UK, Ferraris Piston Services, Brackley Clutch, and Tuberex.
Eighty jobs were saved at Firstline, a distributor of engine, chassis and braking products, when it was sold to management backed by Aberdeen Murray Johnstone Private Equity (AMJPE) and Lloyds TSB Commercial Finance in early 2001.
The company, with sites in Bicester and Banbury, distributed more than 20,000 own-brand parts and was consistently profitable since 1984 when it was founded by Peter Joyner and John Madden.
At the time of its secondary buyout last month Firstline was turning over £312m and employing 90 staff and Joyner was still managing director. With AMJPE replaced by asset-based lender Enterprise Finance Europe, Joyner gained even more control of the business.
Enterprise Finance Europe believes that despite difficult trading conditions, which have seen a number of its competitors fail, Firstline has become a leading niche player in the market with a strong emphasis on service.
LSUK, formerly Lucas Varity, had revenues of £351m when management bought it from the Finelist receivers, backed by NBGI Private Equity. In the seven months between receivership and sale LSUK, a Sheffield-based parts and service business specialising in braking, electrical and fuel injection systems, only managed to keep going with the support of its suppliers.
NBGI invested £34m in the £39.5m management buyout (MBO). "There is always uncertainty when you buy out of someone like Finelist but there have been no surprises and sales have been consistent," says Howard Jennings of NBGI.
Two-thirds of LSUK's business is parts distribution, one-third commercial service and repair. The former is an increasingly competitive market as cars become more reliable and parts cheaper so the challenge for the business is to increase the latter. With the investment now four years old, Jennings says there is "half an eye on the exit".
Which is what ABN Amro achieved last year when it sold another former Finelist business FPS Distribution - formerly Ferraris Piston Service - to Lookers, the Manchester-based quoted car dealer, for £331m. That looks a handsome return for ABN Amro since the 2001 buyout was worth a reported £313m - and even more handsome considering Finelist paid Tomkins £362m for it in 1997.
Founded in 1934, Stratford-based FPS had 19 outlets at the time of the 2001 buyout, supplying branded engine and steering components to the likes of Delphi, Lucas TRW and Federal Mogul. It had 600 employees and a fleet of 280 delivery vehicles.
By 2003 FPS had increased turnover by 15 per cent to £360m. In July 2004, Ken Surgenor, Lookers chief executive, said the FPS acquisition was an important step in its strategy to broaden its revenue streams from the automotive industry. "FPS has an established track record and market position with excellent prospects for continued growth,' says Surgenor.
A less successful buyout was Tuburex, the exhaust manufacturer based in Hixon, Staffordshire. It was bought by managing director David Lunn, Suzanne Day and Norman Tuer in February 2001, backed by the Royal Bank of Scotland and Eurosales Finance.
Tuberex was founded in 1983 as a sub-contractor to major manufacturers such as Unipart, then going into direct competition with its customers in 1986 when it started supplying replacement exhausts for the aftermarket. Successfully building up market share, in 1995 it joined with Veco to form Independent Parts Group, which was bought by Finelist in 1998.
At the time of the buyout it had become the fourth largest maker of exhausts in the country but Lunn was hugely critical of Finelist's ownership of the company, claiming that he had explored a buyout even before the Finelist receivership.
He told trade publication Motor Trader that Finelist had "no interest and a lack of understanding of the requirements of a manufacturing company" and had benefited from Tuberex's cash flow without putting in any investment.
Because growth opportunities were missed and marketing support cut, Tuberex's first year free of Finelist would be one of stabilising the company. It was not enough. At the end of March 2005 Tuberex went into administration. Rising steel prices were the immediate reason for its administration but it was vulnerable anyway because it had won its place as the country's third biggest exhaust supplier to the aftermarket through low margins.
Nevertheless, PricewaterhouseCoopers administrators Matthew Hammond and Rob Hunt have been able to keep the company trading. They have been able to do so with the support of Tuberex customers including JCB and the buying group of nine separate companies known as the UK Parts Alliance.
"The trading strategy has also relied on supplier support which, given that Tuberex had a refinancing last year, was a difficult call for them, but in the main they have been supportive," says Hammond.
Seventy-four of the several thousand part lines have been discontinued and two phases of redundancies have brought the staff count down from 130 to 60. But painful though this is, the business is trading roughly at pre-administration levels and Hammond says talks with potential trade buyers are at an advanced stage.
Tuberex's fellow company in Independent Parts Group, Veco, had a similar rocky ride, going into receivership earlier this year after being bought from the Finelist receivers by a group of Finelist customers led by Fergus Reid. They also bought Autogem and together the businesses traded as Vegem from a base in Morley, near Leeds.
Both Veco, whose main product ranges are braking, chassis and engine parts, and Autogem, a specialist in exhaust components, tools and workshop consumables, had enjoyed a captive market when owned by Finelist - namely other Finelist companies.
Cut loose from this lucrative source of high-margin sales, and with the overheads of a large building, reality bit. The owners looked to sell but failed to find a buyer and put the business into administration on 4 February this year.
But Vegem's customers were loyal and it took only 19 days to complete an MBO, with backing from Cattles Invoice Finance. Some jobs have been lost but most retained, according to David Stafford, sales and marketing manager. "We are leaner, more profitable and adaptable - and we're in a strong position to look at new market opportunities."
There was a much less happy fate for Autela and Edmunds Walker, the two car parts distributors that Swan himself bought back from the Finelist receivers for a reported £32m in May 2001. Before the year was out, the receivers were called in again. Swan shut down most of the business in an effort to stave off insolvency. The receivers wound down what was left of Autela.
Three of the Finelist companies were snapped up by larger trade buyers. Each had its own strategic reasons for doing so.
Morelli became the country's largest independent distributor of car paints and refinishing products when it acquired Bancrofts. Swan had bought the Birmingham business from McLeod Russel, paying £315m.
Morelli closed down some of the 26 branches but rebadged the others as Morelli Bancrofts to give it a bigger presence in the Midlands and the west of the country. A different fate awaited Silencer Distributors (SDL), which was bought by Bosal in December 2000 in what was seen as a defensive move. Bosal, one of the world's largest manufacturers of exhaust systems and other parts, wanted to secure its sales. SDL had 25 locations, each holding over 5,000 stock lines.
Without SDL, Bosal's national distribution was seriously at risk.
SDL continued to run as a standalone business and Duncan Richards stayed as managing director. SDL seemed to have come full circle because it was Bosal that sold it to Finelist in 1997. But even at the time of the deal, Bosal did not rule out selling it on.
Since then, Bosal has either closed down or sold on to customers all the SDL branches, completing the last sale at the start of the year. Owning a distribution business sat uneasily with Bosal's strategy as a manufacturing business.
Finally, US company Delco Remy bought Droitwich-based XL Component Distribution and the associated Autostart brand. XL, which had four manufacturing sites in the UK and a workforce of 300, was a specialist in the remanufacturing, packaging and distribution of steering racks, brake callipers, ignition distributors, ignition leads, transmission components and rotating electrics.
Delco Remy, mainly a remanufacturer of rotating electrics, absorbed XL's corresponding business into its own. But XL, enjoying a strong brand name, also allowed it to expand its range of remanufacturing products. The consequence is that, although the less successful Autostart brand was dropped last year, the four manufacturing sites remain and have enjoyed "significant investment", according to managing director Tim Rahill. Indeed, Delco Remy is performing well in the UK, shifting its Lichfield HQ to a new one in Burntwood and opening a new steering rack and steering pump factory.