John Morphet sold his South Lakeland Caravans business to a private equity buyer for £100m. He still works six days a week and he's still laughing. Over steak sandwiches and chips, he tells Michael Taylor why
When entrepreneurs sell their businesses to private equity buyers, one of two things happen. Either the smartest guys in the room - the buyers - turn the business around through a mixture of business school stardust and cunning financial engineering, or it goes horribly wrong.
Entrepreneurs are supposedly short on detail and strategy. They lack rigorous financial discipline and they miss a few tricks on valuation of the property assets, so the theory goes.
With this in mind, which one do you think applies to John Morphet, the former Lancashire farmer, who sold his caravan and holiday park business for £100m to Legal & General Ventures (LGV)?
Before he goes to bed Morphet laughs heartily to himself. "Since the deal was done, there hasn't been a day when I've gone to bed without having a laugh," he says. He hears things from his loyal former staff about how the business is being run that give him cause for a chuckle. He's already told his local paper, The Lancaster Guardian, that he got out "because I could see there were going to be hard times ahead".
But he insists, with a smile, that he is now focused on his next job in hand, his international interests and building on his most recent UK acquisition, Billing Aquadrome in Northamptonshire.
"I don't care," he says. "I wish them luck, I really do. I sold for a good price. But having built the South Lakeland Caravan brand from scratch I'd taken it as far as I could by driving up the quality of all the leisure parks to the highest standard possible.
"My focus now is to develop my upmarket business interests in the Caribbean and Europe as well as developing some more imaginative concepts for leisure parks elsewhere, under the Pure Leisure brand."
His smile tells a story, but probably not the whole one. Selling the business wasn't straightforward. In 2005 LGV was initially up for buying it with LDC as a co-investor. But LDC wasn't happy with some of the issues about land access and planning permission and there were some lingering doubts over whether the holiday cabin business was at the top of its market. The buyers also insisted on some fairly tough restrictions as to what Morphet could do once the deal was done.
"They wanted to bar me from the whole of the UK and Ireland. We ended up settling on a line north of Birmingham for the holiday park business," he says. And they didn't end up buying the original South Lakeland Park, which lies just off the M6 at Carnforth.
When LGV came back second time - without LDC - it was more satisfied. Morphet says he sorted issues out and answered all the questions. He also poached Nick Dodd from his advisers, KPMG, as his finance director, which helped the deal go through, but also gave him more confidence that he could have a proper running mate at his next venture.
"The business was as streamlined as it could be," he says. "We've nibbled all the low-hanging fruit. They bought because the sector is hot. It has a property angle - some sites have 40 per cent pitch capacity and are underdeveloped. Our sites make the best margins and they think they can get a premium on rental yields."
In fairness, LGV has had a successful experience with caravan parks in the past, having invested in another business, Bourne Leisure. It is confident it can make a turn and has retained Graham Hodgson as chief executive.
And although Morphet admits he may come into conflict with LGV over some of his restrictive covenants, he's looking at "affordable housing" around Blackpool, which isn't covered by the restrictions. But he knows he has to do many things very differently this time around.
"I'm a control freak," he says. "One of the reasons I needed to sell the business was that I was simply too involved in it. Because of the team I had and the structure I'd created I simply couldn't carry on as I was. I don't want to be in that position again, which is why I've brought Nick Dodd in. I'd trust him in anything."
Since the deal was done in March 2006, Pure Leisure acquired Billing Aquadrome in Northampton, in a multimillion-pound deal. The 235-acre parkland site, which provides pitches for 2,000 static and touring caravans, is one of the largest independently-owned parks in the UK. It offers an extensive range of leisure facilities, including a jet ski lake, fishing, licensed bars and a variety of entertainments.
As part of the deal, Pure Leisure has also retained South Lakeland Leisure Village, a log cabin leisure resort located near the M6 at Carnforth, north Lancashire and close to the southern Lake District.
Having learnt what he has about investment, Morphet admits that Billing would not have been bought by a private equity buyer; it had issues with access roads for a start.
"On the face of it the seller didn't own what they said they did," he says, but his own gut feel gives him comfort that legal issues can be overcome. "Our lawyers never saw anything like it, they thought I was mad."
Morphet says he works six days a week, flies around the country in a helicopter to save travelling time and has regularly spent time dealing with micro issues in his businesses, holding open surgeries for staff in his farmhouse kitchen.
We have steak sandwiches at the Water's Edge Restaurant on his site near Carnforth. It's meant to be his one day off and his wife Vicki who works in the business is lunching at the next table. The man just can't stop.
But rather than dealing with local planners and irate farmers, Morphet is now getting used to Hollywood stars phoning him to ask permission to play golf at his Royal Westmoreland resort on Barbados, which he bought for £50m from former bathroom magnate Bill Rooney.
He's also built a further 23 new luxury villas to add to the 150 homes on the championship golf course. Sporting celebrities, including Gary Lineker, Ian Woosnam, Michael Vaughan, Andrew Flintoff and Rio Ferdinand have homes on the complex, which cost from $1.5m to over $10m. He's also had Oscar nominee Keira Knightley and pop icon Jamelia among his visitors.
It's all a far cry from Morphet's early years on a Lancashire farm. Breaking his back in an accident there, he spent months recovering and had to give up agricultural labour. He took charge of a small caravan park on the farm and, seeking fresh challenges, bought his first caravan park in 1988 for £135,000.
Over the past 18 years his company, South Lakeland Caravans have snapped up more than 20 caravan sites. In the year to January 2005, profits soared to £11.1m on nearly £31m sales, which clearly looks like a good margin to attract a buyer.
Time will tell whether the new owners can grow that. Either way, Morphet will be doing the same thing somewhere else, though possibly without the same attention to minor details.
Also in: September 2006
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