Large-scale private businesses are important for regional stability in the current climate. Rupert Cornford meets Michael Bibby, the head of Liverpool’s Bibby Line Group, to understand how it stays afloat.
A book in the reception of Liverpool family empire Bibby Line Group carries the title Time and Tide. The story of a business that has survived the ravaging economic cycles of the shipping industry details a colourful 200-year history, so before I even meet Michael Bibby, the managing director, I realise he must know a thing or two about recessions.
“The family and the business have been fairly practical,” he says. “We’ve not been short of cash for the past 15 years and we don’t gamble. One of the mottos is never put all your eggs in one basket, and no single investment we ever made would be big enough to bring down the business.”
Bibby, 45, has been working in the business since he was 28 after training as an acccountant at Coopers & Lybrand and a four-year stint at Unilever. Entering the Bibby fold was always an option, but it was never a rite of passage.
“I’ve got three brothers and a sister and there was one rule for all of us – if you wanted to come into the business you had to be qualified to do it and have proved yourself,” he says. “But it all fitted together for me when I was looking for my next move at Unilever. I had split up with my girlfriend in London and wanted to take time off. The only company to employ me four months later when I returned from Africa was Bibby Line Group.”
Bibby joined as a financial controller when his dad retired and worked his way up to managing director, a position he has held since 2000. The company has traditionally been involved in the trading and operation of ships, but legislative changes under Thatcher and the cyclical nature of the sector have meant Bibby Line Group has spawned further divisions to spread its risk.
“We tried lots of things, most of which went wrong such as buying and selling CB radios,” he says. “But the skill of management was to stop the ones losing money and back the ones doing well.”
The company now comprises shipping, logistics and financial services divisions and has started acquiring high-growth businesses with cash off its own balance sheet. Bibby Holdings was set up in 2008 under the stewardship of Cy Green, who joined the group in 2004, and is set to mark out the company’s short-term focus.
“Our distribution business is high volume, low margin, but it tends to be quite cash generative,” says Bibby. “When we saw the shipping markets peak and the finance business maturing, we had to find other investment ideas.”
In line with its trading status, Bibby Holdings looks to make majority investments in companies with a proven and successful business model that need access to development finance to grow. Each investment must be able to demonstrate the potential to achieve £10m in pre-tax profits within ten years.
“We are taking over all the businesses we are investing in,” says Bibby. “So we will only take majority stakes, then look to take 100 per cent.” But even though the company will seek a full takeover of its investments, keeping the management teams in place is a priority.
“We will give a second bite of the cherry for the vendors because we want to keep them in to run the business,” he says. “If we acquire a 51 per cent stake, we may have an earn-out for the rest, so they can benefit from the extra growth they get from being part of Bibby Line. Or we’ll structure 100 per cent of the shares with an earn-out bonus.”
Deals so far include a stake in value supermarket chain Costcutter; the acquisition of Bury-based plant and equipment hire business Garic; a majority investment in Staffordshire health and safety advisory company MHL Support; and a £5.6m slug of Colney Memorial Parks, which is looking to expand its woodland burial sites across the UK.
Unlike private equity houses, Bibby Holdings is not necessarily looking for an exit route within three to five years. “We don’t really want that,” he says. “Our concern is tying in the management and providing the corporate governance and back office to move the company on to the next stage of development.
“In the burial site deal, the company had a small site and wanted to roll out but didn’t have the working capital, anagement structure or tools to do it. We came in and gave them financial backing but also the support they needed to become a multi-site operation,” he adds.
It’s good to be cash-rich in a downturn economy, and the platform means the risk can be a spread further, but that doesn’t mean the deals will flood in. Bibby says he will make more acquisitions this year, but concedes that vendor expectations on price make it harder to achieve the equity returns needed. So with a growing number of disparate operations, is it hard for Bibby to keep a handle on expansion?
The management structure allows for a hands-off approach and plays an important part in meeting the company’s minimum requirement of 12 per cent growth in shareholders’ funds each year, he says.
“We push responsibility as far down the line as possible,” he says. “If the guys on the shop floor are responsible for the way the business operates they will be closer to the customer and able to act accordingly. With Costcutter, we had a deal with the administrator on some stores and completed in a week. There aren’t many organisations of that size that can do that with proper corporate governance.”
If devolved power is good for the business, what does it mean for Bibby, who plays no executive role in the trading companies, but maintains responsibility for the holding operation?
He is a lot more than a figurehead of the business but knows where to draw the line, saying: “I have a mobile phone but it’s from 2001; it’s like a brick and when I’m at home it’s not on. No one should need to contact me but if they are then they’re not taking a decision themselves.”
In the office, though, he has an eye on the economic climate. The pressure facing customers and suppliers is on his mind. But through the family shareholding and trust, the family owns 88 per cent of the company and a long-term investment strategy means the company has diversified. The family realises that in today’s world it doesn’t pay to live in the past – progressive operations and empowered management is comforting when so many businesses are falling by the wayside. Time and tide wait for no man.
Also in: April 2009
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