Graham Hallworth tells Michael Taylor how he faced down anti-terrorist legislation and won, and is now on course for a bright future for his twin business passions, Crown Paints and Clearwater.
As introductions to a new job go, they don’t come any more dramatic than Graham Hallworth’s first few weeks in charge of paint manufacturer Crown Paints.
The £70m deal led by turnaround fund Endless to extract the business from Dutch conglomerate Akzo Nobel was sealed in August 2008, with a funding line agreed by Icelandic Bank Landsbanki. But no-one needs reminding that the crash by the banks of Iceland triggered unprecedented action by the UK government to freeze the assets of the banks. The government used the Crime and Security Act of 2001, a piece of legislation designed for something else entirely.
For Hallworth, a daredevil turnaround specialist, with experience in private equity with Alchemy and as an entrepreneur in his own right, it was an experience he was unprepared for, and wouldn’t want to repeat. His preferred routine for a Friday night would include a drive to Abersoch to chill out, or getting ready for a trip to watch Manchester United. Instead he spent a Friday night in court in Manchester with a senior Judge.
On 21 October 2008 the government invoked the Landsbanki Freezing Order 2008, which was aimed at preventing the flight of Icelandic funds from the UK following the banking collapse. Touching the funds was therefore deemed a breach of that order.
“It was a shocking situation to be in. To breach that order had a jail sentence of seven years attached. We couldn’t write a cheque,” says Hallworth. “We spoke to the Treasury and were told Alistair Darling was handling it. We spent that Friday night in court. A senior judge was brought in to create a precedent in law. We had to serve an injunction on Landsbanki and the Treasury to challenge the anti-terrorism law. It was real courtroom drama.”
As for dealing with Landsbanki now, there is no problem. “The money is there,” he says. “There’s a robust funding structure in place, supported by investment from Endless, and it puts us in a strong position to increase sales and take advantage of opportunities.”
The Crown deal was triggered by Akzo’s acquisition of Dulux, creating a monopoly, so the competition authorities in Europe have had one eye on a ticking clock – it’s never been a particularly easy ride.
On top of that he also lost Howard Luft, the chief executive of Crown, just a few months in, and a number of other key people left the business who either weren’t up for it, or up to it. Effectively, he says he’s been full time on the business since October.
Crown’s “return to independence” has meant the 200-year-old business – with brands Crown, Sadolin, Sandtex, Macpherson and Berger – is in ruder health with annual revenue of £180m across UK and Ireland (with a small export business) 1,500 staff and factories in Darwen and Hull.
“I get a peverse enjoyment out of being there. If we get it right it will be a fantastic legacy for the North West,” he says.
Hallworth has had a successful career in business, but has never been particularly high profile. He has been involved in running a number of diverse industrial companies, all of which have taught him something new. They include timber panel distributor Sylvan International, industrial products business Wardle Storeys, tenanted pub chain Innspired, jewellery business Goldsmiths and the Bridgewater Hospital in Manchester, which he says he “failed to sort out properly”.
He’s also fairly unique as a business director – he worked as a hands-on director and spent a lucrative five years within Jon Moulton’s private equity investment business Alchemy, where he was earmarked to become chief executive of car manufacturer Rover during its proposed takeover in 2000.
“Rover would have been the biggest turnaround ever. I was tempted by the challenge of that. I spent three months running around Europe trying to buy it. It was a massively challenging time. We had a plan and we believed it would have worked.”
So far at Crown he’s been making sure the company has its own computer system, now it’s split from Akzo Nobel. “We’ve put in SAP and there are research technologies at Crown with unexploited patents,” he says. “I’ve effectively been executive chairman. I’ve had to appoint people to run production, marketing, sales and find a finance director. I’ve had to resolve many issues.
“Are the skills needed right now the same we will need in 18 months, and who do we know who’s got these skills?”
He’s a great defender of private equity, too. Alchemy’s acquisition, management and sale of AG Stanley (which ran the FADS stores) delivered a return of 12 times money. Business schools write papers on it. An unloved subsidiary of larger group; sound familiar?
He also thinks private equity businesses are good at fundamentals, like cash. “And preventing fraud,” he adds. “The tighter controls on a business by private equity owners means fraud is caught quicker.”
He talks with great energy about some detailed processing innovations that have been applied at Crown. It’s the kind of expertise developed on the factory floor and embraced as bottom-up vision in some companies. You get the impression this is the kind of environment Hallworth is building at Crown.
And though he doesn’t say it outright, you get the sense Crown was rather unloved and neglected: “Now we are no longer the UK subsidiary of a Dutch conglomerate there are fantastic opportunities to develop this business in a far more entrepreneurial way.”
He says he keeps finding hidden gems within the business. One is Nigel Banks, who has been given a job as commercial manager for export and licensing – a signal of Crown’s intent to go for overseas expansion. “As an independent manufacturing company, the world is our oyster,” he says.
Hallworth is also the chairman of Clearwater Corporate Finance, the Manchester boutique practice with a strong track record in advising management teams on buyouts. And the banking crisis has thrown up some tough decisions, but he’s confident they can get through the recession by recruiting people in areas such as distressed debt situations to provide a debt advisory service to businesses.
“The team there are faster on their feet than others I’ve come across. They do practical research better than anything I’ve seen in an investment bank or from the big four,” he says.
“Being busy fools is our biggest danger right now.” Though you rather suspect it’s the last thing they’re going to do.
Also in: July 2009
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Editorial: Time to Think Big
On top of all the challenges facing business at the moment, getting on a plane and going to China might seem like an exercise in indulgence, but it isn’t.
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Better City, Better Life
Insider’s Jim Pendrill joined a Liverpool delegation to Shanghai ahead of next year’s World Expo and found a city busy gearing up for the world’s ‘business Olympics’.
