Rainmakers award judges love a private equity exit
But this was also a week of carve outs, buyouts and distressed sales
This is our free to air summary of the week in corporate finance and M&A. We hope you like it and it encourages you to upgrade to a subscription.
We’ll trail all the good stuff you could have got this week if you had.
We’re holding the judging session for our Rainmakers awards in our different regions over the next couple of weeks.
They are community gatherings with leaders from all the major investors, funders and advisers making all the decisions about who is leading amongst their peers.
They love a private equity exit. One of the categories this year is named exactly that. One deal that wasn’t completed in time to make the North West shortlist was Palatine’s exit from Skelmersdale-based specialist fleet solutions provider NRG Riverside with a sale to Astatine Investment Partners.
Palatine has divested NRG, which leases and maintains specialist vehicles, such as waste collection trucks, to local authorities and private authorities, as CEO Darren Powell told our Rainmakers conference in March, Palatine backed him with significant investment in people and operations and he repaid them with impressive revenue growth
When Powell spoke at the Rainmakers conference 2024 he said of Palatine’s support: “We’ve had nothing but really good experiences with advisory firms here.
“A lot of people have been tightening their belts but with support from Palatine we could invest £13m a year in new stock.
“It could have been a different story if they didn’t have that trust in our business plan.”
It’s interesting to look at the buyer. In a piece we wrote about carve outs yesterday Lizzie Meadowcroft from Cortus emphasised the importance of a disposed of business finding a good new home. There’s no doubt Palatine has enjoyed a good relationship with Powell and his management team, but the emphasis will be on Astatine Investment Partners to fit the business in to the rest of its portfolio, and complementary investments.
Astatine’s other similar infrastructure investments include ACL Airshop, a global leader in air cargo unit load device logistics; BTR, a leader in refuse truck rental in the US; Kelling Group, a leader in the leasing and rental of infrastructure equipment in the UK; and PECO Pallet, a leading transportation and logistics company.
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A management buyout at Featherstone-based Dakin-Flathers, the world’s largest carbon bandsaw and bandknife blade manufacturer, was described by its lead adviser Tim Simpson, partner at Park Place, as “a prime example of a successful Yorkshire business with global reach.”
Simpson revealed that the MBO was the culmination of a long-term succession planning strategy, by developed with guidance from Park Place.
Founded in 1931, the privately-owned business supplies blades for various industries including furniture production, engineering, food processing, foam production and timber processing.
With a headcount of 65, and turnover of £12m, Dakin-Flathers has grown significantly in recent years, and now services clients in more than 100 different countries.
New owners are Carl Jukes, managing director, Lee Barker, operations director, Paul Greenley, sales director, and Stuart Dykes, financial director – who together have more than 30 years’ combined experience at Dakin Flathers.
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We ran a big piece on the trend for carve outs yesterday.
Partly it arose out of the news we reported on Thursday morning first thing that Wilmslow-based Norcros had sold Johnson Tiles to management for £1million, not long after cutting manufacturing capacity in October 2023 by approximately 50% in response to lower UK tile demand.
As a bathrooms business, Stoke-based Johnson Tiles seems pretty key to Norcros. It was acquired in 1971 and it has been one of its core brands ever since. It’s not quite a carve out, but it speaks to a common and recurring problem within UK PLC.
We took a deep dive into the move by PZ Cussons, the Manchester headquartered soap and cosmetics corporate giant, which said it lacks the resources to take the brand to the next level in the US. Since it bought the business in 2010 from LDC for £62.5m in cash St. Tropez has “grown significantly” thanks to heavy investment in the brand and the role of body positive icon and supermodel Ashley Graham (pictured) in fronting their campaigns.
At the time of the sale the St Tropez business was recording sales of £20m a year, but has since grown massively in the US.
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Our long read on Tuesday looked at the rationale behind JD Sports buying Hibbett stores in the US last week.
One of the analysts we spoke to backed up our hunch that it’s all about the relationship with Nike.
Richard Chamberlain (Co-head of global consumer & retail research) at RBC Capital Markets noted the market share gain that the deal would bring, but also issued a few notes of caution on the Nike relationship.
“We note that JD currently only has a low single digit market share in the US, so this would materially increase its presence there, but it would be even more wedded to Nike after this transaction (Nike represented c.70% of Hibbett's inventory purchases in FY23).
“We think that JD Sports should maintain its position as a preferred partner of major sportswear brands like Nike and adidas, given its strong retailing skills, ability to appeal to more urban/cash customers and its opportunity to drive its apparel offer with its elevated stores. JD has the opportunity to broaden its customer demographic in the US and other regions, and to improve its online offer, particularly in Europe. We also think improvements are coming through in governance, which should reassure investors, however execution risk is probably higher than average given the company's pace of expansion.”
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I’m fascinated by Employee Owned Trusts and would love to talk to anyone who has been through the process and has a tale to tell.
The factor I keep hearing is that as an instrument they should be done for the right reasons and not just for the tax advantages of the vendor.
The latest to complete an EOT backed deal is BullsEye Superfactors, a family-owned car parts and accessories retailer and motor factor.
The eight-figure deal, financed by NatWest, is a significant milestone for the South Yorkshire-headquartered firm, which first set up in 1981, in a single shop in Thorne, to have 18 high street branches across Yorkshire, four large motor factor sites serving the local garage trade, and a significant online presence, the company has an inventory of over 150,000 car parts and accessories.
Liam Douglas, relationship director at NatWest, said: “This deal not only secures the future of BullsEye, but also reinforces our commitment to supporting businesses to start, scale and grow.”
BullsEye has around 160 employees in the South Yorkshire area and an annual revenue of about £17m.
NatWest’s funding support for the deal includes £4.5m in facilities, comprising a £2.5m term loan and a £2m invoice discounting facility, enabling Bullseye to facilitate a smooth transition to employee ownership.
Paul Trudgill, partner in the corporate team at Knights, who created the Employee Ownership Trust, as well as advising the exiting management team in the original management buyout several years ago.
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There were a couple of distressed purchases this week.
Leeds-headquartered wealth management and stockbroking firm, Redmayne Bentley, acquired the private client business of Blankstone Sington Ltd, after Leonard Curtis, as special administrator for the Liverpool-based wealth manager and stockbroker securing all clients’ assets and safeguarded the company’s systems.
Flair Furniture, a furniture retail group which owns Bed Kingdom, acquired the assets of Cuckooland, an e-commerce furniture retailer which faced challenges in the post-Covid trading environment as decreased demand and unforeseen incidents, such as a cyber incident and a content management system glitch, affected its website.
Earlier this year, the company was placed into liquidation under the supervision of restructuring firm ReSolve Advisory, with creditors owed approximately £1.75m. The insolvency also wipes out the interests of prior shareholders.
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Our next Rainmakers lunch will feature special guest Ruth Percival, above, CEO of Contollo Group, a buy and build consultancy group backed by private equity investor NorthEdge.
We’re giving subscribers to Rainmakers the first shot at tickets for this event, which you can register for here.
As she embarks on this new venture, this seasoned leader with extensive expertise in the corporate finance, power/energy, and healthcare sectors, will share her strategic ambitions for Contollo and the lessons learned from her impressive track record of leading multi-disciplinary teams across diverse professional service disciplines including commercial/sales and operational/service delivery roles.
She describes her leadership as values-driven, emphasizing integrity, kindness, and collaboration.
Her latest venture, Contollo is a progressive new consultancy that works with commercial developers to offer consulting services in Cost Management and MEP, with particular expertise in smart buildings.
As reported on TheBusinessDesk.com at the time, Contollo made its first acquisition in February 2024 to acquire Abacus, a Manchester-based cost management consultancy which has worked for Vita Student Living, Sunderland AFC and Bolton Wanderers FC.
Contollo sees Ruth once again working alongside entrepreneur Oliver Dennis, as she did at medcomms consultancy group Fishawack.
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Thank you for subscribing to Rainmakers.
Here’s now this is going to work going forward.
There will be a longish and lively read piece on Tuesday and Thursday, for subscribers only.
Typically, one will focus on happenings going on in the advisory and funding market - what it means and where things are going.
The other will look at deals from a market perspective. How much was paid? what the vendor wants, who the management team are, an interview with a CEO on the buy or sell side.
On Friday, free to everyone, we’ll pull out a few of the completed deals from that week and look under the hood a bit more. I might even have an educated guess at some of the prices paid on all of the undisclosed deals we get to hear about.
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