Risky ventures and courtroom drama
This week on Rainmakers - what a judge said to Richard Hughes and why one investor is backing beer
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THIS WEEK ON RAINMAKERS
We’re going to share some parts of our two long reads which Rainmakers subscribers have enjoyed this week.
We love delving in and understanding just what it is that drives a business strategy.
When it comes to mergers and acquisitions everyone will tell you it’s ultimately about the cold hard numbers and making financial sense of a deal.
But then sometimes it’s initially just about gut feel, the love of a brand, and a desire to bring common business sense to a sector that looks broken.
Anna Cooper’s story about the Breal Group’s ambition to become a £100m brewery and pub group by 2028 is full of insight, wisdom and the search for alchemy.
It reads like the best pub crawl ever, if you like ale, but it’s a fascinating business journey.
INSIGHTS INTO THE BEER MARKET
Another brewer acquired out of administration after being hit by a raft of challenges was North Brewing Co by Steve Holt’s Kirkstall Brewery. Whilst the Birmingham taproom was lost, sites in Leeds and Manchester were saved alongside 78 jobs.
Tom Swiers, head of food and drink at Interpath, advised the deal and told Rainmakers the demise of North Brewing is a case study that shows the challenges brewers and craft brewers are facing across the UK.
He said: “The sector was hit hard through Covid, and then restrictions forced North to close for extended periods of time. North took on a CBILs as well as additional asset finance-type lending, giving it a higher debt burden to service.
“Then as we entered 2023, the massive rise in raw material, energy and labour costs coupled with squeezed profitability and a higher debt burden meant the business, whilst profitable, was unable to service its debts.
Both Holt and the founders of Leeds-based North Brewing (John Gyngell & Christian Townsley) are pioneers in developing the craft beer market in the UK - so it was an obvious fit for Swiers (pictured, below).
Swiers said the sector could once be compared with the “tech world of growth” where brewers could build a community of drinkers, and then attract a huge player.
“Beavertown is the example held up to say - you can create a craft brand, grow it and then sell it for a fortune - that world seems to have gone now.
“It’s now all about evidencing profitability - profitable growth is one of the key factors for a good M&A proposal.
“Seeking loyal purchasers to your brand and building a brand is incredibly expensive - the brand name needs to tell consumers that you have great products and great quality. Shelling out for high advertising and marketing is difficult to do whilst growing profitably. New brands will be heavy loss-making because of this”.
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A GLIMPSE AT OUR STORY
On Tuesday we opened a window into the colourful and lively courtroom drama, and provided a deep dive on exactly who Richard Hughes is.
He joined stockbroker Charlton Seal straight from school, before teaming up with his older mentor and later business partner Ian Currie where they built up a network of investor clients who backed a string of successful corporate finance advisory businesses. First they did this as Apax Partners, then Altium, before leaving to set up Zeus Capital in 2002.
Never lacking audacity or ambition, notable deals he led included the flotation of shell company Knutsford Holdings, which soared in value due to the involvement of well-known business names Julian Richer, Nigel Wray, Nick Laslau and Archie Norman. The shell company was even linked with a bid for M&S.
He and Currie went their separate ways in 2010, with Hughes retaining Zeus as part of the split and took the business to new heights.
He was also involved in the rescue of Glasgow Rangers Football Club, placing allies Charles Green and Imran Ahmad into the febrile sectarian Scottish culture wars. At one point in 2012, Hughes owned 6.8% of Rangers.
But possibly his greatest business triumph was persuading his friend and client Mahmud Kamani to think big and launch Boohoo.com as the online equivalent of Primark, with the stock market float landing Hughes a fortune of his own.
On its first day it had one sale for £37 but by the time of its float in 2014 soared in value, and then grew to have a net turnover of £1.2bn and at one time was valued at £3.5 billion.
It also firmly established Hughes, and Zeus, in the big time. In 2014 and 2015, he was also crowned Rainmaker of the Year two years running, as nominated by his peers in the North West corporate finance community.
And while Zeus Capital advised on deals with a value of over £5.3 billion since 2013 it has become a dominant broker on the stock market, completing 20% of IPOs on AIM.
He was also a founding partner of Palatine Private Equity LLP, which was originally established as Zeus Private Equity.
But while Zeus Capital has continued to thrive in the years since Hughes’ legal problems became public, the financier wants to be compensated for the impact on his reputation and earnings. He doesn’t just want to win, he wants someone to pay for what they did to him.
The rest of the story is here, please subscribe to get access.
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