Homebuy

Leading national specialist supplier of electrical and household goods to the low income sector through retail credit, including the provision of cash loans.

Transaction Type: Acquisition from Administration

Status: Current

Sector: Retail Credit

Investment Date: Jul 2007

Transaction Size: £22 million

Website Link: http://www.homebuygroup.com

Endless Contact: Darren Forshaw

The Business

Homebuy is a leading national supplier of electrical and white goods to low income households through retail credit, with cash loans and secondary products being made available once a demonstrable payment history has been established with the business. All payments are collected via a coin-operated meter installed on the first purchase, which is in most cases a television. With over 60,000 active customers across the UK, many of whom do not have access to more traditional forms of consumer finance, the business provides a source of responsible lending to an ever increasing proportion of the market.

The Transaction

The business was acquired out of administration in July 2007, after the aggressive growth strategy pursued by the parent company (AIM listed) resulted in poor credit decisions, declining cash collections and ultimately insolvency. The £22 million buyout delivered the re-emergence of a sustainable, profitable and growing core business with a workforce in excess of 400 people and annual revenues of c.£30 million.

Value Creation

Endless backed a sector-experienced management team that was new to the company in a robust business plan which was underpinned by retention of the loyal customer base and prudent growth projections. With demonstrable asset quality in the underlying receivables book and a business model which was largely self-sustaining, the business has returned to growth through the provision of high-quality products and loan services to both new and existing customers in the non-standard consumer market place. Today, the underlying book has been almost entirely refreshed with new agreements written since Endless invested. This clearly demonstrates the continued demand for goods and services in the sector and the quality of the processes and the team now in place, delivering a model of prudent, profitable and sustainable growth.

The Endless Difference

Endless recognised the strength of the business model and the quality of the underlying book, despite the business having traded under the administrators in a collect-out scenario for a period of 9 months. We were able to advance new finance and secure an external working capital facility for the business, thereby underpinning Homebuy’s position as one of the leading performers in this market. Endless introduced a non-executive Chairman with significant experience of and connections within the sector and have worked closely with management since acquisition to restore the business to an EBITDA performance of £4.6 million within the last 24 months.

Testimonials

“More than 2 years since the buyout, it is fair to say that Endless has been true to its word in providing hands on advice, support and challenge when needed but allowing the Board to run the business unimpeded on a day-to-day basis. Homebuy, the high quality, profitable retail consumer business which now serves thousands of customers and employs hundreds of people, is an outstanding example of what can be achieved, even in these difficult economic conditions, by a strong and focussed partnership of investors and management with clear and common commercial objectives. Endless has shown a strong ability to know when and where to get involved in the issues that any turnaround brings. As a partner for a tough turnaround, I cannot imagine there are many better.”

Roy Reece, non-executive Chairman at Homebuy - Nov 2009

"There's been significant negative press directed at the private equity industry and this deal demonstrates how a supportive and proactive equity investor can secure the future of a business and its workforce. Endless were quick to recognise the opportunity and commit considerable resource, expertise and speed to completing the deal."

James Grenfell at Orbis Partners said of the Homebuy acquisition - Mar 2008

"The Homebuy management team and staff have collectively been working hard to maintain what we have always known to be an excellent business and deliver this deal. We were especially impressed by the ability of the Birmingham-based funders and advisers to act quickly and commercially in providing advice, support and funding. Having such expertise on the ground here in the Midlands was vital in getting the right deal and achieving success."