Business Reporter on Business Turnaround
Private equity firms are leading the way in rescuing and reviving great British businesses from paints to plumbing
Private equity has taken one heck of a beating from the press and politicians recently – greedy, tax-dodging, quick-flipping mavericks who borrow too much from banks and add nothing to the economy. Harsh if you ask me, but then again I work for a turnaround fund.
So who provides the money in this secretive world? If you have a pension or any form of long-term savings plan, it’s you.
Pension funds and insurance companies are some of the biggest investors in private equity and for several years they have increasingly been allocating money to turnaround funds such as the one I work for, Endless.
Every time a turnaround fund invests in a company we create a huge number of winners who gain long before we generate our own investment return. Our win is dependent upon transforming a loss-making, cash-absorbent business into a profitable, growing concern again.
At the point of our investment, suppliers avoid bad debts. The tax man collects his arrears and obtains monthly PAYE, National Insurance and VAT receipts rather than having to fund benefits of employees who lost their jobs. Banks secure best value for their “bad” loans and the vast majority of employees remain in employment.
Private-equity solutions such as those provided by Endless can provide a lifeline for businesses in need of support for transformational activity. This matters to the biggest of companies as well as the smallest, as larger businesses’ issues can be far more complex and difficult to solve without outside involvement.
Crown Paints, which Endless bought and turned around, represents a great example of the role that private equity can have in supporting large UK businesses. Endless was prepared to invest in a heavily loss-making UK manufacturer at the peak of the financial crisis in 2008 when other buyers were nowhere to be seen.
The business had lost significant market share since the 1980s but the three years following Crown’s acquisition by Endless saw a turnaround in profitability of £35m, securing 1,450 jobs in Blackburn, Hull and elsewhere across the UK.
All this was achieved through investment in a new management team, capital expenditure on the shop floor and a new marketing campaign, along with an awesome effort from the entire team at Crown.
Most recently Endless has invested in Bathstore, the UK’s leading specialist retailer of bathroom products. Seen as a non-core asset by its parent company, our acquisition was achieved in an accelerated timescale that could never have been matched by a trade buyer. That secured a swift and decisive transition to a standalone business.
Driven by the strength of its brand and renewed investment, the company will be able to sharpen its focus on identifying exciting opportunities for growth, particularly in e-commerce.
These examples show why private equity can be a key solution to companies which employ tens of thousands of people across the UK. Flexibility and speed of funding, access to knowledge and resources and an ability to look more widely at a business and its issues all help to deliver effective transformation in larger companies supported by private equity.
In a period of low UK growth and continuing risk within the eurozone area, turnaround funds will continue to be a source of support for those businesses aiming to revive their fortunes. Remember, next time you hear about a turnaround fund such as Endless saving a business and rescuing jobs, your monthly savings may well have played a part.
Written by Garry Wilson, Managing Partner, Endless LLP