IN PERSON CAPITAL IDEAS
Cairngorm Capital md Alex Bayliss talks to Fiona Russell-Horne about acquisition and growth in the merchant industry.
A
lex Bayliss is having fun. The managing director of private investment firm
Cairngorm Capital, Bayliss and his team have given the merchant sector plenty to talk about in the last two years since they moved their investment plans up a gear with the acquisition of Parker Building Supplies.
“This is a great industry to be involved in,” he says, sitting back in his chair at Cairngorm’s mews offices in central London just hours after it was announced that Buckinghamshire independent Grant & Stone had joined the Cairngorm family.
“Some of our background over the years has been with the building products manufacturing and distribution sector, both here and in the United States, so it’s an area that we feel very comfortable investing in,” he says. The “we” in this case is the Cairngorm Capital partnership, set up in 2014 by managing partner Andrew Steel, who cut his teeth in the industry with Caradon after leaving university, before heading to the States where he was involved with Home Depot among others.
As well as Grant & Stone – which is remaining as a separate entity – and the Independent Builders Merchant Group, which now includes the Parkers, Stamco, Fairalls, and Chandlers businesses, the Cairngorm portfolio in this sector includes the Building Supplies Online business and the timber operations which combine Arnold Laver, Thornbridge, North Yorkshire Timber and Rembrand, making up the National Timber Group.
Of course consolidation and takeovers are nothing new in the merchant sector, as Bayliss points out. “Twenty to thirty years ago you had businesses like Travis Perkins, Jewson and Grafton who
14
led the way in consolidating the market to form the big national concerns they are today. In the last 10 years there has been less of that activity from them, but plenty of independent merchants have started up and grown in that time. These are independent merchants where the owners have built really nice companies but don’t always want to pass them on for successive generations. A number of those owners have been looking to sell, or transition, the ownership of their businesses and that has created quite a nice opportunity for us to deploy some of our capital in this sector and build slightly larger businesses but ones that still have a very independent ethos about them. “What distinguishes a national, publicly listed business from an independent?” he asks. “One of the most important things for us is that our businesses are empowered to trade at a branch level. We have absolutely no desire to create rigid frameworks and rules that see branch managers become branch administrators. In our view, that sense that a branch manager has the authority over the range they sell, the price that they sell at and the customers they sell to, is fundamental to the ethos of an independent business. Trading in that flexible style, with the customers that they know because they’ve been helping them out for the last 10 years. Can they charge a bit more to make sure that the product is on the first lorry out of the depot the next morning, that kind of decision making is
absolutely critical to us.” Bayliss points out that many of the merchant businesses that have grown up over the last 10 years have been built up by people who, having been acquired, were disgruntled to discover they were turning from branch managers or directors into administrators. “We want to retain that entrepreneurial mentality, whilst at the same time bringing together those businesses that we feel will work well together.
“The components are important to us. Most of our customers of the businesses we acquire are the smaller builders, focussing on home extensions and occasionally building a few houses. Sometimes there are the medium sized housebuilders but by and large our customers are not large national businesses. Rather, they are local businesses, with a strong affiliation towards their local brands. Likewise, the employees that join us tend to have a strong affiliation towards working for a local brand.”
What Cairngorm isn’t seeking to do, Bayliss stresses, is mesh all its businesses together, changing names and lorry liveries for the sake of it. “The businesses that make up National Timber Group may all use that name as a strapline, but if you go to any of the branches – Arnold Laver, Thornbridge, Rembrand or North Yorkshire Timber - those names and brands are retained. It’s important to us that we do that.” The latest (at time of
publication) acquisition, Grant and Stone, is to be run as a separate business to Cairngorm’s other merchanting operations. Bayliss explains that there is a separate holding company and even a separate fund investing in it. The reasons for keeping the businesses apart are partly geographical and partly pragmatic. “With each of these acquisitions we have been able to strengthen the teams with great people. Why would we want to squash two very strong management teams together to create something that’s not quite
www.buildersmerchantsjournal.net February 2020
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48
