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twice as big? If we did that, we would create a bigger entity but would lose some of the glue that holds it together and defines what makes it special .”


That’s not to say, of course,


that there won’t be cross-over and collaboration across the different businesses. “The nice thing about owning several merchants is that you find the new business has some tricks up its sleeve that the others haven’t necessarily thought of. Fairalls brought in some really good ideas, for example, Stamco has a deep strength in timber, Grant & Stone have their electrical and plumbing expertise and Chandlers bring roofing and civils experience and good core strength as well. Every time we make an acquisition we learn something new. Sharing best- practice is what any good business does as a matter of course.” Bayliss says that Cairngorm Capital’s current ambition is to continue to seek out good, regional merchant businesses whose management is looking for


the sort of investment and support that the group can offer. “We will be interested in businesses that might be good add-ons to any of our businesses, either the Parkers, Stamco, Fairalls, Chandlers family or Grant & Stone. That’s our


business model and we would like to think that we are providing a solution for owners who might not have that many other routes. In the same way that Terry Owen and John Llewellyn Jones have grown Huws Gray over the last 25 years into a magnificent


business, we would hope that we can continue to develop our own direction.”


The nature of private equity means that there will be


some kind of exit strategy for Cairngorm, Bayliss says, although there’s no set date or timescale for that. “We won’t be holding onto these businesses for ever because our business model is to buy, invest, develop, grow and then recoup the investment,” he explains. “We invest, we build great companies, help them


open new branches, expand their employee base, help them grow from being really good small


independents to being really good medium-sized businesses. At some point we will be the sellers rather than the buyers. When that will be, or to whom, I don’t know. We have no predetermined view as to when that is or what sort of size we might grow to.”


One of the things that appeals to Cairngorm Capital about the UK merchant sector is the underlying end market. “Builders merchants tend to be more skewed towards the RMI sector than to new build. Because of that, our view is that when we come to the next downturn this market will be a little bit more protected. We like the fact that revenue from independent merchants from 2001 through to 2009 was relatively resilient,” Bayliss says. “Ultimately we believe there is a very long- term theme to UK homeowners wishing to repair, maintain and improve their properties.”


“In part, the resilience of this market is because all the


customers of good merchants still needed to make their own living. In general, we prefer less cyclical industries. We enjoy building businesses and building business through consolidations – our experience of building many businesses


in this way over the


last 20 years means we see a continued opportunity for us to build these groups.


“The third element is that it is an industry that until recently, three, four five years ago, wasn’t perceived as a glamourous place to be investing in but we enjoy the thrill of customers, employees, suppliers, marketing, finance, operations and everything else that makes these exciting businesses for us to be involved with. So it’s a combination of these attributes that make us think this is rather a good place for us to invest capital and build businesses. It’s also fun. They are good people. This is a super industry to be involved in.”


www.buildersmerchantsjournal.net


February 2020


15


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