A provider of electrical products and household goods has been bought by two of its directors in a £22 million deal that has saved the business from insolvency.
A provider of electrical products and household goods has been bought by two of its directors in a £22 million deal that has saved the business from insolvency.
Homebuy, which also provides cash loans, has been bought by its managing director and head of finance in a deal project managed by corporate finance adviser Orbis Partners.
Phil Goad and Steven Banks bought the West Midlands-based business after private equity fund Endless LLP and Landsbanki Commercial Finance agreed to back the deal. Orbis was also an investor.
Homebuy was put into administration in September following bad debts and rising costs and re-commenced trading immediately following completion.
“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,” Goad said. “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.”
Endless director Nick Leitch added that this investment will preserve employment and reinvigorate the business. “This is the first of many investments we will deliver in the Midlands and I am delighted that it is such a significant transaction. Turnaround is a challenging market and needs the right combination of timely funding, support and expertise.”
Landsbanki Commercial Finance, led by business development director Neil Kindness, was introduced to the deal by Orbis.
Kindness said: “Landsbanki had to work to a strict timescale as there were other interested potential acquirers of the business, but because of our understanding of the company’s history and our sector expertise we are able to successfully complete the project to within the set timeframe.”
Orbis’ team was led by senior partner James Grenfell, who has become a Homebuy non-executive director, with support from Craig Nash.
Grenfell said the firm started working on the project in January by helping the management team create the business plan and forecasts and then attract funding.
“Homebuy had been considered a star performer on AIM, reaching a market valuation of more than £100 million. However, administrators were appointed in September 2006 after a fall in cash collection, combined with spiralling costs, forced the company quickly into insolvency.
“As a distressed deal, there were a number of challenges to overcome,” he added. “With each day that passed the customer base was being eroded, meaning that a deal needed to be completed swiftly to maintain critical mass in the business.
“The management team have successfully carried out a difficult job of guiding the business through administration, generating positive cash flows. They now have the opportunity to reap the benefits of this hard work by having the opportunity to grow the business and realise significant equity returns.”
The management team was advised by Graham Muth and Mark Gibson of Cobbetts, while Paul Hayward, Tom Durrant and Carol Betts of HBJ Gateley Wareing supported Endless. Landsbanki Commercial Finance was represented by Speechly Bircham.
Endless and Landsbanki appointed the Metadi Partnership’s Doug Milton to manage commercial and operational due diligence reviews of the target business.
Milton said the firm was approached to work on the deal as the funders required specialist knowledge and experience of the consumer credit market.
“The project was time critical as the due diligence work was initiated without contractual exclusivity,” he added. “Our team was mobilised at short notice and the review and report completed to challenging deadlines. Endless has worked hard with their partners and advisers to secure this opportunity and we look forward to working with them on this and any other opportunity that will come along.”
Homebuy serves some 60,000 households, with a workforce of 400 people and a turnover of £35 million.
The Walsall-based company has a national distribution centre in Manchester and service depots in Belfast, Chester Le Street, Dundee, Glasgow, Rotherham, Sevenoaks and Wigan. The company was established in 2003 and joined AIM the following year.
