Growing a Family Business Through Mergers & Acquisitions
17th December 2019
Companies can turbo-charge their growth through M&A, and family-run businesses are no exception. Like any business, family-run companies must remain relevant in order to best serve their customers and succeed, and M&A can be a successful way for them to acquire new products or expand their market share both in the UK and internationally. In approaching M&A, as well as thinking about strategic rationale and appropriate financing, it is particularly important for family businesses to also think about cultural fit and integration. M&A can add significant value to a business but is important that it is done properly and it is fundamental that M&A does not distract from the “day job” of running the company. It is important to allocate the right resources to M&A both during the period running up to the signing of the transaction and then to oversee the integration. Too often, integration planning is ignored, which results in the befits of a transaction taking longer to achieve than anticipated.
Huws Gray knows this well, having grown acquisitively to become the UK’s largest independent builders merchant. Founded in 1990 as a single branch on Anglesey, Wales with just £200,000 of start-up capital, the first steps were to purchase a 1.5 acre site, a lorry and a computer. Recalls co-founder Terry Owen: “Profitability has always been key. We started with four employees and took it to the limit before taking on a fifth. We really controlled costs as we understood we had to generate a margin. When the opportunity for our first acquisition came along, my partner convinced me not to shut the door before taking a look.”
He was glad he did, as this first acquisition ended up becoming profitable quickly. It gave Terry confidence when another opportunity came along a year later – and another a year after that. “It became like a bit of a drug. By 2000 we had five branches and we saw another opportunity, also with five branches, and we acquired that fairly efficiently. By 2017 we were up to 62 branches.” These were mostly in the North of England and largely achieved through acquisitions.
In 2018 the firm took on minority financial backing from Inflexion Private Equity. “Inflexion gave us the confidence and support to pursue larger acquisitions,” Terry enthuses. And so they did: the firm acquired family-owned Ridgeons in the South of England, substantially enhancing Huws Gray’s geographic reach as well as doubling the size of the business overnight. Ridgeons has now been fully integrated with Huws Gray without losing its own branding and identity. For the family shareholders selling Ridgeons , finding the right new owner was fundamental and the two businesses benefitted from a strong cultural fit.
Terry and the management team remain full of enthusiasm for their future. “In our sector, there are over 2,000 independently run builders merchants and you get the feeling they’re all for sale. There’s the opportunity to become another national in the country. Despite this, we may now be the only merchant out there growing their business through acquisition.”
Growing acquisitively has helped the firm gain market share, with over 100 branches now dotted across the UK. The acquisitions have also helped the firm enhance its offering and expand its geographic footprint. Critical to this success was acquiring the right targets, having plenty of supportive finance agreed in advance and then integrating in a way that respects existing culture.
Inflexion is a UK mid-market private equity firm, investing in high growth, entrepreneurial businesses with ambitious management teams and working in partnership with them to accelerate growth. Inflexion’s flexible approach allows it to back both majority and minority investments, typically investing £10m to £150m of equity in each deal.
Inflexion helps businesses achieve the next stage of their development through international expansion, operational improvements, digital expertise, access to Inflexion’s networks and funding for acquisitions. It benefits from experts in Bangalore, São Paulo and Shanghai dedicated to portfolio development, enabling investee companies to benefit from privileged access to these fast-growth markets.