Celtic Tiger

A management search turned into a private equity joint venture, with Mark Greaves acting as matchmaker.

What is your chosen deal?

In May this year, Piper Private Equity took a stake in Celtic Sheepskin – a premium ethically sourced clothing and footwear manufacturer, which employs 55 people in Newquay, Cornwall. Husband-and-wife team Nick and Kath Whitworth bought the business in 1990. Last year, it turned over £8m and made a pre-tax profit of £1.2m.

What was your role?

It changed. For a year, we had general discussions with the owners about where they wanted to be in five years. They were growing and, like most entrepreneurial businesses, they needed more management resource. I then spoke to George Adams at Piper, as he was an expert on brands, to see if we could bring in someone as a consultant or to augment the management team. We were talking to other people, but he became rather taken with the company, it snowballed and he offered to invest. Our role then became more of a standard corporate finance one.

What were the hurdles to be overcome?

Piper’s involvement was not primarily for its investment, but more to facilitate the continued growth and success of the business. Celtic had expanded and needed a larger executive management team and more sophisticated reporting systems. Normally, the hurdle is that the entrepreneurs do not want to give up equity, but the Whitworths were unusual – they were not precious and had ambitious growth plans.

Who were the other advisers?

Hugh Murrell, partner at niche corporate law firm Murrell Ashworth, who originally introduced me to Celtic Sheepskin and provided legal advice to the business and its owners. Ian Holden and Ken Lewins at Bond Pearce provided legal due diligence and advice to Piper, while Ian Robinson of MaxAim undertook due diligence.

What were the timescales?

Time pressures were more related to the business changes needed as the firm was rapidly expanding. It grew 30% in the year to January 2010 and 20%+ to January 2011. In fact, many of these changes were instigated before the closing of the investment.

How much was raised and what was the structure of the deal?

Financial details are confidential, but it is best described as a joint venture, with Piper becoming a substantial minority shareholder. Piper’s investment range is £3m-£15m.

What were the key lessons?

Piper was keen to invest in the management team, who were workaholics but open to change. That is a good lesson for owner managers searching for a growth partner. And examining the way Piper operates, it shows that equity houses can look beyond simple financially leveraged deals to add value within specialised sectors. For us, it was a good lesson in unusual negotiations. We had to take the management team through the reasons behind Piper’s standard legals and at the same time have Piper tailor its terms for this unusual diet.

This article first appeared in Corporate Financier, magazine of the ICAEW Corporate Finance Faculty , in July/August 2011.