Corporate Finance: Months of Dialogue End in MBO Success; the MBO of Adams Childrenswear Marked the Conclusion of Seven Months of Planning. Michael Hobbs, Chief Executive, Looks Back on a Rewarding Journey
Hobbs, Michael, The Birmingham Post (England)
The break up of our parent company Sears has become a possibility, making a buy-out a serious option for Adams. The idea was first suggested to me some time ago, but it was not the right time for the management team, the company or Sears. The timing is better now. We have come a long way in the past few years, and Adams is in great shape to move forward to a new phase of growth.
The first step is to test the water with the experts. I decide to start talking to venture capitalists and advisers I know to get some informal feedback. We go through possible routes, and potential outcomes. Their responses are encouraging and a route towards an MBO begins to form.
However, enthusiasm needs to be backed with hard financial facts, so the next step is to develop a business plan. Working through MBO guides by the Institute of Directors and 3i it becomes clear that this is an exciting opportunity.
I put my thoughts forward to Sears but speculation is rife that Philip Green will be buying the group. There is little we can do until that is tied up one way or the other.
January/ February 1999
Philip Green's January Investment has completed its takeover of Sears. After my earlier discussions with Sears, my thoughts on an MBO for Adams are already in the public arena. Philip raises the issue and I put forward my ideas. Philip is very supportive and gives the initial OK to move forward.
Following the green light from Sears, it is vital that the other four directors back the deal. Dean Murray our commercial director, product and marketing director Philip Walker, retail operations director Stuart Dickerson and human resources director Claire Shale are all 100 per cent behind the MBO.
We talk through the options and what a buy-out will mean. Keeping core staff on board will be a key challenge.
Changes in ownership can generate insecurity and endless rumours. We must work hard to maintain the internal communication of accurate information about our plans and progress - not an easy task with over 3,000 staff.
The next step is to formalise our plans and start looking for funding. To do this we need a team of professional advisers who know deals, the venture capital industry and the retail trade.
We approach Arthur Andersen Corporate Finance in Birmingham. They are confident that we will be able to get backing for the buy-out and committed to helping us take the process forward.
I approach Philip Green for permission to disclose the information needed to raise financial support for the buy-out, which he gives. Our 'beauty parade' starts. Together with the team from Arthur Andersen we refine our business plan and work on a proposal which we then present to potential backers. We are challenged at every turn during what is a long and arduous round of meetings.
No stone is left unturned, everything is questioned, from historic profitability to each director's commitment to, and confidence in, the business. …