REFLECTIONS OF LIFE IN A MIDLAND BREWERY – No. 1

I was well into my second year as Finance Director when one morning the secretary of the MD popped her head round my office door and said,

“John would like to have a quick word”.

He had learnt on the grapevine that North Country Breweries (NCB) was on the market and they were circulating a sales prospectus, but not for us.

He thought it surprising, since Robin our chairman and the chairman of Northern Foods, the owners, had been school friends.

I suggested Robin gave Northern Foods a call and asked why we hadn’t been on the circulation list and could we please have a copy of the sales prospectus.

The reply came back that our pockets were considered not deep enough for such a major transaction, but kindly their chairman suggested as a courtesy we came over to Hull for lunch on the Friday for a discussion.

What followed was the most expensive fish and chip lunch I had ever had.

The minimum acquisition bid price had to begin with a 4, or in other words ￡40m. This represented some 25 times NCB’s latest profits, or in other words a potential return of just 4%, gulp!

The national brewers were already preparing their bids. We had to move fast if we were to be in the race.

We agreed we would be back within a week with our offer.

A very important factor for Northern Foods was that any acquisition would be executed professionally and their employees properly protected the best we could.

The week that followed I regarded as our finest hour. All our senior management were mobilised to visit every one of the NCB pubs and for us then to meet up at a hotel in Hull and share the information gathered.

Each person involved was sworn to total secrecy and not to discuss what we were doing even to their spouses.

For our offer to work we had to be confident of the rationalisation savings, a 26% increase in sales volumes over three years (1st 13%, 2nd 8% and 3rd 5%) and above all a smooth integration.

The following week we had formulated an offer and returned to Hull to negotiate the final figure. John and Robin finally agreed ￡42m on a handshake. Other bids came in at a higher figure but the deal had been done.

The acquisition price may have been ￡42m but we needed a funding package of ￡65m to cover our professional and advisory costs, the increased investment programme and a contingency allowance.

Within three weeks we owned the business and began to manage the combined businesses.

Chris Clarke, an investment banker with Samuel Montagu guaranteed the money until we could syndicate the funding to 30 international banks. They all came to the brewery to sign the voluminous documentation.

We achieved our sales expectations over three years and the integration worked very smoothly.

If you asked today of a merger and acquisition corporate advisor, if anyone could execute such a proportionally huge transaction in three weeks, they would tell you it is impossible!

Our hour had come, we could conquer the world!