Buyouts: Staking the future on name value: Jason Nisse finds a management that rates the firm's status higher than personal riches

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The Independent Online
MANAGERS wanting to buy out their own businesses are usually driven by a desire to turn their investments into great riches. Venture capitalists tempt managers into deals with the carrot of financially securing their futures. It seems the Ivan Boesky adage that 'greed is good' is still a motivating force.

But there is another form of buyout that exists not for the enrichment of the managers but for the good of the business. The purchase of Sewells, the Merseyside-based motor industry training company, from CRT Group is an example.

William Holden, chairman of Sewells, was informed by the CRT management on 10 April this year that Sewells was to merge with Pendle Consultants, another CRT subsidiary specialising in training salesmen for motor dealers. The topic had been discussed before. CRT had bought Sewells in 1990 as part of its strategy of expanding into all areas of training. Sewells, it thought, would fit well with Pendle: putting the two together would create a whole bigger than the sum of the two parts. The management of Sewells thought differently.

Sewells is probably the motor industry's leading training company. It has been established for 27 years, and trains people in all aspects of car dealership except information technology. Its clients include motor manufacturers and large dealership chains. Its most famous project was when Nissan took back the franchise for selling its cars from Nissan UK late last year, and Sewells trained 2,200 people in 170 car dealerships in six weeks.

By contrast Pendle is an off-the-peg sales training company with a limited range of products, compared with the choice of over 60 training programmes offered by Sewells. It is an aggressive company, with a hard-selling approach that did not fit in with Sewells' long- term, client-based culture.

A recent survey by Manchester Business School found that both companies were known by more than 90 per cent of people in the motor trade. While 86 per cent thought Sewells had a good reputation, only 46 per cent considered Pendle well thought-of.

Mr Holden, a former university lecturer and a respected figure in the motor industry, was first approached about the merger in January. It became clear to him that in the new company the Pendle management would become dominant, and he opposed the move. Critically, when CRT bought Sewells it had left Mr Holden with a 10 per cent stake, which he could use to block the merger. 'There was a difference of opinion,' Mr Holden said. 'There were two ways of getting round the impasse; either they bought me out or I bought them out.'

He soon came to the conclusion that the latter was better, but did not want to suggest the idea to CRT in case it drove the price up. 'I spent most of May engineering a conversation so that they asked me whether I wanted a buyout.'

Mr Holden had an important ally - Chris Leehy, who had been hired by CRT to be part of its mergers and acquisitions team. By early 1990, CRT had come to the end of its growth phase and the M&A activity had stopped. Mr Leehy decided to throw his lot in with Sewells and was able to act as a go-between in the negotiations.

Because of his crucial shareholding, Mr Holden was able to exert considerable pressure on CRT. He eventually bought the business out for a price he could finance from his own resources and from money within the business, without having to go to outside venture capitalists.

The deal was completed on 9 July, almost exactly two years after CRT took over Sewells. In the few months since the buyout, the management has been able to change the company's cost base and effect a number of changes that would not have been possible under CRT. Most importantly, removing the head-office cost from the finances has changed the group's fortunes, and the buyout has sent a signal to the industry that Sewells lives on.

Sales and revenue have performed according to quite demanding plans. In the present economic climate, Sewells reckons it has done well.

'I think we did lose business because of the connection with CRT, and now it's coming back,' Mr Holden said.

Meanwhile, any dreams of riches have been put on the back burner. 'I thought the deal with CRT would secure my future financially,' he said, 'but in the end it is better for me to be able to run the business the way I think it should be run.'

(Photograph omitted)

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