Ten years ago, Philip Green walked away from his bid for M&S – and it's been going backwards ever since
Midweek View: It sits there, like a giant bloated beast, unable to swish its tail and crush the faster, terrier-like opposition
Hard to imagine: it's exactly 10 years this week since Stuart Rose was apparently overheard saying at the Chelsea Flower Show how he was involved in Philip Green's bid for Marks & Spencer.
I say apparently because it caused an almighty row at the time – Rose was supposed to have made his remarks to Rosemary Thorne, then the finance director of Bradford & Bingley, when a Goldman Sachs banker listened in. Goldman was advising Green, and Rose was the chief executive of M&S.
Later, Green squared up to Rose outside M&S's headquarters. "Oi! I want a word with you," yelled Green as he grabbed Rose by the lapels. Then, he teased Rose for not joining his bid team. "I thought you wanted to be rich. You could have made £250m with me."
In reality, the pair were old muckers. There was no chance at all of Green thumping Rose or vice versa. Indeed, no sooner had Green uttered those words than they began laughing and parted on good terms.
Nevertheless, there was, an uncomfortable edge to their relationship back then. Two weeks before the flower show, Green had tried to woo Rose into joining his bid team; Rose refused but not before he signed a confidentiality agreement. Rose was then parachuted into M&S to try to turn it round (the retailer's board knew about his agreement and it's never been suggested that Rose broke it). Green felt betrayed, hence the jousting in the street.
It's all water under the bridge, and the duo are back to being firm pals. Rose has since been and gone from M&S, and now chairs Ocado; Green has added to his fortune considerably by expanding Topshop across the globe. All the players have moved on, except one.
M&S is stuck, exactly where it was a decade ago. Arguably, it's even gone backwards.
We forget that Green had raised more than £11bn to buy the store group. Today, M&S's stock market worth is £7.5bn. Then, the company was making £784m a year before tax; now, it's making £623m. That's after £5bn has been spent upgrading the stores and reshaping the group's portfolio. For a third year in a row, M&S announced yesterday, its profits are down.
Green called off his bid, for two reasons. One was that he had begun to realise that buying M&S would cast him firmly into the public arena, something he did not relish. His style was that of the buccaneering entrepreneur, moving quickly, with a small team around him. He did not fancy having to answer to the City for his every move.
The other was that he knew he was at the very limit, price-wise. He'd put up £1.1bn of his own cash. The rest was coming from a group of banks, led by Goldman and HBOS. Green compiled his war chest in record time, such was his reputation for making a profit. His pals, Michael Sherwood at Goldman, and Peter Cummings at HBOS, were only too willing to back him. "Unconditional money," was how Green described it.
It was not in Green's nature to walk away. For years afterwards, he would show anyone who was interested a clutch of letters promising him the funding from the banks. It was remarkable – a high point in the pre-crash lending boom. "Took me just two hours to get them," he would say, leafing through them. "Look at 'em, 10 billion quid."
While Rose was grappling with the M&S juggernaut (a fascinating chapter by ex-M&S board member Alan Smith in a new book Going Global, from Piper Private Equity, paints a picture of a company long ground-down by hubris and a sense of its own invincibility), Green remained very much his own man, hot-footing it around the world, opening new stores and paying his wife, Tina, a £1.2bn dividend in October 2005. When he was feeling mischievous, Green would call Rose and if the M&S chief did not answer, sing, "If you were a rich man…" before ringing off.
As time went on, however, Green realised how fortunate he'd been. "You can buy anything in the world if you overpay," he reflected.
Down the years, life has got harder for M&S. In 2004, Primark did not have the high street presence it has now. Its breakthrough came in 2005 with the purchase by Associated British Foods, Primark's owner, of the Littlewoods store chain.
Waitrose, too, was nothing like the size it is today. In online fashion and cosmetics, Asos had barely got off the ground in 2004. In all segments, competition has got fiercer – and tied up in every fight, because it straddles all corners of the market, is M&S.
That is still M&S's problem: being all things to all people. It sits there, like a giant bloated beast, to be picked at, unable to swish its tail and crush the faster, terrier-like opposition.
Rose's successor, Marc Bolland, finds himself repeating a mantra familiar to anyone who has occupied the M&S hot seat in the last two decades, of jam tomorrow. Bolland is doing his level best, as did Rose. But the scale of the task is enormous.
In clothing, M&S has done well to hang on to a top slot: it's number one in the UK by value. But it's done that just as the market has been changing. In high street fashion, the chase is on for volume, not value – and in that respect it lags far behind Primark, Next, and Asda.
Its internet business has still to deliver. A new platform is coming on stream but we're told it will take another four to six months to settle down.
Bolland is stuck with large, in-town stores in places scattered across the country where a modern M&S would not choose to be. The lack of out-of-town, with free parking, has hit M&S hard.
Finally, M&S is doing something to rectify a weakness Green had spotted – and he was going to major on if he made a successful bid. To woo the banks to fund him, he would call them to his office. He had two rails of garments side by side, 80 to each rail. One was clothes from M&S; the other was clothes he'd had made up in his factories.
This he would say, pointing is "the engine room of the business"; get it right and everything works.
The items from his factories had been produced quicker and for much less. Their supply chain, he would tell the bankers, was screwed.
Bolland has hired the Lindsey brothers, Mark and Neal, to work their magic at M&S. Outside fashion retailing, the Lindseys are little known. They're very low profile, living in Hong Kong. But within the global industry they're revered. They're also very rich. They were responsible for transforming Next's supply chain, for making it lean and super-efficient, and for producing the profits the City loves.
Now, they've been wooed by Bolland to do the same for M&S. It could just be the best move he's ever made.
Meanwhile, Green is laughing. If he'd bought M&S, he once said to me, "Life would have been very tough. It must be torture doing what they're doing, working 18 hours a day, trying to re-educate the workforce. I can go to bed at night and sleep." He could add: all that effort and their profits are still £160m less.
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