EB: Holdcroft discusses Winstonmead deal



Phil Holdcroft, Chief Executive of the notoriously trade media-shy GB-Office Group, talks to opi.net about his group’s takeover of Winstonmead earlier this year.


Leading UK independent dealer Winstonmead – which had sales in the region of £15 million in 2009 – was reported to be in serious financial difficulties earlier this year.


After many rumours circulating in UK OP circles, it was understood that Winstonmead had been taken over by another leading dealer, Stoke-based GB Office Group, creating what is possibly the largest independent dealer group in the UK, with sales estimated to be in the region of £30 million.


In his first interview with an office products trade publication, GB-Office Group’s Chief Executive, Phil Holdcroft, provides details of the acquisition to opi.net.


OPI: Can you provide an outline of Winstonmead’s financial problems?


Phil Holdcroft: There were a number of issues involved but, in the main, paying too much for some of its acquisitions would be the main factor as the top line sales results for the business have always remained very solid. Whilst a recession will always come at the wrong time for any business, this one could not have been timed any worse for Winstonmead. Acquisitions were made at the height of the market while things were very good and growth was very evident. Within months of its major acquisition the recession hit and the rest is history. Winstonmead was hit with a need to significantly reduce its overheads but did not have the cash required to carry out the required restructuring, whilst the existing management team had made attempts to do so, time ran out.


OPI: When did GB-Office Group become involved?


Phil Holdcroft: GB-Office Group became involved in early January (2010) after the first bout of snowfall which resulted in very poor sales for Winstonmead in what was expected to be a very buoyant first week’s trading. Due to the early January trading being significantly below forecast, Winstonmead’s already weak cash position moved very rapidly into a critical position.


The cash position continued to worsen and with supplier and bank pressure mounting the involvement of GB-Office was required to ensure the survival of the business. At this point GB-Office undertook paying the Winstonmead staff in January a long while before a purchase deal had been finalised, and the two companies entered into a commercial trading agreement to allow Winstonmead to utilise GB’s suppliers.


OPI: You’re no strangers to making acquisitions. Were you specifically looking to acquire during this period?


Phil Holdcroft: GB-Office is always interested in discussing acquisition opportunities which will enhance the group’s position within the office products industry.


OPI: Both GBO and Winstonmead are known to have strong links with VOW. What was VOW’s involvement in this particular deal?


Phil Holdcroft: VOW’s involvement was mainly as an introducer of GB-Office to Winstonmead. Obviously as the largest unsecured creditor they were very keen to see something good come from the very unfortunate situation. VOW had always been very supportive of the Winstonmead business, but were very aware of its fragile cash position and therefore keen to ensure continuity of the ongoing trade.


OPI: It is understood that Winstonmead entered into a Company Voluntary Arrangement (CVA). When did this happen and what were the consequences?


Phil Holdcroft: The CVA meeting took place on 17 February 2010 at BDO’s offices in Baker Street, London. GB-Office acquired the shares of Winstonmead PLC immediately after the CVA being approved by its creditors. All secured creditors have been settled and paid off and all unsecured debts owed at this point are being paid out via BDO in line with the guidelines of the CVA proposal.


There were many issues involved in the CVA, not least ensuring staff security and supplier support, at a time when suppliers were aware that they were unlikely to receive their monies in full. The involvement of Winstonmead’s bankers was also extremely testing at times when they consistently insisted on placing obstacles in the way of what was always the best deal for all concerned.


OPI: Were there any times when it looked like things could fall through?


Phil Holdcroft: Wow! If only we had time to write down every time that we thought the deal could fall through! As mentioned previously, Winstonmead’s bank had their own agenda and politics going on, and on many occasions were close to making the deal impossible, despite the fact the eventual outcome was always going to be their best case scenario.


In fairness, there was not a day that passed from our initial conversations in mid-January when an issue that could have killed the deal did not come up. It was a very stressful time for all and only due to the strength and depth of the management team at GB-Office were we able to throw enough resource at things to ensure the deal’s success.


OPI: What were your main priorities once the acquisition had been completed?


Phil Holdcroft: Upon completion of the deal, Winstonmead was obviously in a loss-making position. Therefore some cuts were required. Of the seven board members in place pre-deal we have three still in place in the combined business. Savings from the back office and accounting functions were inevitable and these have been made over the last three months.


Significant savings across the group have been made in many areas, but the intention was always to safeguard as many jobs as possible. The net effect was that of the 105 staff that were employed by Winstonmead pre-deal we were able to keep redundancies to below 10% of the workforce.


No sites have been closed but we have been able to integrate some of GB’s southern activities into the Winstonmead organisation.


Due to the financial position and supplier pressure on the Winstonmead business we were forced to move all trading directly onto the GB-Office system in a very short timeframe. Whilst we would have preferred a longer period to do so, this was completed very affectively with little disruption as both companies operate the Progress system.


OPI: A number of key managers are known to have left, but Winstonmead’s Managing Director Adrian Hensby has stayed on, hasn’t he?


Phil Holdcroft: Yes, Adrian has recently been appointed to the main GB-Office Group board and is the Group Sales Director with direct responsibility for the group’s furniture, print and SME stationery divisions.


OPI: How did Winstonmead’s customers react while all this was going on?


Phil Holdcroft: Due to the short time frame in which everything took place, there was very little disruption to the customer base. We believe that the added benefits of the larger, combined business will help offset any expected customer leakage.


OPI: Are you going to rebrand the Winstonmead businesses or will they keep their identities under the GB-Office Group umbrella?


Phil Holdcroft: Within the Winstonmead business there are two strong brand names which are Acorn and Winstonmead. From deal completion we have rebranded them both to GB Winstonmead and GB Acorn. We see this as the way forward at the moment as it gives the benefit of the GB umbrella along with the strength of the local identity.


OPI: Outsiders may perceive that the GB-Office Group as a whole could be weakened by taking on a loss-making business. What would be your response to that perception?


Phil Holdcroft: Due to the guidelines of the CVA proposal, GB-Office has not taken on a number of the acquisition issues that Winstonmead had. Immediately after the CVA, a number of one-off cost cutting measures were implemented, along with a detailed business review to ensure that not only did we stop Winstonmead’s losses, but actually put them into profit.


Meanwhile GB’s business has continued to achieve enhanced levels of profitability despite the economic and market conditions of the last 18 months and, contrary to our usual policy of not advertising ourselves to the trade press etc., anyone who really knows GB-Office Group, like our partner suppliers, are fully aware of our plans for the present time as well as the future, and have been actively on board and supportive of the business and, most importantly, the GB-Office team throughout this whole process. 


OPI: How good a fit is the Winstonmead business with your existing business, both geographically and in terms of the products/services you offer?


Phil Holdcroft: We have all agreed that if you were to combine two dealers in the country based on their business fit, then the combination of GB-Office and Winstonmead would have always been a good fit. The trading strengths of the two companies are very complementary with the experience of GB in the corporate arena being complemented by Winstonmead’s SME presence. This, along with the logistical link up which is saving both parts of the business thousands of pounds in delivery costs every day, should deliver a very sound business model going forward.


There are many benefits from this acquisition. We obviously have enhanced purchasing power along with significant coverage of the UK in our own vehicles. Obvious cost savings from back office functions will continue to drive our bottom line. All of the group’s divisions are now working together to sell all aspects of the market place to all of our customers, where we can now realistically see in excess of 20 percent growth being achievable through our existing client base.


Whilst both the senior and middle management team at GB-Office was already strong it has been further enhanced by a number of the key Winstonmead team.


OPI: Finally, how has this deal been different from or similar to other acquisitions that you’ve made?


Phil Holdcroft: The big difference on this deal was its size. However, the speed in which Winstonmead has been integrated into the group has proven to us that nothing is unachievable.