GB-Office Group’s take over of Winstonmead has created what is one of the largest, if not the largest, independent dealer in the UK. GB’s Chief Executive Phil Holdcroft speaks to the trade press for the first time about the deal
The financial difficulties of £15 million (US$22 million) UK dealer Winstonmead have been reported/rumoured for some months in UK office products circles.
The Essex-based dealer was understood to be facing liquidity issues after making a number of acquisitions – Acorn in May 2008, PDQ Direct in January 2009 and Q3 Print in July 09 – while sales were under pressure as the recession bit.
"There were a number of issues involved," explained GB-Office Group’s Chief Executive Phil Holdcroft, "but, yes, 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."
Holdcroft says that Winstonmead was faced with a need to significantly reduce its overheads but did not have the cash needed to carry out the required restructuring. "Whilst the existing management team had made attempts to do this, time just ran out," he added.
GB became involved in the deal in January 2010, at a time when poor weather in the UK hit early January trading at Winstonmead. "Due to the early January trading being significantly below forecast, Winstonmead’s already weak cash position moved very rapidly into a critical position," notes Holdcroft.
Holdcroft continues: "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."
Winstonmead entered into a Company Voluntary Agreement (CVA) on 17 February at BDO’s offices in London, and immediately after this, GB acquired 100 percent of the share capital of Winstonmead.
"All secured creditors have been settled and paid off, while all unsecured debts owed at this point are being paid out via BDO in line with the guidelines of the CVA proposal," states Holdcroft.
With UK wholesaler VOW being the largest unsecured debtor, with some putting the amount owed at £2 million, there was some speculation that the GB/Winstonmead deal was in fact brokered by VOW.
Holdcroft admits that the wholesaler was involved, but states that its role was "mainly as an introducer of GB-Office to Winstonmead".
"Obviously, as the largest unsecured creditor, VOW was very keen to see something good come from the very unfortunate situation. VOW had always been very supportive of the Winstonmead business, but was very aware of its fragile cash position and therefore keen to ensure continuity of the ongoing trade."
Holdcroft points outs that due to the CVA guidelines, GB had not inherited a number of the acquisition issues that Winstonmead had. Nevertheless, Winstonmead was still a loss-making business and a number of cutbacks had to be quickly made. Four out of seven of Winstonmead’s board members have left – although Winstonmead’s Managing Director Adrian Hensby is on the combined board and is Group Sales Director with direct responsibility for the group’s furniture, print and SME stationery divisions.
There have also been inevitable cutbacks in back-office and accounting functions made over the last three months. But it has been far from a cull.
"Significant savings across the group have been made in many areas, but the intention was always to safeguard as many jobs as possible," states Holdcroft.
"The net effect was that of the 105 staff who were employed by Winstonmead pre-deal, we were able to keep redundancies to below 10 percent 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."
Holdcroft maintains that a GB Office/Winstonmead combination would have made a good business fit, even if circumstances had not brought them together so suddenly.
"The trading strengths of the two companies are highly complementary," he argues. "The experience of GB in the corporate arena is being complemented by Winstonmead’s strong 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."
Winstonmead’s two strongest brand names, Winstonmead itself and Acorn are maintaining their identities, but have been rebranded 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," says Holdcroft.
Holdcroft adds that due to the short time frame in which everything took place, there was very little disruption to Winstonmead’s customer base, adding that he expected the benefits of the larger combined business to help offset any expected customer leakage.
"All of the group’s divisions are now working together to sell all aspects of the offering to all of our customers and we can now realistically see in excess of 20 percent growth being achievable through our existing client base," concluded a confident Holdcroft.