OPI: Let’s start off with some career background stuff that you’ve probably gone through millions of times at dinner parties.
JW: At dinner parties I’ve said I’m a scaffolder. It’s much more interesting (laughs).
OPI: We’ve all been there, but seriously, can you tell me when you first came to OyezStraker Group (OSG)?
JW: Yes. I’ve been with OSG for about 18 years. I joined when Hugh Sear bought the company I worked for at the time – a company called Marathon Stationers – shortly after he joined Jonathan Straker at Straker Office Supplies. Actually many of the staff who worked at Marathon are still with us today. Also, if you look at the main board, many other board directors came from acquisitions – like Phil Lawson from Stat Plus and Ben Richards from Whitegrove. We are all hands on; we know the business and our market inside out. We are very proud of our team and are lucky to have such great people working with us.
OPI: OK, can you tell me a bit about how the MBO came about?
JW: We have been private equity backed for over a decade now. Bridgepoint Capital, which was originally NatWest Ventures, was an investor in us for about nine years and during that time, it realised an excellent return on its investment. But clearly, this only becomes real once it can sell the company.
So, it had been seeking an exit for the years leading up to the MBO. Management were given the opportunity to lead an MBO, led by me and including Phil Lawson, the group sales and marketing director, James McCallum, a new financial director we bought in from BT to help us, and then five other key executives of the team, comprising Derek Pitt, the sales director for the OyezStraker brand, our company secretary Pippa Maynard, Nick Hodges, our marketing director, and of course Hugh Sear.
It was a typical MBO. First we wrote a comprehensive business plan. It’s actually quite remarkable how you run a company day by day and don’t devote sufficient time to really prepare a detailed strategy for the future. So three months later we came out with a decent plan. We selected venture capitalists (VCs) to present to, helped by PricewaterhouseCoopers, and from that process we were fortunate enough to interest more than one investor and had the pleasant task of choosing a VC for our future partner.
Hermes came out of that process on top, and I have to say we’re very pleased with our selection. There hasn’t been a day that’s gone by that we’ve regretted the decision we made.
OPI: What was the attraction for you personally to get involved in the MBO?
JW: If you want a straight answer, bucket loads of money hopefully. Why do people do MBOs (laughs)? Hopefully, there is a big incentive long-term. Clearly I’ve worked for the company for a long time. I’ve helped create wealth for others and, hopefully now, it’s the new team’s chance to create some wealth for themselves as well as a wide team of people within the company.
Of course, there is a good degree of control and all the things that one would expect. It’s is a great business, we’ve got a terrific team of people and it’s great to be leading them. It’s personally pleasing for me, after working throughout the business for so many years, to be able to lead an MBO.
So if you believe in the business you’re running, then why not take the top job and actually run it yourself, and enjoy the spoils.
OPI: So post-MBO, you’re happy with how things have gone so far?
JW: We are delighted with the way things have gone but, more importantly, so is Hermes. We are spot-on our profit targets and we’ve got some great plans for the future. We are also having great fun!
OPI: Going forward, how will OSG under Jeff Whiteway compare to OSG under Hugh Sear and Jonathan Straker.
JW: That’s an interesting one. Clearly my profile compared to Hugh and Jonathan’s has been low – but maybe that’ll change following this interview (laughs), but within the company it hasn’t been the Hugh Sear/Jonathan Straker show for quite some time.
The team who’ve now taken the top jobs in terms of the MBO have actually been running the company for some time. Jonathan fully exited at the MBO, but really was taking a back seat for quite a few years before that and doing what he did very well in terms of entertaining clients, and being the face and voice of OyezStraker.
Hugh realised that for him to be able to exit partly from the company, he also had to take a back seat, and Hugh has always been – for the 18 years I’ve known him – a great delegator of both the task and the responsibility and, over the last few years, he’s delegated those tasks and responsibilities more and more.
So realistically there’s no great shift change to the company as a result of the MBO because we were running it before. The only shift change, I suppose, is that we’ve got an even more highly motivated management team than before, because there is some great upside for us. We are certainly working harder than ever!
OPI: So Hugh doesn’t really have much involvement in OSG anymore?
JW: On a day-to-day basis, no. He’s moved into an executive chairman role working three days a week. I think it’s a great compliment to him that Hermes didn’t put in an external non-executive director to lead the group board. It was happy, having interviewed Hugh, for him to remain as chairman. But, realistically, as you expect, Hugh isn’t involved on a day-to-day basis. He is the true chairman. He’s a great sounding board and mentor. Hugh is also a very good friend of mine, which always helps. But, at the end of the day, he’s just not involved day-to-day.
OPI: What are OyezStraker’s current annual revenues?
JW: We’re annualising at £160 million ($279 million), and we’re making approaching 10 per cent net.
OPI: Target for the next few years? Can you tell me anything about that?
JW: Well, I think I’d rather not talk about actual figures because either way I’ll be wrong. I could either overestimate and live to regret it, or underforecast our growth potential. But, we’re VC-backed, and clearly Hermes has invested in us because it likes what it sees in terms of the company, the management team, and our potential for growth. It wouldn’t have invested in us unless it saw that potential as rapid and profitable growth.
So where does that take us? We’ve always been mindful that it’s not just turnover for turnover’s sake. We need to have some sanity in terms of the profit margin, and we’ve always been a highly profitable business. So, we’ve got the infrastructure in place, we’ve got the people in place to really grow the business. There’s little to stop us now. There’s no great step change required to move this business to much higher figures.
OPI: Have you identified key areas to get to the goals that you have?
JW: Yes. One of the sayings within our business is that we are the ‘hidden secret’, because if you look in the contract market, you’ve obviously got Office Depot and Lyreco, but we are the third biggest in our market, and we haven’t really been featuring in the contract market too much.
Therefore, that’s one area we clearly need to start pushing in, and for that reason we helped create Office Zone, run by Chris Lee and his team, which is now at £8 million turnover and growing very rapidly indeed. That’s why we acquired Whitegrove at £20 million which is also growing rapidly. And that’s why we also employed two major contract teams within the OyezStraker business to attack that contract market. And already we’re seeing good signs of success.
Initially, you have to let the new salesmen finish their contractual obligations in terms of previous employers, but as they’re coming out of that period we’re now seeing some very good signs of delivered success and also a fantastic pipeline for the future. So we’re very much moving into the contract market as an add-on and to complement our existing business.
OPI: Since you mentioned Whitegrove, can you tell me about some of the recent acquisitions you’ve made – I’m thinking of Whitegrove and Lynch McQueen.
JW: Well first of all, it’s pleasing to note that the Lynch McQueen acquisition was completed less than three months after our own MBO, which shows the aspirations of our new financial partners in terms of helping us grow, both organically and by acquisition. I mentioned earlier the new contract teams. Again, you don’t bring in big teams like that without investing heavy money. So Hermes has also been supportive in investing in organic growth through new people.
In terms of Lynch McQueen, we weren’t particularly strong in Scotland and the acquisition of this company gave us five sites in Scotland and critical mass to really start pushing and attacking that market very heavily. And then we moved on to Whitegrove, which was completed in the summer. I’ve known Ben Richards, the CEO there, for many years, and again, it helps our focusing of the group into the new, untapped contract market. Whitegrove has shown substantial growth over the last few years. It’s a very well run business with a great management team.
It brings great advantage and knowledge to OyezStraker in terms of moving into the contracts market while OSG provides the national infrastructure and extra purchasing power it required. So it’s a real win-win situation.
OPI: And how has the integration of those companies gone?
JW: OSG is really a series of brands and independent companies working on a common logistics platform. How we go to market on acquisitions really was set by the highly successful acquisition of Stat Plus some five years ago. We don’t buy ‘basket cases’, we buy good companies with good management teams. For that reason, it doesn’t distract our own management away from the core business, because so often you see that an acquisition adversely affects the main business, as everyone is so busy trying to integrate. Because they’re good companies we leave the management running their own businesses, running their own brands and, because we’ve only got £160 million turnover in a £6 billion market, fighting out there as separate brands, against the competition, isn’t a problem.
Obviously, we look at maximising purchasing potential. And obviously, we lump together things like insurance and some of the back-office systems and clearly, we also look at the logistics, to ensure we reduce cost, but always whilst improving service to the clients. That’s what it’s all about. What we don’t do is buy a company and think, "OK, how can we cut costs out of this business- What we look at is buying a company, motivating its people, growing the business and making it more efficient.
OPI: So are you exercising an acquisition strategy?
JW: Absolutely, yes.
OPI: Changing tack a bit here, I wanted to ask about the changing shape of your product portfolio. Are you carrying more jan/san or FM supplies and high-tech products?
JW: Yes. FM always sounds incredibly boring, doesn’t it? We actually call it ‘office edibles’ and ‘bathroom stationery’.
OPI: Well, that’s a new one. Some great new phrases to help confuse everyone.
JW: Absolutely. Office edibles and bathroom stationery -remember you heard it here first (laughs). What we want to do is maximise our sales into each client. You can only sell so many paperclips and so much copier bond into a client, so therefore we’re looking at everything else people use within their offices and, clearly, office edibles and bathroom stationery is one heck of an area that we can grow, and we’re seeing some very good growth in that.
OPI: So it’s a live thing.
JW: It’s a live thing. It’s been a live thing now for quite some time. We really have been pushing it very heavily. The wholesalers in the UK have seemingly led this and in doing so have woken the market up to a certain extent. We’re working with them, and we’re also working with manufacturers directly.
So yes, it’s becoming a more and more important part of our business, and we see that it is still an area for tremendous growth.
OPI: And a similar type of thing – the more high-tech products?
JW: The jolly old EOS market – yes, that’s growing rapidly, and that gives us opportunities, because the cost of servicing that type of business is much lower because the unit value is higher with bulk and weight being lower. So we’ve woken up to the fact that it is a different market with different margin expectations, but different costs involved in that as well. Again, that has always been an important part of our business for many years, but we now have a focused and dedicated team making sure that we maximise the opportunities within our client base.
OPI: Do you think that we’ll ever approach the day of the paperless office?
JW: We are certainly seeing a downturn, against other trends, in traditional filing products. Your filing cabinet these days is your PC on your desk, and its hard drive.
The fact is that if you store your copy on there, you don’t actually keep a paper copy, but each time you look at it, invariably you print it off. I look around my office now and it’s full of paper. Actually these days, not only is my office full of paper, my inbox will be full of emails. It’s a double whammy these days. So no, I don’t think the paperless office will come.
Certainly, trends in the market are changing and, again, through analysis and through focus, we’re always watching the trends in the marketplace.
OPI: How frightened do you get by this idea of manufacturers selling direct? It’s one of these things that comes up every now and again.
JW: This may prove to be a naïve statement (laughs), but not at all. Why? I know our logistics operation, how it works, and I don’t think there is any manufacturer that can actually do what we do cost-effectively. Average order sizes in the industry are £80 or £90. What manufacturer wants to be doing that on next-day service, often same-day service? Those that do, have to be pretty specialist, and obviously there have been some manufacturers which have done that very well, but it tends to be on much higher ticket items.
There is an area where the manufacturers should go direct. It’s a fact that some paper merchants go direct to very large organisations – at the end of the day if it’s multi-pallet deliveries, yes, good luck to them, I don’t really want that sort of bulk on my transport – they just need to communicate to us well. But, for the vast majority of our customers, I can’t see any manufacturer or wholesaler that can supply our type of service to the end-user.
OPI: One of the things that people are talking about a lot from a dealer perspective is the stocking versus stockless dealer debate. Do you have a view on that?
JW: For a small dealer, I think reducing stock makes tremendous sense. With the wholesalers now becoming more reliable on service and first fill rates, and with their own brand strategy, for a small dealer that must make sense, maybe holding just the top 100 products. Obviously for larger dealers, you need to carry stock because you need to buy extremely competitively. They also need the support from the manufacturers to attack the market.
So there’s no one-story-fits-all, but yes, if it’s a small dealer and it’s holding many more than 100 lines in stock, I would question whether that makes sense.
OPI: I just want to touch on the story revolving around United Office Products and its dealer splinter groups. I know that you’ve officially now come away from them. What was your take on that whole story?
JW: In some ways it’s difficult for me to comment on why others left United, so maybe let’s talk about why we left United, because I think maybe it was for similar reasons. We’d been founding members of Officeteam running through to Momenta, where we were represented at board level, then moving on into United.
The fact is, OSG outgrew the group scenario, so therefore we were starting to find that it was holding us back. Many manufacturers were saying, "we find your membership of a group quite confusing" and "we’d like to treat you as the contract stationer you are". It stopped being of value to us. Everything has its time and for us, the dealer groups had had their time. Obviously pulling out of United meant that we left Europa, and BPGI in turn. But we’re still great friends of those people. There’s no animosity there. Again, circumstances had just moved on. We’re now big enough and bold enough to paddle our own canoe.
Any group must add value, both real and perceived to its members. Perhaps United stopped providing that in sufficient quantities and at the same time Kingfield Heath offered a very comfortable bed to lie in.
OPI: OK Jeff. Just to close up, I’d like you to tell me a bit about your PALS programme. It’s a pretty interesting strategy.
JW: OyezStraker’s approach to the market is different to most because of the huge service focus we have. We are national and while we are the third biggest in the marketplace, we also keep all the advantages of a local dealer.
The advantages of the local dealer is local focus, so when a Liverpudlian customer phones up an office, he/she is speaking to somebody who’s based in Liverpool and will get a delivery from a Liverpudlian driver. Because of that infrastructure, we have the ability to provide logistics services for independent dealers.
And that’s what we’re doing both in terms of start-up and in terms of existing businesses where dealers are just finding it too hard to compete against the big players – Lyreco with their hundreds of sales reps out on the road attacking and bombarding areas of the business.
These businesses can come onto our logistics platform and enjoy industry leading levels of service; we’ll help them with marketing; we’ll help them in terms of improved purchasing; we’ll help them in terms of very efficient but high quality logistics, so they don’t have to worry when Bob the driver doesn’t turn up. Instead, they can focus on the sales drive, with the new armament of the tools that we can give them. It helps their sales growth, so they sell, and they collect the money, leaving the rest to us – IT and the whole lot.
Why do we do that? Well, these people clearly have obvious potential for us to acquire them later on. The PALS programme stands for Pre-Acquisition Logistics Service, which actually makes it rather clear what we’re about. It also means we help them grow their business.
Why on earth would you want to help them grow their business because we’re going to pay more for that business once we do buy them? The answer: I’d much rather buy a high quality company that we know and which has clear evidence that people within the business can actually grow the business. So it cuts out a lot of risk from an acquisition for us, it provides greater benefit to the dealer and it means that for both parties it’s a win-win situation.