The Works is the UK’s leading retailer of discounted and remaindered books and also sells art materials, gifts, stationery and DVDs. The company carries more than 40,000 different product lines, including many well-known brands.
The Works was first established in 1981. The founders started by selling remaindered books on a table in their chemist shop and gradually realised that this entrepreneurial idea had real potential. By 2003 The Works was operating from 175 stores in the UK and had widened its product range to include non-book lines. The company was still owned by its founders, who were starting to think about succession, and the management team were keen to become owners.
The Big Idea
After a failed auction process in 2002, we were approached by the management team’s advisers and incoming non-executive chairman in Spring 2003. We saw the opportunity to enhance the company’s market leading position and grow the business via further store roll-out and acquisitions. We completed the £25 million management buy-out in July 2003.
The Grand Plan
We put together a straight-forward package with a modest amount of bank debt which allowed the company’s cashflow to be used for rapid expansion. Within five months we acquired 27 shops from The Works’ main competitor and then added a further 30 new stores over the following 18 months. We also helped the company to upgrade the look of their stores, introduce more effective management systems and to add a range of new products.
The Bottom Line
Sales and profits grew substantially in the relatively short period of our ownership. The company was sold for £50.5 million in April 2005, generating 3.7x our original investment.
Date of investment: July 2003
Deal status: Realised
Date of realisation: April 2005
Investment return multiple: 3.7x cost
For more information talk to: Graham Hedddle or Rob Foreman