Great Escapes

As the financial cyclone was silently gathering, six self-made entrepreneurs plotted their exit - and slipped away with a massive payoff. Was it judgment or jamminess, asks Rhymer Rigby.

by
Last Updated: 09 Oct 2013

What it is to have timed it just right. We all know someone - the neighbour who sold their house in the summer of 2007; the friend who bought dollars three months ago; or the colleague who switched to a tracker mortgage that has now tracked right down to no interest whatsoever.

Here, MT looks at perfect timing writ large - six businesspeople who got it spectacularly right, selling up just before the economy went down and pocketing sums for their businesses that now seem astronomical. Was it luck, judgment or a combination of the two? What can we learn from them? And what are they doing with all that lovely, lucky lucre?

JON HUNT, FOXTONS

Foxtons founder and majority owner Jon Hunt is a man whose firm - all funky office furniture, sharply dressed staff and flash-liveried Mini Coopers - embodied the property boom at its devil-take-the-hindmost peak. He also embodies the art of getting out while the going is good. In May 2007, Hunt personally trousered a cool £370m when he sold Foxtons to the private-equity group BC Partners. Nearly two years on, the housing market has collapsed and Hunt's deal now looks insanely good.

His timing was impeccable - the deal went through right at the top of the market, mere weeks before the longest property boom since WWII came to an end. But he has pointed out that the idea of a perfectly timed exit is a flawed one: the process of selling a business can be even slower than selling a house, taking anything up to a year - 'In my case, it took nine months.' And he did worry that he might be getting out too early. A big part of his decision, he says, was simply that he'd been in the business for 40 years and had had enough.

Hunt was in the news again last month, this time for shorting shares in the retail developer Hammerson - a ruthless move that netted him another multi-million pound profit. He noted simply that you didn't have to be Einstein to see that 'retail is not a particularly clever place to be'. Ouch.

SIR KEITH MILLS, NECTAR

Loyalty-card magnate Sir Keith Mills also made his latest exit in 2007, selling LMG, the company that owns the Nectar reward cards, for a tidy £350m to Canadian company Aeroplan. Sir Keith's personal stake in Nectar was £160m. It has been estimated that this represents a staggering 45,000% return on his initial investment - a few hundred thousand pounds worth of R&D, for which he received a 46% stake in the nascent business in 2002.

Sir Keith, who MT caught up with in New Zealand, where he is in charge of the British America's Cup team, says a variety of factors prompted him to sell: 'I'd been in the business for 20-odd years and I felt I'd done as much as I could do. I'd got involved in the London Olympics and the America's Cup, which were taking more and more of my time. Being in New Zealand for two to three weeks is tricky if you're running a company in Europe.'

Moreover, he adds, in 2007 the economy was looking progressively worse and 'we were being pursued by another company that was making a cash offer'. As that offer was largely funded by bank borrowing, he admits it's quite possible that he would be unable to sell the business now, even at a knockdown price.

It helps that he's done it all before; Air Miles, the business he founded with partner Liam Cowdery, was snapped up by BA for £10m in 1994. But there's an ironic coda to this tale of good fortune. His bankers, pukka Coutts, advised him to put £30m of his cash in US insurer AIG, which then went belly-up last autumn. Although he's considering suing the bank to get his money back, he seems fairly sanguine about the episode. After all, it's only £30m...

LINDA BENNETT, LK BENNETT

In the retail world, Linda Bennett - the 'kitten-heel queen' - is an enigma. Her reputation is that of someone who guards her privacy jealously and shies away from the spotlight. Nonetheless, Bennett made headlines in July 2008 with the sale of her eponymous shoe store. Amazingly, she managed to get £100m (of which some £70m was her stake) out of buyers Phoenix Equity Partners and Sirius Equity for the 89-branch chain founded in Wimbledon in 1990.

What made the deal extraordinary was that by last summer, the writing was already on the wall for economic gloom. And Bennett had already failed to get the £75m she had been pursuing as she'd tried to sell the business four years earlier, when the recession wasn't so much as a blip on Nouriel Roubini's radar.

Commenting on the exquisitely timely disposal, Ms Bennett said that 2008 was the most successful year in the firm's history, and that the buyers were a good fit for the business. 'Phoenix's strategy and mine are best aligned,' added a well-heeled Bennett. Even so, the company's initial price tag was said to have been £150m when it was put up for sale in October 2007, so the equity houses drove a pretty hard bargain.

Although Bennett's plans now apparently include fading even further into the background, spending more time with her family and in her Somerset garden, she still has a considerable interest in where LK Bennett goes from here. She retains 30% of the business and has been kept on as a non-exec director. She must have been a shoo-in for the job.

MIKE CLARE, DREAMS

Life has been a bed of roses for Mike Clare and wife Carol since they sold their bed retailing business Dreams plc (in which they were the only shareholders) to private equity group Exponent for £230m last March.

Even at the time, the understated but effective Clare was reckoned to have pulled off something of a coup. From the standpoint of a year later, his timing looks almost preternaturally good. But those wondering how he got such a great price might reflect that the company was vigorously bucking the downward trend and had seen its sales rise by 27% in the previous year. And it was prudently run by Clare, a man of simple tastes who once told MT that his idea of extravagance is buying two rows of seats at the cinema so his family don't have to look over the heads of people in front. Moreover, he wasn't jumping ship: he reinvested £20m in the business, is said to retain 25%, and has stayed on as non-exec president.

Nonetheless, as the retail downturn turns into a full-scale rout, Clare may find that the only thing that's more comfortable to sleep on than a Bed of Dreams is a pile of cash.

CLIVE COWDERY, RESOLUTION

Clive Cowdery has been dubbed the Comeback King - and with good reason. In November 2007, he sold the life assurance assets of his Resolution Group (the closed funds known as 'zombie funds' offloaded by the likes of Royal & Sun Alliance and Abbey) to the Pearl Group for £5bn, netting himself £125m in the process. Cannily, he kept the rights to the Resolution name and by late 2008 was back with a brand-new Resolution Group. He now plans to use this vehicle to buy up undervalued firms in the financial sector, where pickings should be rich for those brave enough to go hunting at all.

Some may talk of the worst recession for a century, but the downturn doesn't seem to have altered Cowdery's modus operandi at all. A born entrepreneur, he seems to be motivated more by the buzz of the financial markets than by the desire merely to get rich. His elevation to the ranks of the super-wealthy hasn't changed him a bit, he insists, the bulk of his wealth has gone straight back into Resolution Mark II and the Resolution Foundation, which concerns itself with low-paid workers. He has put a little aside for his family's security. 'I don't think I've changed my lifestyle in 10 or 15 years,' he has said. 'Working at Resolution and chairing the foundation - that'll do me.'

DAVID WILSON, WILSON BOWDEN

Looking back, it seems like a different age, with three giant housebuilders - Barratt Developments, Wimpey and Hunter - slugging it out for the prize of family-owned rival Wilson Bowden, founded by David Wilson. Eventually, Barratt emerged victorious in May 2007, paying a nosebleed price-tag of £2.2bn for the prize. David Wilson's family trust owned a third of the company and got more than £700m of the consideration - about £300m in cash (whoopee!) and £411m in Barratt shares (oh well, you can't win 'em all).

The combined company was valued - albeit briefly - at over £5bn. But not for long. Only a few months later, Barrett's shares nosedived into a long and steep decline that eventually wiped more than 90% off their value. By October that year, Barrett was worth only £300m, almost exactly the amount of cash it had paid for Wilson Bowden just a few months earlier.

All things considered, Wilson did all right out of it, thanks to the cash component of the sale. But the collapse in value of the shares, comprising nearly 60% of the deal, must sting a bit. Wilson's confidence in the industry's immediate prospects was sadly misplaced and the gains made by the family trust were slashed.

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Strategy

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