UK: Nat Puri's bargain buys. (3 of 4)

UK: Nat Puri's bargain buys. (3 of 4) - Today Puri and Philpotts maintain strict separation of powers. Puri is the dealmaker, policymaker and monitor. Philpotts, the manager, goes in at the deep end. "The formula is that Puri buys and I run. He is the id

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Last Updated: 31 Aug 2010

Today Puri and Philpotts maintain strict separation of powers. Puri is the dealmaker, policymaker and monitor. Philpotts, the manager, goes in at the deep end. "The formula is that Puri buys and I run. He is the ideas man. He has no practical management sense at all, but he's one of the best analysts I've come across."

Philpotts admits that his own forte is operations. A grammar school boy from Birmingham, who came to general management by way of sales and marketing, he spends just one day a week at the group's modest head office in the "less salubrious part" of Nottingham. The rest of his time is spent at one or other of Melton Medes' 17 operating businesses. These are spread more or less at random from the North-west to the South-east, with a concentration near Manchester. He visits each operation at least once a month on average and likes to run them on a formal basis, "with properly minuted and regular meetings". Nonetheless, he prides himself on a relaxed management style.

Puri, on the other hand, is more of a stand-alone character, insular, as you might expect of an entrepreneur. But, according to one divisional manager, "he knows when to open up". Though he is in daily contact with Philpotts and the team, he abolished group board meetings long ago, he says. "We had one once, a long time ago, and it wasted a whole day. It's a matter of confidence and trust," he says. "I don't have a doubt about what he (Philpotts) is doing. He's excellent." That said, the two do disagree from time to time, a situation of which Puri thoroughly approves: "Someone who's good doesn't say yes all the time."

It may only be on the day that a deal goes through that Philpotts gets involved with a new addition to the group, though he always sees the information pack. Then follows a period of hectic activity, as he and his team get to know the management and examine the acquisition from top to bottom. "We're not looking for just five or six areas of improvement but across the whole spectrum," explains Philpotts. Often hard decisions must be made - and made quickly. For example, at plastics company Bettix, acquired in October 1984, where 40 of the 100-strong workforce had to be made redundant, the announcement was made within three days of takeover. "I have a very simple philosophy," says Philpotts. "I said to them: 'One in three jobs are going to disappear and I'm sorry. But two out of three are much more secure as a result'."

Once the initial "treatment" is over, group subsidiaries fall into the routine of monthly reporting. Philpotts expects a flash report within seven days and a full 10-page financial pack within two and a half weeks. Within that framework, subsidiary managements are responsible for controlling working capital and the budget, and for generating cash. Eddie Holt, managing director of three of the plastics companies, says that he has much more autonomy in how he runs the company today than he would have done under the old Bowater Industries, whence he came in an acquisition in 1984. "Under Bowater there was a complicated set-up for authorisation for capital expenditure and changes in business direction - and we were always bottom of the list at board meetings. In Melton Medes the mechanism for approval is quicker and clearer."

Last year investment was kept up, at £14 million. This year the total will be cut by £2.5 million to about £4 million. With interest rates as high as they have been, funds for investment are scarce and Puri wants to be sure that the businesses are "in the right shape for investment". Nevertheless, he believes that this is the time to invest. "If you do it when times are good and production is running at full speed, you simply lose sales. Companies which go under are the ones which invest at the top of the cycle," he says.

Puri is highly critical of Government economic policy and compares the cost of borrowing here with in Germany, where Melton Medes has two businesses. "We can't compete with a manufacturer based in Germany. He's borrowing at 9% while I have to pay 15%. You think twice before you invest here because interest rates are so high."

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