UK: Owners in the driving seat.

UK: Owners in the driving seat. - A number of the UK's top quoted companies are run by the people who created them. What else have they got in common?

by Alistair Blair.
Last Updated: 31 Aug 2010

A number of the UK's top quoted companies are run by the people who created them. What else have they got in common?

Every year dozens of entrepreneurs capture a moment of glory as they float the companies they created on the stock exchange. Most are barely heard of again. In stockmarket terms, their companies are small and a majority stay that way. In some cases, the exercise is simply about turning years of hard work into cash. Retirement, early or otherwise, beckons. If the owners are lucky, a takeover bid will complete the process soon enough. For owners who don't sell out, there is always the danger of petering out: the risk-taking zeal that got them as far as flotation may give way to a particular brand of conservatism, sometimes said to be unduly prevalent among British entrepreneurs. They're reckoned to be far too happy with their first £5-£10 million, insufficiently keen on turning it into £50 million or £250 million.

Underlying both tendencies is the fact that running a public company is a different kettle of fish from founding and building up a private one. Institutional shareholders, analysts, non-executive directors, AGMs, nay even journalists, are not everybody's idea of an interesting company.

At its smaller end, that doesn't matter too much. Here, the stock market tolerates lip service to its norms. But as companies grow, so does the need to comply.

For these reasons and others, only a few of each year's crop of newly floated company bosses stay the course to the stock market's upper echelons.

Around one in eight of the UK's largest quoted companies are still run by the people who created them.

We've been slightly liberal with the term 'created', letting in several people who weren't founders but have so shaped their companies that it is as if they had been. Sir Ernest Harrison joined then-tiny Racal as its accountant, but he's run it since 1966 and made its name synonymous with his own. Richard White and George Gray led a £15-million management buy-out of Serco in 1987.

Since then its business has grown tenfold and its value thirtyfold. Richard Budge of RJB did not create the British coal-mining industry. To have bought it, we thought, was sufficient. On the other hand, we have left out 'inheritor-drivers'.

For the purposes of this exercise we have taken the top 350 companies by market capitalisation and excluded those, such as the Body Shop, whose change in market cap has not yet been reflected in the FTSE Index, which is only updated quarterly. Allowing for three or four partnerships, and not double-counting Sir David Alliance (with both Coats Viyella and N Brown to his name), there are 49 people in the table. What might they have in common?

Beyond the fact that they are exceedingly wealthy, there are three fairly common denominators. Given the popular wisdom about self-made men, the first should not be surprising: few were academic achievers. A third have kept their early CVs off the public record. Of the balance, half have no qualifications at all and by our reckoning, barely half the others went to university. (Martin Sorrell, with degrees from Cambridge and Harvard, sticks out a mile.) Fairly typical in this respect are David Crossland of Airtours, who left school with three 'very bad' O levels to work in the local travel agent's; Steve Morgan of Redrow, who didn't complete the sixth form; and Flextech's Roger Luard, whose A levels weren't good enough to get him to university.

Another strong theme is how many of their fathers had their own businesses.

Information about family backgrounds is even harder to track down than that about education. For half the people in the table, we recorded question marks on this aspect. But of the remaining 24, a striking 19 had fathers who ran businesses, generally very small ones. Sir Stanley Kalms's start in his father's photographic shop is well known, as are the Lords Hanson's and Harris's in their fathers' small businesses. The father of Brian Souter and his sister Ann Gloag of Stagecoach was a bus driver, but he also had a sideline in used cars. Housebuilder Berkeley's Tony Pidgley cites his earliest lesson in cost consciousness as being responsible for draining the water from the radiators of his adopted father's lorries on winter nights, saving Pidgley senior from shelling out for anti-freeze.

Next, virtually all of them got going young. By our estimate two-thirds were already owner-drivers before they were 30 and several were already worth their first million, if not yet in cash. They also got going on next to nothing. Pidgley's origins as a Barnardo's boy adopted by gypsies is the most colourful tale, but many others had equally modest beginnings.

A fair few had a private education, but even here there are only one or two cases of family resources affording any kind of big-bang start. According to Duncan Davidson, a duke's nephew and builder of the house of Persimmon, his initial business resources were 'one wheelbarrow, two years' experience at George Wimpey and an acute shortage of capital'.

There is also among them a firm preponderance of mono-product companies, for the good reason that a proven way to get a company going from scratch is to do one thing well. But there aren't many seriously new ideas here.

Sir Tom Farmer's was one. It looks a pretty everyday concept in Britain in 1997 but in 1971 the idea of getting a new exhaust fitted while you waited was a pretty definitive gap in the market, even if Farmer simply copied an idea he had seen in the US. Less than 20 years ago, J D Wetherspoon's Tim Martin thought it would be a fine idea to have a pub with no music, a non-smoking area and serious choice of beer, an idea he certainly didn't copy.

Most of the others simply did, and do, the same as others, but better. There's nothing new about package holidays, carpets, property, advertising, clothes retailing or plant hire. Which helps prove the point that the principal ingredients here are talent and focus. For more evidence, consider the housebuilders. There must be something about housebuilding. There are five of them here, and they're not only the single biggest industrial segment in our selection; these five are also the best in the business. Barratt, Berkeley, Wilson Bowden, Persimmon and Redrow virtually are the UK housebuilding industry, especially after the consolidation of the last three years, which has seen many of the industry's big names hand over lacklustre housebuilding divisions to their more talented competitors.

But while most of these people are only supplying the same products or services as the world and his wife, many have developed distinctive reputations for the manner in which they go about it which extend beyond such predictable qualities as tenacity and salesmanship. Kwik-Fit's customers probably aren't quite as delighted as it would like us to think, but the firm puts amazing efforts into finding out why not. Every day, 5,000 of yesterday's customers are phoned for an opinion on the service. And Farmer is eloquent in describing his latest 'obsession' - his desire to see the windscreens of all cars coming through his outlets being washed by his 'lads and girls' in a value-adding and free service to customers.' Since 1984, plant hire outfit Ashtead has transformed itself from a £500,000-management buy-in to the £400-million number two in its sector. Despite mutterings about depreciation policies, it's a City favourite. The first thing Peter Lewis and George Burnett did when they bought Ashtead was to implement a profit-sharing scheme which plugged even the lowliest trainee directly into the profitability of his or her depot.

Martyn Arbib junked much of the investment management industry's modus operandi when he started up Perpetual. For years, fund managers whose offices were for historical reasons in the provinces, have upped and offed to the Square Mile. Arbib set up shop in Henley-on-Thames in 1974 and has always insisted that being away from the herd was good for performance.

Sir David Alliance's success in gobbling up the textile industry's giants in the '70s and '80s was put down to his revisionist management style in an industry little progressed from its Victorian heyday.

The property men, in addition to sharing an exquisite sense of timing, have also shown more than a mere developer's mentality. For instance, in taking on the Trocadero, a site which had confounded all previous owners, Nick Leslau virtually turned himself into a leisure operator. His recent decision to step down from the board of the company, together with partner Nigel Wray may, however, say something about the dangers of spreading yourself too thinly.

Having made a fortune from selling his meat pies firm to GrandMet, Stan Thomas of TBI couldn't resist spending the proceeds on property as it hit the floor in the early '90s. Already encroaching on the sector's top 10, he helped himself to get there by branching into airport management after noticing the unexploited property potential of many small airports.

No one is more at home in mainstream property deals than Elliott Bernerd of Chelsfield, so when he saw Wentworth Golf Club going for what looked like a song at £23 million, he did not hesitate. Noting that the Japanese paid unbelievable prices for golf club memberships at home, he offered them the chance to do so here. They snapped up 40% of Wentworth for £32 million.

And we haven't got around to tenacity and salesmanship yet. At least half of the owner-drivers have prosecuted hostile takeover bids, but none more notable than Whittaker's assault on the Manchester Ship Canal, which involved an eight-year takeover battle followed by a three-year planning battle. Probably no less taxing a performance has been put on by Souter during his (at last estimate) 25 referrals to the Monopolies & Mergers Commission. Another brand of tenacity was displayed by Martin Sorrell, who basically busted WPP by betting the ranch on the ill-timed purchase of advertising agency Ogilvy & Mather. For months, legions of lenders, investors and even employees pressed him to resign. He outstared the lot and eventually coaxed them into refinancing him. When things had settled down, he proposed they put in place an unprecedented option plan, which looks set to restore his personal fortune. They did so. Every one of these people has shown exceptional skill in selling themselves to customers, backers and bankers but the biscuit was arguably taken last year when Bernerd talked his way into a huge White City property deal which had been stalled for years. He neither conceived the scheme nor owned any of the four adjoining sites involved, but, as the one who finally proposed an agreement all could accept, he has been estimated to have set Chelsfield up for a profit of £100 million.

In terms of personality types, we appear to have the whole range. Kalms has been said to bully his staff, Harrison to be too soft on long-serving senior colleagues. Bernerd is a card-carrying member of the beautiful people set while Robert Peel's idea of an exciting weekend is showing travel agents around his Thistle hotels and explaining how much they will be improved when promoted from three to four stars.

As the exceptional returns in the table demonstrate, fund managers love owner-drivers who make it this far, although they get aerated about the inevitable reverses. As Racal issued its third profits warning of the year in June, a 'You've been great, Ernie, but it's time to go' bandwagon made its quinquennial round of the City. This time it even elicited an 'I would like an early retirement after I've seen this job through,' from the 70-year-old. Harrison's previous seeing-the-job-throughs have served shareholders well although any who bought his shares in the early '80s had to wait 10 years to see the full value return.

The other thing for shareholders to worry about is the succession. 'Like any other company, we look ahead. I split the top job three years ago and whilst I am the executive chairman, the day-to-day is run by John White, who's been here 18 years,' says Persimmon's Davidson. That should keep them happy, if they forget that similar arrangements at Barratt were followed by near catastrophe and the recall of Sir Lawrie from retirement.

What about sons and daughters? Young Tony Pidgley, although not believed to be an expert in anti-freeze alternatives, is growing his own housebuilding firm. But despite the generally ropey record of heirs succeeding self-made men, it has inevitable appeal. Kalms at one point had three sons coming through the ranks. All now work elsewhere. Hanson and Ritblat both seem to fancy their sons' chances in their own shoes and have so far got them as far as the board. Hopefully, it won't be a disadvantage that they've both had blue-chip educations.

HOW THE FOUNDERS AND THEIR COMPANIES HAVE FARED

Company Activity Years since Outper- Market cap

flotation* formance (£m)

(%)**

Airtours package

holidays 10 100 1,426

Ashtead plant hire 11 36 404

Barratt

Developments housebuilding 29 6 581

Berkeley housebuilding 13 23 689

Bodycote engineering 26 6 615

British Land property 27 n/a 2,755

Brown (N) mail order 28 14 569

Burford property 10 30 540

Capita outsourcing 8 75 450

Carlton tv, video,

Communications film 14 14 3,031

Carpetright retailing 4 20 397

Chelsfield property 4 15 667

Coats Viyella textiles n/a n/a 892

Danka photocopier

distribution 10 140 1,368

DFS furniture

retailing 4 13 586

Dixons electronics

retailing 5 26 2,018

Flextech tv programming/

distribution 11 100 750

Halma engineering 25 36 439

Hanson building

materials 32 34 1,862

JJB sportswear

retailing 100 465

Kwik-Fit exhaust/tyre

outlets 25 1 476

London

Forfaiting trade finance 0 410

Mayflower engineering 8 50 368

Misys software 10 40 1,154

Morrison (Wm) supermarkets 29 24 1,144

Peel property 29 24 404

Perpetual unit trusts 10 60 756

Persimmon housebuilding 12 17 399

Racal

Electronics electronics 31 42 688

Redrow housebuilding -3 361

RJB Mining coal mining 4 -3 528

Sage software 8 138 702

Serco outsourcing 9 56 420

Stagecoach buses/rail 4 75 1,517

TBI property 3 27 361

Thistle hotels 21 n/a 969

Tomkins 'guns to buns' 16 31 3,246

TT Group engineering 11 36 609

Wassall diversified 9 2 679

Wetherspoon

(J D) pubs 5 80 527

Williams building

products 16 106 1,916

Wilson Bowden housebuilding 0 7 478

WPP marketing

services 12 -3 1,790

Company Owner-driver Stake (£m) Stake (%)

Airtours

David Crossland 170 12

Ashtead Peter Lewis 18 4

Burnett 18 4

Barratt

Developments Sir Lawrie Barratt 4

Berkeley Tony Pidgley 25 4

Bodycote Joe Dwek 37 6

British Land John Ritblat 17

Brown (N) Sir David Alliance 233 41

Burford Nigel Wray 33 6

Nick Leslau 11 2

Capita Rod Aldridge 19 4

Carlton

Communications Michael Green 69 2

Carpetright Lord Harris 60 15

Chelsfield Elliott Bernerd 120 18

Coats Viyella Sir David Alliance 6

Danka

Dan Doyle 28 2

DFS

Sir Graham Kirkham 59 10

Dixons

Sir Stanley Kalms 10

Flextech

Roger Luard 5

Halma David Barber 17 4

Hanson

Lord Hanson 41 2

JJB

David Whelan 140 30

Kwik-Fit

Sir Tom Farmer 37 8

London

Forfaiting Jack Wilson 27 7

Stathis Papoutes 25 6

Mayflower John Simpson 3

Misys Kevin Lomax 26 2

Morrison (Wm) Ken Morrison 83 7

Peel John Whittaker 219 54

Perpetual Martyn Arbib 386 51

Persimmon Duncan Davidson 33 8

Racal

Electronics Sir Ernest Harrison 5

Redrow Stephen Morgan 127 35

RJB Mining Richard Budge 11 2

Sage David Goldman 34 5

Serco Richard White 4

George Gray 4

Stagecoach Brian Souter 212 14

Ann Gloag 197 13

TBI Stan Thomas 97 27

Thistle Robert Peel 1

Tomkins Greg Hutchings 21

TT Group John Newman 60 10

Wassall Christopher Miller 3

Phillip Turner 3

David Roper 2

Wetherspoon

(J D) Tim Martin 89 17

Williams

Sir Nigel Rudd 7

Wilson Bowden David Wilson 208 44

WPP

Martin Sorrell 10

TONY PIDGLEY

Berkeley Group

Date of birth: 6/8/47

FTSE ranking: 207

Company founded: 1976

Barnardo's boy adopted by gypsies. Learnt cost consciousness at an early age

SIR ERNEST HARRISON

Racal Electronics

Date of birth: 11/5/26

FTSE ranking: 216

Company founded: 1950

Joined as an accountant but has run the business since 1966 and made its name synonymous with his own

MARTIN SORRELL

WPP

Date of birth: 14/2/45

FTSE ranking: 108

Company founded: 1986 Nearly lost the ranch, then put in place unprecedented option plan which looks set to restore his fortune

DAVID CROSSLAND

Airtours

Date of birth 18/12/46

FTSE ranking: 119

Company founded: 1972

Left school with three very bad O levels and started work in a local travel agent's

STEVE MORGAN

THE M&S OF THE BUILDING INDUSTRY

Steve Morgan may well have made the most money, the most quickly, in our entire sample. The table shows his shareholding in Redrow is worth £127 million. But that's only after selling £90 million of his stake in March this year, and another £62 million in 1994 when Redrow was floated.

If the 1994 cash has been broadly invested in UK equities, it ought to have appreciated to about £120 million by now. Adding in pre-flotation earnings, and assuming he had no serious personal borrowings, the total pile could be £400 million.

The Liverpudlian Morgan started Redrow with a small loan from his father, an RAF fitter turned plant hire operator. Morgan had progressed from uncompleted A levels, via a building site and an OND course, to work for a small civil engineer engaged on a job at the junction of Redwood and Harrow Drives in Merseyside. His employers withdrew from the contract, and Redrow was set up to complete it. After a few years,Morgan started building houses.

'We're the Marks & Spencer of the industry,' he says, a claim possibly supported by his OBE for services to the building industry. This year, having recently purchased Costain's housing division, Redrow should put up around 2,500 houses.

No doubt Morgan was always on his way to at least £50 million, but the rest came from two clever decisions. Over 20 years leading up to flotation, he managed to hang on to every last Redrow share bar a tiny fraction which went to his managing director, Paul Pedley. Secondly, having expanded into the South East in the mid-'80s, Morgan and Pedley decided in 1988 that rapid property price escalation presaged a crash. They sold their entire land holdings in the region at the top of the market and replaced them later at distress prices.

DUNCAN DAVIDSON

Persimmon

Date of Birth: 29/3/41

FTSE ranking: 303

Company founded: 1972

Started with 'a wheelbarrow, two years' experience at George Wimpey and an acute shortage of capital'

TIM MARTIN

J D Wetherspoon

Date of birth: 28/4/55

FTSE ranking: 252

Company founded: 1979

Had a revolutionary idea for pubs - no music, a non-smoking area and a serious choice of beer

STEVE MORGAN

Redrow

Date of birth: 25/11/52

FTSE ranking: 338

Company founded: 1974

When his employer withdrew from a contract he was working on, he set up a company to complete it.

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