Focus became a byword for private equity mismanagement earlier this year, when it almost collapsed under the weight of its own debts. Its red-faced owners, Apax Partners and Duke Street Capital, were eventually forced to sell it for a measly £1 to Cerberus, the US firm that specialises in buying sows’ ears and turning them into silk purses.
In fairness, Focus was a rare failure for Apax and Duke Street, who have both had a fairly unblemished investment record in recent years. They did load the company with debt, but the amounts involved were not unusually large given the company’s size and profitability. The problem was the cut-throat competition of the UK high street – Focus ran out of money because it was battered by larger rivals like Homebase and B&Q.
Still, the near-collapse of such a well-known name was meat and drink for the unions this summer, when the row over private equity was at its height.
But the turnaround looks to be under way. Cerberus has already started chopping out the dead wood – it immediately replaced the management (bringing in a new team led by Bill Grimsey and Bill Hoskins, the former saviours of Wickes) and has now sold off 41 stores (mostly to rivals) for a combined £68m. 39 of its remaining 215 stores have also put up the ‘For Sale’ signs, as Focus targets locations where it won’t be squeezed out by its bigger competitors. Meanwhile the debt mountain has also been reduced to a slightly less eye-watering level.
Could the classic private equity failure yet become that even greater rarity – a classic private equity turnaround?