UK: Nat Puri's bargain buys. (2 of 4)

UK: Nat Puri's bargain buys. (2 of 4) - The hunger for a good deal drives Puri's strategy. Beyond that, he says: "The first governing factor is knowing our own limitations and the businesses we don't want to be in."

Last Updated: 31 Aug 2010

The hunger for a good deal drives Puri's strategy. Beyond that, he says: "The first governing factor is knowing our own limitations and the businesses we don't want to be in."

Like Lord Hanson, Puri hates the notion of top people being tied up in the long term in businesses requiring constant monitoring and updating, like high tech, high fashion or heavy engineering. With a head office of just 11 people, including five support staff, management resources are scarce, and in any case, Puri has developed a neat strategy. The group's businesses fall into four divisions: plastics, paper and packaging, carpets and textiles, and engineering - the theory being that they give enough of a spread so that when one sector is down, others will be up. Now acquisitions are mostly to strengthen existing businesses; last year's buys had sales of £40 million in total.

In the early days, however, Puri was cautious, making sure that each acquisition was responding before advancing further. But he was always on the lookout for a new deal, usually involving fairly ordinary, loss-making operations. Typically, acquisitions have been neglected businesses which no longer fitted into the chosen core of a very large public company. Says Philpotts: "Does a board meeting in London care about a subsidiary with turnover of £2 million and a loss or profit of £30-40,000? Being part of a very large group is being part of a pyramid of paper."

Melton Medes' approach has been to invest both top management time and capital. As one manager said to Philpotts: "I've seen more of you in the past three weeks than I saw of the other guy in 10 years."

By the second half of the 1980s Puri was ready to up the pace. As he and Philpotts felt up to handling more than one operation at once, the acquisitions came more quickly, sometimes two or three in a month. They were also larger. Where at first targets would have turnover of £3-4 million, on which they would expect to start seeing a return within three to four months, they began to take on companies with £10-15 million of sales, where it might be 12 months or more before profits started to come through. "When you're building up a business you can't take on a big corporation and change it overnight," says Puri. "There's a learning process you have to go through."

By 1988, however, he felt sufficiently confident to attempt a quantum leap. Into his sights came two larger targets (one considerably so). Though these attempts were unsuccessful, they brought the previously low-profile Melton Medes into the limelight. The first was privatisation candidate North East Shipbuilders Ltd (NESL), part of British Shipbuilders. But the Government thought Melton Medes too small to cope with the Sunderland yards' chronic problems. "They didn't fancy the cost," is Puri's blunt explanation.

If the NESL approach was bold, the second offer - £400 million for Rover Group - was even more daring. After all, who then (and even now) had heard of Melton Medes? With 1987 turnover of just £66.5 million, it was scarcely large enough even to be called a mini-conglomerate. Puri is quick to defend his offer and the ability of his team: "If we had acquired Rover, it wouldn't have changed the way we work. The principles of business don't change: you buy, you sell, you make a turn in the middle. Eight years ago I wasn't running anything. Today I've got £260 million of turnover to manage."

This total includes Melton Medes' sister company, Melham Holdings, which comprises the original building contract business, Skerritt, plus recently acquired printing and publishing interests in the United States. Skerritt was spun off in 1987 after an offer for Melton Medes valued the group at £50 million ("a bloody stupid offer", according to Puri), which, he says, would have been more without the contract business. He claims that he was not interested in selling anyway.

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