Candover led half a dozen institutional investors in subscribing £150,000 for shares and putting up £3 million in unsecured loans. Bank of Scotland provided a term loan of £2 million, plus an overdraft facility, and took a floating charge on the company. The institutions nominated an ex-director of Commercial Union, John Linbourn, as chairman. O'Connor became deputy chairman, also non-executive. None of the new money found its way into the coffers of the vendor. But at the same time as parting with the assets, Yale and Valor obtained a 20% interest in Stoves and appointed a director to the board. This investment had to be realised when Yale succumbed to Williams Holdings, and the stake has been taken up by existing shareholders.
The eventual size of the management's own stakes will be determined, as usual in a buyout, by performance. O'Connor and Crathorne are the biggest individual shareholders, and a successful flotation after five years - which is the time frame envisaged in the business plan - could leave them both tolerably rich. But circumstances have altered dramatically since they drew up the plan. The recession has postponed the era of social change on which it was predicated. In volume terms, the gas cooker market has dropped by over a quarter since 1988. That is equivalent, as Crathorne points out, to the elimination of one major manufacturer.
Valor was not exactly a market leader, and had a dismal reputation in the high street (meaning the gas showrooms) concerning the supply of spares, for example. Moreover, it had no margins to speak of and was losing money even before the recession began: around £4 million a year, according to Crathorne. Given all the noble intentions about quality and customer orientation, Stoves' acquisition of this run-of-the-mill producer began to look like a classic case of bad timing - which could have only one end.
Naturally the company went into survival mode, of a kind. But, perhaps fortunately, management could not know how bad things were going to get, and it still had all those millions to play with as a result of the acquisition. Thus the measures adopted were largely those that it would have taken anyway. "There is no item of plant", intones Crathorne, "that was not replaced, improved or refurbished in the first year."
Down on the shopfloor, Kane and Gostelow, responsible for manufacturing and engineering, point to heavy presses that have been rebuilt; to state-of-the-art enamelling plant, installed by a couple of employees, which can switch instantly from white to brown ("Nobody else in the world is doing that," claims Kane); to re-laid tracks which have reduced the assembly area by half - and which allow a minimal space for rectification because it is hardly necessary. Nor is there any separate assembly of parts: every sub-assembly is built by the same worker who fits it into the product.
Crathorne claims that the driving force behind all of the improvements in engineering and methods was a determination to improve quality. But one inevitable side effect has been a sustained assault on manufacturing cost.
Also in the first year, management "changed the culture of the company", a claim which can mean almost anything. At Stoves it meant the replacement of Valor's complex piecework system, with its 26 grades, by a flat rate. Workers currently perform a multiplicity of tasks within each section or "cell": hence the absorption of sub-assembly into the main assembly area. Space on the assembly lines is "very tight", which encourages communication. Towards one end of the shop, where sub-assembly used to be, are a dozen office desks in a broad semi-circle around a mini boardroom table. The desks, most normally unmanned, belong to the "conformance team" on which the various cells are represented. Kane's is in the middle. Engineering staff are also out in the open, in close touch with the shopfloor.
Near each cell a notice board records the range each worker's skills, and the current level of production and the incidence of faults. The presentation varies from board to board. "They do it themselves," says a manager. "We don't tell them how to do it." But management did provide the Soviet-style slogans proclaiming "Quality - our first priority".