Neil Utley spent a great deal of effort raising the money to buy Cox. He explains his long road to success
Neil Utley gave a fascinating insight for anyone wanting to raise money in a leveraged buy-out, a management buy-out or a management buy-in.
"It's something that's massive. It's in the distance. It's actually further away than you think," warned the Cox chief executive after he finally bought the company in the summer.
"It needs a lot of planning as to how you're going to get up there, and you can be sure on your route there will be a lot of detours and a lot of obstacles," he confessed.
He highlighted why he was so passionate about doing the deal. "I've spent so much time, energy, money and effort because it's a great business."
Utley originally joined the company at the end of 1998 to run the retail side of Cox, which at the time had a great reputation for underwriting. "It was a small broker, it had been run by a family for 40 years and it was ready for the next stage in its journey," said Utley.
The decision was made to leave the marine syndicate, leaving two businesses: an underwriter and a broker. "The underwriter is the sixth largest car insurer in the UK. We have about £550m of premium. We're the largest motorcycle insurer and we have an unparalleled record for profits.
"For 36 years we had unbroken underwriting profits, which is unique in any insurance company or syndicate operating in this business," said Utley.
Cox, in terms of broking, is the eighth largest personal lines broker, has £160m of premium, and can operate across all types of insurance.
"We have built a great team in the business. Some of the team I've worked with for 25 years, in many different businesses, and some are new," said Utley.
He highlighted that there were some serious corporate issues in the takeover process. "There were shareholders wanting an exit, and about 35% of Cox stock was held in the hands of two venture capital firms, one of which had been there 10 years and had supported the business through thick and thin. But they really were at the end of their investment life and they wanted out.
"So every time we'd go to investors, they knew that there was a big chunk of stock that wanted to leave, so that kept the share price down. The public market was a big distraction for us.
"All these things were depressing the price of the business and the prospects, and the business was sort of stuck in corporate limbo. It was difficult to buy things, it was difficult to sell things and people who were looking at trading with us didn't know what shape the ownership would be."
Utley first tried to buy the company in 2002 with Peter Wood and HBOS. "Buying it now, the timing is perfect in that you buy a business just as the cash from three years of rolled-up underwriting releases over time."
He then gave a number of top tips. "First, prepare for the long haul. I underestimated massively how long it would take, I thought it would take six months. It took a year. It felt like five years. And apparently this is always the case.
"Prepare yourselves for dozens and dozens of the same thing. You'll have a model, you'll have a presentation, you'll be repeating it. Our banking presentation that we did early on in the first month we probably repeated 25 times, just going through the same thing.
"And you have to do that later on in the deal, not just to your banks and your private equity, but to the regulator, to your major customers, and then even after the deal on syndication.
"This is not a short-term business, this is a real huge investment and you should never underestimate that."
Utley admitted that there were a huge number of ups and downs. "The ups are fantastic, but there are a lot of times where you can be pursuing a course of action and, through no fault of your own, something can change.
"Second, work with people you like. Obviously, the people that you work with have to be exceptional. But there are many firms that offer advice and there are many private equity firms and lenders."
And he said it was crucial to get quality advisers right from the start. "They are also part of the due diligence that people will carry out on you.
"If you have not got a firm that is recognised and stands up in this market, then when people are going to be lending you money they're going to want to do their own secondary work and third round work.
"If you have good firms that know the market, that are putting their name and credentials behind what you're doing, it's going to be much easier going forward."
He also said it was important to invest in the business plan and model. "We were at version 57 of the model before we actually went live with the business. And this is a hugely complex model, but it's worth the time and the effort.
"The model becomes the bible on which all future lessons are based. So get that right. The model itself will become the topic of due diligence and everybody will be poring over it.
"Again, you'll look pretty foolish as a management team if they find potholes in the model that you have created. And you need a contingency for every aspect."