David Howden, chief executive, Hyperion
In April this year, Hyperion sold a minority stake in its business to 3i for £50m.
Howden formed Hyperion in 1994 – the company now has offices in 17 countries around the world, including Europe, India, Australia and the Americas. Hyperion sought the investment from 3i in order to expand the company.
“We needed capital to help us grow the business”, Howden says. “We’re entrepreneurial and we wanted to encourage the local MDs [in the branch offices around the world] to seek out opportunities – we want to focus on developing territories through organic growth by getting teams on board.”
Howden adds that Hyperion was looking for an investor with an international presence that would have a long term commitment to the broker’s business. “We needed to find someone who shared our values – someone who would be with us for a long period and who would help us develop internationally, so we needed someone with a global network”, he says. Howden was impressed that 3i, unlike some of the other potential investors, showed an interest in Hyperion’s plans to expand its business. “Many of the venture capitalists I spoke to asked me what was my exit strategy, but 3i wanted to know what was my growth strategy”, he says.
The process of securing the investment from 3i took around seven months. Howden says: “The first thing was to get a top-level view of whether we would make good partners – we developed a 5-year business plan, they got to know us, they met our people around the world and carried out extensive due diligence.”
According to Howden, the 3i investment will generate more opportunities for mergers and acquisitions, particularly in Asia where Hyperion aims to strengthen its presence.
In his view, other brokers seeking similar investment should be clear about why they need the cash injection and choose an investor with similar objectives. Howden says: “It’s important to understand why you want the investment and remember that. Are you looking to develop and grow or are you looking for an exit strategy? You need to choose your partner carefully – it’s important to have a shared vision.”
Jeffrey Klipp, managing director, Marcus Hearn
London-based Marcus Hearn was acquired by Manchester-based CBG Group for £2.7m in October 2007
The main reason Marcus Hearn was sold to CBG was to facilitate the retirement of Michael Green, the company’s majority shareholder, who held a 70% stake. However, Klipp says that, in addition, the sale would enable Marcus Hearn to develop its business. “With the backing of a large broker, we would be able to take the business forward and maintain the level of service we had been able to provide to our clients.”
Marcus Hearn appointed an agent, Resolution Partners, to conduct the sale. “We drew up the sale documentation and circulated it to a number of organisations”, Klipp says. “A dozen showed an interest and we had a meeting with each one – we invited offers from eight or nine brokers.”
Klipp adds that Marcus Hearn wanted to ensure the deal minimised the disruption to the day-to-day running of the company. “When we sat down with the parties, one of the main criteria was the security of the staff and directors – ideally with everyone remaining in situ”, he says.
Klipp continues: “One of the main reasons we decided on CBG was that they were a broker without a London office that would use Marcus Hearn as a hub for expansion in the south – an added benefit was that they were exceptionally nice people.”
The process of selling the business presented a number of challenges, according to Klipp. “It was hard work collating information, and it was not easy agreeing the sale and purchase agreements”, he says. The procedure took ten months to complete. “The decision to sell was made in December 2006, and the paperwork was sent out three months later, we met with the interested parties in May 2007 and we made a decision on CBG in June 2007 – we completed on 5 October 2007.”
Klipp says very little has changed at Marcus Hearn since the sale, apart from the “governance associated with being part of a public company”, such as the way accounts are prepared.
Klipp advises other brokers who are thinking of selling their business to make sure they are satisfied with the company that is making the purchase. “Money is important, but it isn’t everything – it’s important the staff and directors are happy with the new owner.”
Andrew Tett, managing director, Tett Hamilton
Somerset-based broker Tett Hamilton, which had a turnover of £2.6m, was sold to Oval in December 2007
According to Tett, the decision to sell the business to Oval was made due to a number of factors, including the fact that the company’s senior staff were getting older. “Firstly, it was due to the age of the principals, I’m 58, so it was something we would have had to do at some point – also, the market had changed, brokers were consolidating and getting bigger”, he says. Tett adds that, as a result, there was a feeling that Tett Hamilton needed to be part of a bigger organisation. In addition, the market price of the company was “better than it had ever been”, he says.
Around a year ago, Tett Hamilton received approaches from a range of potential buyers – the company was in talks with, among others, Axa and Smart & Cook, which was later bought by Axa. Tett Hamilton had “serious offers” from three potential buyers, according to Tett. Each buyer was offering a similar amount of cash, but money “wasn’t the ultimate issue, it was more cultural”, he says.
“Oval more closely represented what we were – they felt the same way about clients – and their local presence was strong”, Tett says. “They mirrored what we were, though it [the decision about the offers] was a close call.”
Selling the business was time-consuming, with the deal taking around 12 months to complete. Tett says: “Although we were warned that the time commitment would be huge, there was a huge amount of information to process during due diligence.”
How has Tett Hamilton been affected by the sale? “We have been left to run more or less as a separate branch with little interference from outside – although, understandably with a larger firm, there is a greater necessity to report figures than before”, Tett says.
He adds: “Being part of a bigger organisation, we’re able to cross-pollinate ideas, they also [Oval] have facilities and policies we didn’t have that we have used to our clients benefit as well as our own – they also have the ability to negotiate schemes we wouldn’t have been able to as a smaller broker.”
What advice would you give to other brokers considering the sale of their business? “It’s very important to make sure the culture [of the buyer] fits – staff sometimes find it difficult if they don’t like to work for a larger organisation.”