UK Flexible Steel Hose Assembly Manufacturer

Spencer Partners Corporate Finance Limited has successfully concluded a mandate to advise on the sale of one of the UK’s leading suppliers of flexible stainless steel hose assemblies, Arnold (Hose) Limited (“the Company”).

Despite the European flexible metal hose industry suffering from increasing competition from lower-cost imports from Eastern Europe and Asia, the Company
had recorded a consistent record over many years of sales and profits growth as a
result of pursuing a niche strategy in selected areas of industrial applications.

Although the recent financial performance of the Company had been excellent and prospects for the future remained favourable, this mandate posed two particular challenges for Spencer Partners:

• the three senior members of the management team wished to retire from the business as soon as practicable following the completion of the sale; and

• the Company purchased its flexible steel hose from a major European manufacturer under the terms of a long-term exclusive supply contract which had a further two years to run and included a number of demanding commitments.

The existence of the long-term supply contract effectively excluded the possibility of selling the Company to a rival hose manufacturer. Spencer Partners' challenge was, therefore, to identify potential buyers for the business who would be willing to inherit the long-term supply agreement already in place and, at the same time, to pay a premium price.

In the light of these constraints, Spencer Partners believed that the eventual purchaser for the business might well come either from a management buy-in team or from a company based outside the UK. In order to address this issue, Spencer Partners prepared a comprehensive sales memorandum that provided detailed information on the Company, its competitors, the UK flexible hose market and financial projections based on a number of options for expanding the business.

At the same time, Spencer Partners undertook a major research effort to identify possible acquirers for the business in the UK, mainland Europe and the US. After conducting discussions with a number of prospective purchasers, the Company was eventually sold to a UK management buy-in team that was keen to take on the existing supply contract until expiry and which enabled the existing senior management team to retire shortly after the sale.

The shareholders in the Company were delighted with the final result. The majority shareholder commented: “We believe that Spencer Partners has secured a good price for the business whilst at the same time finding a new management team to whom we feel comfortable in passing on responsibility for the business and, very importantly, our employees. The close relationship between Spencer Partners and its associated business, Hewitsons Solicitors, was particularly beneficial when it came to the structuring of the sale and identifying and dealing with the various key issues that arose along the way”.

“We were also most impressed with the depth of the research carried out by Spencer Partners, including their ability to address the foreign language issues encountered in attempting to unearth information in the major European markets and the speed with which they understood the dynamics of our industry and the strategies of the major players. We had a professional, director-led service from beginning to end and would not hesitate to recommend Spencer Partners Corporate Finance Limited to other owner-managed companies seeking to secure a sale of their business”.

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