Private equity firm buys troubled Brammer for £221.5m
The industrial distributor Brammer has been bought by the private equity firm Advent International for £221.5m. The deal follows a turbulent period for the MRO (maintenance, repair and overhaul) distributor, whose share value halved after it issued a profit warning in October. Brammer’s shares have plummeted in value by 80% since hitting a 16-year high in June 2014.
Brammer, founded in 1920, distributes industrial products and services, including bearings, pneumatics, tools, and health and safety equipment. It operates in in 23 countries – mainly in Europe – and generated a turnover of £717m in 2015.
But the business has been hit by lower demand from commodity customers and by the effects of low oil prices. A recent strategic review of Brammer’s activities found that it would take at least three years to turn the business around, and that this would require “significant structural and behavioural changes”, would be expensive, and would carry “significant execution risk and uncertainty for a public company”.
The review also found that:
• by concentrating on top-line growth, Brammer had lost focus in some of its core products and markets;
• an emphasis on large accounts had driven growth with those customers, rather than the SME customers that represent a significant proportion of Brammer’s revenues;
• some of Brammer’s acquisitions in recent years had not been integrated successfully and had failed to deliver satisfactory results;
• the focus on top-line growth had resulted in overstocking; and
• there were inefficiencies in Brammer’s distribution network, and the business was not making enough use of third-party logistics providers.
Brammer’s directors are recommending unanimously that its shareholders should accept Advent’s offer, which represents a premium of about 80% above Brammer’s average share price from 7 October to 22 November, 2016.
Advent managing partner Jan Janshen says that his firm’s “deep sector expertise and operational focus will help Brammer to execute a turnaround strategy and strengthen its commitment to its customers and suppliers”.