The most famous of these was the £814m refinancing that Polestar undertook in 2006, which cost Investcorp its stake in the company (not to mention hundreds of millions of pounds) and which the Financial Times described at the time as "one of the worst failures of a European leveraged buyout in recent years".
It was therefore a welcome surprise to note that this week's MBO sale of Welsh magazine printer Pensord marked the successful conclusion of the "highly leveraged" buyout that outgoing chief executive Tony Jones completed in 2003. By his own admission, Jones geared the firm to the eyeballs in order to complete his MBO and to finance subsequent investment in new equipment needed to take the business forward.
Through sound cashflow management and organic growth, Pensord was able to pay down its debt over the following five years, doubling in size in the process and leaving it in good shape going into the recession. While the downturn put the current MBO on hold for two years, the company was nevertheless in a good position – with an invoice discounting line that had been unused for years, no outstanding loan notes and little mortgage debt – for new managing director Darren Coxon to be able to complete a second LBO at the firm once market (and lending) conditions improved. So hats off to Pensord for showing us all how to complete the perfect MBO.
Pensord's LBO proves to be a very British success
Leveraged buyouts (LBOs), the darling of the private equity sector throughout the 1980s and 1990s, have often struggled to produce the desired results in print and packaging, which is ironic given that it was the LBO of a print company (Gibson Greetings) in 1982 that partly inspired the subsequent boom in PE deals. Sadly the Gibson deal was not to be the norm and the print sector is littered with examples of failed PE deals, culminating in debt-for-equity swaps.
