Denison
Transaction Background
In June 1993 Graphite Capital led the management buy-in of Denison International from a subsidiary of the Wallenberg Group. Denison manufactures pumps and valves for hydraulic machinery, used mainly in the industrial and marine markets. At the time of the buy-in, the company had operations in France, Germany and the US.
Deal Attractions
Denison was a turnaround, as it was loss-making. We acquired the business at a substantial discount to net asset value. The company suffered from weak senior management, a poorly formulated strategy and a lack of financial systems and controls. There was a significant opportunity to improve working capital management. The new management team was highly experienced and we knew them well.
Achievements
- turnover grew from $106 million to $148 million between 1993 and 1997
- having made operating losses of $1.8 million in the year before the buy-in, profit rose consistently to $19.3 million in 1996
- operating margin rose from 2.1 per cent in 1993 to 13.0 per cent in 1996, thanks to substantial cost reductions and the management reorganisation
- cash generation was strong, enabling over 70 per cent of our investment to be repaid within a year
Exit
- we floated the business on NASDAQ in August 1997 at a market capitalisation of $53.1 million
- we realised part of our investment on flotation and the remainder in the aftermarket
- total proceeds represented a multiple of 12.3 times our cost and an internal rate of return of 90.6 per cent
