Equanet
Transaction Background
In March 2000 Graphite Capital led the £14 million management buy-out of Equanet from the company’s founders, who wished to retire from operational management and secure their financial position. Equanet was one of the largest resellers of Intel and Microsoft-based products in the UK. It was a demand-led business, operating a stockless indirect supply model. The company specialised in the high volume delivery of computer hardware and software to medium and large public and private sector organisations.
Deal Attractions
The company's founders agreed to reinvest a substantial proportion of their proceeds from the transaction and remain involved in non-executive capacities. Equanet's stockless business model was unique in the industry (80% of orders are shipped directly from distributors to Equanet's customer) and highly scaleable. It also proved resilient to the generally difficult market conditions around the millennium.
Achievements
- the founders transferred management responsibility to a new generation of directors
- the founders' interest was protected through non-executive roles
- Equanet's business model was further strengthened through electronic integration of the supply chain with direct links into supplier warehouses
- turnover and profit grew substantially with profit margins consistently above industry average
- strong cash generation enabled all shareholders to redeem a significant proportion of their investment ahead of schedule
Exit
- against the background of industry consolidation the shareholders decided to market the business discreetly to a small number of larger trade players
- in August 2005 Equanet was sold to Dixons Stores Group Plc, enabling the founders to retire fully from their positions
- Graphite generated a multiple of 2.2 times it original investment and an IRR of 20 per cent
