Snowbird management buyout a 'no-brainer', says boss
While it might seem like an almighty decision to some, deciding to press ahead with a management buyout (MBO) of Snowbird Foods was a “no-brainer” for joint md Philip Paul.
It helps, of course, that he knows the business inside out having been involved with Snowbird and its predecessors, or parent firms, since 1981.
That said, getting to the stage where he was in charge of the business – which provides ready meal manufacturers, sandwich makers and food service operators with cooked and frozen sausages and meatballs – alongside joint md Albert McGovern and aided by long-serving sales director Roy Anderson was far from plain sailing.
To start at the beginning, the business was originally raw sausage and burger company Plumtree Farms before becoming a fully cooked and frozen sausage manufacturing operation in Enfield under the Snowbird Foods name.
That business was sold in 2007 to J&J Tranfield which, in 2009, was acquired by Vion. When Vion decided to withdraw from the UK at the end of last year, it sold Snowbird to the management of its pork division, which had formed a new company: Karro Foods.
Not a natural fit (Return to top)
With the new outfit focusing on raw pork, Snowbird was not a natural fit, so Karro agreed to sell the company to its management –Paul and McGovern. The pair had hoped to take over before it was sold to Karro but that deal was thwarted. When it was resurrected in February this year, hours of painstaking negotiations had to be completed and countless legal hurdles had to be cleared, before it was completed in April.
“In terms of production and the day-to-day operation, the changeover was seamless,” says Paul. “However, in terms of securing the finance and dealing with some of the legal issues, that was far more difficult.”
This was where McGovern's experience was vital. He first joined Plumtree Farms in 1995 and was latterly finance director of Snowbird Foods.
He oversaw the talks with Vion to extract the business from its network and ensured the firm was able to retain the Snowbird Foods name while also liaising with the banks – many of which were reluctant to lend to food businesses.
“It has taken a lot of time and effort but everything is now in place to build for the future,” adds McGovern.
“Our credit rating has been secured, all of our IT operations are fully independent and we were able to come to a financial agreement with ABN Amro and secure a commercial mortgage from the Cambridge & Counties Bank to keep this great company thriving, and in the hands of people who are passionate about the products.”
Massive Decision (Return to top)
McGovern was able to successfully secure the funding needed for the MBO bid through a combination of sources, including leveraging the value of the firm's plant and machinery, a mortgage, a confidential invoice discounting facility, an Enterprise Financial Guarantee loan and investing substantial personal money giving personal guarantees.
“The buyout was a massive decision, but to be honest, it's not one that took much thinking about,” Paul continues. “It had been clear for a while that the business wasn't core to Vion's focus – and I can understand why that was the case – so it had been in the back of our minds for a while. This was a business we had built, one we love and we've got a great team here, so it was a no-brainer.”
So now that all of the i’s have been dotted and the t’s have been crossed, what's the plan for the months ahead?
Production capabilities (Return to top)
The company produces 120t a week – with two thirds of that being sausage and one third meatball products – and its products end up in ready meals and sandwiches on sale at Asda, Co-op, Morrisons, Waitrose, Sainsbury and Tesco.
“For the first year we want to steady the ship and get it back to the levels we had in 2008, before the credit crunch and, for that, we need new customers and new areas we can operate in,” says Paul. “We can't just rely on the organic growth of our existing clients.”
Looking further ahead, Paul and McGovern are keen on making an acquisition and, if additional orders roll in, extending the factory with environmental and energy efficiency principles at its core.
“That is a dream of ours," adds Paul. “It’s a big aspiration but now we are in control of our own destiny and make decisions far more quickly, it’s one I think we can achieve.”
Listen to our exclusive podcast to find out what advice Paul would give food manufacturers considering taking part in a MBO.
