Deal in Focus: Endless picks up Gresham’s ailing West Cornwall Pasty Company

Endless's acquisition of WCPCo comes hot on the heels of another UK turnaround deal - Rcapital's investment in railway infrastructure contractor Giffen Group - showing much needed signs of activity in a segment that has so far failed to pick up in the post-crisis years: only two turnaround deals were recorded in the UK in 2013, down from 11 in 2009 and eight the following year.

"Wholesome" and "excellent" are two words used by Chris Cormack to describe the West Cornwall Pasty Company (WCPCo) brand. Cormack is an investment director at Enact, the SME-focused fund set up by UK turnaround house Endless, which recently bought part of the company. WCPCo marks the first acquisition for Endless's £7.5m fund, which launched in December 2013.

The GP's acquisition is the result of an agreement with WCPCo's administrators following seven years for the company under Gresham Private Equity's ownership. The assets purchased include 35 outlets and the aforementioned company brand, a resource that the new owner will look to capitalise on.

Cormack cites a study in December 2013 by The Activate Solutions Group which placed WCPCo seventh in a customer satisfaction survey of UK high street brands. This is in part testament to the work of its former owners - a spokesperson for Gresham cited the WCPCo brand as an area in which it undertook "significant investment" during its period at the helm.

The outlets acquired by Endless are those described by Cormack as being in "high footfall" areas, which are "appropriate for people looking for a fast-food option". According to media reports, 30 additional stores not included in the deal will close. This is of particular note, given Gresham's assertion that under its tenure the company expanded its store network by more than 50%.

While the company's new owner does eventually plan to open additional outlets in "strategic locations", its initial focus will be on refurbishing the brand and its stores as well as investigating opportunities for product innovation.

The ‘pasty tax' factor
When WCPCo was first bought by Gresham in October 2007, unquote" data valued the deal at between £50-100m. 

Gresham attributes its troubled tenure of WCPCo to "difficult economic conditions" and "changing tax regulations" following the acquisition. In March 2012, the UK government announced the introduction of a 20% VAT charge on food which is baked and sold on the same premises to be eaten hot. This development quickly became known as the "pasty tax". Nevertheless, WCPCo going into administration comes on the back of a troubled few years at Gresham.

In 2010, the GP faced negative headlines with its oil & gas recruitment company Swift Technical Group. At the time, four former Swift directors were accused of conspiring to damage the company with the intention of selling it to HIG European Capital for a negligible amount. The deal did not materialise and the directors were eventually fired, with the case being settled out of court. Gresham divested Swift in November last year, making a 2x return on investment.

In January it was announced that Gresham's chairman, Paul Marson-Smith, would retire. Prior to this, five partners including Anthony Bull, Mark Blower, Mike O'Brien, Gary Ward and Andy Tupholme all left the GP.

Against this backdrop of departures, Gresham announced its intention to launch a new fund in January, focusing on the lower mid-market and regional investment segment. However, with a target understood to be around £150m, this will be considerably smaller than the vehicle's predecessor Gresham 4. According to unquote" data, the previous fund closed in 2006 on £340m, £40m more than its initial target of £300m.

Advisers
Equity - Gordons, Simon Pilling, James Cook (Legal).

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Buyouts
• UK / Ireland
• Consumer
• United Kingdom
• Endless
• Gresham Private Equity