Radley & Co (United Kingdom) - Dec 2007

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01 December 2007

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Buyout deal

Exponent Private Equity has supported the £130m secondary management buyout of handbag brand Radley & Co Ltd from Phoenix Equity Partners. Exponent beat competition from both trade and financial buyers to win a PricewaterhouseCoopers-run auction. Reports suggested Barclays Private Equity and MidOcean Partners reached the final round of the sale process. Lloyds TSB provided a debt package to support the deal. Radley’s fast growth in recent years – it has shown sales growth of nearly 30% each year for the past five years – attracted Exponent to the deal. Exponent expects future growth to come from expansion in international markets. Radley handbags will be launched in the US in spring 2008 through Bloomingdales and Lord&Taylor and is already being sold in major department stores in South East Asia, with the first overseas Radley flagship store having opened in Dubai in September 2007.

Exit deal

Phoenix realised a multiple of 3.8x its original investment, representing an IRR in excess of 120% on its two-year ownership of Radley. The £130m deal value saw Phoenix take out £64m. Having received a number of approaches for Radley, Phoenix hired PricewaterhouseCoopers to conduct a strategic review in September and subsequently a competitive process was run to enable Phoenix to divest the business. Phoenix had already realised some value from the refinancing of the business in spring 2007. Phoenix acquired Radley in a £45m management buyout in 2006, investing £16.8m for a majority stake (13 March 2006, page 25).

During the two years of Phoenix’s ownership, Radley’s revenues increased by 47% and profits rose by 95%. Radley’s growth was achieved by bringing in a new chief executive and finance director to the business in 2006. Radley established a new head office in London and a new distribution warehouse in Milton Keynes. Under Phoenix’s stewardship, Radley grew by concentrating on its wholesale business as well as developing its retail strategy with the roll-out of three flagship stores in London and another in Manchester. Additionally the business positioned itself for international expansion. It also started selling through its website and benefited from a national advertising campaign. During the past two years, Radley also leveraged its brand into other accessories including purses, umbrellas and sunglasses.

Company

Founded in 1998, Radley designs and distributes handbags, luggage and accessories to more than 500 retail outlets and department stores. Radley has forecast revenues of £60m in the year to end of April 2008.

People

Hugh Richards and Richard Tudor led the deal for Exponent and join the board of the newco. David Burns and Hugh Lenon led the exit deal for Phoenix. Roger Best is the chief executive of Radley. Neale Broadhead, Richard Cartwright and James Ranger led the deal for Lloyds TSB.

Advisers

Debt - DLA Piper, Philip Butler (Legal)Management - BDO Stoy Hayward , Andrew Ware, Nick Spero (Corporate Finance)Management - Travers Smith, Philip Sanderson (Legal)Purchaser - Allen & Overy , Derek Baird (Legal)Purchaser - Heath Lambert, (Insurance Due Diligence)Purchaser - Pragma, Monica Lucas (Commercial Due Diligence)Purchaser - PricewaterhouseCoopers, Russell Taylor (Financial Due Diligence)Vendor - PricewaterhouseCoopers, Sean Williams, Stuart McKee (Corporate Finance)Vendor - Travers Smith, Edmund Reed (Legal)