Kitchen and bathroom distributor PJH Group has been sold to management in a £33m deal.

Andrew Yates led the buyout by members of the existing management team with backing from private equity firm Lloyds TSB Development Capital.

The Manchester office of LDC invested £10m for a majority shareholding. HSBC – led by Noel Jones, Director HSBC Leveraged Finance and Gautam Sahdev, Associate Director, HSBC Leveraged Finance – provided a debt package of £27.5m.

Jones said: “PJH Group has banked with HSBC since 1993 and we are very pleased to have provided funding to support the LDC backed MBO of the group.”

Eversheds’ Dean Gormley advised HSBC and said: “To complete such a significant North West buyout – backed by LDC and at a time when the market is relatively quiet – is a great result for the HSBC Leveraged Finance team and for Noel Jones in particular, coming so soon after they opened their North West office.”

The preparations for the sale of the business commenced in the autumn of 2004 with the appointment of KPMG Transaction Services in Manchester, led by John Hughes and Ian Waterfield, to perform vendor due diligence on behalf of the potential purchasers.

John Hughes commented: “Once the preferred bidder and preferred lender had been identified, LDC and HSBC were able to quickly gain an independent and comprehensive understanding of the business from the vendor due diligence report. We were then able to work alongside their advisers to steer the most efficient course to completion.”

The deal coincided with the introduction of the new pension’s regulator with wide-ranging powers in relation to deals. The new regulator wishes to act as “referee” in deals to ensure that the position of a pension scheme is not weakened as a result of a deal. KPMG also provided advice on pensions issues associated with the transaction.

Paul Cuff of KPMG Pensions said:

“We identified the costs and risks to the purchaser associated with PJH’s defined benefit pension scheme, and assisted in negotiations to ensure a satisfactory outcome for the purchaser.”

PricewaterhouseCoopers Strategy Group conducted strategic and operational due diligence on behalf of LDC.

James McDonnell, the partner who led the PwC team said: “Our econometric analysis indicates 2005 trading is likely to be difficult as there is lingering anxiety and uncertainty in the marketplace. We believe, however, that PJH will benefit from a strong position with key customers in key distribution channels, which will help it accelerate out of any temporary market malaise.”

Advice and due diligence around the blend and fit of the management team was conducted by The Quinn Partnership. Paul Quinn, who leads the UK practice commented: “In Andrew Yates, LDC have once again placed their faith in a strong and purposeful MD who is capable of creating value and steering PJH through an important phase of commercial growth.”

Michael Prince of DLA Piper acted for the vendor shareholders whom he has represented for many years.

He said: “It was in the best interests of the selling shareholders and the management team and also LDC who recognise the strength of the management team and the integrity of the outgoing team.

“Every deal has new challenges but the new pension’s legislation which came into force as we were doing the deal proved to be the greatest obstacle. This must be one of the first deals on which the regulator gave clearance notice to the shareholders.”

Dow Schofield Watts were appointed by the management team to represent their interests in the negotiations between all parties. Dow Schofield Watts’ team was led by Frank Herlihy and Philip Price.

Frank Herlihy commented: “We are delighted that the management team have been successful in securing this buy-out with the excellent support of LDC. We look forward to advising them again in the future.”

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