A force for good in the market

20/07/2020
Dominic Browne

Equipment hire is a significant part of the infrastructure and civil engineering sector. A new business has been launched to help support the market around these companies, which ensure the roads sector has the tools for the job.

The infrastructure sector relies on an intricate network of supply chains that react to an ever-shifting landscape of investment, demand and innovation.

The diversity of the market is key to protecting its macro efficiency, but that in turn requires protection of micro efficiencies. Plant, tool and equipment hire is an essential element to this; from large scale projects to localised traffic management, companies need to be able to source the right tools for the job in short and long timescales.

Contractors across the highways supply chain might hire lighting towers, welfare cabins, plant and specialist tools to complete maintenance work, often for months or even years at a time.

A key benefit is that for a small weekly fee, a contractor can have peace of mind the equipment is the latest and best available for their workers, with a full replacement or repair service should a problem occur. Typically hire businesses would offer the same day or next day delivery across the UK.

In fact, it is not unheard of to see long stretches of work on the strategic road network, with almost all the equipment supplied by one of the national hire companies.

Now for the first time, there is a business to help support the market surrounding these equipment hire companies that can maximise their value. The Hire Exchange Ltd is the first hire industry specialist advisory to help sell hire businesses. It is dedicated to connecting well-prepared sellers with well-informed buyers.

The business provides an anonymous mechanism for sellers to showcase their business on a new online platform, and then, if required, provide an advisory service to prepare the business for sale, present the information the buyer needs in a structured and clear fashion and then find the right buyer.

It has been set up by David Graham, ex sales director of Youngman and ex managing director of Speedy Hire Plc - one of the largest plant, tools and hire businesses in the UK - Josh Llewellyn, a well-known and highly respected hire industry insider, Chris Harvey, an experienced hire industry brand and marketing specialist and Mark Woods (chairman) a serial investor with a diverse background in IT, project management, and PFI bids.

The hire sector has around 4,500 separate businesses. A small scale independent hire business usually has up to three local depots, typically family-run, above this are the regional operators who usually have around 15 depots, mainly secured by consolidation and buying up the smaller companies.

Finally, there are the ‘nationals’; companies with several hundred depots throughout the UK, some even operating internationally, that handle the enormous quantity and variations of kit that few companies can keep in stock.

Chris Harvey outlines this landscape to Highways and describes the market as largely relationship-based, often with family-orientated firms. Those setting up their own business have often worked at larger firms for many years, and when these independents come to a certain age or position and want to sell their company, the prospect can be daunting.

While adept at running their own hire businesses, selling the business is another matter. Mr Harvey says one of two things usually happens:'The independent businesses often sell to a mate or one of the giants and so either don't secure the best price from fiends or are outgunned by the bigger companies.'

Even worse, he points out that good businesses 'available for sale' are sometimes never even picked up by interested buyers.

Mr Harvey says: 'We act for the seller, so we can put their best foot forward. The best value comes from the best fit, finding the right buyer.'

Hire Exchange's market research suggests that around 200 independent hire businesses could be up for sale or preparing to be sold on the market at any one time.

The question is, how can these businesses be sold in order to secure the best value for both seller and buyer and thus the market and wider infrastructure sector.

There are two key elements to this. The first is information. Mr Harvey explains: 'We provide a business information memorandum. We know what the client and the buyer wants, and we know how to get it for them. We know how to draw up the key information lists, plant, stock, make of product, model, the software of the business. This can all optimise the value.

'It is in everyone's best interest to ensure the right buyer for the businesses; the buyer that can maximise the value. They can only do that if they know exactly what they are buying.'

After producing an exhaustive information file on the business, the second key element is matching this to the market in order to leverage value.

'In this market, there is a lot of appetite for specialist businesses, which can then be used to leverage added client value. Businesses will often gather specialists together to make a complementary portfolio.' 

Mr Harvey concludes: 'What we are doing is in the interests of the industry and has been called a force for good.'

Hire Exchange does not provide legal advice, but its information memorandum can provide the basis for the due diligence around the sale.

The Hire Exchange started trading in January 2020 and has already attracted the interest of a number of significant sellers and interested buyers with whom we are working on several deals.

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