The proposed merger between Taylor Woodrow and Wimpey may be the biggest housebuilder deal so far, but it follows a year of frenetic takeover activity. Mark Leftly investigates what lessons this might hold for the new kid on the block
A roadside cafe was the setting for merger talks between Peter Redfern and Ian Smith, chief executives of Wimpey and Taylor Woodrow respectively. The conversation proved fruitful: last week the companies told the London stock exchange that they had struck a £5bn deal that will form the UK’s biggest housebuilder.
However, with Persimmon considering its own bid for Taylor Woodrow, the two parties will have to work quickly and effectively to complete the deal. Then the massive work of merging cultures and staff begins.
But the Taylor Wimpey deal, if it succeeds, is just the latest in a series of major mergers and takeovers in the housebuilding sector in the past 15 months. Here, Building takes a behind-the-scenes look at how some of these unfolded and the problems the parties encountered along the way. They may provide clues as to what Wimpey and Taylor Woodrow will have to do to complete their merger – and the pitfalls that might be in store.
Barratt and Wilson Bowden
Deal Barratt pays £2.2bn
Date Continuing, but the board recommended Barratt’s offer in February
Significant leavers Wilson Bowden chief executive Ian Robertson will leave and the Wilson family will give up its 37.7% stake
Potential cost savings £45m a year
Off the record Even five years ago Wilson Bowden’s management team knew that David Wilson, the chairman of the company and head of the family that owned more than a third of the business, was keen to sell. Last July, news of the latest review of his stakeholding was leaked to the press.
It was through the newspapers, then, that staff discovered that they could soon have new bosses. Managers confirmed the story in an email to employees, but merger rules held them back from revealing more details.
There was a fear that Wilson Bowden could lose staff, but because the company was in the second half of its year, many were less than six months away from their bonuses, a definite incentive to hang on.
Between November last year and February this year, Wilson Bowden effectively interviewed interested parties. “We managed to dictate the process,” says a Wilson Bowden insider. “It was friendly, not hostile. In various formats we met the parties six to 12 times.”
Financial negotiations were thrashed out by advisers, with the chief executives, Barratt’s Mark Clare and Wilson Bowden’s Ian Robertson, discussing landbanks and structural changes rather than price and terms.
Although the deal is pretty well done, Wilson Bowden and Barratt cannot bid together for development land. Equally, it is difficult for one of the parties to pull out of a land sale, as this would look as if they were colluding.
Another problem with the lack of a formal conclusion to the deal is that staff don’t know whether or not their jobs are safe. As a result, managers fear that some Wilson Bowden employees are polishing their CVs. Directors know at least some of the people who will stay in their posts, but because they cannot tell them yet, there is a chance the company will lose them. It’s known, for example, that one of the companies’ head offices will have to close, although it might still be used as a regional office.
One person who is definitely going is Robertson. It is understood he will leave shortly after the deal is completed.
Persimmon and Westbury
Deal Persimmon pays £643m
Date January 2006
Redundancies One-third of Westbury’s staff – about 500 people
Significant leavers Chief executive Nigel Fee and four non-executive directors, all in January 2006
Potential cost savings £45m over two years
Off the record Rumours had circulated for 18 months that Persimmon fancied a bit of Westbury. The company waited and waited, striking when it felt Westbury was at its weakest – Persimmon is understood to have made its approach on 2 November 2005, the day after chief executive Martin Donohue left the company.
John White, Persimmon’s chief executive, and Duncan Davidson, its chairman, often saw Donohue at trade shows, but they never spoke to him about their interest in his company. It had been a difficult 18 months for the target, as Westbury was finding it hard to attract vital staff. “It was difficult recruiting people into key positions,” says a Westbury source. “Applicants would be fearful that they’d take the job, and then Persimmon would come in and make them redundant.”
Persimmon calculated that Donohue, the chief executive for 10 years, was too entrenched in the company to consider takeover talks. Although his successor, Nigel Fee, had been deputy chief executive, he was “an unknown quantity” according to the source, and probably more amenable to making a deal.
In the end Fee played a harder game than Persimmon had expected and it was forced to raise its offer from 540p a share to 560p.
Galliford Try and Linden Homes
Deal Galliford Try pays £109m
Date March this year
Redundancies Six out of a staff of 350
Significant leavers Chief executive Philip Davies
Potential cost savings £2.5m a year
Off the record The Linden sale was always on the cards. Directors had owned 65% of the business since it went private in 2000, and the plan was for them to make a return on this investment within five to seven years.
Philip Davies, Linden’s chief executive, started taking a serious look at the possibility of selling about two years ago, and in March last year held a “beauty parade”, according to a company source, of seven institutions that could market the business. Linden chose NM Rothschild & Sons which ran the first round of bidding after the summer; 30 businesses showed an interest.
Between five and 10 submitted further bids in November. Not being a listed company, Linden was not compelled to select purely on price. This meant it could ensure that staff were protected – hence only six redundancies: “We looked at the future of the business,” says one director. “Fortunately the best price and the best promise of continuity for Linden both came from Galliford Try.”
Greg Fitzgerald, the Galliford Try chief executive, met Davies about six times to seal the deal, and they were able to work quickly together, having known each other for four years through joint-venture company FRL.
The fear was that staff would leave, knowing that the company was being touted. Directors offered key employees bonuses to stay put while the deal was going through. Ultimately, the only people to leave were Davies – although he is assisting with the integration of the business part-time – two of his assistants, and three employees at the Surrey head office.
Two venture capitalist deals
Deal HBOS/West Coast Capital pays £1.1bn for McCarthy & Stone
Date October 2006
Significant leavers Keith Lovelock, chairman, and Matthew Thorne, finance director
Potential cost savings None. The consortium wants McCarthy & Stone’s revenue stream, which is virtually guaranteed as it is the main player in a specialist market: retirement homes.
Deal HBOS and West Coast Capital pocket Crest Nicholson for £715m
Date Continuing, but last month the board said it was minded to recommend the offer
Redundancies Likely to be announced a week before the deal is completed, probably in April
Significant leavers Unknown, but a strong directors’ presence at Mipim suggests that the management team will stay in place
Potential cost savings Unknown, as yet.
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