Heppell said he wanted Lovell’s three remaining contracting divisions, which now have a turnover of about £150m, to hit £150m-200m in three to four years.
But he also plans to build up the business by acquiring specialist contracting businesses with turnovers of £50m and margins of 5%. Heppell is particularly keen to make modest investments in small building services, maintenance and property management firms.
The £15m from the sale of Lovell Partnerships will be used to cut debt, which stood at £26m at the end of last year. The firm has also sold land worth £8m.
Heppell said: “All the talk has been about ‘distressed Lovell’ but we have now put that behind us.” Lovell’s fortunes have been slowly improving since it reported a £33.5m loss in 1995, but it has been increasingly hampered by a lack of funds to invest. Late last year, a proposed merger with Mansell fell through.
Under the new deal, Morgan Sindall will be able to use the Lovell Partnerships name, and Lovell will be renamed YJL. Lovell Construction will be permitted to use the name for two years. The other contracting arms, Bullock and Walter Lilly, will keep their names.
Morgan Sindall is planning to use the acquisition of Lovell Partnerships to expand its social housing operation and to go on a land-buying exercise.
Morgan Sindall chief executive John Morgan said: “It’s a logical extension of our existing business and takes us into a new area. We were doing business of £40m-60m of social housing with our regional businesses but this will make it a lot more.
“Lovell Partnerships has huge potential but lacked the financial muscle to achieve it.” Morgan said Morgan Sindall had not considered buying the whole of Lovell as this would not have been a good strategic fit.
Morgan said he was attracted by the prospect of expanding in social housing, as government forecasts suggest the UK public housing market will grow 41% between 1999 and 2001.
Morgan said the Lovell name would remain and that no redundancies were planned. Lovell Partnerships managing director Stewart Davenport will remain, as will the rest of the existing senior management.
However, one of the firm’s high-flyers, former director Charmaine Young, quit the firm for Berkeley subsidiary St George in March.
Morgan said the firm would have £20m left from a £28.4m cash pile at the beginning of the year. The purchase of Lovell Partnerships is partly being paid for from existing funds and partly from the proceeds from the sale of shares.
Morgan said Lovell Partnerships would break even this year, and predicted that the firm would make good profits in future.
Morgan Sindall has been one of construction’s success stories in the 1990s, building up a strong network of regional businesses carrying out mainly small contracts.