About two years ago we looked very seriously at flotation. There was a window of opportunity: the market was appreciative of our type of business and the multiples were good. But the market started to move against us, and by early 2003 the FTSE hit its low point at the same time as our pension deficit was at its highest – about £60m, before tax and according to the accounting rules that were to be introduced in 2005.
The deficit was huge compared with our net assets, which were about £20m. Under the upcoming accounting rules, we would have been unable to pay a dividend to shareholders, and this would reduce the value of the business and make the possibility of a flotation even more remote.
The pension deficit caused one of our potential suitors, a Middle East consortium, to shy away from making an offer at the end of last year. They returned with a bid in the summer, after hearing that management was giving some thought to a buyout.
The pension deficit coupled with our high level of borrowing eventually became too great a hurdle, primarily for the bondsman, and so the idea of a buyout was discarded.
Balfour Beatty came in two months ago with a better bid than the Middle East consortium. It had a clear strategy and it would allow us to attach ourselves – and our pension deficit – to a larger balance sheet.
They were serious, and we were confident that between us we could deliver.
Philip Cleaver is chief executive of Mansell.