Grenville Turner, CEO of Countrywide plc, is a highly experienced business leader who has had a unique experience over the past 7 years
Grenville led the £1bn public to private buyout of Countrywide in 2006 backed by Apollo Management, worked through a fundamental capital restructure in 2009 where Countrywide emerged with the backing of Oaktree Capital, Apollo Management and Alchemy and successfully re-floated the business on the London Stock Exchange in April 2013.
At the time of going to press the business is trading at a premium of 94% to the listing price.
We asked Grenville to reflect on his experience of private equity ownership through the most sustained downturn in the UK residential property market in living memory.
1) Why did you lead a take-private of the business in 2006?
As leaders of the business we did not feel that the market properly valued the business at the time and the business was not set up to be properly valued either. We needed to re-configure the business in order to drive value creation and felt that this would be much better done in private with one or two investors than on the public market.
2) What did you see as the advantages of private equity ownership?
The key thing for us was finding an experienced investor who agreed with our strategy for the business, could help with decision making and had the capital to back our plans. As it turned out the experience point was absolutely critical and we were very fortunate to have that in abundance with Mark Rowan of Apollo. We also found that Apollo helped us in analysing options and, importantly, were then happy to act decisively and back our Board decisions.
They also helped turbo charge some aspects of our strategy – to do more and quicker.
3) Tell us about the impact of the residential property market crash on the business?
At the time of the take private we had actually planned for a cyclical downturn in the residential property market and the capital structure was specifically designed to cope with that scenario. However a typical cyclical downturn had historically seen a severe fall in the volume of property transactions over 6 – 9 months followed by a rapid return of volume, often at lower valuations. As most people are aware, what started in 2008 was an unprecedented downturn which has seen residential property transaction volumes remain at below 60% of the long term average for 6 years and counting. This made our capital structure unsustainable.
4) How did Apollo react?
Mark and the team at Apollo showed astonishing levels of support for the Countrywide business and its management team. When the market turned, they did not panic and took the view that “you can make money in periods of market distress”. They provided confidence to the management team by being mature and calm throughout. They took the view that we could not change the market but we could change our share of the market and our profitability performance in that market. The capital structure could not be sustained and this led to the refinancing which we completed in 2009. Apollo kept telling us that they had confidence in us as a management team and in our strategy and our ability to execute a winning strategy whatever the market conditions.
5) How did the PE ownership experience impact the business and its management?
Apollo and Oaktree have brought hard discipline to the business driven by a complete focus on value creation. They ask difficult questions and help management to “hone” their understanding of the key factors for success within the business. They never allow any aspect of the business to get “fat” or let the strategic drive become lethargic. They set the bar high and this has been positive for us, not least in encouraging us to hire the best people we can. So there is real challenge and hard work for the management team but also clear rewards for achieving success.
Having shareholders who are prepared to act decisively was most clearly seen when the sentiment in the UK housing market started to turn and Oaktree and the rest of the private equity shareholders saw the opportunity to bring Countrywide back to the market through an IPO. They were able to react quickly and decisively to bring the IPO to market and again underlined their confidence in the business by deciding to retain 100% of their shareholdings in the business at the time of the float.
6) Finally, what lessons have you learned from your experience of private equity?
Agree the ground rules early - This is particularly relevant where there is a consortium of investors in place and as a management team you want to deal with one key point of contact. For us that has been Oren Peleg of Oaktree over the past few years and it has worked really well.
Set your strategy and be bold. - The rewards are there but you have to have the confidence and support to go out and achieve them.
Execute your plan rigorously - Be disciplined and don’t ever think you have reached your goal – keep on delivering.
Don’t rail against your shareholders requirements - Recognise that you have shared goals and there is real alignment of interests. The admin and discipline can sometimes feel unnecessary but it goes with the territory so try not to get frustrated and just move on.