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Case studies

Caledonian Building Systems

Sectors: Industrial & Energy

Deal Type: MBO, Exited - Trade Sale

Transaction Value: £37 million

www.caledonianmodular.com

Dunedin contact:
Dougal Bennett

 
Caledonian Building Systems

Overview

We backed the £37m management buyout of Caledonian Building Systems in November 2003. The management team was led by David Turnbull as Managing Director and Kevin Wheat as Finance Director. Two and half years later, we realised our investment when part of the business was sold to Speedy Hire PLC and the remainder was sold to Champion Enterprises, Inc of the USA. This investment returned a money multiple of 6.5 times, which equates to an IRR of 115% over two and a half years.

Deal Features

We were attracted by a first rate management team and a company which had a unique position within the construction market. Caledonian was a clear market leader based upon its design and construction expertise. The modular construction market segment within which it operated was likely to see strong growth opportunities, driven in part by legislative and health and safety requirements. Additionally, Caledonian's modular approach to construction gave added value to its clients and speed of build advantage for many types of structures.

We worked with the management team to identify and pursue new market opportunities for Caledonian's modular product. Innovative designs led to modular hotels and residential projects being won and to the award of a number of long term Framework Agreements with Government bodies. Increased demand for the modular product resulted in Caledonian investing in circa sixty per cent additional manufacturing capacity and a larger workforce.

As a result of Caledonian's rapid growth, it was ranked 38th in The Sunday Times Profit Track 100 in 2006; an annual ranking of Britain's private firms with the fastest growing profits. Over the course of the investment, revenue grew from circa £44 million to £90 million and operating profits grew from circa £5m to circa £9m.

Together with the Caledonian management team we recognised, after conducting a strategic review, that an enhanced return to shareholders would be possible if the secure temporary accommodation business within Caledonian was sold independently of the core modular manufacturing and construction business. Accordingly, a small number of likely acquirers for the temporary accommodation business were targeted and this part of Caledonian was ultimately sold to Speedy Hire PLC, at an attractive exit multiple.

The strategic review also identified a number of possible trade acquirers that would be interested in Caledonian's core modular business. One such interested party was the NYSE-listed Champion Enterprises, Inc of the USA. Champion is the largest modular house builder in North America (providing timber framed homes throughout the US and Canada) and was particularly interested in Caledonian's modular steel technology. Caledonian gave Champion the opportunity of exporting the steel modular technology to the USA whilst also providing a foothold in the growing European marketplace.

Once this final part of Caledonian had been sold, Dunedin and management had turned a £37m MBO in 2003 into a £76m exit to trade parties, less than thirty months later. This investment returned us a money multiple of 6.5 times, which equates to an IRR of 115% over two and a half years.

Business Description

Established in 1996 through a buyin to a loss making mining products business, Caledonian is now the UK market leader in the design and manufacture of pre-engineered steel buildings, using off-site construction methods. It specialises in multi-story commercial and residential structures using a modular system of off-site fabrication and construction. At the time of Dunedin's investment, Caledonian also provided secure steel temporary accommodation units to the construction industry.

The company operates across the UK from a 42 acre manufacturing site in Newark, Nottinghamshire and has an annual turnover of circa £110 million. When Dunedin invested in Caledonian, the company was actively involved in the design and manufacture of accommodation units for the Ministry of Defence and of secure prisons for the Home Office.

Caledonian's Perspective

"Dunedin's backing provided financial support at a critical stage in our business growth, and allowed us to realise the potential in the off-site construction market. They were beside us all the way and helped us to make some major strategic decisions, in particular in terms of new market penetration and the maximization of shareholder value." Dave Turnbull, Managing Director, Caledonian.

Your Expertise

What people say about us

"Dunedin has provided genuine strategic input and support in to the development of the business. They're also really good people to deal with. As a house, they do more than just write the investment cheque. I'd recommend Dunedin to anyone needing equity."

Nick Dilworth

Managing Director, Practice Plan

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