Downer leads management buyout at Borders UK
16.07.09 | Katie Coyne
Philip Downer chief executive of Borders UK and finance director Mark Little have led a management buyout of the chain, backed by Valco Capital Partners (VCP). It follows the sale of five of the company’s store leases to New Look earlier this week.
No figures were divulged about the m.b.o. But it means that Borders UK has changed ownership twice in as many years. The business was bought by the Luke Johnson backed Risk Capital Partners in September 2007 for a maximum cost of £20m. Last month Johnson denied that Borders UK was up for sale, though RCP said it was seeking additional investment.
Johnson and Downer have been locked in negotiations for much of this week. It was reported on Tuesday by the Independent that Valco, part of the distressed debt specialist Hilco, had emerged as one of three suitors for the business.
In a brief statement Downer said: "We are delighted that we have been able to secure the future for Borders in what are exceptional times for UK retailing and the global economy. The Borders management team looks forward to continuing to develop our innovative approach to bookselling, driving sustained growth and success in the future, and strengthening our unique position in the UK book market."
Johnson added: "I am very pleased that the management of Borders are taking the business forward with a new backer, and I hope they achieve lasting success."
The sale follows the decision to sell the leases on five of its stores to fashion chain New Look. These stores are located at Oxford Street (London), London Colney (Hertfordshire), Blanchardstown (Dublin), Llantrisant (Wales) and Swindon (Wiltshire). More than 100 staff are currently in consultation over the future of their jobs.
Other companies supported by VCP include Denby Pottery, the 200-year-old manufacturer of premium tableware, and Clipper Marine, a fast-growing leisure boat company.
Comments on this article
By philip.jones@bookseller.co.uk
At last! But I wonder what Valco will do that Risk Capital couldn't?16 Jul 09 15:21
By Bookbuyer
A management buyout? Someone must be being overpaid, it certainly doesn't flow down to the rest of the company....16 Jul 09 15:22
By philip.jones@bookseller.co.uk
It's an mbo backed by Valco. The management may have only invested a small amount. Nevertheless, it's a committment to the business, which has to be good news, even in these cynical times.16 Jul 09 15:28
By lonely sad eyes
considering it was the management that got them in this state in the first place its not the best solution.16 Jul 09 15:35
By tina@thebookchannel.com
It might not have been the UK management that created the mess. Quite often in these situations it is the unrealistic expectations, or constraining managment controls of the parent company, that cause the problems - particularly where the parent company is based in another country and doesn't fully understand the UK market it is dealing with. I've seen this time and again with US-based parent companies that ride rough shod over their UK children. This has to be good news for Borders UK and for the book trade, and the book buying public. Let's hope it works to the benefit of all.16 Jul 09 15:50
By jackson
Surely the real villain here is Luke "I like books, me" Johnson. Anyone remember his BA conference speech. Some effort . . .16 Jul 09 15:54
By philip.jones@bookseller.co.uk
It doesn't appear to have been Clive, though we will get more detail tomorrow morning.16 Jul 09 15:58
By Deckard Cain
Well friends, who knows what the future now holds for the borders booksellers, nevermind about the upper echelons of their heirachy. Hopefully we shall all be able to stay awhile and listen to the further expanding story that is developing with borders. Peace out, and email me if ye find the horadric cube!16 Jul 09 16:05
By j christ
I feel so sorry for the people I know going from one CLOSING borders to another. This guy is the one who got in all the old Woolies stock to stop Borders being such a great bookshop. My thoughts go out to the silly monkeys who helped the top man buy out this chain, coz it won't be around forever this way!16 Jul 09 16:18
By Ernie
MBO!! Don't want to be the bringer of doom here but thats what happened to Virgin Megastores, an MBO and then turned into zavvi!. And look what happened to them....16 Jul 09 16:18
By Ray Hollingsworth
Borders is a hot potato revolving in the microwave...every once in a while yet another trainee chef puts on the oven gloves and gets the thing out for inspection as it visibly shrinks before their eyes. 'Best put it back guys, too hot to handle'. A few more months and it will be burnt to a cinder.16 Jul 09 16:36
By philip.jones@bookseller.co.uk
Hilarious, though nonsensical. We'll have an update out tomorrow first thing, if anyone has anything sensible to say we'll put it to Philip Downer when we speak to him.16 Jul 09 16:46
By Clive Keeble
Philip, will Borders Group hold any stake in the new MBO company : when Borders UK was originally purchased by Luke Johnson's Capital Risk Partners, Borders Group "retained" a 17% stake in Bookshop Acquisitions - the purchasing company instrument. I'm sure TheBookseller would have asked the question anyway without my prompting !!!16 Jul 09 17:39
By Blake
Can you ask if Philip Downer considered going on Dragons Den with Borders UK at any point? :)16 Jul 09 18:26
By Hawkeye
Question for Philip Downer Price is King! Price and value are becoming more important by the day. HMV realised this years ago and reduced their in-store prices so the gap to the the internet and supermarkets was not so great. Why hasn't Borders done this? Its what customers want and you make money by giving customers what they want. Get aggressive with the bestsellers and make your profits on innovative sections, fantastic titles that the supermarkets don't have and researching(rather than guessing) what customers want and reacting much faster than you have been.16 Jul 09 19:48
By C. MacRae (ex Staff)
I would be interested to know if Philip has any plans to reverse the slow strangulation of the shops payrolls? In my time I saw a slow reduction of the staff levels to the point where I was opening the Glasgow store (all 7 separate floors of stock) with 6 members of staff on a Saturday morning. You can't sell things to people if there is no one there to serve them! Conservatively I would estimate that staffing is at 7-8% at the moment. I would also like to know what plans he has to push Borders into the twenty first century and why have these plans not shown themselves prior to this. How does he see himself as the driving force to push Borders forward when so far his leadership has led to the US parent company jettisoning the UK one, Johnson buying it for next to nothing, losing one of the flagship stores and now teetering on the edge of oblivion? Borders UK opened a whole new level of bookselling in the UK and now it is playing a distant second fiddle to Waterstones. It would be interesting to know what Philip Downer thinks he can achieve as the "buck stops here" man that he never achieved with the budgets of the Americans and the support of Johnson. One would hope it will be more successful than the new IT system!!16 Jul 09 19:59
By Blake
@Hawkeye gawd it is the mass discounting you are talking about that is killing the physical retail trade as it stands. It is hard enough to keep the margins high enough to pay rent and staff at the current levels and you want more discounts...16 Jul 09 20:15
By Another ex-Bordersman
I agree with McRae, what would Downer do now that he hadn't thought of before. True they need a cash injection and may be this will supply it (although paying suppliers on time may be a start if you believe the rumours). But that is short term thinking. Short term thinking basically sums up Borders in the UK e.g. payroll was often brought in on budget at the expense of service and sales (even at Christmas in one memorable year). Borders needed fresh leadership for the future, people who could be objective about their store model and the systems, buying etc needed to support it (or change it). I hope it works becuase we need another book chain in the market- but I fear the track record that got them to where they are. Believe me, they cannot blithely blame the recession.16 Jul 09 20:54
By whatever
So what exactly is Downer going to do that he didn't do over the last.....ooooooooooohhhhhhh..... however many years. Is he trying to prove without doubt that he's not the right man to lead Borders?16 Jul 09 21:15
By Free from Borders
If, like me, you worked at Borders recently or you currently work at Borders, on the shop floor, it's very difficult to have any hope that today's announcement will bring anything positive to the company and it's remaining staff. Whether there's "new" money to spend or not makes little difference if the ideas, professionalism and procedures coming from head office, are so face-smackingly farcical.16 Jul 09 21:51
By Borders Employee
What good is that? None of the publishers or wholesalers have any trust in us anymore. We have stopped accounts with pretty much all of our suppliers - hence why the shelves in most of our stores are almost empty. We're going down by the end of the year for sure.16 Jul 09 22:41
By Clive Keeble
Given the current state of the commercial property sector, there are enormous opportunities for a progressive retailer to obtain 4,000/5,000sq ft shops in (still) vibrant provincial market towns. Does the MBO team have any plans in the immediate future to open in such locations ?17 Jul 09 05:59
By Ray Hollingsworth
New locations Clive? As much chance of this as the sight of you breakdancing in Oxford Street whilst singing Calvin Harris covers.17 Jul 09 08:21
By C. MacRae (Ex Borders)
For "Another", yes from what little I can glean there is real supply issues at the moment with even Gardners being a bit iffy with supplying them. Apparently something is sorted out though and this should help. It is the small things that have suffered. My favourite Glasgow store hasn't had its windows cleaned in who knows how long! Seems a petty details but shows the degree of penny pinching to feed Johnsons desire for reimbursement. The best option really would be to franchise out regions and allow better placed individuals with local knowledge to run Borders stores with a modicum of actual common sense. I know of the Christmas you speak! I know that Glasgow had every single member of staff and managers on the tills one day and the rest of the shop was completely devoid of staff. Rob Farnworth started the cull in payroll hours and James Sneddon continued it, all with Philip Downers blessing. I am always astonished at both myself and the other ex members of staff that look at our time in Borders with huge fondness, I made several really good friends there, some of which still work for the company. It breaks my heart to see the ethos and the high standards that I signed up to reduced to a corner shop. This is a literal truth, in an effort to gain sales they have put in cold fridges so you can buy fizzy drinks and chocolate bars! Of course, this investment wouldn't have been better placed in actual books would it? Do they need glow in the dark snakes, cheap boardgames and iPod socks? No, they need a decent back cat on the shelves and a Front Of Store that is heaving with the best books at the best promotions. Deep discounting is not the way forward, but a large 3for2 range and attractive presentation and pricing can hold the ship steady. Ditch CDs, deepen DVD and hire some good staff. Wow, maybe ex staff should club together and buy Philip out, we would have a better idea of what happens on a shop floor any day of the week!17 Jul 09 08:24
By Different Planet
Yes, C. MacRae why don't you put your money where your mouth is? I bet you won't... for all the kicking off at the 'management' and capital investment companies at least they DID put their money where their mouth is.. without them ALL employees would be out on the streets.17 Jul 09 08:49
By philip.jones@bookseller.co.uk
Graeme has written an update now after speaking with Philip Downer. It answers some questions, new capital injection, no likely store closure, new borrowings: if as seems to be the case the business was just hamstrung by a lack of ready cash, then the buyout should immediately help to alleviate some of the short terms issues: Borders to receive working capital injection after buyout. Of course I'd still like to know how much was paid, and whether Risk Capital Partners made any profit from the two years they owned the business.17 Jul 09 08:49
By C. MacRae (Ex Borders)
For Different, thanks. Kind of obvious response is that for capital investment companies that is their job! They are there to put money into things, and the management is there to utilise that money in the most effective way. A discussion about whether the management has done this effectively is a fair enough one to have when there are store closures and account payment issues with suppliers. Let's not forget, they lost David Roach, a man that is probably one of the best book retail thinkers of his generation. My money simply isn't big enough to buy it! I hope all the staff can keep their jobs and I hope that Borders can survive and go from strength to strength. If there is a new capital investment then it has to be seen how this is used. I hope that Philip can see the shortcomings of his approach over the last 10 years and hire someone who can actually inject new thinking and great new ideas into the company. Seems a fair hope to me! Not getting into a flame war here with you.17 Jul 09 09:04
By alison
virgin was bought for a pound by their management and they were left with all of it's debt and had no outside investment.17 Jul 09 09:29
By Reg Mitson
Whilst I am pleased at this news of a buyout, this doesnt help the 5 stores that are closing17 Jul 09 09:32
By Eggfriedrice
All the money in the world isn't enough with Downer and his merry men at the helm.17 Jul 09 14:14
By The Peter Principle....
P Diddy as he is affectionately known in the Borders SSC has brought this great company to its knees. The last time it had any direction and strategy was under the management of David Roche. When Luke Johnson bought Borders, P Diddy did everything in his power to undermine Roche in order to get the CEO job back. When he got it, he didnt know what to do with it hence the mess Borders is now in. DOwner is a perfect example of the Peter Principle....promoted to the level of his ineptitude. My only sorrow is all of the good people in Borders that have suffered under his management, and will suffer in the future. That said, DOwners only option was to buy the business as no other company would employ this idiot17 Jul 09 19:01
By William D Roberts
as a small publishere with outsatnding invoices with Borders...( some over 5 months old) can anyone tell me when we will be getting paid?21 Jul 09 14:16
By P Diddy and the three stooges.....
P Diddy and his mates Little, Sneddon and Newbould.......they got Borders into this mess. How do they possibly think they can think they will turn it around. I wouldnt trust any of them with the remote control for the telly never mind the Borders business.22 Jul 09 12:41
By Magic Man
I did some magic for a midnight opening for Borders for the final Harry Potter book. After 3/4 months of being told your cheque has been sent I finally had to go in to the store and threaten to take stock. They paid me cash from the till. This company is going down the pan!27 Jul 09 17:27
By kendo nagasaki
Editedi was pleased to hear Borders had been bought out and rescued but it didn't last once i found out who it was. time for borders staff to dust off thier CVs i'm afraid. oh boy am I glad I took the redundancy!!!
31 Jul 09 07:43
By Oleanderman
Still owed over 2k after 300 days and no response from the Borders mgt despite constant requests. Is this the 'innovative approach to bookselling' Downer's talking about? Having been supportive of them for almost a year the knife in the back is beginning to hurt horribly. Ethics? Honour? Loyalty? Lamentable.06 Aug 09 09:25
