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Lakesmere founder regrets MBO but not McMullen takeover

Former Lakesmere owner Mark Davey has told Construction News he regrets selling the company in a management buyout in 2015, which led to a “whole host” of disagreements with the new owners.

Lakesmere collapsed into administration in October last year, with the 2015 MBO cited by administrator Deloitte as the root of the company’s problems.

Speaking exclusively to Construction News, Mr Davey said: “Would I do [the MBO] again, knowing what I do today? The answer is: no.”

The buyout saw six Lakesmere Group executives buy the business from Mr Davey, who started the company in 1993.

He remained as chairman with responsibility for overseas operations, but with much less control of the UK business.

Among the buyout team were three executives from McMullen Facades, who joined after Lakesmere bought the Northern Ireland-based company out of administration in 2012.

Mr Davey said he still felt that purchasing McMullen in 2012 had been a good move.

“I don’t regret the purchase of McMullen,” he said. “I think it’s a very good business.”

Mr Davey said he “saw the opportunity” of taking on McMullen’s Northern Ireland factory, adding: “There’s no other facility in the UK like that.”

The acquisition of McMullen Facades, with its expertise in offsite-manufactured unitised glass panels, allowed Lakesmere to expand into the high-rise glass-clad buildings, according to Mr Davey.

Control of the expanded Lakesmere Group remained in Mr Davey’s hands until 2015 when he invited his executives to buy him out after rejecting advice to sell the business outright to a third party.

“I always promised the senior team that when that time came I’d give them the opportunity to take it on, and I fulfilled that promise,” he said.

Mr Davey said 2015 had been an ideal point for the management team to take over the business, citing the point in the industry business cycle and expected increases in activity, plus the £12m in cash and £5m in reserves it held.

“It was a very strong, profitable business,” he said, adding: “I hoped they would continue with the legacy that I created. But it didn’t work out.”

As part of the MBO, Mr Davey agreed to remain as chairman and oversee Lakesmere’s international operations in Dubai, Oman, Saudi Arabia and Hong Kong for three to five years to help with “continuity”.

He said he also wanted to make sure he received the balance of the buyout that was due to be paid in 2020.

“I wanted to ensure that second tranche was paid,” he said.

However, problems emerged after the buyout and Mr Davey said “relationships soured very quickly” between him and the management team.

“It got to the stage where I was looking at exiting sooner rather than later because of the acrimonious relationship with my former colleagues,” he said.

This acrimony was rooted in a “whole host” of disagreements with the management over their running of the business, he said.

Payment of the balance of the MBO to Mr Davey evaporated when Lakesmere collapsed into administration in October last year, with creditors, who were collectively owed £26m, told to expect to recoup nothing.

Last week Construction News revealed that Mr Davey lost £15m in Lakesmere’s collapse and was its second largest creditor after the firm’s main lender, HSBC.

Due to the ongoing administration, Mr Davey said he was unable to divulge certain details about how the business was run after the MBO, and the events leading up to the administration.

“It’s all documented, it’s all factual, but until the administration process is complete I’ve been advised that there really is a limit to what I can say legally,” he said.

“But the administration process will be complete this year, I’m sure, and then I’ll be quite happy to go through it.”

In the wake of Lakesmere’s collapse, Mr Davey’s new company, Kaicer, purchased a large chunk of its assets, taking on 120 employees and eight contracts – including on Crossrail and Hinkley Point C – from the firm.

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