Garden Centre Takeover - Can Hands Get the Growth?

Students researching AQA BUSS4 M&A for 2012 may well come across the private equity firm Terra Firma run by Guy Hands. They were the investors who got their fingers burned when investing £3bn in EMI, only to have to sell it for about half that price a few years later. Well. Terra Firma are back in the market - they have just completed the takeover of the Garden Centre Group, owners of brands like Wyevale and Blooms.

There are probably some good pun opportunities with names like Hands, Terra Firma and gardens in this deal. But let’s stick to the motives for the takeover for now. As a private equity investor, it is the financial motives that are key for Hands and his investors. Can they achieve a turnaround in the Garden Centre Group that was beyond the previous management team and investors?

Will Hands look to exploit what was previously seen as the big opportunity in this specialist retailing market - to consolidate what is perceived to be a highly fragmented industry (i.e. many small, independent garden centres, none of which has a significant market share).

A good exercise for students would be to consider what the potential advantages of a consolidation might be. For example, are there some economies of scale which might arise if Wyevale is able to grow its store portfolio significantly larger than the existing number (120 stores)? What might these economies of scale be?

How important is it for customers to be able to visit a trusted national brand rather than choose from one of several local independent garden centres?