£3m investment round will help online retailer move from ‘clicks to bricks’
North West multi-family investment office, Arete, has led a £3m funding round into a Stockport online retailer specialising in stoves, fireplaces and outdoor living.
The deal, together with newly-launched TDC (Tosca Debt Capital) Impact Fund, will help Direct Home Stores realise its ambitions to hit £20m in revenues in the next financial year, including plans to move from ‘click to brick’ by opening stores around the UK.
The company was originally formed as Fireplace Warehouse in 2005, by founder Adam Leah who sold fireplaces and stoves via two websites, Direct Stoves and Direct Fireplaces.
Together with business partner, Ryan Hancock, the pair went on to acquire teak garden furniture business Cotswold Teak and specialist wicker basket business, Woven Hill. The brands have now been brought together as Direct Home Stores.
The UK home improvement market has seen a significant boost over the past few years, due to a seismic shift in consumer behaviour, driven by lockdowns during the pandemic. This change in consumer behaviour shows no sign of slowing down, with the market set to increase by a further five per cent in the short term.
More time spent at home means that consumers are increasingly looking for ways to improve their homes, with a long term goal of enhancing the value of the property and increasing its saleable value. Furthermore, 92% of UK house buyers consider the garden or outdoor space to be the most important factor when looking for a property.
The deal with Arete will help the business invest in its IT systems and build out its route to market by rolling out several flagship stores in key locations around the UK.
The deal will also help in the acquisition of a number of key senior hires that will strengthen the existing board and help generate future growth, with the business expecting to double its staff numbers within the next three years.
Founder Adam Leah said: “We believe we offer a distinct service unlike any other retailer in the UK, and, with help from Arete, we will be able to finetune this offering and extend our reach to a wider proportion of the UK home and lifestyle market. We are delighted to have the backing of Arete and TDC as M&A could form a significant part of our growth.”
Simon Lord led the deal for Arete with support from Mike Bound and worked closely with Victoria Daly, Mark Metcalf and India Kendrick in forming the funding package for the deal.
Arete partner, Ben Hatton, who will join the board, said: “It’s a crucial time for the UK home heating market. Not only has there been an increase in consumers choosing to create focal points out of fireplaces in their homes, but in recent years we have also seen a resurgence of wood burning stoves and other alternative means of heating as energy prices have continued to spiral.
“We have built a strong relationship with the team and have been extremely impressed by the ambition they have shown to work alongside Arete. The business is already very well established and is forecast to generate over £20m turnover in the next financial year, so our goal now is to work with the group to develop its portfolio of brands and drive the business into its next stage of growth.”
The transaction was led by Simon Lord, Mike Bound with Ben Hatton, at Arete. Mike Murphy and Ben Correia de Sousa at Hill Dickinson acted as legal advisers to Arete. Victoria Daly, Mark Metcalf and India Kendrick led for TDC. David Crout at PMSI (commercial) and Phil Cox at Iafeya (technical) assisted on due diligence. Peter Hully at Claritas provided tax advice. Scott Sands, Terry Moore and Olivia Sturgess of Myersons Solicitors and David Middleton of Cole Associates advised the Vendors.