£70m stake sold in builders’ merchants

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Global investment group Bain Capital has bought Hull-based MKM Building Supplies, after investing £90m to replace the private equity incumbents LDC and 3i.

Between them the firms held 45% of the independent builders’ merchants, with other, undisclosed, deals giving Bain a controlling majority stake.

Management, including co-founder and executive chairman David Kilburn, will retain a significant shareholding in the business.

The deals value MKM, which employs more than 1,100 people, at around £200m.

“MKM has enjoyed exceptional growth over the past 21 years and I would like to thank 3i and LDC for their long-term backing and support,” said Kilburn.

“The UK builders’ merchant market is anticipated to grow to £13bn by 2020 and we expect to expand our UK branch network significantly.”

MKM generated sales of £284.3m in the year to September 2016, with EBITDA – a measure of operational profitability – of £22.4m.

Long-standing investors 3i backed the firm in 2006 and partially syndicated its investment to LDC.

3i will receive around £70m for its 35% stake which, put with the £11m received by 3i since 2006, represents a 5.9x money multiple. LDC will get about £20m for its 10%.

Matthias Boyer Chammard, principal of Bain Capital Private Equity, said: “We were attracted to MKM’s best-in-class customer service, underpinned by its unique business model, which has enabled the firm to significantly outperform the market.”

Bain, which was co-founded by former Presidential candidate Mitt Romney, previously bought East Midlands brick manufacturer Ibstock in 2014 and floated it within the year.

He added: “Bain Capital has a strong track record of applying its expertise in the building materials and construction sectors to successfully grow companies, including Ibstock in the UK.”

The transaction is expected to complete by May, subject to regulatory approvals.

Rothschild acted as lead adviser to the selling shareholders alongside Addleshaw Goddard, as legal adviser, and PwC and OC&C who provided vendor due diligence assistance. Moelis & Company and PwC advised Bain Capital, with Ropes & Gray as legal adviser.

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