MKM's private equity backing funds growth

Earlier this year, 3i and LDC sold their stakes in Hull-based MKM to Bain Capital. The management team at MKM retained a significant shareholding in the business.

3i’s 2006 investment, which had been partially syndicated to LDC, helped to support founder David Kilburn’s growth plans. Since 2006, revenues and profits have more than trebled and, the business has developed from a regional to a national player.

The UK builders’ merchant market is anticipated to grow to £13bn by 2020 and MKM expects to expand its UK branch network significantly.

Turnover in the last financial year was £334m, compared with £284m the previous year. It has 51 branches and 1,280 employees.

Mr Kilburn co-founded MKM in 1995 with just five staff. Its growth has been driven by a branch equity ownership model, which means that the local directors have the flexibility to run the business in a way that suits their market.

Mr Kilburn said like for like sales had grown over the last year and MKM has opened nine new branches. MKM has expanded in the North West, Scotland, the Midlands and Devon, and the area to the south of London was also potentially on its radar.

He told The Yorkshire Post: “We’ve got people on a national basis wanting to open stores for us.

“Once we’ve got the right person then we start looking for the site. Finding the right site in the right location can be a bit tricky.”

The mantra behind MKM is “local people serving local people”, which enables the company to steal a march on rivals who are managed tightly from above.

Mr Kilburn said: “It gives people the motivation, the sense of ownership and it encourages them to make sure they have got the right people working for them. We tend to get the best of both worlds. It’s very much self-managed.”

Mr Kilburn said both Bain and MKM’s management were excited about taking the business to the next level.

He added: “The good thing about Bain is that they love the business model. They are really enthused about the business opportunity that we’ve presented to them in our plans.

“We’re six months into their investment and I think both parties would say that it’s working exceptionally well.

“Private equity can bring a new dimension to a business in two ways. One is through funding, which helps to provide the cash to grow the business, and secondly in areas of expertise where a business like ours could be lacking.

“It could be in procurement, or could be in operational issues. They are invested in multi-sector businesses where they can bring significant experience to the table when we need it. It’s very much a partnership.”

He said “Brexit has not had any effect on our business whatsoever”, although in common with many businesses, MKM had experienced margin pressure over the last year.

He added: “We’re excited about 2018. We’ve got plans to open anything between 10 and 15 new stores.

“We’ve got about six in construction as we speak, there will be another six or seven that will start very shortly, early in the New Year.

“We’ve got a significant pipeline of people who still want to join us.

“It’s a great British tradition that people like looking after their houses. After water, air and food, people need a shelter over their head.”

In the longer term, Mr Kilburn said he wanted the company’s main base to remain in Hull while it continues to grow nationally.

He added: “There’s two ways that could be continued. One way could be through private equity investment and secondly through a flotation...Flotation clearly is an option that has got potential.”

Mr Kilburn is also taking pride in the economic advancement of his home city.

He said: “The City of Culture has certainly put Hull on the map. Unemployment is at its lowest level for 30 years in the city, which is one very good sign.

“It is the energy estuary. The Siemens investment has created 2,000 jobs.

He added: “It’s just the beginning of something that could be huge.”

Hitting the fifty mark

In October, builders’ merchant MKM opened its 50th branch in Leamington Spa with the Hull-based company hosting a ribbon-cutting ceremony with its founder David Kilburn.

From modest beginnings, MKM has grown to become a national player.

Mr Kilburn said: “Having established MKM over 21 years ago, it’s with unbelievable pride that we are opening our 50th national branch – and Royal Leamington Spa couldn’t be a nicer town in which to mark this achievement.”

He added: “It’s only thanks to the fantastic work of everyone across our branch network that we’ve been able to reach this milestone.”