TTJ readers might not have escaped the mention of Cairngorm Capital in news stories during the past two years.

In this issue the private equity company’s name appears again, this time in relation to Parker Building Supplies’ takeover of fellow Sussex merchant Stamco. Parkers is one of Cairngorm Capital’s general builders’ merchant businesses.

Cairngorm Capital’s activity in the past two years has changed the landscape of UK timber company ownership, with a string of acquisitions including Sheffield-based Arnold Laver in November, 2018.

This led to the creation of the National Timber Group (NTG), which encompasses Lavers and earlier acquisitions Grangemouthbased Thornbridge Sawmills (a leading timber importer/processor/distributor with eight trade centres), North Yorkshire Timber (importer/ distributor and timber engineering business with six branches) and Rembrand Timber (20 merchant branches across Scotland).

Earlier in 2019, Cairngorm Capital also acquired Sentry Doors, which along with Building Supplies Online, Parkers and Stamco becomes part of the Cairngorm portfolio, though separate from the NTG.

So, TTJ visited the Marylebone HQ of Cairngorm to find out more about its plans.

Inside the office there is a very obvious association with wood, with pictures depicting forest scenes and a wall of wood cladding in its boardroom, while on its website there is a section describing the Cairngorms National Park

I was here to interview Rob Barclay, NTG group CEO, Neil McGill, Cairngorm Capital MD and NTG board member, as well as Stuart Whiteford, a Cairngorm Capital investment director who also sits on the board of the NTG and Sentry Doors.

There is a Scottish theme at the company, – the name, the people (founder and managing partner Andrew Steel hails from Edinburgh and has spent many years skiing and adventuring in the Cairngorms, while Mr McGill and Mr Whiteford are among other Scots) and of course some of its portfolio companies such as Stevenswood, a PVCu and aluminium doors and windows distribution business, Thornbridge and Rembrand are also based in Scotland.

Mr Steel formerly worked in the building materials supply sector, having held a senior position at Home Depot.

“That helps to explain the interest that Cairngorm has and its track record in building materials distribution,” said Mr McGill.

“We enjoy investing in businesses that serve into RMI as well as new build construction. We like business that serve trade customers, rather than DIY retail.”

He pointed out that a large share of the timber market is held by regional merchants, where it saw opportunities.

“Generally we like the timber industry because of the wide range of applications for this renewable material,” he said.

“We quite often like to scale businesses quite quickly with follow-on transactions.”

Specialised timber merchants with processing operations and specific expertise add value and supply customers with just-in-time products, providing advantages over general merchants.

Arnold laver

The acquisition of £150m turnover timber products distributor Arnold Laver last November was a seismic move and a key in Cairngorm’s strategy to scale its business interests nationally.

The addition of Lavers’ 13 depots effectively created the UK’s largest independent timber distribution business, with combined revenue in excess of £250m, also incorporating North Yorkshire Timber, Thornbridge and Rembrand under the banner of the newly named National Timber Group (NTG).

The enlarged Group has 52 distribution and processing sites extending from the north of Scotland to London and the South West and over 1,300 employees.

“Arnold Laver is a large business in terms of scale,” said NTG CEO Rob Barclay, who joined a year ago from SIG, where he was group MD.

“This gave us the next step.”

He said it offered an opportunity to form a genuine national presence, synergies with its other business and a geographic fit, opening a gateway for business in the south of England.

“The owners of Lavers had a substantial leisure and property sector business,” added Mr Barclay. “It had been in family ownership for 98 years. The origins of the group are in timber, with Andrew Laver’s grandfather.

“They had been thinking about the future. They had separated the timber company from the rest of the group and I think the timing of the sale of the timber company was just right. They had also seen what we had done with Thornbridge, NY Timber and Rembrand.

“It did allow us to take our business to that full national presence.”

Andrew Laver is still involved in the business and a very visible figure, he added

“The company has a lot of good people and good infrastructure.”

NTG plans to grow Lavers organically and potentially also add new sites for further geographic coverage.

“Traditionally, Lavers had focused on the big customer, so there is an opportunity to expand the product and service proposition down to smaller customers,” added Mr Barclay.

One of the features of Cairngorm’s acquisitions is a focus on leading brand names with loyal recurring customers and strong management teams that need a boost to take them to the next stage of growth. Brand names are retained and each company operates autonomously with an entrepreneurial philosophy.

“Lavers is a very strong brand, an English brand and we do not want to take away from that brand and history,” said Mr Barclay.

“I see a requirement for specialist expertise in this space. Timber is coming to the fore and I see that growing when you look at offsite construction. I see an opportunity for a fairly large specialist player, offering more than what other general merchants can do.”

He highlighted Lavers’ additional processing capabilities and products, with its value-added approach including an ability to supply pre-lacquered products, such as those offering fire performance, and specialised panel processing operations – meeting a market need for pre-finished products and solutions.

Sentry doors

The acquisition of Sentry Doors in February brought a major timber doorset manufacturer into Cairngorm Capital’s portfolio.

“One of the reasons why we became attracted to investing in Sentry was because of its emphasis on the fire and security door market,” said Cairngorm investment director Stuart Whiteford.

The Doncaster-based company also had a strong management team.

“What we really love about the business is it was well-know for its fire certification, really high manufacturing standards and product quality. We wanted to find a business that we could help to grow substantially.

“The site in Doncaster has a large amount of space. We are going to invest in additional CNC machinery, upgrade equipment and increase our marketing and branding efforts to help drive sales.”

“One of our focuses is to increase regional growth in other regions as a lot of the current customer base is in London. There’s a big opportunity to get out to new regions.”

Due diligence and compliance are important trends in the doors market, driven by factors such as the Grenfell Tower tragedy.

“The fact that there have been historic compliance lapses in the marketplace means people will move towards timber doors and certificated products.”

Mr Whiteford said this benefited Sentry as it was “ahead of the curve” on certificated products, with BWF Certifire and BM TRADA Q-Mark third party accreditation.

“It’s likely that third party certification throughout this industry will become mandatory at some point in the near future.”

“When you look a the firedoor market, there are very few specialist companies on this scale. We saw this as an opportunity to create the standout leader in terms of certification.”

Previous owner & MD, Gordon Yates, was keen to protect staff and the production site in the sale of his company. Cairngorm supported that by taking on a new 10-year lease after the transaction.”

“I am very excited about the opportunities ahead for growing this business,” added Mr Whiteford, targeting both organic growth and potentially also further merger activity.

He can see more volume interest in FD60 products as buyers look for best in class performance.

Future

Despite the major moves made by Cairngorm Capital in the timber sector and an ambition for the NTG to reach £500m turnover, it stresses that there is no “we want to be the biggest” mentality.

“We never say never to new acquisitions if the right opportunity comes up,” explained Mr McGill.

“But being the biggest just for the sake of being the biggest is not where we are at. It’s about how can we provide the best service for our customers. Whether we get to £500m turnover or not, let’s see. But it’s probably likely there will be further mergers and acquisitions.”

Watch this space.