Acquisition and Sale of Spring Distribution (Scotland) Limited
How I engineered the acquisition of the company from RBS Global Restructuring Group (GRG), helped the board build the company into one of Scotland’s most successful independent logistics and warehousing businesses and took it to market resulting in the sale to Bond International in 2024.
Backstory
In 2009 my wife Lesley’s family business was a successful and profitable warehousing & distribution company. However, the shockwaves from the Global Banking crash had begun to set in and in March 2009 the Bank of England reduced interest rates to an unprecedented 0.05%. Within weeks the companies banking was transferred to the Banks GRG department and the interest rate protection that the company had always paid for in previous loan was revealed to be a sophisticated “swap” product that meant Spring had to fund the difference between the loan interest rate of 5% and the new rate of 0.05%. What had been sold to them as a protection became instead a massive liability. As well as paying the loan amount every month, they had to find another approx. £35k per month to service the “swap”.
GRG was where The Royal Bank of Scotland sent companies to be asset stripped and sold off.
Impact
Suddenly the company was hemorrhaging cash to pay this additional debt. No one had explained to the business owners how the “swap” worked. In truth it was a product that RBS created to inflate profits at the time when dubious practice was standard procedure and bankers were making millions. This was during the period that Fred Goodwin was at the helm and his goal was global domination of the banking sector.
Spring is a family business that had its origins in Lesleys Grandads haulage company H.W.Garden which was established in Whitburn in the 1950’s. Her Dad Ronnie Garden, his brother Robert and his sister’s husband David worked for HWG from its early days and they formed Spring Distribution in 1985.
They grew the business over the next 20 plus years and it became an important employer to the area. In 2008 Ronnie bought out his brother and Brother-in-Law via a loan secured against the company’s properties. The value at that time was circa £9 million. This loan was agreed as all other loans had been, via the branch manager at Whitburn. Ronnie had no idea that the company as part of the loan agreement had signed up to this “Swap.”
Within a year the company was being bled of all the cash it had built up over the previous 25 years and were heading for administration.
Involvement
Slowly over the next few years RBS – GRG sucked the life out of the business. It went from a profitable financially secure company to what was a cash cow for the bank. In 2012, I was on the verge of selling my start-up company Fasteq. I was travelling to meet acquirers and was only hearing the Spring issues peripherally. However, I came back from a London meeting one Friday to find Lesley in tears. The bank had instructed a revaluation of the properties at Springs cost and the valuation had come back at less than £2 million.
Industrial property was decimated during the recession that took place after the banking collapse. The bank wanted all of the company’s Directors to provide security against the loan by putting their family homes on the line.
This was not reasonable nor fair and the board argued forcefully against it. They were told to drop off the keys to Spring if they were not prepared to go ahead with giving this security.
By sheer good luck I was reading the Financial Times a few weeks later and saw that the Financial Services Ombudsman had instructed an investigation into the mis-selling of “swap” products. I immediately called the Spring board and we met with lawyers that same week. The issue was that there was no case law at that time, so no lawyer could accurately predict how the courts would look on these cases. We were back to square one. In the meantime, I was reading everything I could about swaps and as the story developed the FCA had established some rules; This was around borrowers of the original loans being “sophisticated” or “unsophisticated borrowers”.
With the deadline for signing over speak, our homes looming, I asked Lesley and Ronnie to make me a Non-Executive Director so that I could attend the meeting with RBS. Countless times Lesley had arrived home from these encounters in tears at how brutal the meetings were.
I remember the three of us taking the train from Bathgate to Edinburgh Waverly, then walking to the offices in St Andrews Square. We stood in the reception area and one of the bankers came to meet us. Upon being introduced to me he asked rudely what I felt I could do to resolve anything at this late stage. As we went up in the lift the atmosphere was somewhat tense.
In the meeting room we were not offered any drinks and the meeting started with some very negative comments. I asked if I could speak, and he said of course. I then asked were Spring considered to be a sophisticated or an unsophisticated borrower.
It felt like all of the air in the room had been sucked out. There was a very long silence and then he jumped up and said to please wait (this was the first use of the word please we had encountered all day). We looked at each other not sure what was happening. Twenty minutes later he came back, this time with a lawyer, his boss and two colleagues. Suddenly they were offering coffee and drinks, nothing was too much trouble. After treating the company as something toxic or diseased for the past 3 years, this was unexpected.
Result
Over the next 6 months the family negotiated with RBS to buy the business back, they were able to use their valuation as a starting point and in December 2013 they acquired the company. It was a difficult and slow process to build the business back up. Spring had over 250,000 square feet of space which was working to 30% of capacity when they secured it. I provided the funding for the acquisition in the form of a loan and my role was to negotiate and win new contracts.
Spring was BRC accredited and partnered with many household names from the food and beverage sector. By the time the business was sold in 2024 it was operating at 95% capacity and running 2 shifts. Quite the transformation from that December day in 2013.
As an aside the Bank were ordered to pay £1.5m to the shareholders of Spring in 2016. They did not actually pay this as they had written into the sale agreement that any future compensation would be offset against the loss they made when selling the company to the family. Pillars of the community indeed.