Exciting expansion plans for MKM Building Supplies as 3i and LDC stakes sold to Bain Capital

By Hull Daily Mail | Posted: 3 Mar 2017

HULL-based MKM Building Supplies - the UK's biggest independent builder's merchant - has announced the sale of the 3i Group plc and LDC stakes in the company to Bain Capital Private Equity.

The move sees MKM, led by founder David Kilburn, retain a significant shareholding in the business which will now seek to benefit from 'exciting' new expansion opportunities.

The company is famous for providing a one-stop-shop for branded building materials, timber, plumbing and heating, and a broad range of complementary categories including kitchens and bathrooms.

It is equally well-known for its unique business model. Established in Hull, in 1995, by Mr Kilburn and Peter Murray, MKM was built on the concept that skilled, local people who understand the needs of local customers should serve the local trade. MKM is centred around Branch Directors owning an equity stake in their branch and currently has 47 branches across England and Scotland, employing in excess of 1,100 people

3i originally invested in MKM to support Mr Kilburn in 1998 and made a further investment in 2006, which was partially syndicated to LDC. Since 2006, revenues and profits have more than trebled.

During this time, the business has also developed from a regional to a national player, consistently growing like-for-like sales well above listed peers through superior service and category expansion, generating revenues in excess of £284 million in 2016 and employing over 1,100 people

David Kilburn, Founder and Executive Chairman of MKM and founder of For Entrepreneurs Only, said: "MKM has enjoyed exceptional growth over the past twenty-one years and I would like to thank 3i and LDC for their long-term backing and support. "We are looking forward to working with Bain Capital for the next stage in MKM's development. The UK builders' merchant market is anticipated to grow to £13 billion by 2020 by which time we expect to expand our UK branch network significantly."."

Matthias Boyer Chammard, Principal, 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 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. We are delighted to have the opportunity to partner with the MKM management team to further expand the business throughout the UK."

Jonathan Crane, Director, 3i Private Equity, said: "David's leadership and MKM's unique business model have driven impressive financial performance and a long-term track record of growth. We are proud to have supported David and the company during this period of transformation and wish them all the best with their exciting future expansion plans."

Proceeds to 3i from the transaction will be c.£70m, and including £11m received by 3i since 2006, represent a 5.9x money multiple. Proceeds represent a 17% uplift over book value at 31 December 2016 and 31% as at 31 March 2016.

The transaction is subject to customary regulatory approvals. Subject to these approvals, the transaction is expected to complete by May 2017.

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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