As featured in Business Insider 2015
Mottie Kessler isn’t a loud entrepreneur, but his calm and measured delivery is underpinned by sharp focus and vision. Over a decade, chemicals conglomerate 2M has made its ascent, bringing together seven companies as part of a buy-and-build strategy. The group now has a £110m turnover, selling into 75 countries. And it all started with a phone call.
“Petroferm acquired Banner Chemicals in 1999 and after five years decided they wanted to get out of chemical distribution,” he says. “They called me and asked if I knew anyone who wanted to buy the business. I thought it was an opportunity to build something independent.”
At the time, Kessler, a former chemicals engineer, was working for the American industrial gas company Praxair, but saw a gap in the market to apply strategy and management practice from big companies into smaller, privately owned businesses, without losing their dynamism.
Banner Chemicals, a supplier of solvents based in Runcorn, was the first deal and 2M was born in 2004. Kessler co-founded the company with Ieuan Thomas and borrowed money from RBS to get up and running. The plan was to build a series of internationally branded chemicals distribution and service companies, building on expertise and the potential for exports.
Then came a knock on the door. The London Development Agency (LDA) wanted Banner’s storage site in East London as part of the Olympic Park development and gave him a year to find another site. It was tempting to cash out on the deal, pay down the debt and walk away, but Kessler hadn’t even got started. “I didn’t leave a public company, to risk my own money in a 100-year-old business, just to close it down,” he says.
He relocated Banner’s facility to Middlesbrough, acquired MP Storage and invested £5m on the site. The deal with the LDA was done and the money used to pay down the original debt. The show could go on.
“People remembered it as the place they’d get shouted at. I said ‘I’m not shouting, that’s not the culture here.’”
In 2007, the deal to buy Surfachem, based in Leeds, came across Kessler’s desk and took the business into household cleaning and personal care. This time it was Yorkshire Bank that stepped up to the plate.
Kessler says: “Both companies were doing well. Our strategy is not turnaround; it’s to identify a good business and make it excellent.” This is the holy grail of buy-and-build, but it’s not always achieved because of difficulties integrating cultures, making efficiencies and enough profit.
In 2M, the businesses remain standalone, but speak to each other and share expertise. Kessler likens it to “a large army with smaller commander units”. He says: “We have small dedicated groups operating as profit centres. They manage their relationships with suppliers and will have sales teams focused on their industry.
“The common denominator is the infrastructure behind that: manufacturing, laboratories and sharing of product know-how. This enables these businesses to operate on a daily basis without the interference of the 2M board.”
This is important to Kessler, who is trying to move to a model whereby decision-making is delegated. An open culture is important, he says, to enable people to speak out and identify where improvements could have been made. The transparency also allows business directors to see how other areas are performing and provide feedback.
“Before I acquired it, Banner Chemicals was centrally run, autocratic, with less freedom of decision-making,” he says. “When we converted the old chairman’s room into a boardroom, people used to feel uncomfortable because they remembered it as the place they would get shouted at and told where they were going wrong. I said: ‘I’m not shouting, that’s not the culture here.’”
Kessler adds: “There is no way you can grow your business without empowering people. You have to give them the tools; it’s about working with the people that are there and helping them. Of all the companies we have acquired, two people have left.”
“The expectation is to list 25 per cent of the company on AIM and use the proceeds to support acquisitions.”
The other side of this coin is technology, which enables what he calls the flow of information around the business. “On a practical basis you can call me more of a business development manager,” he says. “While everyone is focusing on their area, I see my role as helping to shape the strategy, and looking around the world to see where we can grow. There is an ongoing inflow of information. It takes me less than five minutes in the morning and the evening to know how the business is performing and if there are any alarm signs.”
This way of doing business looks to be working. 2M has since acquired a packed chlorine business from Ineos and Leicester-based chemicals supplier Stowlin Croftshaw. The group also owns West Sample Right, based in West Yorkshire.
EBITDA is north of £7m and is continually reinvested. While 60 per cent of the growth has come from acquisitions, 40 per cent has been organic.
In his own, measured way, Kessler is “quite pleased” with the group’s performance. He’s bought out his business partner in 2012, with the backing of Investec, and owns more than 90 per cent of the shares.
The company has extended its international footprint considerably, with people on the ground in three continents, and he’s got his eye on 12 companies at the moment. This will likely result in two or three deals in as many years, before he plans to float the company. Like I said, he’s focused.
“The expectation is to list 25 per cent of the company on AIM on day one and use the proceeds to support acquisitions already targeted,” he says. “Within five years, we’ll reduce the holding from 75 per cent to 25 per cent.” And here comes the big ambition: “There is no reason why £110m won’t be a £1bn.”