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"We were a little surprised by the industry's response to the deal, to say the least," says David Searle, joint managing director of HS Printers, the new owners of former MPI firms Borcombe SP and Goodman Baylis, which incorporate BAS Printers and Friary Press respectively. "There was a very aggressive response from many and a hostile reception from some suppliers."

Indeed, HS Printers’ takeover, which saw the newly formed vehicle buy the two companies out of administration in a pre-pack deal last month, was highly controversial. The message board on PrintWeek’s website was soon crackling with vitriol together with totally false allegations that the new owners had a prior association with MPI owner Mike Dolan. Suppliers lined up to criticise the new owners and many refused to do business with them, instigating new ‘pre-pack policies’.

To be fair, the controversy that surrounded MPI’s previous ownership had much to do with the industry’s reaction to the closure of Butler and Tanner and the consolidation of the Friary Press into Goodman Baylis’s Worcester site, both unpopular moves. However, the last-minute decision to place Borcombe SP and Goodman Baylis into administration and sell the businesses in a pre-pack, cost suppliers dearly and remains the root cause of the ill-feeling.

Steve Hardy, the other managing director of the new venture, insists that it was the only option available to them: MPI would have had to have paid us to take it off their hands to make the deal viable, he says. The well-publicised problems that it had with its suppliers prior to our involvement had caused a crisis in cashflow and the result was the net worth of the business was negative. We did offer to pay back the debts MPI had incurred by paying more for our supplies over time, but obviously, as a newly launched business we were never going to be in a position to settle debts there and then. Ultimately the suppliers refused that offer.

Searle is quick to add that he understands their position. We can’t blame them. After all, they lost a lot of money with MPI and it is up to us now to re-earn their trust and support.

Winning friends
A peak in the visitors’ book at the Borcombe site suggests that trust is growing, with a number of big supplier names among the recent visitors to the Hampshire plant. Searle says that a number of kit and raw materials suppliers have been hugely supportive of the new business, along with a former owner of Borcombe SP, Nick Budge, who has taken on a role in its day-to-day running.

There is a great team here, adds Searle. Without their support this would have been impossible. The staff have gone way beyond the call of duty to make this work. We are very grateful to them.

Searle and Hardy, however, are not ones to shirk a challenge. The two financial directors were responsible for turning photo processor ColourCare International from a failed business, which they bought for £1, into a thriving £50m powerhouse. They see parallels between the photo processing market in the early 1990s when they bought the business and the printing industry today, the key motivation behind their decision to invest.

Both markets are crying out for consolidation, says Hardy. They are also both low-cost, high-volume sectors. This is a business model that we understand. The underlying businesses that we have bought are profitable with an ROCE in excess of 12%, we now need to build on the foundations that we have bought and grow the business.

Surprisingly perhaps for two serial businessmen, there is currently no master plan in place for the businesses. The first step, according to Searle is to move to near capacity at the current sites and introduce tight financial controls into the two businesses, bringing big business systems into place.

Following that, expansion is on the cards, although its exact nature is as yet undecided. We are well placed geographically to get work from London and the South East as well as the Midlands, says Hardy. We believe there may be the opportunity to establish a number of hubs across the country, that is one area that we are going to explore.

The first step, however, is consolidating what we have now. We have to get the two factories as efficient as possible and get the cost of the product right, we have to make sure that we are not being disadvantaged on price.

There has been little time to think of the future and the last few weeks have been difficult for Hardy and Searle. It will be a challenge winning back the trust of suppliers, but Hardy remains stoical. We invested in the potential of the future rather than the mistakes of the past, he says.

However tough the situation, Hardy and Searle are more than accustomed to challenges. Indeed, one gets the impression they almost prefer it this way.