To borrow from The A-Team’s Hannibal Smith, “I love it when a plan comes together.” That’s how it felt when one of the property world’s most obvious marriages was finally confirmed.
When Graham Penny and I first started discussing joining forces, I was keen to acquire Graham Penny Auctions, but it hadn’t crossed Graham’s mind and he had no intention of selling. His auction house was in the process of expanding from its original Derby base, having established a Nottingham office and recently opened another in Leicester.
Over the next couple of years, Graham became less involved on a day-to-day basis and director Andy Parker assumed more and more of the running of the business.
Graham and I recognised that it would make good business sense if the largest West Midlands auction house and its East Midlands equivalent were brought together.
Not only are there economies of scale in any deal, but it also doubled the total sales of the group’s auction division to more than £160m per annum, taking it in to the top four nationwide.
But in our original format as CP Bigwood, before we were acquired by SDL Group (formerly Shepherd Direct), the deal was never going to happen as we had some shareholders who were looking to retire. To be part of a major acquisition that might take three to five years to see material benefits to the business was not, understandably, something they would contemplate.
I remember saying to Graham on a number of occasions: “I really want us to do something together but at the moment I’m not clever enough to work out how we can.”
However, following the deal with SDL Group on 18 December 2015, we immediately reopened the dialogue.
The deal meant that not only were a number of shareholders able to exit CP Bigwood as they wished, but we also had a clear mandate to discuss acquiring Graham Penny Auctions.
What we didn’t realise at the time was that Graham Penny had been approached by two other established names, and negotiations were at quite an advanced stage. But our timing was perfect and the encouraging nature of our earlier discussions meant we were able to agree terms quickly and commit to a speedy completion, which took place on 1 April.
It was clear to all parties that the prospect of combining the largest in the East Midlands with the largest in the West Midlands was overwhelmingly compelling to all of us and made for a perfect fit.
Another positive factor for us was that Andy Parker had been running the business for over 12 months in an extremely effective manner, so there was a natural succession of leadership already in place.
However, it was still important to us that Graham remained involved, and he agreed to stay on as a consultant, which meant that Andy had both of us on hand to support the continued growth of the East Midlands operation.
The announcement that the two auction houses were to become part of one group came shortly after both had delivered record results at their first events in 2016.
As the largest auction house outside of London and the fourth largest in the UK, we are now perfectly placed to continue to grow both locally and nationally. We can offer blanket coverage of the Midlands, and the next strategy is to expand the West Midlands operation into the North West and the East Midlands operation into the North East.
We base our faith in the potential for growth on the fact that the trend over the past 10 years, and even more so in the past five, has been for the auction marketplace to become more accessible to a wider range of would-be vendors and prospective purchasers.
Historically, auctions have been thought of as a last resort and the most dramatic change to the market as a whole is that more and more vendors – institutional and private – are willing to see auctions as a first resort.
For this reason, we believe that the timing for the merging of the two largest regional auction houses is perfect, and we expect to see a continued upturn in auction volumes with more dates and venues.
And for that reason, we believe there will be a continuing consolidation of UK auction business outside of the capital, and other deals, both with SDL Group and others across the country, will soon follow.
Rory Daly is chief executive at CP Bigwood
