Monday, 27 April 2009
Last Wednesday 22nd April my company Severn Delta acquired the business of PitRok Ltd. and in particular ownership of the PitRok brand of natural deodorants. Given that at a glance this has looked like something of leap for Severn Delta, not to mention that we have made the acquisition in the teeth of a recession, I thought a few words on the subject were in order.
1. How does this make sense for Severn Delta?
The logic is three fold:
a) The distribution fit is good. Both Severn Delta and PitRok sell fast moving consumer goods into UK multiple retail. The overlap is strong with three exceptions - one where we are stronger by a long way and two where PitRok is stronger. The net effect is the opportunity to broaden the distribution base in both directions.
b). We have acquired the PitRok brand and this will increase the % concentration of branded business vs contract manufacturing.
c) Price and ease of absorption are attractive. We have bought at a reasonable price a small business with strong cash flow and a low level of complexity that makes it straight forward for us to take over and absorb administratively into Severn Delta.
That caveat is of course that any acquisition features some of Mr Rumsfeld's "unknown unknowns" or as Sig put it me that in any acquisition you are: