The move is a stark U-turn for Kirkham, who only last month said he was “categorically not interested in selling the business” because was he “loaded” and didn’t need the money. The denial followed stubborn rumours of a three-horse bidding race emerging between Advent and rivals Cinven and Permira.
If the deal goes ahead, Kirkham will hand over the chairmanship of DFS to Richard Baker, the former chief executive of Alliance Boots, who joined Advent as an operating partner in August last year. Kirkham will retain a financial interest in the company.
Advent, which also owns budget retailer Poundland and fashion chain Fat Face in the UK, did not provide any specific details on how the deal would be structured. But it is expected to pay cash upfront and introduce a debt financing element further down the line, in order to fund an aggressive domestic expansion of the chain.
DFS currently has 74 stores across the UK and employs over 2,600 people. Its Full Circle Future holding company saw pre-tax profits rise more than threefold for the year to August 2009, to £17.7m.
Advent director Andy Dawson said: “Although the business operates in a sector which has been difficult for some retailers, DFS is unique. The company’s relative size and reputation as market leader has allowed it to perform well during the downturn.”
News of the deal comes in the context of a wider resurgence of activity in the private equity space, after Kohlberg Kravis Roberts bought Pets at Home earlier this year for almost £1bn.
MANAGING DIRECTOR AT QUAYLE MUNRO
PRINCIPAL adviser to private equity firm Advent on its £500m acquisition of sofa chain DFS was merchant bank Quayle Munro.
Quayle Munro is quoted on the Alternative Investment Market (Aim) and specialises in corporate finance advice. It recently advised on US billionaire Wilbur Ross’s acquisition of a £100m equity stake in Virgin Money, as well as assisting the shareholders of floral fashion and homewares brand Cath Kidston on the sale of a majority stake in the company to TA Associates.
Leading the advisory team on the Advent deal was managing director Rashmi Sinha, who joined Quayle Munro in 2008 from Landsbanki and specialises in the retail and consumer sectors.
Advent has also engaged another boutique firm Hawkpoint – owned by Collins Stewart – on the debt advisory side. Hawkpoint’s team is led by managing director Andrew Lynn, who joined the firm in October 2007, having previously been head of acquisitions and leveraged finance at Icelandic bank Kaupthing. Lynn also recently advised on the restructuring of Jane Norman and on Phoenix Partners’ acquisition of LK Bennett. He was also part of Hawkpoint’s team advising the Icelandic government on the restructuring of the country’s battered banking sector.