Dealer services organisation Nectere has entered a new phase in its history following the management buyout (MBO) that occurred in March (read Nectere confirms MBO). The business founded by Paul Musgrove in 2007 is now owned by a triumvirate of executives that bring complementary experience and skill sets – in areas such as operations, IT, marketing and sales – to the table.
The two largest shareholders are Managing Director Mike O’Reilly and Heema Naik, IT & Marketing Director, who have been with Nectere for ten and eight years, respectively. Joining them – albeit with a smaller stake – is Andrea Eli, Sales Director, a familiar face in the UK workplace channel following a successful career that has included running her own dealership and holding senior sales positions at EVO, including Banner.
Steve Harrop, although not a shareholder, is another key member of the management team in his role as Head of Commercial. Decades of experience in the business products industry have not dampened his infectious enthusiasm nor his unwavering optimism in the future of independent dealers.
A long time coming
The MBO, however, is not something that happened out of the blue. Musgrove and his wife Serena, who each owned half of the business, had been planning for their retirement for some time. Musgrove had gently been taking steps back from the frontline for a few years, with Naik and O’Reilly enjoying progressively greater levels of responsibility.
Last August, O’Reilly – who had been Operations Director for the best part of nine years – was promoted to Managing Director, with the founder taking on the role of Chairman. The new main shareholders say these ongoing developments have meant the shift from employee to owner has therefore been something of an “organic process” and not a shock to the system.
While the Musgroves may have left the building, they have by no means departed the scene altogether. Both have been retained on a consultancy basis for 12 months (with an option to renew), meaning they will be there to support the new shareholders.
“We’re conscious that Paul has a very entrepreneurial flair and Serena has got massive systems experience,” states O’Reilly. “They’re a formidable force between them and being able to tap into their knowledge is proving extremely useful. Our partners also appreciate that they are there.”
O’Reilly says the strong existing relationship between all parties was one of the reasons why the MBO was navigated without any major obstacles. “For me, a key aspect was we put it through with support from our suppliers, the banks and our partners,” he notes.
“The transaction was very sensitively constructed with the stability of the company in mind. It was carefully crafted to ensure there was no financial impact on the business spread over several years.”
Widening the net
Shortly before the MBO was announced, Spicers confirmed it had entered into a new agreement with Nectere as its main office products wholesaler. The timing and apparent suddenness of this raised a few eyebrows in the market but is not something the new management team wants to dwell on. However, they confirmed that Nectere still trades with VOW and has a good working relationship with the wholesaler.
As Harrop states: “It is not something we did lightly, but we were looking at the balance of things across the board and made a decision based on the best interests of our business model.” Regarding the reaction of Nectere’s partners to the switch, O’Reilly notes: “All of our dealers understand that we need to trade with a number of key suppliers to make sure they [the dealers] can get the best deal and service for their customers. This was how it was received.”
The bigger picture
Harrop says it is important to look at the bigger picture in the marketplace and understand what is happening in terms of pricing, product, the supply chain and profit margins.
“There are many dealers – and I’m not talking about Nectere partners here – keen to see changes in the way the market is structured. They have moved their business, or chunks of it, away from their existing supply partner to other distributors because it offers a solution which works for them.”
While there was some noise about the move to Spicers, in reality, Nectere probably works with 25-30 various wholesalers so that it can offer competitive pricing on a broad assortment across 14 product categories.
Traditional OP now represents just 27% of partners’ sales as they diversify into areas such as workwear, industrial and medical supplies, and sustainable packaging.
“Our market is not closed, nor are we trying to get into new sectors in a piecemeal way,” explains Harrop. “It was built into the DNA of the model from day one, and Paul was very keen to have diversification at the core of what we’re doing. The challenge for us is to make sure we’re engaging with a range of suppliers and then delivering what they can offer to the partners.”
This ties in with what Harrop describes as a “sea change” in the attitudes of manufacturers – even larger ones – regarding direct solutions because they are unable to push their entire product offering through a traditional wholesaling source.
“Increasingly, vendors are taking an omnichannel view of distribution, whether that be through wholesale, a dealer, online, telesales, or direct; they will look at every single solution,” he affirms. “It has made things smoother for us in being able to build relationships with those suppliers that are keen to support a direct approach through third-party logistics.”
In terms of priorities under the new ownership, O’Reilly says they will essentially be continuing the strategy that was already in place. “It’s to provide the best service we can to our dealers, give them the ability to grow and prosper, continue diversifying into new markets and increasing the basket, and then to embellish our service offering,” he states.
Harrop concludes: “The cost-to-serve aspect is crucial. With the level of inflation, product cost increases and higher wages, dealers have to take some of that cost out. With our service bureau model, I believe we can justifiably claim to be able to do that and do it very well.”