Maui Capital

Who: Hirepool
What: Management buy-in and purchase of an under-capitalised business and roll-up play to create the national leader in its sector
When: Acquired in July 2003, sold in August 2006
Website: www.hirepool.co.nz

Returning over 10 times its initial cash investment, Hirepool succeeded by creating a strong new national organisation, Tenby Powell its former Managing Director, says. But it also needed to move fast and build high morale.

When Tenby Powell and Sharon Hunter, the directors of Hunter Powell Investments, stopped outside an office in the Auckland suburb of Penrose about eight years ago it was, Mr Powell says, the only time they had ever been early for a business meeting. But it gave him time to take in the Hirepool depot across the road. The first thing that caught his eye, a row of freshly re-painted bright orange concrete mixers in the sun, signalled a business potentially for sale. Having previously held senior roles in industrial groups including running a hire business, he knew a sale was the usual reason for prettying up machinery otherwise routinely thrashed. Calling the chairman of the group that owned Hirepool that night, he got all the confirmation he needed when told: the company was not for sale “at the moment.”

In seeing an opportunity in Hirepool, Mr Powell was hardly alone. Most people think of hire companies as catering to weekend warrior handymen, but the bigger companies earn over 80% of their profit from large infrastructure, construction and industrial customers. Since these customers were increasingly national organisations there was a significant opportunity for the first hire company to offer a national service. At the time the industry was run by dozens of independent family-owned businesses. With nine branches around the city, Hirepool was the leader in Auckland, but almost everywhere else a larger rival, HireQuip, was already more established nationally and held the upper hand. However, Hirepool was known to be a good company that had long been under-capitalised, and both these main players still faced large geographical holes where they had little presence.

Paul Chystall and Brent Lawgun, who were then managing the Hauraki No. 1 fund at Goldman Sachs JBWere, had coincidently been looking at the Hirepool opportunity at the same time and came together with Mr Powell and Ms Hunter. With HireQuip also bidding, negotiations to buy Hirepool from its owners, the Owens Group, dragged out over eight months. In July 2003 a sale at $43.5 million was concluded to a new consortium, the Rakino Group, 51% owned by Hauraki, with Hunter Powell Investments and the Owens Group sharing equally the balance. They then set about building a truly national industry leader within three years. With a first deal in Taranaki, Mr Powell began talking with hire companies all over New Zealand. Reflecting the family nature of the industry, he recalls warmly how “every single deal I did was in someone’s lounge, talking in their sitting room”.

The two main ways of growing were to buy existing businesses or start green field enterprises. Demographics were on their side. Many owners were nearing retirement or had children little inclined to take over the firm. Where time and money precluded a speedy sale agreement, they offered partnership alliances to owners to opt in and benefit from being branded as part of the group. “This blocked others coming into the same space, and let us keep up momentum,” Mr Powell says. “It was a race, and we were generally there first.”

As important were the people the new group attracted. Drawing on Mr Powell’s previous networks and experience, they drew 24 managers from their main rival. The team at Hirepool turned out to be superb. Committed to building a new culture, the new group invested heavily in professional development and customer experience. This extended to hiring and training branch managers even before they had branches to manage. Many hire company owners had watched previous efforts at a national organisation falter. But as they saw the Rakino organisation headed by people they knew the pace of negotiations became “frenetic”. Increased size also soon brought efficiencies. A hub and spoke operation between the Hamilton, Rotorua and Tauranga branches, for example, allowed expensive plant to be shared rather than bought for all three sites. As the company kept growing they reached their three-year target of being the national leader in just two-and-a-half years.

During 2004 Hirepool grew from 14 to 28 locations. A year later they were in 52. They had grown new specialist divisions in scaffolding, Port-A-Loos, heavy equipment and pump hire, and completed major on-site contracts at Marsden Point refinery, the Huntly e3p co-generation project and the filming of the King Kong movie at Wellington. In 2006 when the shareholders sold out to new investors, staff numbers had climbed 250% and revenues by 300%. The return to shareholders was 10.3 x cash invested, giving an annual compound return of 132%, and Hunter Powell have kept a stake in the ongoing business.

To some extent they enjoyed an economic tail wind, Mr Powell says. But along with speed and flexibility, the deciding factors were the morale, culture and rapidity of decision making created by the management and private equity owners. Mr Powell met with Paul Chrystall and Brent Lawgun formally once a month and talked to them every week. He recalls one board meeting being convened in a car park to confirm approval for a deal that needed doing quickly. Hirepool managers had new freedom to make decisions, producing more customer contracts and loyalty. “It was a team effort. It was like being in a good band where everyone plays really well and everyone sings in harmony,” he says. “And where everyone saw clearly what they needed to get done”.


“It was a team effort. It was like being in a good band where everyone plays really well and everyone sings in harmony.”