When a company is waist-deep in debt, it can feel like it will never escape. But a takeover, while bruising to the ego, need not be the end of the world, says Mel Ewell.
As chief executive since 2003 of Amey, the UK road and rail maintenance business, he has seen the company rise from the brink of oblivion in 2002, to being taken over by Ferrovial, the infrastructure group, in 2003, to a return to health.
Amey’s experience offers an insight into how a reverse takeover can work if both sides are working from the same page.
When Mr Ewell joined as operations director in September 2001, the company was thriving on the back of the private finance initiative projects launched by the Labour government. “It was a very, very exciting time,” Mr Ewell says.
But bidding for PFI projects had got out of hand. “We were spending money like it was going out of fashion.”
Amey had also outgrown its internal control systems. “Our ability to track our cashflow was limited.”
A change in the accounting rules for PFI projects pushed things over the edge and in 2002 Amey defaulted on its bank covenants.
By the autumn, the chief executive had stepped down and an interim chairman and finance director were brought in alongside Mr Ewell to “stop the haemorrhage”. The team stripped out overheads, reduced headcount and renegotiated its banking facilities.
In spring 2003, with new bank deals in place, Mr Ewell was promoted to chief executive. The share price, however, had dropped from a high of 431p to as low as 19½p, and to get back to health, Amey needed a more stable owner than the stock market could provide.
At the time that Ferrovial was put forward, the Spanish group had never made an outright overseas acquisition. But Mr Ewell gelled with its point-man Inigo Meirás. “His values dovetailed very well with ours,” Mr Ewell says.
Openness and mutual trust were essential. The presence of a new management team with a plan to revive the business instilled confidence at Ferrovial, and that in turn gave Amey the freedom to put its house in order. “As soon as they were assured that we had the right policy they moved from audit mode to support mode,” he says.
The plan since then has focused on putting the lessons learnt into practice. “While I would never wish [a near collapse] on anybody, it’s one hell of a learning curve. It’s a free MBA squashed into an evening. You let go of the basics at your peril,” he says.
