A Driving Instructor's Blog

This is an OLD story. Red went bust on 2009/10 but was bought up immediately. It never ceased trading, and it is still going strong now. It doesn’t advertise (or do) instructor training like it used to do. It is not the same company as the one it was before it went bust – only the name is retained.

Red Driving School LogoI saw this news article today (link now dead, from The Times). It was published very early this morning, but It looks like a buyer is already found for Red Driving School.

That didn’t take long, did it? I hope people working for/franchised to Red stop worrying now, because it looks like they are in good hands!

Kelso Place , which specialises in private equity, is buying the entire Red portfolio. Previously, Kelso has financed Smythson of Bond Street. They appear to specialise in picking up businesses which have not been realising their full potential, and then turn them right around into very profitable organisations.

Kelso’s website identifies the kind of challenge they take on:

Our Special Situations Fund invests between £1 million and £20 million in opportunities which typically:

  • are in any sector;
  • are based in the UK;
  • have run-rate annual revenues of at least £10 million;
  • are not performing to their full potential;
  • have sound underlying businesses; and
  • are capable of organic growth and cash generation.

Portfolio Companies are likely to fall into one of two categories:

  • Businesses which have a strong platform for growth but require investment and additional management expertise and experience in order to realize their potential; and
  • Businesses which require investment and “hands on” involvement to rectify operational underperformance arising from a distressed situation or from having been deemed a non-core subsidiary of a larger company.

Obviously, Kelso believes that this is a worthwhile investment – and here is where we get into an amusing paradoxical situation, when we begin to look at what is being written about the situation on driving school websites.

It was absolutely obvious to anyone with even an ounce of intelligence that Red would be snapped up quite quickly. Also, anyone with an ounce of intelligence would have accepted the administrator’s (MCR) assessment:

“We are confident a buyer will be secured as the most recent financial reports indicate the business has been quite a healthy and profitable operation”

“It only entered administration due to a lack of funding and investment.”

But we are talking about driving instructors. The outlandish scenarios they have painted over the last couple of days have been so funny you have to be careful not to hyperventilate and hurt yourself! Why is it that driving instructors can never accept the simplest and most likely explanation, and have to look for convoluted conspiracy theories? Apparently, MCR is “lying” about that last sentence… and the whole conspiracy theory is built up from that foundation. On some forums, they are actually wishing that Red goes under and hundreds of people lose their jobs!

Anyway, the Times article quotes Kelso:

Philip Weston, a partner at Kelso Place, said: “We are buying into the [company’s] existing strategy — we are very supportive of that.”

“The reason it had problems was nothing to do with trading or operational factors but because of external factors outside its control.”

Now this is interesting. Kelso – a company which is unlikely to throw millions of its money away – is effectively saying that the business model is sound, and nothing that led to the administrator being called in had anything at all to do with that business model (which is exactly what MCR said). And Kelso’s previous successes might also indicate that it knows what it is on with:

Perhaps its biggest success was a deal to buy Sepura, which makes radios for the police, from administrators for a nominal £1. It later floated the business for £200m.

But driving instructors know best, eh?

EDIT 21/02/2010: And I’m still getting hits for “how does red being in receivership affect my franchise payments” and similar search terms. Red is still trading, so it doesn’t affect it at all! You try and hold back payment and you’ll be in breach of contract!

EDIT 22/02/2010: The BBC now also has a story about Red being bought by Kelso Place.

EDIT 23/02/2010: There’s also coverage of the takeover in the Daily Telegraph. The initial administration story is covered here in The Independent (interesting comment by someone that LVG dumped Barclays and sought alternative means of funding itself – a lot of people reckoned that Barclays dumped LVG! The same person also makes the point I did in another post – that being in administration is not the same as bankruptcy or receivership.) The rescue story is also covered here on Yahoo (link now dead).

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