In the crazy world of caravanning, where talk quickly turns to jockey wheels and tow balls if you’re not very careful, it has been a seismic couple of days. Two of the three biggest operators of caravan parks changed hands and reported fabulous returns for their owners. Another went bust.
Parkdean Resorts was sold to Onex Corporation, a Canadian private equity group, for £1.35 billion. Electra Private Equity, which first bought into the debt of one of Parkdean’s precedessor companies, has made 3.9 times its original investment and a sparkling IRR return of 46 per cent.
Park Holidays (no relation) was sold to Intermediate Capital for £362 million. Caledonia Investments, the Cayzer family’s listed investment vehicle, made 2.9 times its money from its controlling stake and an IRR of 44 per cent.
Lifestyle Living UK, meanwhile, went to the great park in the sky. It is being run as a going concern while the administrators search for a buyer of the assets. The feeble pound, the continental atrocities of Isis and the sudden appeal of staycations are boosting some operators, but not all.
The Parkdean deal is a milestone moment in another saga entirely, the siege of Electra by the corporate raider Ed Bramson. Bramson alighted on Electra three years ago, forced his nominees on to the board, gave notice to the manager, Electra Partners, and generally shook things up. At the time his claim that he could double the value of the trust was greeted with hoots. Yet with the shares above £45, compared with his “in” price of less than £26, he is well on the way to achieving it, despite not even getting his hands on the levers yet: the management contract expires next May.
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Nor is it necessarily a disaster for Electra Partners, which last week renamed itself Epiris, prior to going out looking for new money as it loses its sole client. Epiris is rumoured to be planning an £800 million fundraising early next year. Its finesse in squeezing out spectacular returns from caravans — the Onex sale came after 11 deals to put Parkdean into its present condition — won’t hurt it when it comes to marketing the new fund.
More generally, however, it’s hard to see the caravanserai in private equity secondary deals trundling on forever. The idea that assets passed from PE house to PE house can keep generating these kinds of returns is a load of tow balls.
Someone will pay
Animal spirits: an apology. We may have given the impression in these pages that animal spirits, a central plank of Keynesian orthodoxy, play a key role in shaping business and consumer behaviour and that big political shocks inevitably sap confidence and damp down spending and hiring. We’d like to apologise for this delusion and for any inconvenience caused.
It may have been one of the most shocking and confidence-shaking of years, but you wouldn’t know it from the data. The latest CBI study shows renewed optimism among employers, with four fifths either planning to increase their workforce next year or maintain employment levels. Only 13 per cent expect to shrink back. The jobs market has softened a little in the past two months, but not by much.
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Similarly, consumers remain in good heart. Some measures of spending showed a wobble in November and it is too early to come to a verdict on this Christmas, but, anecdotally, shoppers are out in force, or rather are clicking energetically from home.
This may have something to do with one of the measures of the past decade. The introduction in April of the national living wage (NLW) is estimated to have boosted the wage packets of 4.5 million low earners. By definition, these are people most likely to spend every last penny.
Firms having to shoulder the extra wages costs are coping by training their staff to work more efficiently, investing in new technology or by that most primitive of management techniques — ordering employees to work faster. It works, at least for a time. Ask Mike Ashley.
But as the Resolution Foundation report points out, there’s a limit to how much rising productivity will be able to offset the rise in wage costs. (Now £7.20, the NLW is set to reach £9 an hour by 2020.)
The question for next year is how far firms will dare to go in passing on higher costs by raising prices and how much the resultant pick-up in inflation will hit living standards and belatedly start to curb those still unreadable animal spirits.
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Current account
Terrible about the latest bank to go bust. No, not Monte dei Paschi of Italy. Keep up, do. The latest alarm is at Privatbank in Ukraine, which President Poroshenko nationalised yesterday, urging the 20 million depositors to keep calm. According to the country’s bank regulator, Privatbank has a $4.2 billion capital shortfall, while no fewer than 97 per cent of its loans are to business partners of its former owner Igor Kolomoyskiy. All very Icelandic.
Apple turnover
Never has a sovereign state laboured so hard to avoid taking delivery of €13 billion. Ireland’s energy in denying that it is owed a penny by Apple is enough to delight any taxpayer. However, the European Commission has landed one blow in its judgment yesterday. Way back in 1990, Apple’s tax experts were admitting that there was no scientific basis for the amount they were proposing to pay to Dublin. Whether or not it was state aid is another matter, but it was Alice in Wonderland accounting from the very start.
patrickhosking@thetimes.co.uk