Tyrone-based Euro Auctions will look to expand the business after a $1 billion (€950 million) sale to a larger peer failed last month, forcing the brothers behind the business to hit pause on their succession plans.
"We see growth," Jonnie Keys, one of four Keys brothers involved in the global machinery auctions business, told The Irish Times this week.
He said he and his brothers knew of the deal being called off by Canadian buyer Ritchie Bros only a couple of days before it was announced to the market but acknowledged that "we had a feeling for a few weeks".
The cash buyout foundered on competition concerns after the UK's Competition and Markets Authority (CMA) decided to refer it for an in-depth investigation and Ritchie Bros judged it was unlikely to be approved. The brothers learned of the news through a solicitor.
There has been disappointment, Jonnie said, mostly because the transaction was rooted in the desire of his brother and Euro Auctions’ main shareholder, Derek Keys, to bed down succession at the business.
“Exiting in two to three years’ time was appealing but we’ve now just got to get past it,” Jonnie said.
There was also some frustration at the CMA process and the authority’s “perception” of the auction market, which Jonnie believes did not fully take account of the importance of the online nature of modern auctions. While appreciating the nature of the authority, he bemoaned the lack of human interaction in the CMA’s process, which he described as “faceless, very bureaucratic” and based on a “quite a narrow definition” of how Euro Auctions worked, “which we would challenge greatly”.
The sector, he said, had changed hugely in recent years and was continuing to do so on two fronts: through the proportion of online versus physical sales and through a reduction in barriers to entry, aided by software.
When he considers Euro Auctions's future competitors, he sees Ebay and Facebook in the mix, not just entities such as Ritchie. There are "not just two horses in the stable".
He also saw an irony in what he viewed as the company essentially being punished for its huge success and growth – becoming “too big” to sell – when this expansion to turnover of more than £200 million had been encouraged at all stages by local government agencies in the North.
Back burner
For now, succession has been placed on the back burner, and Euro Auctions is getting back to the huge auctions and asset sourcing in which it is a global leader. Jonnie said its revenues were up 15 per cent this year, hammer value was up 19 per cent and UK staff numbers had climbed by 6 per cent.
He pinpointed the agri sector and transport as key sources of further growth, as well as offsite auctions for third parties – back after being stymied by Covid restrictions .
The company is also eyeing the geopolitical and economic upheaval stalking all markets at the moment, working out where problems attached to high credit exposure could create opportunities to access equipment for sale at good prices that could then be auctioned. Geographically, expansion in continental Europe and the US (where Ritchie is most active) is planned.
“We’re now getting back to where our growth plans will be,” said Jonnie adding that there was some relief in the bad news coming out so the family could stop sidestepping “the questions”. He is happy too to be once more paying customers “the attention they had been used to”.
Jonnie said some of the millions of pounds in expenses attached to the abandoned deal were covered in the negotiations but other outlays were not, leaving the Tyrone group footing the bill. He said the positive side was that the business ticked all the boxes necessary for a transaction (audits and all the rest) and would thus be even more ready for opportunities than it was when the Ritchie sale was signed.
Options
These options now appear considerably more likely to focus on either an initial public offering (IPO) or a private equity sale, should the brothers again seek an exit. Jonnie Keys said interested parties were in touch as soon as the CMA announced it was referring the Ritchie deal for a deeper investigation.
Between 10 and 12 entities were on the radar before the Canadian buyout was signed, with Euro Auctions looking more closely at about six of these at the time.
“We’ll have a better idea in maybe six months’ time,” Jonnie said. “We just need to gather our thoughts.” He accepted that the operations of the business had more or less stalled for about a year between sale negotiations and getting closer to Ritchie after the contracts changed hands.
“It was a different type of work for six months,” he said. “It was exciting, the path we were heading on.”
The two companies, which Jonnie said had probably learned equal amounts about how the other does business over the past few months, will now go back to competing. “It was a friendly divorce,” he said.
