"There are few more impressive sights in the world than a Scotsman on the make," wrote the Scots playwright J M Barrie, creator of the ultimate boy who never grew up, Peter Pan. More than 70 years later, the observation rings as true as ever. While much of the land north of Hadrian's Wall is so imbued with the ethos of the welfare state and benefits culture that it could easily pass for a Soviet Socialist Republic on a bad day, pockets of entrepreneurialism and wealth creation do remain.

One of those is LCH Generators, widely recognised as a leading provider of temporary power for hire in the UK, and recently sold to Speedy Hire, a heavy plant hire specialist. When the transaction completed in May, the founders, John and James Pirrie, and John's former wife, Glynnis Pirrie, walked away with £54.5m in cash and £4.5m in Speedy Hire shares between them, for a business that the brothers built literally from scratch.

Another excellent writer, that quintessential Englishman P G Wodehouse, opined on more than occasion that it is not difficult to distinguish between a Scotsman with a grievance (SWAG) and a ray of sunshine (ROS). Anyone who has experienced the Scottish climate, socio-economic as well as meteorological, can perhaps grasp the reason why that might be the case. But they still might find it baffling that the addition of nearly £60m to the equation does little to bridge the gap between the SWAG and a ROS. Calvinism is alive and well!

The modern consensus has it that sentiment has no part to play in business. That is patently not the case in this transaction which, after several months of negotiation and a competitive auction, resulted in the sale of LCH to a company that did not make the highest bid. "The brothers wanted their business to go to a good home," says Mike McGrath, Commercial Director, speaking from Speedy Hire's headquarters just 150 yards from Haydock Park race course.

"They built it up from nothing to a business with nearly 200 employees, some of whom have been with them for a long time. Speedy Hire has a similar history and culture, and we were at pains to prove that we were the natural future owners of the business. A competitor might have bid higher, but we want to preserve and develop the integrity of the business, working closely with the existing core management team. There will be no closures, there will be no job losses, in fact there will be further investment. LCH is a great business and the two companies make an exceptionally good fit, culturally, geographically and strategically. The companies have a number of common customers but there is by no means a complete overlap, and while we have traditionally hired generators at the smaller end of the scale, while LCH operates a broader range."

Strategic planning and opportunism combined in this transaction on the sell-side and the buy-side, if the reports coming from both camps are accurate. Added to the mix on the sell-side was a liberal dose of good old-fashioned Caledonian conservatism (with, of course, a very small 'c').

The brothers Pirrie tell how they received what they describe as a 'sensible' approach from a would-be trade buyer in May 2005. "We've never believed in handing the business down the generations," say John and James Pirrie, speaking shortly after the conclusion of the transaction in a tone that suggested they had just sold their first-born rather than left a lifetime's worries behind. "If we had chosen the ideal timing ourselves we would have grown the company for a couple more years to maximise profitabiity and value, but this approach drove us to where we are today."

"The business is very capital intensive, especially as it is still growing rapidly, and the increased levels of debt and associated risk that would be required to continue the company's development left us feeling apprehensive about having all our eggs in one basket. It felt right to sell, and take the eggs out of the basket," says James Pirrie. Taking the eggs out of the basket involved Speedy Hire's paying an ebitda multiple of 7.5 times, equivalent to 2.7 times revenue.

The brothers, who already had built up a relationship with PwC's sector specialists during earlier discussions on industry consolidation trends, formally appointed PwC as their corporate finance adviser in October 2005. "The team lived and breathed the project, all hours of the day and night," say the brothers. "This was a real team effort, client and adviser working together hand-in-glove."

"All the options went under the microscope, private equity, trade sale and flotation, and we spent a lot of time agonising over the price," says PwC Glasgow-based corporate finance partner David Leslie, who reportedly threatened to begin playing his bagpipes whenever negotiations began proving difficult. "Having prepared an information memorandum to stir up interest, we received a handful of indicative bids. Deciding the eventual winner came down to a range of factors, including price, future plans and the impact upon existing management." The payment structure also had a part to play for the brothers, the absence of an earn-out clause in Speedy Hire's offer proving attractive to them.

As the brothers and PwC mulled over the indicative bids in December, LCH continued to improve its commercial performance, leading to new profitability forecasts. The second round of bidding in January proceeded on that basis. "There's a lesson here for anyone selling their business," say the brothers. "Take time out to see how your numbers are doing, then take it back to the would-be buyers," they advise.

Concern for staff welfare, incidentally, translated into hard cash in hand, costing the brothers several million pounds. "Every member of staff received a bonus, even if only nominal for very recent hires, but over five figures for longer serving staff," they say. "We felt it was important to say thank you to everyone, and to give our blessing to the company for the future."

For Speedy Hire, LCH represents the largest so far in a string of acquisitions dating back well over a decade. "This is my 41st acquisition in that time," says the company's Commercial Director Mike McGrath. He joined Speedy Hire and took up a position on the board on April 1 this year after many years looking after its M&A interests while a partner at law firm Pinsent Masons, and heads an in-house team which has helped the company grow from being a small regional player with 20 sites in the early 1990s to a national player with 320 sites across the country today. He and the team were supported in this case by KPMG in Manchester carrying out financial due diligence, and his former colleagues at Pinsent Masons handling the legal work.

"The team has a good deal of experience, and knows what's required when buying a business, but the major focus is not the deal itself, it's what you do when you've acquired it," says Mike McGrath.

In which respect, a number of pleasant surprises awaited him when he took delivery of the new purchase. "The first barometer of a business and its health is the stock take. That took place over our first weekend of ownership. Of the 2,400 or so generators that LCH owns, we located all but four in the first few hours, and we found those four shortly afterwards. It's a very well run business. This deal is a major step forward for us, in size, and in intent. This is deliberately so. We are sending a message to the market. It almost completes our national power generation network, and saves us three or four years in our development plans."

The Deal
Speedy Hire acquired the entire issued share capital of LCH Generators Limited, a generator hire company based in Milngavie, Scotland, operating from six depots. The combined operation will have over 4,000 generators available for hire to service construction and industrial customers throughout the UK.

Total consideration is £59.0 million, comprising £54.5 million in cash and £4.5 million satisfied by the issue of 512,626 new ordinary shares. Included in the transaction price is £13.5m of debt that Speedy Hire will assume on completion. To finance the transaction, Speedy Hire negotiated increased bank facilities of £210 million up from £150 million from its existing banking syndicate.

LCH has achieved 20% compound annual growth in revenue over the past five years driven by a high level investment in quality equipment, customer and product focus and expansion of its depot network. It has available for hire 2,400 generators and services principally for construction and industrial customers. LCH employs 196 staff at five directly operated sites in Glasgow, Wigan, Coventry, London and Portsmouth, plus an agency agreement based in Aberdeen that provides services to the offshore market.

Advised by Close Brothers' Debt Advisory Group, Speedy Hire raised £150 million of committed debt facilities to refinance existing debt and support the next stage of its growth. The company's existing club of banks all committed to the new five-year facility, Close Brothers reported. Commercial law firm Brodies LLP acted for LCH, its team led by Iain Young (Partner), while Leeds-basedAndrew Black led the Masons Pinsent team. "Not many lawyers could make the transition to corporate development director, but Mike has obviously done so with great aplomb," he comments. "As a classic poacher turned gamekeeper, he knew exactly what he wanted from his legal team. It'll be challenging having as a client someone who's been a colleague for so long."

Strongly suggesting that a certain volume of drink was taken at the post-deal dinner, neither Mark McGrath nor Andrew Black can remember the name of the restaurant in central Edinburgh where they had the celebratory meal, nor the name of their hotel.