ARTHUR SMITHFLUID GRAVITY ENGINEERING

At first, Arthur Smith just wanted to sell up so he could slow down. Now, after 30 years at Fluid Gravity Engineering, he’s looking forward to hanging up his lab coat for the last time.

When Arthur Smith and his business partner bought out the last of the founding shareholders to take over computational physics consultancy Fluid Gravity Engineering (FGE), they were passionate about growing the firm they had worked at for the previous 13 years.

It’s not hard to understand why. FGE is one of the UK’s leading experts in its field, working on cutting-edge projects for the UK Ministry of Defence and the European Space Agency, among others.

Starting out

Arthur and Alec Milne both joined Fluid Gravity Engineering in 1986, bringing in new business capabilities as the company began to expand.

They offered scientific and engineering research, software engineering and consultancy services to British universities and UK, US and European government research agencies.

“We worked away at it for all those years, but as we approached our late 50s we thought we wanted to slow down,” Arthur explains.

SECTOR: ENGINEERING

“WE WERE TWO WEEKS AWAY FROM SELLING ...WHEN ANOTHER OFFER CAME IN”

REAL LIFE CASE STUDY

“IT WAS MORE IMPORTANT TO US THAT THE STAFF WOULDN’T HAVE TO ADJUST TO SOMEONE ELSE’S WAY OF WORKING”

When they decided it was time to retire, nearly 15 years later, they had no idea whether it would be possible to sell. They didn’t predict that it would be the people they were closest to who would one day take control.

Deciding to sell

Receiving a circular from BCMS sparked the possibility of a sale in the directors, and after attending a seminar they decided it was the right course of action.

“We were getting literature from a lot of companies but it was the presentation by BCMS at the seminar that rang true with our experience; how the growth had gone and how we were feeling,” says Arthur. “I still have that presentation somewhere.”

“It was obvious to us that BCMS had dealt with a lot of small companies like us, but we weren’t sure the business was actually worth anything.”

But BCMS was able to explain that there was value in the business and take Arthur and Alec through the whole process; something that Arthur describes as ‘quite illuminating’.

“We knew we couldn’t do it ourselves, so to get someone else who had the experience was the obvious route,” he adds.

“We chose BCMS for the good feeling we got. There was never any pressure from the company at all, but once you got going you were on the train and had to follow the schedule.”

“But they talked us through it all and they did warn us that it would get a bit arduous – and remember we were trying to still keep the business going at the same time.”

“Those first contacts that the team made with hundreds of people were key and we would never have been able to do that ourselves.”

The offers come in

BCMS kept both men informed of the progress throughout, giving weekly updates, which worked well for their scientific minds, Arthur says. “In our business people like to see numbers and plot progress so those updates really helped us,” he adds. “Both of us had very similar outlooks and we agreed on everything, which you need to be able to go through this process. You couldn’t present different views to potential buyers.”

When offers were made for the business he admits they were ‘surprised’.

“We had always wondered who would buy us; we just couldn’t see who it would be,” he admits. “We went into it with no particular expectations though and that is important.”

“What did shock me was that at our first meeting, the potential buyer made us an offer there and then. As it turned out it was one of the higher ones too.”

Signed and sealed

Fluid Gravity Engineering, which has offices in Emsworth, Hampshire, and St Andrews, Fife, received four offers, but Arthur and Alec were keen to develop the idea of a management buyout (MBO).

“We talked through all the offers, but suddenly working for someone else and keeping the profits going probably wasn’t going to work for us,” Arthur explains. “We were about two weeks away from selling to an American company when the management buy-out offer came through.

“It was more important to us that the staff wouldn’t have to adjust to someone else’s way of working.”

Both Arthur and Alec remained Directors of the business in the immediate aftermath of the sale, with Arthur resigning two months later and Alec stepping down the following year.

The pair do still, however, own 12.5% of the shares each and still work for the company occasionally.

Neither of the former directors made any extravagant purchases after the sale, but Arthur says he now enjoys spending his time with his family and pursuing his hobbies of sailing and gardening.

“I still do a little bit of work one or two days a week and time seems to fly by,” he laughs. “It is really busy being retired.”

“My wife is just coming up to retirement now so we are looking forward to that.”

“The sale was more about security for me. I did probably spend a bit more on parts for the boat than I would have though!”

Life after work

Arthur and Alec will be completely paid out by the end of 2017, but neither can quite say goodbye to Fluid Gravity Engineering.

“I am still interested in the science but with no management and personnel worries it is all very stress free,” says Arthur. “I was quite happy to hand over responsibility and just do the things I like. It has been quite a gentle transition.”

“My business partner still does a few more hours than me and he travels a lot. His hobby is physics, so it is just what he does.”

Handing over control to people they knew made the process much easier for both men, according to Arthur. He admits that they were wary of some of the bidders because they felt the way the company worked would have had to change dramatically.

Although he says the whole process went really well he admits it was a ‘pretty tiring’ one.

“The high of selling is countered by all the paperwork you have to go through,” he adds.

“If you start out with that expectation of value you could be disappointed. Having fairly low expectations kept us on the straight and narrow.”

“Selling your business is a big commitment and you have to plan early, but if you follow the procedures it will work. It worked for us.”

COMPANY NAME FLUID GRAVITY ENGINEERINGLOCATION EMSWORTH AND ST ANDREWS, UKFOUNDED 1982BUSINESS ACTIVITY SCIENTIFIC CONSULTANCYANNUAL SALES £3MREASON FOR SALE RETIREMENTSOLD 2014ACQUIRER MANAGEMENT BUYOUT

© 2017 BCMS Corporate Ltd. All rights reserved