The Cutting Room – Issue 411


Investor unease, consultants, industrial grade debt collectors. Samsung quits, Vodafone follows; big supplier brands leave in quick time, hard on the heels of Tesco, the plum customer contract in UK distribution, divvying business up among rival operations.

20:20 and Doughty Hanson met again last week – another one of these rollover meetings, with the banking syndicate that financed their £347 million partnership. KPMG is putting the final touches on its diagnosis of 20:20’s trading health for the Royal Bank of Scotland (RBS), the senior debtor in Doughty’s purchase of 20:20.

Bain & Company is doing the same for Doughty.

The pair are due to present at another meeting in mid-April, after which Doughty is expected to plough another £150 million into 20:20 to reduce the debt fielded by the RBS.

Decisions by Tesco, Samsung and Vodafone to tear up their old 20:20 contracts will not help, ostensibly at least.

And, certainly, if Doughty was gearing up for a sale of the business, those lost deals will hurt.

But, in terms of profit alone, each should be considered on its own merits. The Tesco Telecom Centres contract, gone to Shebang, was estimated on the value Dextra claimed it was worth when it sealed the deal in 2006.

The fact it was trading at closer to £70,000 per year, not £25 million, says more perhaps of the limited success of the retail venture itself. And sources claim Tesco wanted a sizeable fee from 20:20 to keep it. So, it let it go.

Tesco’s other business, which has been split between several distributors, is perhaps as much to do with Tesco’s multilateral strategy with regards all its suppliers: divide and subjugate.

In terms of the Samsung deal, 20:20 might do well, in the short term at least, on trading grey market stock.

But if Samsung stamps down on grey market trading at source, in the way Motorola did through last year, then short-term gains could be short-lived.

As for Vodafone, Dextra was doing such little business on it anyway, that its absence now from its customer roster is merely an issue of kudos.

Still, it doesn’t necessarily look good, and that can sometimes do harm to a business on its own.