Jon Moulton bails from Alchemy: what about COA?

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In a letter reproduced in the FT, Jon Moulton, who until now has been widely regarded as the ‘turnaround king’ in private equity has made clear a decision to quit the firm as early as possible. In doing so, he effectively torpedoes the firm, saying that he has little confidence in the proposed new leadership and that:

The state that the firm is now in leads to the view that the best solution for investors and the partnership is an early orderly Plan termination. The Plan’s economics are no longer favourable. Investors need proper arrangements for portfolio work out. A proposal for this is under consideration by the Plan Manager.

Under consideration? Jon is dreaming. Sending this message along with the opinion that:

We have lost investment capacity from £400m pa a few short years back to a likely £100m pa within the next year. This loss reflects a number of factors – one is simply the general market where our Plan represents a readily reduced commitment in a market where over commitment is a major issue. More significantly team issues at Alchemy, very low new deal activity and a weak overall investment performance, with continuing losses and largely defensive investing, have drained confidence.

…means it will be difficult to persuade investors to continue support. A break up therefore seems a racing certainty.

Richard Murphy wonders whether this represents the end of private equity in the UK. That’s a little prescient.

I am more concerned with the ongoing investments. In a conversation with COA Solutions earlier in the week, the company said that it had received renewed assurance from Moulton of his continued investment in the company through 2017. Moulton had planned an exit in 2010. In the past few years, COA has been a model for turnaround and shrewd portfolio investment generating plenty of cash as it executes on its strategy of acquisition led growth. Even so, this casts doubt on what will happen to the company in the near term, especially as Moulton is generally regarded as one of the smartest PE leaders operating in the UK market.

I doubt this is the end for Moulton – he’s too big a figure unafraid to speak his mind.

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