United Kingdom

How Debenhams never recovered from its brutal private equity era 

He is not a household name like Sir Philip Green. Nor has he, like the Topshop tycoon, had the dubious distinction of having a film entitled 'Greed' based on his life.

Indeed, in the acres of coverage on the collapse of Debenhams, the name of its former chief executive Rob Templeman has barely been mentioned.

Like his fellow exponents of the dark arts of private equity, Templeman is able to bask in his multi-million-pound fortune in lucrative obscurity.

Smash and grab: Rob Templeman was chief executive of Debenhams after the chain was taken over by private equity buyers in 2012 for a token sum

Yet he, and the band of buyout barons who took control of Debenhams for a brief but brutal period, certainly have questions to answer about whether their reign sowed the seeds for the demise of the much-loved department store.

Templeman and his cohorts, who made vast sums in rapid time out of Debenhams, are accountable not only to its 12,000 staff but also to the shoppers of Britain.

Debenhams is the most devastating case so far of a retailer that has suffered at the hands of vulture capitalists. Others to have experienced their aggressive business model include Maplin and Poundworld.

Private equity has infested the British high street for two decades, with stores often ruthlessly milked for profit then put into administration.

Restaurants and pub chains came in for similar treatment.

One of the most toxic episodes until Debenhams was the case of Comet, once a big name electrical goods chain.

It was taken over by private equity buyers in 2012 for a token sum. Months later the company, whose history dated back to the 1930s, collapsed with the loss of 7,000 jobs. 

The estimated cost to the taxpayer was nearly £50million in lost tax revenues and redundancy payments.

Sad to say that, in recent years, the British high street – once the home of proud names well and ethically run for decades – has become a happy hunting ground for the private equity predators.

Their exploits have left many businesses riddled with debt and in far too enfeebled a state to withstand the ravages of Covid-19. 

The private equity bosses argue they are not to blame and trying to make an honest pound rescuing shops.

Be that as it may, it is an observable fact that while stores have shut and thousands of jobs lost, the private equity boys have raked in more riches.

As for Templeman, his tenure at Debenhams ended almost a decade ago. But it has never got over the damage inflicted. 

I am not alone in believing the greed of the private equity barons, who treated the 242-year-old business as a lucrative plaything, is a factor. 

The sorry situation stands as testimony to the destructive long-term consequences of their flawed, debt-fuelled business model.

The big idea behind private equity is leverage. What they do is put in a small amount of capital and a large amount of debt

Collapse: Debenhams is the most devastating case so far of a retailer that has suffered at the hands of vulture capitalists

This magnifies profits when times are – or appear to be – good. It also causes losses to balloon when times are bad, and means businesses don't have funds to invest or cushion them through difficult times.

It is a modus operandi founded on risky financial engineering, rather than the hard slog of shopkeeping. Serving customers, finding out what they want, searching out products, dressing windows – the buyout boys bypassed the detail of retail.

At Debs, Templeman took control in 2003, backed by a trio of private equity firms: Texas Pacific Group, CVC and Merrill Lynch Global. TPG's co-founder is David Bonderman, a US billionaire who mingles with the stars, booking the Rolling Stones and Paul McCartney for parties. 

CVC is best known for its near-£2billion purchase of Formula One, a deal which netted huge dividend payments.

Three years later, Templeman and his paymasters cashed in when they floated Debenhams on the market. The three firms made back three times the £600million of capital they put in.

Templeman did nicely, cashing more than £8million of shares and receiving a £2.2million payment on bonds.

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In terms of pay and benefits, he had made around £8million by 2011, when he stepped down. Under private equity ownership however, the chain was loaded with more than £1billion of debt, a millstone. It wrote off £300million relating to that era as recently as two years ago.

Templeman, who claimed he was turning Debenhams into a lean, mean profit machine, cut costs to the bone and failed to invest enough in stores. 

He also sold some big stores. In the short-term, that brought in more millions, but in the long run left it denuded of some of its most valuable assets.

Now 63, Templeman went on to be chairman of the RAC, also owned by US private equity, and the Singapore sovereign wealth fund. 

This summer, he advised US private equity group Apollo on a bid for Asda. In the event, the supermarket group did a deal with petrol forecourt tycoons, the Issa brothers.

He argues that Debs' woes are down to events long after he left. Outside his London home last night, Templeman said: 'When we sold the business, it was making over £300million.'

Asked whether he regretted decisions he made, he said: 'Come on, that's not a fair question ten years on. I think that when we sold the business it was in a good, healthy position. Go and look at the numbers.'

What is beyond dispute is that he and his backers made a great deal of money very quickly.

Retailing is not just about money. At its best, it is an art form. Whether it is an exquisite Fortnum & Mason Christmas window, or the gusto of a market trader shouting her wares, the best know it's all about connecting with customers.

Our high streets would be much healthier if shops were run by shopkeepers, not cold-eyed financial engineers.

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