Former Melrose Boss Launches New Firm Rosebank to Acquire US Businesses

Simon Peckham, the former head of Melrose, is embarking on a new venture called Rosebank, a company designed to acquire and improve struggling businesses, mirroring the strategy that generated significant wealth for him and his investors. Peckham, 63, who recently recovered from prostate cancer, stated that his experience did not deter his passion for dealmaking.

Rosebank's operational model closely resembles that of Melrose, which Peckham co-founded. The firm targets troubled companies, implements improvements, and then aims to sell them for a profit. Despite the London stock market's current challenges, Rosebank successfully raised £3 billion to acquire three heavily indebted U.S. companies: CPM, a supplier of processing equipment; MW Industries, a manufacturer of precision engineered components; and ECI, a U.S. electrical components manufacturer. These companies were previously owned by private equity firms.

Peckham explained that Rosebank's strategy involves reducing the debt burden of acquired companies, a significant portion of which was addressed in the recent acquisitions. "With ECI, CPM and MW we saw three assets that had been in private equity hands loaded with debt that was preventing them getting to their potential," he said. "Some of it is about cutting costs... On the latest acquisition, we spent roughly $3 billion. Roughly $1.7 billion of that was on reducing the debt. We have saved them $150 million every year that we can now invest in those businesses."

Melrose, which Peckham and colleagues departed after a substantial payout, was known for its aggressive acquisition strategy. The firm's approach, often described as a "buy, improve, sell" model similar to private equity, generated substantial returns for investors. Over two decades, Melrose reportedly returned £8 billion to investors. The firm's acquisition of the aerospace company GKN in 2018, however, drew criticism, with some labeling its practices as "robber baron capitalism."

Peckham defended his approach, stating, "Not everyone is always going to love what we do, and I don’t really care, if we can create value, and we can have fun doing it. Actually, the country benefits from it because we pay a lot of tax."

He also commented on the evolving regulatory landscape, noting that setting up Rosebank involved a prospectus of around 100 pages, a significant increase from the 10-15 pages required when Melrose was established. Peckham suggested that increased costs and red tape, along with governmental policies affecting pension fund investments, could be contributing factors to less investment in UK businesses.

Peckham clarified that he doesn't consider himself an entrepreneur in the traditional sense, defining his work as improving existing businesses rather than creating new ones. He expressed admiration for business leaders, acknowledging the difficulties of running companies.