3i has invested €30m in MKM building supplies, the fifth largest independent builder's merchants in the UK. The funding allows founders Malcolm Walker and Peter Murray to exit the business and will enable the company to accelerate its rollout plan.

The business, headquartered in Hull and operating primarily across the North East of England, has 19 sites between Grimsby and Edinburgh and is aiming to double this number over the next three years.

Strong track record
Since being founded in 1995, MKM has achieved an impressive track record of growth and now employs 420 staff across the UK. It is unique among builders merchants' in giving managers a 25% stake in their depots and handsome bonuses. This strategy has worked extremely well and has enabled MKM to increase profits faster than its competitors and recruit some of the best managers in the industry.

3i first invested €1.47m in the company in 1998 and approached the management team again in November 2005. John Rastrick, Investment Director, 3i, explains: "We decided to target the business because it is a high quality organisation which has become one of the biggest players in the industry and its track record of profitability is second to none."

Attractive terms
During the negotiations with 3i, MKM was in talks with two other potential investors. 3i was able to secure the deal because it offered more attractive terms. The management team was also impressed by 3i's sector knowledge and ability to deliver quickly. The whole deal was completed in less than four months.

Since then, 3i has helped appoint a new finance director the board. The appointee, David Bradley, is a former FD at Wolseley, the largest builders' merchants in the UK. Rastrick says: "David will bring greater financial rigour to the business and will use his sector knowledge and expertise to position the company for an eventual exit."

Knowledge is power
One of Bradley's first responsibilities will be to rollout a new business information system to provide up-to-date sales and product information on the  company's depots. This solution will enable MKM to calculate how each depot is performing on a real time basis and make any changes if  necessary. Bradley rolled out a similar system at Wolseley so he is perfectly placed to carry out this task.

Bradley will be supported by Chairman Stuart Rose, who was introduced by 3i to the board in March 2006. A former Deputy Chairman of Body Shop, Rose will use his retail knowledge to help MKM raise like-for-like sales across its depots. He will  also supervise the rollout of new depots across the country.

John Rastrick, Investment Director, 3i, said: "MKM is a quality business which is already one of the leading independent builders' merchants in the  market. Because of its focus on service it is in a great position to leapfrog the other independents in the market and have a dominant position. I'm delighted that 3i is able to provide significant further investment to help the company achieve its growth potential."

Malcolm Walker, Founder, MKM Building Supplies, said: "MKM is a great business and I am delighted that 3i has committed further investment."