Case spotlight: Should Stuart Roberts Sell the Family Silver?

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This case was featured in the May 2022 issue of Connect.

Who – the protagonist

Stuart Roberts, founder of Two Seasons.

What?

Passionate about extreme sports as a teenager, Stuart opened his first Two Seasons shop in 1983, which sold clothing from brands such as Quiksilver, Animal, Element, Billabong, Nixon and Oakley. It also sold sports equipment like surfboards, skis, and snowboards.

Two Seasons was a family affair, with Stuart’s parents and siblings playing various roles in the company, and each owning a stake.

By 2007, Two Seasons had opened 13 stores in central England and grown from one employee to 93.

two seasons

Why?

In 2007 Australian multinational sport clothing supplier, Billabong, offered to buy Stuart’s business for £2.5 million – about four times the book value of Two Seasons’ assets.

Following months of discussion, Billabong gave Stuart a final 24 hours to take up their offer.

Stuart was well aware that Two Seasons had reached a crossroads – it was a small-scale retailer with tight profit margins, so there was little headroom for funding expansion through retained earnings.

Stuart felt he had three options – sell to Billabong, fund business growth through continued bank debt, or approach equity investors to fund further business growth.

When?

Two Seasons arrived at a crossroads between 2003-2007 when turnover increased by 75% but profit margins before tax were never more than 5% and fell to 1% in 2007.

Where?

Stuart opened his first store in the small town of Northampton, and opened further shops in the Midlands and East Anglia in towns and cities including Derby, Leicester and Cambridge.

Key quote

“Besides being able to draw on their own business abilities and knowledge, having the family as both shareholders in the business and actually working in the business means that we have a tight control on finances and a strong work ethic.”
Stuart Roberts, founder of Two Seasons.

What next?

Stuart had to make a difficult decision for himself, his family and his staff.

Stuart knew the Billabong offer was both timely and could be the basis for an attractive valuation of Two Seasons. However, he had spent 25 years building up the business based around a good relationship with his bank, and there were potential opportunities for additional debt financing, as well as interested equity finance suitors.

What should Stuart do?

AUTHOR PERSPECTIVE 

Family matters

Francis said: “We were interested in working out how a small family firm responded to the challenges of financing the future development of their business. So, we looked around, talked to some of our contacts and found a firm that was on the cusp of making a strategic change. Once we talked to the principal, this opened up opportunities to develop a richer case on how family matters influence and shape financial choices.”

Overcoming challenges

Francis continued: “Getting the principal to agree to participate and be interviewed was a particular challenge. Because he was busy and going through the choices we describe, it was difficult for him to give us the time to fully flesh out the case. We did intend to do a follow up case where we looked at him buying back the firm during the pandemic. Unfortunately, for a variety of reasons, this has not worked out as yet.”

Relatable subject

He added: “Participants like the case because it contextualises financial decision making in a business that is easy to relate to and has different and valid choices.”

Bringing the case to life

Francis explained: “It does not take students long to discuss and argue the various choices faced by the business owner. Initially, though, you have to work with them to bring the case more to life because not everyone necessarily sees how financial information can support, for example, business valuation.”

Keeping options open

Francis concluded: “My advice for case writers is to make the options viable and tangible. There has to be some tension between the options available so that participants can readily see that their non-favoured option is possible.”

question mark magnifying glass

THE CASE 

The case

Who – the protagonist

Stuart Roberts, founder of Two Seasons.

What?

Passionate about extreme sports as a teenager, Stuart opened his first Two Seasons shop in 1983, which sold clothing from brands such as Quiksilver, Animal, Element, Billabong, Nixon and Oakley. It also sold sports equipment like surfboards, skis, and snowboards.

Two Seasons was a family affair, with Stuart’s parents and siblings playing various roles in the company, and each owning a stake.

By 2007, Two Seasons had opened 13 stores in central England and grown from one employee to 93.

two seasons

Why?

In 2007 Australian multinational sport clothing supplier, Billabong, offered to buy Stuart’s business for £2.5 million – about four times the book value of Two Seasons’ assets.

Following months of discussion, Billabong gave Stuart a final 24 hours to take up their offer.

Stuart was well aware that Two Seasons had reached a crossroads – it was a small-scale retailer with tight profit margins, so there was little headroom for funding expansion through retained earnings.

Stuart felt he had three options – sell to Billabong, fund business growth through continued bank debt, or approach equity investors to fund further business growth.

When?

Two Seasons arrived at a crossroads between 2003-2007 when turnover increased by 75% but profit margins before tax were never more than 5% and fell to 1% in 2007.

Where?

Stuart opened his first store in the small town of Northampton, and opened further shops in the Midlands and East Anglia in towns and cities including Derby, Leicester and Cambridge.

Key quote

“Besides being able to draw on their own business abilities and knowledge, having the family as both shareholders in the business and actually working in the business means that we have a tight control on finances and a strong work ethic.”
Stuart Roberts, founder of Two Seasons.

What next?

Stuart had to make a difficult decision for himself, his family and his staff.

Stuart knew the Billabong offer was both timely and could be the basis for an attractive valuation of Two Seasons. However, he had spent 25 years building up the business based around a good relationship with his bank, and there were potential opportunities for additional debt financing, as well as interested equity finance suitors.

What should Stuart do?

AUTHOR PERSPECTIVE 

Author perspective

Family matters

Francis said: “We were interested in working out how a small family firm responded to the challenges of financing the future development of their business. So, we looked around, talked to some of our contacts and found a firm that was on the cusp of making a strategic change. Once we talked to the principal, this opened up opportunities to develop a richer case on how family matters influence and shape financial choices.”

Overcoming challenges

Francis continued: “Getting the principal to agree to participate and be interviewed was a particular challenge. Because he was busy and going through the choices we describe, it was difficult for him to give us the time to fully flesh out the case. We did intend to do a follow up case where we looked at him buying back the firm during the pandemic. Unfortunately, for a variety of reasons, this has not worked out as yet.”

Relatable subject

He added: “Participants like the case because it contextualises financial decision making in a business that is easy to relate to and has different and valid choices.”

Bringing the case to life

Francis explained: “It does not take students long to discuss and argue the various choices faced by the business owner. Initially, though, you have to work with them to bring the case more to life because not everyone necessarily sees how financial information can support, for example, business valuation.”

Keeping options open

Francis concluded: “My advice for case writers is to make the options viable and tangible. There has to be some tension between the options available so that participants can readily see that their non-favoured option is possible.”

question mark magnifying glass

THE CASE 

The authors

Francis Greene
Chair in Entrepreneurship and Head of Entrepreneurship and Innovation Group
Kevin Amor
Lecturer in Accounting and Finance
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CASE - Reference no. 822-0002-1
TEACHING NOTE - Reference no. 822-0002-8
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