Read the story of longstanding client Nick Russel about the motivations, challenges and successes of being a modern entrepreneur – interviewed by Nick Palmer (NP).
Nick Russel is an entrepreneur with notable clarity of direction and a supportive business ethos. Nick Russel became Executive Chairman of Denchi Group, a leading manufacturer and supplier of specialist Lithium-ion battery products to the global defence industry, in 2014. In the following six years, he has developed Denchi, acquired a complimentary business, Prima Electronics, and led them both to a position of strength. As he now considers his future plans, we asked Nick about his business vision and what he’s learned from his journey so far.
NP (Taylor Vinters): Nick, what motivated you to take the leap from employee to entrepreneur?
“I’ve long been inspired by the success of the Mittelstand, Germany’s nucleus of SMEs that effectively drives the nation’s economy. Mittelstand businesses have a reputation for innovating and excelling in a specialist area, and succeeding not just nationally, but globally. Even relatively small companies often become world leaders in their niche.
I think that’s a highly effective and sustainable business model, and I wanted to prove to myself and others that it could work just as well in the UK. As a former employee of Denchi I knew it would be a good starting point, with great products. When I had the opportunity to get involved with the company after its sale by Enersys, I saw it as the ideal platform to put those business principles into practice.”
You have notably grown your business through acquisition. What prompted you to focus on this course, rather than relying on just organic growth?
(In 2016 Nick acquired the long-established Oldham Caplamps business (providing lamps, batteries and chargers to the mining industry) as a bolt-on to Denchi’s business, and in 2018 his newly-formed holding company acquired Prima Electronic Services Ltd, a specialist contract manufacturer of printed circuit board assemblies and electromechanical products).
“For me, a model of ‘acquire, consolidate and expand’ results in faster and more sustainable growth.
My experience with Denchi (and previously with other companies) is that the UK supply chain for SME OEMs isn’t that great; Chinese companies are often much more responsive as well as being cheaper. This prompted the idea to find a supply chain business like Prima to create a central core with a Mittelstand perspective around which to add other businesses at the smaller end of the supply chain spectrum.
By creating this core and employing high calibre specialists in fields such as HR, supply chain, marketing and finance, we can give these group companies access to skills and experience they wouldn’t necessarily be able to afford as standalone entities.”
What have been your biggest challenges over the last 6 years and how did you overcome them?
“Denchi was initially quite challenging as we focused on reinvesting every penny in new product development. When cash is tight, all you can do is continually reiterate what the plan is, tick off key milestones and then when cash is available, make sure you deliver on your promises.
Acquiring Prima through my own holding company was perhaps a greater leap of faith, as this required remortgaging the family home, other personal debt, personal guarantees and so on. It was also so highly leveraged, there was little room for manoeuvre in the early days, so it did wake me up around 3am at least once or twice! But the way the company has progressed has absolutely fulfilled my expectations.
Less than two years on, Prima is performing strongly, with debt repaid ahead of schedule. We’ve been able to invest in bringing in fresh management talent, and I’m now working with my team to consider how Prima will benefit most from further funding.”
So those challenges haven’t diminished your appetite for growth through acquisition?
“No, I’m still committed to the idea of a UK Mittelstand, and there are a couple of potential business acquisitions in the pipeline. For it to work, they have to be the right fit; acquisitions like Prima, which had been built up over 30 years by people who clearly cared about the business.”
You operate in a market you know very well. Would you ever be tempted to risk venturing into an entirely new sector?
“I actually find it particularly satisfying to try and understand new markets and industries. Having said that, there is still plenty of potential for championing innovation in our chosen sector. I think it’s arrogant and risky to assume success in one industry is transferrable to something completely different, so I’d always look for some overlap, whether it’s technology, customer base or sales/service process.
Constantly considering and trialling creative business approaches is stimulating and keeps the business fresh. Figuring out how we could diversify beyond defence with Denchi is proof of that and was an enjoyable journey for our team. It resulted in our SLICE large battery platform, which combines the best proven and new technology to create innovative energy storage products for the fast-evolving markets here in the UK and abroad.”
You have a track record of seeking out talented managers and valuing existing employees in your businesses. Was preserving employees’ morale and helping them develop their skills key to growing Denchi?
“Yes, and subsequently for Prima too. In the case of Denchi, the initial journey was quite challenging but our order book has grown significantly over the past 12 months and it has been very satisfying to be able to invest in team development, individual training and the equipment and tools our people need to perform their jobs more efficiently. Building a company this way sends a positive message to employees – much more so than pursuing an expedited exit, which only benefits the few.”
What do you find most satisfying about your business, and seeing it grow?
“I especially enjoy reaching those points where we have recruited a new team member or an existing employee reaches their next stage of evolution, and I realise I can step back from that particular part of the business. I like to see other people find satisfaction in what they do. The impact great people have on a business never ceases to amaze.”
What are your plans for the future? What’s your ultimate aim?
“The near and medium-term objectives are to build a strong, predominantly UK-based engineering and manufacturing group, through additional acquisitions and organic growth. And even now, in the midst of Covid-19, there is opportunity.
In the long-term I’d like to develop a sustainable ownership model for the business that perpetuates the Mittelstand ideals, long after I’m dead and buried.
For me, buying and selling to acquire wealth is not fulfilling; I don’t want to just take the cash and sit on a beach, and I don’t think passing on businesses to your children is necessarily the best thing for them or the business. I suppose it’s how you define success; I see it as being able to leave a legacy of sustainable businesses built around long-term investment with an ownership structure that enables a significant level of employee participation.”
Finally, in the light of your passion for your businesses, how would you describe your work/life balance? Do you find it hard to switch off?
“Most of my out-of-work activity revolves around the kids and, before the emergence of Covid-19, their sports clubs, which I volunteer for and support where I can. In normal circumstances we also try to go skiing at least once a year, as the level of concentration required to avoid breaking any limbs is the best way of giving my brain a break from thinking about work.
I love what I do, so I’m not too fussed about needing to switch off in general. If we were to go away for a beach holiday I’d take my laptop and still dip in occasionally.”
Fulfilling your own vision
As Nick Russel’s business journey demonstrates, growth by acquisition can be a powerful business catalyst, introducing potential synergies, new capabilities and a customer base which can integrate with and enhance the wider business.
Taylor Vinters’ relationship with Nick Russel began following the acquisition of Denchi from Enersys Advanced Systems, and has continued through his acquisition of Oldham, advising Denchi on various life-cycle commercial and intellectual property matters. We then advised Nick on acquiring Prima, which included his use of inventory and receivables finance to part-fund the transaction. We continue to advise Nick and his companies across a broad range of business issues.
Whatever your preferred business model, our support can help you achieve your ultimate aims. For advice at any stage of your journey, please get in touch.