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Why Morgan sold itself to the Italians

After collecting our jaws from the floor on news of Morgan's sale PH collared the MD to find out more...

By Mike Duff / Wednesday, March 06, 2019

There was a smattering of surprises at this year's Geneva motor show, but only one that was big enough to be called seismic. The new Morgan Plus Six was a pleasant enough surprise, but it was the company's revelation that its family shareholders had sold a majority stake in the firm to Italian outfit Invest Industrial that caused both surprise and a degree of confusion.

Of course, the story of Morgan's family politics started a while back. Back in 2013 then Managing Director Charles Morgan was forced out of the company after a boardroom bust-up over various issues, the biggest being the amount being spent to develop the Eva, which was meant to be a new model powered by a BMW six-cylinder engine. Spotting a pattern here?

Although no longer in control - or even on the board - Charles Morgan remained the largest shareholder in the company. To get technical, ownership was split between him and three other family members, with a total of 52 per cent, with a collective family trust having the other 48 percent. So while Morgan was entirely Morgan-owned it's fair to say that it didn't make for the happiest of family dynamics.

Despite that, business was going well. Morgan has been selling strongly over the last few years and - if not quite rolling on a bed of fifties - obviously feeling flush. The Malvern factory was bought back in 2017, after being previously having been sold to raise funds. The company also bought its visitor's centre, which it hadn't owned since the war, and treated it to a big refurbishment. The entire £7m cost of creating the Plus Six also seems to have been done from revenue. 

So, in short, few obvious reasons from an outsider's point of view as to why you might want to sell a big stake in the firm to a venture capitalist.

Invest Industrial is the Italian outfit that put cash into Aston Martin a few years back, something which - following AM's recent IPO - has clearly given them an appetite for British sports car makers. According to Morgan's chairman Dominic Riley, Invest Industrial had been monitoring the company and its fortunes for some time. and its approach came at an opportune moment.

"The family had formed a council to discuss the future of the company some time ago," he said, "I told them that we were doing well and we had a good three-four year horizon with good prospects, but if we took a longer term view that the bar is getting higher in terms of technology, safety and research costs."

At which point, the Italian cavalry rides over the hill. "They were interested in a new investor to take Morgan to the next level, and then I got a phone call from Invest Industrial," Riley adds, "it was serendipity."

Only certain numbers have been released; we don't know how big Invest Industrial's majority stake is, but Riley confirms that the decision to sell was taken unanimously by all four family shareholders, including Charles Morgan, and that all of them still maintain a stake in the new company, with the workforce also set to receive shares.

Nor do we know how much money the Italians have put in, although Riley says it is "very significant in the context of Morgan." The company made a £3.2m net profit on £33.8m revenue in 2018 - a healthy margin in the car game - but has ambitions to increase that substantially with the help of new investment.

"We are going to at least double production in the next three to five years; probably go beyond that," Morgan told us."We're doing about 750 cars now. We will go to 1500 or beyond in that period, but it's an incremental evolution of scale."

The money isn't just going to be used for developing new models - although Morgan admits the plan is to use the new CX architecture to underpin a fuller range - but also to create demand for them.

"You will see a strong increase in sales and marketing, particularly if you look outside the UK where it tends to be down to the dealers. We're going to help, support them with advertising and running events. We want every dealership, wherever in the world, to have an element of Malvern and the factory to it."

The U.S. is also a big opportunity; Morgan hasn't sold a four-wheel model there since the Aero 8's exemption from requiring smart airbags ended. The company is already planning to go back under less onerous "replica car" requirements, indeed it has already sold some modern cars there with engines to be fitted locally. But Morgan hopes it will be able to arrange a bigger launch with U.S. homologated models.

Ambitious? Certainly. But PH was assured that the hallowed traditions held in such high esteem at Malvern will be fully respected - Morgans will still be made by hand in Worcestershire. It's just that there are going to be many more of them. 

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