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Duffy on Mortgages

John Garfield being back at Charcol will please more than just local tobacconists in London WC2 – for one, the deal’s equity providers, who have a CEO with a prodigious record in making corporate silk purses as well as 270-yard golf drives.

For those unfamiliar with the talismanic Garfield, think Simon Cowell meets Jose Mourinho.I graduated from Garfield’s mid-1990s’ finishing school and he commanded respect.

However , one misconception is that Charcol alumni have enjoyed universal success. They haven’t. The X factor that defines Garfield is a stem cell of three facets – intelligence, invention and gravitas. Some breakaways have struggled where the management are adequate processors of work but lack the vision, craft and maturity to perform more than textbook tricks or simply plagiarise ideas and people from elsewhere. And more will follow this pattern.

One exception is Savills. And herein lies the first of several ironies and paradoxes in the Charcol biography.

Savills has displaced Charcol in recent years as the top dog in town. The companies’ revenues are not dissimilar but thereafter comparisons wither. B&B expensively overcomplicated Charcol to the extent that the line of B&B shareholders puzzled by an alleged bargain sale price of 5.8m must extend all the way to San Francisco.

The irony is that when Savills’ founders departed Charcol in 1997, they were given a “zero per cent chance ” of success. Whether this legendary quote was tongue-in-cheek or not, this is an extraordinary reversal of fortune.

A second irony is that Hamptons and Charcol were once sister companies back in the late 80’s when Abaco owned both. Hamptons’ historians tell me it was a mutually beneficial arrangement in those days. The companies’ figureheads these days co-exist socially without the need to throw pizza or soup at each other but it remains a delightful irony in the piece, given some recent consultant transfer activity.

Third. Can sections of the press stop referring to the deal as an MBO? Unless MBO means management bow out. The speed at which the previous management were invited to weed their allotments was exceptional and sends a compelling message to those unacquainted with the returning regime that little quarter will be given to underperformers.

What now? It seems that some quick wins are required. I suspect that Charcol’s flair for creating innovative products will get fresh adrenalin. This may even involve manufacturing some lines themselves, particularly in areas such as the FTB market where demand chronically outstrips supply.

Multi-tie arrangements on both protection and mortgages might manifest. Is independence over-rated anyway? The FSA is certainly making me feel that way. Charcol may want to up the ante with lenders on matters of procuration fees and exclusivity. If so, the intermediary market will be watching closely. Since 1997, networks and clubs have proliferated to the extent that a lender now runs a real distribution and reputational risk when extending disproportionate favour.

Finally, can some prodigal sons be won back? Charcol is still the foremost brand in the business but in what will doubtless be a challenging 2005 any competent self-generator of business will surely run for value , not brand.

With some expenditure still likely to come on systems and network reconfiguration and in a climate when compliance costs are unrelenting, I hope that the kitty does not encompass lavish consultant packages. Mediocrity does not win rosettes these days so I would beware of overpaying for it in the name of PR.

It is good to have you back on the tee John. Let us tee it high and let it fly.

Kevin Duffy is managing director of Hamptons International Mortgages

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