With Mortgage Next now in his stable, and a new lender about to be launched, Rupert Webb hopes to make as big a noise in the mortgage market as he did in the loans business.
Set up as Wilmslow Financial Services in 1983, Webb sold 55% of his loan company to venture capitalist JZI in 2000. The deal was worth £22.5m, and together they aim to sell or float the business in the next five years in a deal valued around E500m. Things move quickly at what is now called Freedom Finance.
Initially, Freedom operated under Webb as a secured loan brokerage. It now offers third party loan referrals for many of the leading banks, where it will broker a deal for customers unable to meet the primary institution’s lending criteria. It also provides protection insurance products.
In the mortgage market, Freedom Finance is about to go live as a lender, the purchase of Mortgage Next has added a mortgage network to the group, and third party packaging and processing operations are already in place.
Before Webb sold his controlling share in the business, he says it had gone as far as it could in its existing format.
He says: “The culture of this business has changed dramatically in the last couple of years and certainly compared with the time before the deal with JZI in 2000. The hardest thing I did was bring in management consultants three years ago. Normally you bring in consultants when a business has a problem, but we brought them in when the business was doing extremely well because we were expanding rapidly, and needed to expand in a controlled and orderly manner.
“We got them to look at systems, processes and IT and also to look at people from the top down. Luckily they thought I should stay, but some people went and we totally reorganised both the business and the senior and middle management structure, and brought in a far more professional group of people. But that was very hard.”
He adds: “There were a lot of people at middle and junior levels that had basically been given positions purely because we were trying to cope with volumes and build up numbers and not because we had been looking for quality people.” Dealing with the company’s growth was a fire fighting operation, and to emphasise the difference in today’s approach he says: “Our loan officers used to get about three days training. They now get six weeks before they are allowed to start and so the whole recruitment training and selection process has completely changed.”
He continues: “Going forward, the most important thing for us is technology, culture and people and that is what makes a business. We invest very heavily in staff training and development and spend around £200,000 a year at the moment on training and development.”
Following the visit from the consultants, Webb’s hands-on approach to the business changed, and much of the responsibility for business operations has been devolved to senior management. Webb explains: “I now effectively manage seven people and that is my job, but it has been difficult to take on the micro management style and keep away from the coalface.”
The change may not have come easily, but Webb has been compensated by a new set of goals. He says: “Yes I miss the cut and thrust of the day-to-day business, but it is also very exciting getting involved in buying businesses both here and abroad and dealing with challenges that come from being an entrepeneur and managing seven professional people.”
Indeed things are now easier for Webb with the new structure in place, which is better equipped to handle the planned growth. Webb explains: “Holding the whole thing together is key if the company is going to keep its focus and discipline in the years ahead. It is all about having the right people. My life is easier now than when I did not have these people around me – they each know individually what they have to do. As long as you set out the strategy and everyone knows what that strategy is all the way down the line, then it should not be a problem whether it is 500 or 5000 people, and that is something you learn as you go along.”
Webb learnt a lot from the deal with JZI. It made him aware that sentimentality has little place in the business world, and like pruning a rose, cuts have to made to reinvigorate a business for future growth.
The experience proved helpful in convincing Martin Maynard of mortgage club and proposed network Mortgage Next, that selling to Freedom was the right thing to do. Initially the deal had fallen by the wayside when Maynard took up another offer. However, as the intial attraction of the alternative offer began to wane, Webb stepped in with a deal which made both good financial sense and suited Mortgage Next’s future.
Webb explains: “Nobody ever tells you what to expect when you sell your business. Basically it is your baby and it is treated like pound notes – not something that you created. I knew all the emotions he [Maynard] was going through and luckily I was able to relate to him about that.”
In the same way that JZI bought into Freedom, but let it get on with growing its business, Webb says the plan is the same for Mortgage Next. He says: “We will not be involved on a day-to-day basis. When you buy a business like this you are buying people, not a manufacturing plant, which has got lots of contracts which you can sell on or machinery that you can strip out. Mortgage Next is 250 miles from here and it is run extremely well. We have bought the concept and the management team which fit very well into our own model.”
Webb also has big ideas for the Freedom Finance lending operation. He says it aims to lend up to £250m in its first year, building up to £2bn in its third. The numbers are big, but with a distribution deal in place with Pink, and the obvious possibilities that Mortgage Next offers, Webb believes they are attainable. Warehouse funding for the operation will come from Barclays, while other partnerships are currently being finalised.
Future opportunites abound, and Webb says much of his time is spent looking at possible acquisitions and partnerships. Further consolidation in the market is on the horizon and Webb believes; “This is the perfect time for both buyers and sellers. Buyers want distribution and the sellers have got the worries about Mortgage Day and beyond but I think there will also be a market post Mortgage Day and there are people looking at building up networks to sell them on once they have got distribution.”
Any such move from Freedom is unlikely in the next six months as Webb tries to steer clear of over-extending. He says the focus at the moment is on preparing for Mortgage Day, and making sure everything with Freedom Finance and Mortgage Next is in place and operational for the new regime. Having a whole suite of mortgage related businesses will make Freedom a prime target for the Financial Services Authority to cast its eye over, but Webb is not worried. He says: “If you embrace regulation and take advantage of it, it can work for you because it is the biggest and most professional companies that do well.”
Webb believes professionalism is at the heart of everything, and having sold his company once and gone through the emotional side of transforming a business, he gives the impression that there is no room for sentimentality.
It is as though having succeeded with Wilmslow Financial Services, he now owes it to his staff to make a go of the plans for Freedom and says: “If you employ senior, highly motivated people, then you have got to give them something for the future. I have been through the emotional split with my baby and what I have got to do now is turn Freedom into a pan-European financial services group which eventually we are going to sell or float.”
