Greater Manchester Buses

In March 1994, Montagu continued its strategic thrust of investing in privatised companies by providing £2.25 million (€3.5 million) of equity to support the £25 million (€40 million) Management and Employee Buyout of Greater Manchester Buses South ('GMBS').

The bus industry had been transformed over the previous decade as a result of the Government's decision in the mid 1980's to deregulate bus services in the UK. Due to a perception that the monopolistic power of a single entity would be anti-competitive, it was decided that Greater Manchester Buses should be split in two more or less equal parts. GMBS was formed late in 1993 with a fleet of over 750 buses, six depots and almost 2,000 employees.

Montagu was attracted to the bus industry due to the combination of high predictability of earnings at the local level and considerable change and turbulence in the industry at the national level. The former provides a relatively low risk environment for investment and the latter results in many opportunities for corporate activity. GMBS was particularly attractive due to the quality of the management team, the support of its employees and its track record of operating in a highly competitive environment.

The management team, led by Peter Short, was well balanced with skills derived from long experience in the industry combined with commercial and financial experience gained from other sectors.

A key element of any bus buyout is the attitude of the employees, since they have a significant role to play. In the case of GMBS, the commitment and enthusiasm the employees showed for the buyout was astounding. This was highlighted by the fact that over 90% invested up to £1,000 (€1,600) each, so that the employees provided over £1.8 million (€2.9 million) in total. In return, as is common in bus buyouts, employees have a say in the management of the company through three employee-directors who were appointed by them to the company's Board.

The confidence in the company shown by the employees was fully rewarded in 1996 when the business was sold to Stagecoach plc at a price which gave all shareholders an attractive return on their investment.