News Analysis: Evolution to recover Anglo?s missing links

Anglo Corporation?s untried saviour will have to struggle to escape remembrance of things past

The name Anglo Corporation is dead and gone. Evolution Holdings, an unknown investment consortium, swept up the assets of Anglo two weeks ago, ditched the name and rolled out the banner for the old distribution business SDL. With the company vowing that it will make SDL bigger and better than ever before, the tone has been set.

But creditors and suppliers of SDL and its retail operation Silica have yet to be convinced. The response to the acquisition has been sceptical, not least because no one knows the history of the purchaser. It is not a retailer ? like Electronics Boutique or Micro World, which were expected to pick up the business ? but a group of investors from outside the industry.

According to Evolution, the backers are high-profile people from the City. There is Alan Wheatley, a non-executive director of a number of firms, including Rothschilds, Legal & General and Babcock International, as well as an ex-chairman of 3i; Alan?s brother David Wheatley, a chartered accountant and ex-Deloitte & Touche man; Martin Hodgson, a City investment banker and co-director; and Colin Lloyd, a co-founder of KLP, a large direct marketing company, and now chief executive of the Direct Marketing Association.

Such big names seem incongruous against SDL and Silica?s own background. Both have fallen into administration twice in two years: once under Prodis, which it left with debts of #7.8 million, and now under Anglo with debts of #7 million. Despite this track record ? dramatic even for the retail industry ? Evolution investors believe they have bought a sound operation.

Hodgson, Evolution?s MD, said: ?I would say that really a lot of the negativity doesn?t come into what we?ve got. The whole top level ? about 40 people, not just one or two at the top ? has been stripped away. They were the ones stopping the staff from doing their jobs and stopping the companies from being profitable. The new management will be much more supportive.?

But one investor, which Evolution failed to mention, is part of the old management team ? Tony Deane, co-founder of Prodis and VP of business development at Anglo. His re-association with the revival of SDL has met with mixed reactions. Some trade creditors, still smarting from the wounds and expense of the old trading relationship, have stated that they will have nothing to do with any company which is connected with the old management.

One creditor said: ?This is what I thought would happen. Often the old management is linked with the saviour ? I wouldn?t touch it with a barge-pole. All I?m interested in is the creditors? meeting and extracting what?s owed to me.?

But others are more forgiving, such as Paul Donnelley, MD of Anglo creditor Gem. He said: ?Retail is a difficult market and a key element is finacial controls. Tony Deane?s been there a long time. Nothing he?s ever done is malicious and he brings experience to the party, which is needed. If it invests like it should do, then I?d have no problem trading with it again.?

Another creditor agreed. ?If it was completely new people I?d probably walk away, but because I know Tony Deane, the door is still ajar. I?d want to have in-depth meetings with the new people before I did anything because we?re still reeling from the last blow.?

Hodgson is confident that he can woo old partners. ?Controls are going to be far tighter than they ever were before. Our stocking policies and product sales will be focused and will come from a direct response to the field, not at the whim of the purchasing manager.?

He said SDL would also put more focus on adding value. ?We are going to get back to service. We will be competitive, but we are not going to be a price animal because we want to build on our old relationships through support.?

Steve Bennett, chairman of Software Warehouse, a competitor to Silica and potential SDL customer, said Hodgson has his work cut out. ?I wish the firm the best of luck, but unless it radically changes its retail and distribution model I find it difficult to see how it could survive. We never used SDL as a distributor because it was never on the ball with prices.?

SDL was known for the high level of support it offered independents, but the risks associated with the company have damaged its name. One source said: ?Evolution thinks it has bought a good brand but does it realise the stigma attached to it? Maybe not, as it isn?t from the IT industry.?

Evolution is desperate to distance itself from Anglo directors, but at the same time refuses to be completely open about the organisation. It was unwilling to name all the investors, citing a ?very senior lawyer? as one shareholder. It claimed there were six investors and then admitted there were seven, after being prompted to acknowledge Ian Mitchell, CEO of Cybertec, as a backer.

It is also unclear whether the Wheatley brothers and Lloyd will work full time with the operation. These ambiguities mean that although Hodgson is adamant there are no links with any of the previous directors, such as David Gosling, creditors are still suspicious.

Trying to establish names and identities involved with SDL and Silica has become a recurring nightmare for suppliers still trying to make sense of the organisation. Evolution will have to convince them of its own standing if it is to outgrow the reputation of its predecessors. Otherwise, although officially dead and buried, the Anglo name and SDL?s past will come back to haunt it.