KEY POINTS:
For the past three years, Rodney Martin has been busy building a flooring empire.
The purchase of three Carpet Court stores in Dunedin, Napier and Palmerston North in December 2004 marked the beginning of something big, and today Martin's investment vehicle, Lincoln Capital Partners, owns 32 of the country's 61 Carpet Court stores.
It has also added a further eight independent stores to its stable, including a major retailer in Melbourne.
Collectively his group now controls more than 30 per cent of the New Zealand retail flooring market, generating an annual revenue of $185 million. But Martin is not done yet, with plans to continue the acquisition programme until the group controls 50 per cent of the New Zealand market.
The next three months will see a rebranding of the seven independent non-Carpet Court stores in New Zealand under a new shared banner tentatively known as The Floor Store, while a capital raising exercise is planned for the later part of the year.
The latter will take the form of a public float, a selldown to private equity or a trade sale. But Martin's first choice remains an IPO, despite the current state of the sharemarket.
"It wouldn't be feasible right now obviously but in six months time, it could be well be feasible again. I've been through a few of these cycles and they tend to work themselves out."
Martin is undeterred by the global credit squeeze, which he said has not affected the group's access to capital, but the slowing domestic housing market will have an impact on revenue.
"There's no doubt it will have an effect but we haven't seen much of that effect coming through - yet.
"There is this counter-cyclical effect in the carpet market where if people don't buy or build a new home, and they sit tight, then they very often will refurbish their existing home instead."
On the surface, carpets appear to have little in common with Martin's last acquisitions project in the printing industry.
But he sees it differently.
"I am a roll-up acquisitions specialist - that's what I do. What I look for when I embark from one project to the next is a highly fragmented industry, lots and lots of small to medium-sized businesses and no major businesses under common ownership.
"And carpet retail contains 400-odd independently owned businesses. It's a highly fragmented, very disjointed industry and that provides lots of opportunity to rationalise."
Rationalising in this instance involves all 61 Carpet Court stores - together with the eight independent stores - coming together as a single group controlled by Martin's Lincoln Capital under the Carpet Court banner.
With this initiative, the Carpet Court stores move away from their co-operative model of 12 years to a full format franchise group. All 32 stores owned by Lincoln Capital will be sold to the Carpet Court company, with the remaining stores operating as franchisees.
With some of the independent store owners having run their businesses for three decades, Martin's proposal for them to become franchisees was not going be an easy sell. But 95 per cent agreed in the end.
"It was a challenge and it was heavily debated, and they didn't roll over, but in the end they could see that the benefits outweighed the costs," Martin said.
