Directing a legacy

David Murray wants to make sure future generations of the Murray family are left a legacy. So he’s ensuring a large part of the family fortune is being invested in businesses with long-term prospects. As he would no doubt agree, earnings from traditional manufacturing companies with strong cash flows, much of it earned in international markets, are a good way of guaranteeing that legacy.

That sounds like an investment vision based on coherent investment principles, born out of the dour nature and thriftiness of his fellow Scottish brethren. Yes, but not entirely. Murray’s investment sobriety might also be a tad influenced by his father, Sir David Edward Murray, a swashbuckling Scottish entrepreneur who made a fortune in his 20s and nearly lost it 30 years later (see Scotland the Brave below).

At least, that’s according to the Sunday Times Rich List, which estimated Sir David’s fortune at more than £700 million (€815.2 million) in 2008, but two years later said it had fallen to just over £100 million. Unsurprisingly, Sir David disputes these numbers. Whatever the merits or not of the list in determining Sir David’s wealth, there’s little doubt that the credit crunch hit the Scottish financial and property market hard, and the Murray fortune was squeezed as a result.

So the decision in 2010 to split the family office from the main holding company, appoint Sir David’s son to manage it and build its portfolio around good sound businesses with export potential is at the very least a back to basics for the family.

The demerged investment business was called Murray Capital and was to be seeded by some of the businesses held by the holding company, Murray International Holdings, including Murray Metals. Steel is where Sir David’s fortune was first made, when he was in his early 20s.

Other direct investments include the UK’s biggest bus-maker Alexander Dennis (pictured, right), the UK’s largest manufacturer of data and fibre optic cables Brand-Rex, audio company SFX and information technology company Capito. All good sound Scottish businesses, expanding into markets outside of the weak British economy. Murray says ownership varies between 10% and 90% with representation on the board varying correspondingly.

“Our biggest private equity holding is 90% in Brand-Rex,” (pictured, left) says the 39-year-old. “We have two board seats at Brand-Rex and the non-executive chairman was our appointment. Depending on the level of investment we would tend to have a board seat, either for a Murray Capital person or a non-executive of our choice.” He adds: “This isn’t passive investing: we want to get involved in helping these businesses both strategically and financially to achieve their goals, which of course also means a better investment return for ourselves.”

Murray says working with these companies often represents a long-term commitment. “We are not interested in short-term commitments – we want to work with these businesses over a longer period of time. We are interested in building a legacy for future generations within our family office,” he says. 

But making money for future generations also means doing deals. So selling businesses at the right time is tempered with working with these businesses for the long term. “We are keeping a close eye on the economy and will be considering exit strategies if appropriate,” says Murray. 

The family office also has a stake in the Glasgow-based wealth manager Argyle Consulting, which gives Murray Capital access to more straightforward investments like equities and bonds. The family office doesn’t invest in hedge funds, preferring to take a more direct approach when buying assets.

The current portfolio of investments is worth around £150 million, says Murray. Turnover of Murray Capital, according to Companies House, was £94.5 million in 2011, up very slightly from the year before, although gross profit was slightly down at £25 million, from just over £26 million in 2010.

Most investing is done with the family’s own money, says Murray. “The family investment company has no bank debt with each investment financed on a stand-alone basis.” But Murray doesn’t rule out working with bank debt in the future to add to the portfolio, particularly as banks become more confident in lending.

The family office currently has a team of six professionals based in an elegant Georgian terrace in Edinburgh’s New Town. Murray says the family office is keen to make other investments and has a “little black book” of potential targets. It also works with advisers and advertises itself through various venture capital and funding organisations as willing to invest up to £5 million in all sectors excluding biotechnology. A cautious approach, emphasises Murray, is very much the stance taken in these straitened times.

But the family office wasn’t just set up to make money. Murray says part of the thinking behind it was to establish a governance structure designed for the transition to the second generation and beyond. That means setting up a family advisory council with non-family members, which Murray says should help the family transfer the wealth to the next generation “in a constructive and hopefully seamless manner”.

That desire is strong in the Murray family, as Sir David had to be pulled out of one of Scotland’s top schools, Fettes College, because of his father falling on harder times. Future generations of Murrays will hope that doesn’t happen to them. Investments in sound businesses should help to ensure it doesn’t.

Scotland the brave – Sir David Murray
Scotland has produced its fair share of great entrepreneurs with colourful lives like Andrew Carnegie, the steel baron, and William Walls, who helped build Glasgow into the great industrial city it became in the 19th century. More recently, there have been names like Tom Hunter, Scotland’s first billionaire, and Duncan Bannatyne, the fitness club entrepreneur and TV personality.

But few have led a more extraordinary life than Sir David Murray (pictured, right). Born into a wealthy family, Sir David has so far pretty much experienced all the highs and lows any individual would care to have in a lifetime. He saw his father lose much of the family fortune, was pulled out of Fettes College, one of Scotland’s best schools – he was a fellow pupil with Tony Blair – and sent instead to the local school, only to leave at 17 with few qualifications. Recalling his early years, he once told the Scotsman newspaper: “My father gambled so much I remember him once gambling on [TV show] Come Dancing.”

Determined to make a mark, Sir David found success first through his uncle’s scrap metal business and then setting up Murray International Metals at the tender age of 23. According to the Scotsman, the business had revenues of more than £2 million (€2.3 million) in its first year and a profit of £100,000. That success underpinned his confidence and Sir David went on to invest in multiple businesses, building them up and making millions in the process. As one close associate said about him: “His talent for uncovering hidden long-term value is among the best in the country.”

His success is even more remarkable given the fact that he lost his legs in a motor accident when he was 23. That, say those who know him, made him even more determined to succeed. It also led him to set up a foundation in 1996 to support amputees. His philanthropic efforts, as well as his entrepreneurial acumen and contribution to Scottish business life, led him to be knighted in 2007.

But perhaps Sir David is best known for his involvement with Glasgow Rangers. He bought the team for £6 million 1988, and helped build it up with much of his own money to one of the most successful teams in the UK in the 1990s. But that success came tumbling down 20-plus years later when he sold Rangers for £1 in 2011 under, what most observers saw at the time, a cloud of debt and tax disputes. The team went into administration soon after, and was demoted to the depths of the third division of the Scottish Football League.

Sir David used to say he spent at most 20% of his time on football, but that it accounted for 99% of everything that was written about him. As the Rangers episode fades from all but the most ardent football supporters’ minds, Sir David’s irrepressible resolve will no doubt rise again with new ventures.