A man dressed in a jumper and slacks is sitting in a basic, functional office on the outskirts of a tiny village in rural Co Tyrone. He’s explaining quietly how various international currency crises over the years have been a boon for his family’s billion-dollar multinational company.
Jonnie Keys makes it all sound so straightforward and natural when he talks about sudden movements in the rouble and the rand that the juxtaposition with the fields and livestock in the near distance doesn’t even jar, and nor should it.
Keys, along with three of his brothers, has just presided over the sale of his family business, Euro Auctions, for $1 billion in cash to larger Canadian peer Ritchie Bros. The deal crystallises a stunning corporate journey that began with the brothers' father buying and selling Land Rovers and their parts when the boys were young and now has annual turnover of £220 million. It has about 200 employees in 14 different countries.
“We like home, we’re from here,” says Keys, the low-key brother in charge of operations for the group and the member of this very private family who least dislikes being the public face of the business.
Euro Auctions is a baby in corporate terms, having been started only in 1998 by an elder Keys brother, Derek, but it has managed to turn a lot of endeavours to gold in its short life.
These days, it operates both online and physical auctions of equipment such as excavators, cranes and agricultural machinery at home and in Britain, Germany, Spain, Dubai, Australia and the United States. Essentially commodities, the products for sale can be sourced from anywhere, with margins depending on factors including supply, the cost of transport and the aforementioned currency differential.
Behind the scenes, as well as Derek, are Lynden and Trevor, both of whom focus on sourcing the machinery the company sells. Trevor is based near the group's main auction site in Leeds, but everybody else has stuck close to home, as has a fifth brother, who is not involved in Euro Auctions but has an agricultural machinery dealership just down the road.
Village headquarters
Close to three-quarters of the company's revenues come (at the moment at least) from online auctions, all of which are closely organised and overseen from its headquarters in Dromore, a village of some 1,500 inhabitants, a small number of whom are suddenly very wealthy indeed.
Keys says the sale to Ritchie Bros came about because the family wanted to "go to the next level" with Euro Auctions while the business was doing well. The natural location for sizeable expansion of the group was the US, but none of the brothers, all aged in their 40s and 50s and with children, wanted to move there at this stage of their lives. They were also conscious of Euro Auctions not acting as "a burden" on the next generation.
“We decided this [the Ritchie deal] was the best offer for ourselves, plus it was the best offer for the business . . . for continuity. Our general nature is we like to see people doing well,” says Keys.
Given the size of the transaction, the process involved was rapid, concertinaed into six or so months, although Keys acknowledges that Euro Auctions had been in the pre-sale beauty parlour with the help of a consultant for a few years before that.
The trigger was pulled earlier this year when Derek (the biggest shareholder) engaged Jefferies and A&L Goodbody as advisers.
Between 10 and 12 parties appeared on the radar, with Euro Auctions ending up looking closely at about six potential suitors. The brothers met “three or four” of these as they sought “the cleanest” and best deal.
Wanting the sale to be clean and to allow for the preservation of the business meant a private equity buyer was not going to work, so this option was dismissed, just as earlier discussions about a potential IPO were also set aside.
“Some of us wanted to list, some of us didn’t,” says Keys, outlining how the length and regulatory requirements of the listing process were among the factors that made it unappealing as things played out.
After Ritchie Bros was selected as the preferential suitor, travel restrictions meant meeting in person to nail down the numbers was tricky. The unlikely solution was Iceland, with face-to-face meetings and signatures secured over a few summer days in Reykjavik.
As with high-level currency movements, Keys makes the process of selling a global business for $1 billion (15 times’ earnings before interest, taxes, depreciation and amortisation) sound very simple and stress free. He explains that Ritchie Bros was a very familiar competitor and occasional client, so the company brought with it a level of trust the brothers might not have found elsewhere. The Keys brothers have been open about having modelled their business on what the Ritchies, another family of brothers, had done in building their own group.
"We thought Ritchie Bros would be interested at the start," he says, tracing the neat jigsaw fit of Euro Auctions being strongest in Europe, where Ritchie wanted to grow, and vice versa with the US.
Ritchie Bros was also happy for the Euro Auctions brand to stay, and for the Keys brothers to retain ownership of the company’s many sites, including Dromore, which is based on farmland bought by their father many decades previously. While Derek is the biggest beneficiary of the deal, all the brothers are bringing individual companies to the sale and thus all have skin in the game.
“We’ve a lot of good people here and we just want to make the right path for those people to go forward and to remain here,” says Keys, surveying the 90 or so staff working away around him on verifying products for sale, pricing, logistics, secure payments and other high-level activities. Very many of the employees are local.
Big in Japan
The business as it looks today started to develop properly in the early 1990s, when the brothers’ father had become more deeply involved in farm machinery and excavators, and the Celtic Tiger was finding its feet. Money was flowing into the country as never before and Irish buyers were able to pick up equipment that might previously have been sold elsewhere, just as Derek had emerged from agricultural college with the knowledge that he “preferred machinery” to farming, as his brother puts it.
The family's first big, and most significant, international move was in Japan, where the economy was stagnating and machinery was being off-loaded in quantity. "We started to source some of that," says Keys. "People wanted the Japanese thing because of quality."
This pre-internet model involved Polaroid pictures of excavators arriving in Dromore in the morning via DHL and offers being faxed back in the afternoon to secure the product. Very quickly, business started to grow, culminating in the company's first mass auction "in a tent" in Dromore in March 1998. Some 371 vehicle and equipment lots went under the hammer that day, with sales amounting to close to £1 million. Euro Auctions set up in Britain in 2000 and its gallop has been continuous since.
Keys is not emotional about any of this but he does fondly recall the brothers having attended many local auctions with their father, with his younger brothers often being taken out of school for the purpose. Is auctioning in the blood? Perhaps, he ventures – “buying and selling” definitely was.
He also places huge emphasis on the legacy of his parents. His now deceased mother ran the family’s small petrol station while managing her household of five sons, while his father, now in his 80s, farmed when he wasn’t focused on machinery.
“They had a very good work ethic,” he says. “Treat customers how you want to be treated yourself.”
Part of this ethic was being conservative, with any money made by Euro Auctions reinvested in the business from the start.
“A lot of people would have gone the other way: they got a few pounds and spent it on flashy cars or a different lifestyle, whereas we were always ‘keep your feet on the ground and have a wee bit for a rainy day’.”
This philosophy was evident when the Ritchie deal was signed too; celebrations began and ended with a small family dinner in an understated restaurant in nearby Omagh.
Looking back, Keys agrees that first auction in 1998 was probably the company’s biggest risk, with 80 per cent of what was on sale offered unreserved, or with no minimum price. This was highly unusual at the time.
“It made people come to the auction,” he says, recalling a gathering of more than 3,000 people in the carpark on that first day. This encouraged the brothers to move to a 90 per cent unreserved auction, and then 100 per cent, which is where they have stuck. Their model also includes taking a commission from both buyer and seller.
Keys joined the business full-time in 2001, having trained in accounting and spending his career until then in the clothing manufacturing trade, a business in which the North once excelled but which was by then well in decline. He had had enough just as Euro Auctions was accelerating.
Sourcing expertise
While Euro Auctions and Ritchie are in the same industry, he says, there are a lot of differences between the businesses. The Tyrone company has much greater expertise in sourcing equipment internationally, something that particularly appealed to its larger peer. And Euro Auctions is considerably more nimble on the staffing front, employing just 10 people in an IT department that regularly runs multimillion-pound auctions, where Ritchie, eight times bigger, has 400 and a measurably higher cost base.
The model is “very simplistic”, says Keys, who expects numbers in its head office to now grow by perhaps 60. “They want to look at how we do it and maybe modify their model.”
The company's in-house expertise, assisted by a system designed by a Cork developer, was particularly important when the pandemic hit in 2020, with Euro Auctions able to move a planned Spanish auction completely online within days. This saw sound studios being set up in Ohio and Florida to allow expert US auctioneers sell via translators to an in-person event in Zaragoza, with £6 million in sales being monitored and facilitated in real time from Dromore.
“It worked the first time, and got the confidence up,” says Keys. “We were able to go straight on to Leeds.”
As the group’s main auction site, this entailed an online sale of £40 million, proving to all that the model could change forever, and leaving Euro Auctions in a position where Covid represented a bump in the road rather than a commercial disaster.
The main company in the business, Derek’s Gardrum Holdings, had revenue of £146 million in 2020, more or less flat on 2019, but pretax profits climbed by 14 per cent to £29 million as costs inevitably declined. Derek took out a £2 million dividend.
“I don’t see it going back,” says Keys of the in-person auction model. Rather, he expects maybe 60 per cent of activity to take place online, with Euro Auctions constantly trying to enhance its offering, most recently by facilitating virtual inspections via headsets for remote buyers.
The other big challenge for the company of late has been Brexit, or maybe not. Keys plays down the impact on Euro Auctions, beyond an increase of up to 1 per cent in shipping costs and a “storm in a teacup” before the company’s first Leeds auction this year. He suggests a “refinement” in language is needed around the position of the North in the single market, which he sees as hugely advantageous in the overall Brexit picture.
“If everybody had studied the complications, maybe it wouldn’t have gone ahead,” he says, but he is also willing to see potential long-term gains, especially for his locality.
Where costs have been a much bigger irritant for the group this year is global logistics, with container shipments often tripling in price. Containers are the bread and butter of getting machinery to auction sites so prohibitive costs can put movements to a stop.
“I can understand it rising a little bit . . . but it can’t have risen that much,” says Keys, musing quietly about cartels and inflation.
He is unsure at this stage about his or his brothers' future with Euro Auctions beyond the three-year retention written into the Ritchie deal, but all have substantial other interests. These include large rental property portfolios, sizeable farmland assets across Ireland and England and commercial property in prime continental European cities.
Gardrum Holdings accounts shine a partial light on this, detailing investment property worth £30 million. Derek and Lynden are particularly active in housebuilding, mostly in the North, but with Derek looking at developing a derelict golf course near Dublin too.
His most high-profile investment in recent years has been in the Necarne estate in neighbouring Irvinestown, Co Fermanagh, which he hopes to develop commercially as a holiday retreat and major international equestrian centre.
Keys describes how the brothers don’t have board meetings, but rather meet regularly for tea in their father’s modest house, located beside the Euro Auctions headquarters. “We’ve been lucky; we have a fairly tight family bond,” he says with some understatement. He attributes at least some of this to his mother, who left her five sons with a clear mantra: “Stick together, boys.”
As with everything around Euro Auctions, it’s a straightforward message, and one that has worked for the Keys brothers from the start.
Name: Jonnie Keys
Age: 51
Family: Married with teenage twins
Something you might expect: He spends a lot of his spare time ferrying his children to sports training
Something that might surprise: Since Covid hit, he has been keeping pet sheep who are increasing in number
