Wedgwood deal is close, say sources

So it appears KPS appears to be on the brink of securing a deal for Waterford Wedgwood. Thank God.

The past four weeks will have been hellish for workers at Wedgwood with looming over the Barlaston plant continued, particularly given the state of 'deep recession' that Mervyn King, Governor of the Bank of England has today warned.

To read the full story, go to The Sentinel , although the thrust of it appears to be that the private equity firm which first entered the bidding race was also the first to secure the funding to get the deal to go ahead. While offers such as the one put forward by the two Wedgwood relatives might have secured more jobs in the UK, it sounds as they were too late to get the money together.

It doesn't necessarily mean disaster for a private equity firm to take over a company, amid all the fears that the people behind such firms simply cut jobs to extract as much profit out of a company, and then leave.

Take for example Alchemy Partners run by Tunstall-born Jon Moulton. This is a firm which has taken long-term stakes in a number of businesses which had struggled and needed cash to restore their fortunes. But the company was widely criticised by the media after Mr Moulton made a bid to take on the stricken MG Rover business back in 2000. Mr Moulton made no bones about the fact that there would have to be significant cuts needed, but pledged to return the business to profit and keep some production in the UK.

He failed and instead a consortium led by John Towers so-called Phoenix Four successfully took over the company. They had promised to retain high levels of production at Longbridge which attracted the support of the trade unions and the Government.

At the end of the day, however, the business was not viable and again collapsed in 2005. Now the brands have been taken over by the SAIC.

The great imponderable is whether Jon Moulton, his private equity finance and streamlined production would have done any better.

But take a step back and look at the business case. Surely it is far better to look at the market, work out the demand for the type of product your company will make and decide with cold, hard-hearted, logic, what is the best way of satisfying that need at a profit.

And the same question needs to be asked by any prospective bidder for Waterford Wedgwood, private equity or not.

That's not to say I'm in favour of wholesale off-shoring and job losses, God forbid.

But pumping cash into a loss-making operation is illogical, full stop.

In the case of Wedgwood, and I have state that it's a while since I've looked at their figures and markets in any depth, I would say there is definitely a brand and a business which can support prestige manufacturing at Barlaston. There are a whole raft of ceramic brands under the Waterford Wedgwood umbrella, all aimed at different price-points and different markets. Any skilled businessman with cash and a clear vision could breathe new life in to the empire.

All the new owner has to do - and it really is this simple - is consider each brand, each product line, and decide right from the outset what is the most best commercial way of designing, producing and supplying those wares, and where.

One benefit a new owner would have is that they could effectively slash thousands of low-margin lines that had to be produced just to keep money coming into the business, and instead focus on the top-end stuff which customers - according to conventional wisdom - want made at the home of Wedgwood.

And the benefit of the new broom to sweep out the crud from the business was something the old empire under Sir Anthony O'Reilly never had. It had to balance making the changes need to meet what customers wanted with trying to ensure there wasn't a shopfloor riot.

One thing is clear: expect fireworks if and when the new deal is struck. There will need to be radical changes to streamline the new business and ensure it can stay afloat in the tough times. And those changes could mean wide-scale redundancies.

But at least that will remove the uncertainty from those who have to go and find new work - although I don't envy them - and allow those that remain to keep their heads down and push the company back to profit.

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