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IN PRINT. IN PERSON. ONLINE
MIDLANDS, CENTRAL& EAST OF ENGLAND
DEALS GUIDE 2013
DEALS OF THE YEAR ASK THE EXPERT
BUYING, GROWING OR SELLINGYOUR BUSINESS
EDITOR’S FOREWORD
A-Z OF DEALMAKING
SPONSOR’S FOREWORD
Welcome to the inaugural digital version of the Midlands, Central &
East of England Dealmakers Guide. We hope you enjoy this new
and interactive version of the Guide and find it useful, informative
and user-friendly.
Looking at such a large geographical area as the Midlands, Central
& East of England is a challenge. But the diversity of businesses
doing deals and the difference in size of these organisations presents
another challenge too.
What’s very clear is there is a real willingness to do deals in this
region and the sheer number of transactions that have been completed
in the last 12 months is proof positive of this. We have taken the
opportunity of celebrating the successes of the region by throwing
FOREWORD
the spotlight of some of the deals struck over the course of the last
twelve months.
We have also included an Ask the Expert section which focuses on
some of the thorny issues that affect many deal negotiations today
and there are also three articles which offer ideas if you are thinking
of selling your business.
My name and face will be unfamiliar to many of you but I’m very keen
to change that and to make myself known to the dealmakers of the
Midlands, Central & East of England. So, do get in touch and make
comment about the content of this digital guide.
Philip CunliffeSpecialist Publications Editor
As organic growth continues to remain challenging, companies that
have conserved cash during the downturn are increasingly focused
on acquisitive growth in order to satisfy shareholder demand for
higher returns on capital. With significant cash resources available,
corporates and private equity houses are on the lookout for good
quality acquisitions. The Midlands has seen transactional activity
in the mid-market pick up considerably during the last 12 months
and the good news is that there are no signs of it slowing down
in the near future.
International trade buyers have also ramped up activity, having identified
the UK as a relatively safe haven and staging post to trade with
Europe. This is particularly the case for US corporates, which have
cash ‘land locked’ in Europe, with acquisitions in the UK doubling
in the last 12 months.
As a region, we have a lot to offer international acquirers. Not only
do we provide an in-road to some of the world’s most sophisticated
SPONSOR’S FOREWORD
supply chains, but our diverse brands and heritage, combined with
our sector expertise in manufacturing, support services and TMT,
has made us an attractive and lucrative proposition.
With trade buyers returning to the market and private equity houses
anxious to invest, contrary to belief, now is a good time to sell.
As they go head-to-head, the competition has forced a steady increase
in the price paid for quality acquisitions, reflected in the results of
our latest Private Companies/Private Equity Pricing Index (PCPI/PEPI).
There is a real demand for deals in the Midlands and, although the
ability to find the right opportunity remains a challenge, it is only
a matter of time before more vendors come to market and the
demand/supply ratio tips into balance.
Mid market businesses in demandGraham Elsworth, National Head of Transaction Services, Partner, BDO LLP
Insider Deals of the YearThe Midlands, Central and East of England regions have seen the
completion of an impressive number of deals over the last twelve months.
To celebrate this, we have analysed all the transactions that have
been completed and compiled a list of transactions that, in our
opinion, are noteworthy – not just in terms of size, value or complexity,
but also in terms of interest and significance to the region.
� Everest bought by Better Capital Manufacturing
� MBO of Midlands Industrial Glass Manufacturing
� Wow! Stuff receives investment from the BGF Manufacturing
� BRM Packaging bought by J Mindal Manufacturing
� LDC funds MBO of Benson Group Manufacturing
� Cambridge Water acquired by South Staffordshire Utility
� UK Drainage Network merges with Waterflow Group Engineering
� Acquisition of Fountains Environmental by OCS Facilities management
� Acquisition of Workplace Systems International Information Technology
� Acquisition of Applied IT solutions by Integra ICT Information Technology
� Autologic Diagnostics MBO funded by ISIS Equity Technology
� Echo Management Buyout Technology
� TransLinc acquired by May Gurney International Construction
� Acquisition of Direct Health Group by Accord Housing Group Property
� Equistone Partners Europe in investor buyout of Audley Travel Travel
DEALS OF THE YEAR
If you been involved in a deal that you would like us to feature,
contact Rebecca Baron, Commercial Manager, to discuss the
opportunities available – 0161 907 9718
CORPORATE FINANCE FROM THE MOST ACTIVE ADVISOR IN THE MIDLANDS IN 2010 AND 2011
www.bdo.co.uk
1 Experian Corpfin Advisor League Tables and M&A Activity 20112 Independent research carried out by Lighthouse Global (Mid Market Monitor 2012)3 Independent research carried out by Lighthouse Global (Client Listening Programme 2011)BDO LLP is authorised and regulated by the Financial Services Authority to conduct investment business.
BDO is the most active Corporate Finance team in the Midlands1. We have successfully completed over 90 deals from the Birmingham office in the last two years. We have the expertise to help maximise the value of your business by advising on a range and variety of matters including acquisitions, fund raising, flotations and disposals.
BDO is Number One for Exceptional Client Service – we have the highest overall satisfaction score of all the major firms and are the only firm to have increased its score over the course of the last three years2. 90% of our clients would recommend us to their colleagues and their network – 72%3 have already done so.
For information on how our Corporate Finance team can help you, please contact one of our Corporate Finance Partners:
Roger Buckley, Mergers and Acquisitions, tel: 0121 352 6213
Graham Elsworth, Transaction Services, tel: 0121 352 6212
John Stephan, Mergers and Acquisitions, tel: 0121 265 7264
Everest bought by BetterCapitalWindow manufacturer becomes first acquisitionfor fund managed by private equity firm
Everest, the well-known manufacturer,
installer and supplier of windows and doors
and whose headquarters are in Cuffley,
Hertfordshire, has been acquired by
Better Capital, the investment firm which
specialises in turn-arounds. Debt finance
on the deal was supplied by Bank of
Scotland and National Bank of Australia.
Better Capital now has a 98 percent
stake in Everest.
Everest recorded revenues of £173 million
in 2010, employs 810 staff across the UK,
and was acquired by a special purpose
vehicle owned by Better Capital with £25m
equity. This was the first acquisition made
by Better Capital from its BECAP12 fund,
the capital from which is now being used
as working capital and a restructure of
the requirements of the business.
The deal saw Nick Sanders and Peter
Williamson of Better Capital both joining
the board of Everest who will assist the
company with new marketing strategies,
new installation processes and the
modernisation programme of its factories.
Clearwater Corporate Finance and
KPMG were engaged by Everest to act
as financial advisers, while BDO supplied
financial advice to Better Capital. SJ
Berwin provided legal advice to Everest.
Chris Smith, partner at Clearwater
Corporate Finance, said: “Everest is
a business with a strong heritage and
well-known consumer brand with a
strong presence in the market. The funding
Better Capital has provided will support
the continued growth of the company and
its ability to take further market share.”
• Window and conservatory manufacturer with £173m revenues
in 2010
• Better Capital acquires the company with £25m equity
• First acquisition from BECAP12 fund (Fund II)
• Two Better Capital directors join Everest Board
Everest-manufactured conservatory
THE FACTS
BDO | BANK OF SCOTLAND | CLEARWATER CORPORATE FINANCE
KPMG | NATIONAL BANK OF AUSTRALIA | SJ BERWIN
MANUFACTURING
ADVISERS INVOLVED
GLASS MANUFACTURING
MBO of Midlands IndustrialGlassSecondary MBO funded by Key Capital Partnerssees the company speeding up its growth plans
Smethwick-based Midland Industrial Glass
(MIG) is one of the largest independent,
specialist glass processors in the UK,
supplying glass to retailers Marks &
Spencer, Next, New Look, Arcadia group
and John Lewis Partnership, as well as
Phillips and Aga Rangemaster.
Alan Taylor and Glenn Bicknell led the
secondary buyout which allows it to
capitalise on a number of future projects,
as well as building its client base and
market position. Taylor and Bicknell worked
with independent private equity firm Key
Capital Partners (KCP) which subsequently
invested in them, thereby providing an
exit for venture capitalist firm, Midven.
Taylor said at the time of the deal: “The
investment from KCP marks a new era
of our proud history. Having developed
into one of the leading players in the UK
glass processing market we look forward
to building on our position and continuing
to provide the highest quality service to
our clients.”
Richard Thomas, investment manager
with KCP said: “Our investment will help
MIG to grow the business through the
development of new products and markets,
we will also be seeking acquisitions to
further accelerate the growth of the
company.”
KCP was advised on the transaction
by corporate lawyers Peter McLintock
and Ryan Hawley of Squire Sanders.
Roger Penney of RPL provided commercial
due diligence on the deal, while Justin
Sparks of Springboard Corporate Finance
and Matt Harvey of Harvey Ingram
advised the management team at MIG.
Alex Hyde and Andy McGinn of Grant
Thornton provided financial due diligence
services.
• Glass specialist with growth plans
• Two directors plan MBO strategy
• KCP supplies investment for secondary MBO
• KCP replaces Midven as equity providers
Specialist glass processors in the UK
THE FACTS
GRANTTHORNTON | HARVEY INGRAM | RPL
SPRINGBOARD CORPORATE FINANCE | SQUIRE SANDERS
ADVISERS INVOLVED
TOY MANUFACTURING
Wow! Stuff receives investmentfrom the Business Growth FundWolverhampton company given growth funding to assist its plans for international development
Toy company Wow! Stuff, which is based
in Wolverhampton, received a £4.8m
investment from the Business Growth
Fund (BGF) to enable the business to
accelerate its impressive overseas interests.
Wow has grown rapidly in the last five
years with revenues totalling £20m with
its stable of toys, some of which were
named in Hamely’s Top 5 toys for
Christmas 2011. The BGF investment
is being used to bring forward new and
innovative products to market, as well
as expanding the company’s product
range into the US, where significant
growth opportunities exist.
In addition to the funding, BGF is con-
tributing operational support to the
company both through the introduction
of a non-executive director and chairman
and through enhanced management of
their supply chain and logistics.
Alistair Brew, Investment Director for
BGF, believes the company is well
placed to expand into the US, the world’s
largest toy market. He commented:
“Over and above its recent success with
blockbuster toys such as the Air Swimmer,
it has a desirable new product pipeline
that is exciting the toy market and
enjoying significant early stage interest
from global retailers.”
The investment deal was arranged and
led by Springboard Corporate Finance,
with Ernst & Young delivering the financial
due diligence, CiL the commercial due
diligence and Catalyst the management
due diligence. The Wilkes Partnership
provided legal advice to the company,
while BGF was advised by Pinsent Masons.
• The company has grown revenues to nearly £20m in 2011
• It is projected to deliver sales of nearly £100m by 2017
• £4.8m invested by BGF
• The lucrative US market is now targeted
Alistair Brew, Ewan Gribb, Dr. Graeme Taylor, Richard North,
Kenny McAndrew, Keith Pacey, Jon Birch
THE FACTS
CATALYST | CIL | ERNST & YOUNG | PINSENT MASON
SPRINGBOARD CORPORATE FINANCE | THE WILKES PARTNERSHIP
ADVISERS INVOLVED
BRM Packaging bought by J MindalWest Midlands investment company acquiresplastic packaging company for undisclosed sum
BRM Packaging designs, produce tools
and manufactures bespoke packaging,
including printing, to a wide range of
customers. The company is one of the
country’s leading makers of plastic
thermoformed packaging and point-of-
sale blister packs. The £2m-turnover
plastic thermoforming and contract-
packing business has 45 employees.
Despite the retirement of BRM’s managing
director, Neil McLaughlin, the company
were looking to put in place expansion
plans but needed added investment capital
to fund it. J. Mindal, a local investment
company grasped the opportunity.
The commercial arm of RBS Bank
supported the purchase with working
capital facilities to cater for the business
requirements and any future expansion.
Following the acquisition, which was
completed in April 2012, new jobs have
been created and additional contracts
have been won. One new contract is
with leading international freight delivery
network PALL-EX.
Ian Taft, director of Halesowen-based
J. Mindal, said: “It is our intention to build
on the company’s good reputation and
we will be listening to our customers to
see how we can grow our business with
them. In addition we will be implementing
a controlled programme of new investment
in the company going forward which
will generate new opportunities for local
employment.”
Law firm Hawkins Hatton advised J. Mindal
with a team from Mazars providing financial
advice. Other advisers on the deal were
legal firm Higgs & Son and Hamiltons
Accountants which advised BRM
Packaging.
• Packaging company with 45 employees has turn over of £2m
• Expansion plans required investment capital
• Investment company J. Mindal injects finance, with support from RBS
• New jobs and added contracts have now been secured
BRM Packaging’s state-of-ther-art machinery
THE FACTS
HAWKINS HATTON | HAMILTONS ACCOUNTANTS | HIGGS & SON
MAZARS | RBS BANK
MANUFACTURING
ADVISERS INVOLVED
LDC funds MBO of BensonGroupMBO of Leicestershire-based packaging manufacturer through investment made by LDC
Benson Group is one of the UK’s leading
privately owned printed carton suppliers,
producing packaging products for both
the food and pharmaceutical industries
for a wide range of UK and European
customers. Its impressive client list includes
Northern Foods, Reckitt Benkiser and
Greencore, as well as being an approved
supplier to the leading retail chains.
Benson Group employs more than 900
staff and operates from its head office
in Bardon in Leicestershire, as well as
strategically located manufacturing sites
in Newcastle, Gateshead and Crewe.
Over the last ten years, the company has
grown from a £10 million turnover single-
site operation, to a four-site £108 million
turnover organisation returning an EBITDA
of £10.7 million in 2011. Following the
MBO, sales of £120m in 2012 were
projected.
The MBO was led by Mark Kerridge and
Nick Benson who had two objectives:
firstly to facilitate the exit of two principal
family shareholders and, secondly,
to support the company’s future growth
strategy. LDC provided the equity capital
for the MBO, with HSBC supplying
the debt and revolving credit facilities.
Commenting on plans for the business,
Mark Kerridge said: “We expect to
continue with our current business strategy,
with further organic growth anticipated.
We will also be keeping a keen eye
on European developments.”
Benson Group had Grant Thornton acting
as financial advisers and Shoosmiths
as its legal advisers. Eversheds supplied
legal advice to LDC, while Gateley acted
as legal advisers to HSBC.
• Privately owned packaging suppliers with turnover in excess of £10m
• MBO sought to support future growth strategy
• LDC provided capital injection and HSBC supplied debt funding
• Further increases in sales projected in 2012
Mark Kerridge, MD, Benson Box
THE FACTS
EVERSHEDS | GATELEY | GRANTTHORNTON |
HSBC | SHOOSMITHS
MANUFACTURING
ADVISERS INVOLVED
UTILITY
Cambridge Water acquired bySouth StaffordshireRival buys Cambridge Water from HSBC whichhad bought the company from CKI
A complicated series of water company
acquisitions took place during the second
half of 2011, with HSBC Holdings taking
centre stage. In August, HSBC bought
Cambridge Water from the Cheung Kong
Infrastructure Holdings Ltd (CKI),
a consortium from Hong Kong, for £74.8m.
It then offered the water provider for sale
and it was acquired by Staffordshire
water for an undisclosed sum.
The chain of acquisitions was begun
earlier in the year when CKI bought
Northumbrian Water for £2.4bn. CKI then
needed to sell Cambridge water in order
to comply with UK merger rules.
South Staffordshire Water – which is a
portfolio company of Alinda Capital
Partners, the infrastructure investment
firm - supplies water services to Walsall
and other parts of the West Midlands.
The service that the two water companies
provides should be unchanged,
as Cambridge Water MD Stephen Kay
pointed out: “At Cambridge Water our
commitment is to deliver quality water
and excellent service to our customers.
This remains unchanged under our new
owners. We know the management at
South Staffordshire well and understand
their commitment to the water industry
both through their regulated business
and having contracted their subsidiary
companies over a number of years to
install water treatment equipment.”
With HSBC and Alinda overseeing the
financial aspects of the deal, three
law firms were involved. Freshfields
Bruckhaus Deringer acted for South
Staffordshire which also engaged
Martineau. For HSBC, Linklaters provided
legal advice.
• Cambridgeshire water supplier the subject of complex acquisition
• HSBC buys Cambridge Water from CKI from Hong Kong for £74.8m
• Offers business for sale and is bought by South Staffordshire Water
• Competition Commission investigate but clear the take-over
Cambridge Water offices
THE FACTS
ALINDA CAPITAL PARTNERS | FRESHFIELDS BRUCKHAUS DERINGER
HSBC | LINKLATERS | SGH MARTINEAU
ADVISERS INVOLVED
ENGINEERING
UK Drainage Network mergeswith Waterflow GroupTwo of the biggest independent drainage companieshave merged in a deal funded by Lyceum Capital
The deal saw UK Drainage Network and
Waterfow Group join forces to create a
company (now called UKDN Waterflow)
with a £50m turnover providing specialist
services to the household, industrial,
commercial, transport and water sectors.
Debt funding for the deal was arranged
by HSBC in Birmingham.
Since the merger UKDN Waterflow has
increased its presence across commercial,
transport and infrastructure sectors
for clients with large property portfolios,
including Network Rail, Thames Water,
London Underground and McDonalds.
This is part of the organic growth pro-
gramme and has led to an increase in
revenues of 30 per cent since the merger.
Simon Hitchcock, Partner at Lyceum
Capital and Non-Executive Director of
UKDN, said: “Waterflow is a high-quality
business which is a great fit for UKDN.
This is a transformative deal for both
businesses and is a key step in our strategy
to consolidate the highly fragmented
drainage services market, where legislation
and an increasing focus on driving
efficiencies through outsourcing is creating
new growth opportunities for businesses
with the right reach, experience and skills.”
Professional advice on the deal was
supplied almost exclusively from
Birmingham firms. BDO Corporate
Finance acted as financial advisers
to both UK Drainage Network and
Lyceum Capital, with New World
Corporate Finance acting for Waterflow.
The Birmingham office of Cobbetts
supplied legal advice to Lyceum Capital
and UK Drainage, while Finers Stephens
Innocent acted on behalf of Waterflow.
• Two major drainage companies see merger potential
• Lyceum Capital invests in merger
• HSBC supplies debt finance
• Merged company now turns over nearly £50m
Greg Beech, Chief Executive, UKDN Waterflow
THE FACTS
BDO | COBBETTS | FINERS STEPHENS INNOCENT
HSBC | LYCEUM CAPITAL | NEWWORLD CORPORATE FINANCE
ADVISERS INVOLVED
Acquisition of FountainsEnvironmental by OCS GroupBusiness assets of Banbury company bought bymajor facilities management group
OCS Group UK acquired part of the
business and assets of Banbury-based
Fountains through its administrators
at BDO for an undisclosed figure.
The move has seen OCS significantly
develop its position as one of the UK’s
leading facilities management operations.
The Fountains’ companies include
grounds maintenance, street cleaning,
landscaping, arboriculture and waste
management.
Fountains was incorporated in the US in
1980 to provide UK investors access to
natural hardwood forests but was originally
formed as a forestry management
operation in SW England. OCS Group
offers a wide range of services including
catering, security, cleaning, engineering,
horticulture, hygiene, waste management
and pest control.
One of the largest privately-owned facilities
services companies, the business employs
56,000 people worldwide.
The acquisition forms part of OCS’ plans
to further develop its position as a
leading player in the UK FM market.
The Fountains’ brand allows the group
to broaden its horticulture service
offering to customers. All Fountains
employees were able to transfer their
contracts to OCS under TUPE regulations.
Debt finance on the deal was supplied
by HSBC.
BDO and KPMG were the financial advisers
for Fountains, with Deloitte providing
financial advice to OCS. Legal advice
was supplied by Jones Day (Fountains)
and Nabarro (OCS).
• US forestry and grounds maintenance company
• OCS Group acquires to boost horticulture business
• Debt finance arranged by HSBC
• All Fountains staff transfer to OCS under TUPE
Fountains Environmental now part of OCS Group
THE FACTS
BDO | DELOITTE | HSBC | JONES DAY | KPMG | NABARRO
FACILITIES MANAGEMENT
ADVISERS INVOLVED
Acquisition of WorkplaceSystems InternationalMilton Keynes software company acquires sharecapital of software applications company for £41m
Wasp Management Software was formed
by its senior management team and
Lloyds Development Capital (LDC) and
the takeover of Workplace Systems
International is a significant move for the
company. Workplace Systems is a world
leader in the development and supply of
software products for the use of human
resource strategic management and has
a client list that includes BAe Systems,
British Airways, the BBC and Eurostar.
The offer for Workplace, which was
formerly called TeleWork Systems,
was made at 25p per share which valued
the company at approximately £41m.
Under the terms of the deal, the Wasp
management exchanged some of their
existing shares in Workplace for a com-
bined aggregate stake of approximately
17.5 per cent. Following the deal,
Workplace Systems International Plc
delisted from AIM.
Barney Quinn, CEO of Wasp, commented:
“Partnering with LDC, the UK’s leading
mid-market private equity house which
has ample skills and resources, will help
us to accelerate the growth of the
business and deliver on the ambitious
strategy we have for the company.”
Fairfax IS and Torch Partners were Wasp’s
financial advisers, with Torch also advising
LDC. Mazars Corporate Finance provided
financial advice to Workplace Systems
International, while CMS Cameron
McKenna supplied legal advice to LDC.
• Workplace Systems is a global supplier of software products
• Wasp and LDC saw a takeover opportunity
• Shares priced at 25p, making the value £41m
• Workplace de-listed from AIM following the deal
Workplace Systems is a leading supplier of software products
THE FACTS
CMS CAMERON MCKENNA | FAIRFAX IS | MAZARS
TORCH PARTNERS
INFORMATION TECHNOLOGY
ADVISERS INVOLVED
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THE FACTS
INFORMATION TECHNOLOGY
Acquisition of Applied ITsolutions by Integra ICTHitchen-based company bought by Integra ICTin merger in strategic takeover
Integra ICT, which once traded under
the Anglia Telecoms, is an award winning
specialist in the strategic management
and maintenance of integrated IT and
telecommunication systems. It helps its
clients to reduce costs, eliminate waste
and optimise performance within their
communications infrastructure.
Applied IT has a solid track record in the
provision of IT managed services and
was seen by Integra as a perfect fit for
it to take over. The acquisition therefore
allows Integra to expand and develop
the Applied products and services into
its own client base. With these clients
increasingly demanding integrated
voice and desktop technology solutions,
Integra’s management were keen to
buy an organisation that complemented
its core voice expertise.
Staff retention was a careful consideration
in the merger negotiations and Stewart
Peart, the former owner and MD of
Applied IT has now become a director
within Integra ICT and has taken a
key role in developing future business.
Integra ICT’s MD, Pas Ruggiero,
commented: “This acquisition allows
Integra to provide a complete IT
and communication technology offering.”
The acquisition was brokered by
Peter Watson from Prism Corporate
Broking while the legal side for Integra
ICT was handled by Duncan Walker
at Greenwood Solicitors. Legal advice
to Applied IT was provided by Maddersons
from their offices in Hertfordshire.
• Information Technology companies with complementary solutions
services
• Strategic acquisition sees merged company for undisclosed sum
• Staff retention a major consideration for both companies
• Former owner and MD of Applied IT now a director of Integra ICT
Peter Watson (Prism Corporate Broking), Pas Ruggiero (Integra ICT),
Stewart Peart (Applied IT), Martin Miller (Maddersons Solicitors, acting for
Applied IT), Duncan Walker (Greenwood Solicitors – acting for Integra ICT)
GREENWOOD SOLICITORS | MADDERSONS
PRISM CORPORATE BROKING
ADVISERS INVOLVED
TECHNOLOGY
Autologic Diagnostics MBOfunded by ISIS EquityCar diagnostics company in £46m managementbuyout with assistance from ISIS Equity Partners
Autologic Diagnostics is one of the fastest
growing vehicle diagnostic services
companies in the world and supplies
independent garages with diagnostic
solutions and back-up support to enable
them to service and repair leading car
brands.
Based in Oxfordshire, and with offices
in New York and Hong Kong, Autologic
is one of the fastest growing vehicle
diagnostic services companies in the
world, with a growth of 125% over the
past two years. Since initial investment
by Foresight and Octopus Investments
in 2009, Autologic’s turnover has grown
from £6.2m in 2009 to £14.5m in 2011.
The deal has seen Foresight continuing
to part-fund the company while Optus
Investments has exited.
The major investment by ISIS Equity
Partners will not only allow Autologic’s
current shareholder base to realise their
holdings but will also support the
continued overseas expansion plans
where there is significant potential for
growth. Debt finance on the deal was
supplied by HSBC Leveraged Finance.
WK Corporate Finance financially advised
Autologic, and Catalyst Corporate Finance
did the same for ISIS. Legal advice was
supplied by Olswang (for ISIS) and
Shoosmiths (for HSBC). • Automotive diagnostics company growing fast
• Management team announce a management take-over
• ISIS and HSBC fund £46m package
• Foresight continues to invest but Optus Investment exits
Autologic Diagnostics back-up support
THE FACTS
CATALYST CORPORATE FINANCE | HSBC | OLSWANG
SHOOSMITHS | WK CORPORATE FINANCE
ADVISERS INVOLVED
TECHNOLOGY
Echo Management BuyoutEquity investors assist technology outsourcing andlogistics company Echo in a management buyout
The management of Milton Keynes-based
Echo were given financial backing of
£1.3m from Catapult Venture Managers
to fund their buyout of the company. The
company now plans to use the injection
of cash to increase business volumes
from existing customers, which include
Fujitsu, Getronics and Phoenix IT, and
acquire new customers at the same time.
Echo works with IT services companies
and employs 130 staff, with another
200 technicians working in the field.
The company’s turnover is around £13m
and has built an excellent reputation for
providing technical and logistical support
services to its growing number of clients.
Steve Bolton, Echo’s CEO, commented:
“Echo has positioned itself well to build
on the strong foundations it has
developed in recent years, following its
core principles of quality, security,
technology and innovation, delivering
‘excellence in field service’.”
Richard Bucknell, fund principal at
Catapult, said: “Echo’s management
team is highly experienced in this market
and has strong ambitions to continue to
grow and develop the business.”
Further finance was raised through
asset-based lending arranged by Centric
Commercial Finance. Centric commercial
director Tim Hawkins added: “Centric
recognised the strength of the manage-
ment team along with their excellent
technical expertise. Backed by Catapult
we believe this business has a great
future.”
Echo’s management team had Mazars
and BDO as financial advisers,
while it had Browne Jacobson and Tollers
supplying legal advice. RSM Tenon
provided financial advice to Catapult,
while Bermans acted as legal advisers
to Centric.
• Technology and outsourcing company seeks MBO
• Catapult Venture Managers supply £1.3m assistance
• Centric Commercial Finance provide asset-based finance
• Management now aiming to expand order book
THE FACTS
BERMANS | BDO | BROWNE JACOBSON
CENTRIC COMMERCIAL FINANCE | MAZARS | RSM TENON
TOLLERS
ADVISERS INVOLVED
Richard Buckney, Catapult Venture Managers; Steve Talbot, Mazars;
Steve Bolton, Echo; Mike Rose, Echo; Tim Hawkins, Centric
TransLinc acquired by MayGurney InternationalConstruction company buys specialist vehiclehire company for £34.9m
TransLinc, which is based in Lincoln, is a
supplier of specialist vehicles to local
authorities on contract hire, was original-
ly formed within Lincolnshire County
Council. In 2007, the company was sub-
ject to a £50m buyout backed by invest-
ment company RJD Partners.
May Gurney Integrated Services, a con-
struction and civil engineering company,
made the strategic purchase of
TransLinc, giving RJD a return approxi-
mately 2.5 times its original investment.
RJD has now exited from its investment
in TransLinc.
Since 2007, TransLinc has grown to
become the market leader in its field,
with a large number of local authorities
having contracts with the company
across the UK and has further growth
plans for the future. The company offers
its local government customers a
bespoke one-stop service. The acquisi-
tion by May Gurney has seen the value
of TransLinc rise to £65.6 million.
Paul Wood, MD of TransLinc, said of the
deal: “There remain considerable oppor-
tunities for the business to grow further
as it continues to focus on its customers’
needs within a difficult fiscal environ-
ment. The team is looking forward to
becoming part of the May Gurney group
and developing the business as part of a
larger organisation.”
RJD Partners and the other shareholders
of TransLinc received corporate finance
advice from PwC and Grant Thornton
and legal advice from Eversheds and
Browne Jacobson. Altium Capital and
Hawkpoint Partners supplied financial
advice to May Gurney, while Wragge &
Co provided it with legal advice.
• Specialist vehicle hire company supplies local authorities
• Company formed out of Lincolnshire County Council
• Construction and civil engineering company acquires for £34.9m
• Original investment company exits, more than doubling
investment value
TransLinc specialist vehicle
THE FACTS
ALTIUM CAPITAL | BROWNE JACOBSON | EVERSHEDS
GRANTTHORNTON | HAWKPOINT PARTNERS | PWC | WRAGGE & CO
CONSTRUCTION
ADVISERS INVOLVED
PROPERTY
Acquisition of Direct HealthGroup by Accord Housing GroupMidlands housing organisation buys domiciliarycare business for undisclosed sum
West Bromwich-based Accord Group
acquired Nottingham-based Direct
Health Group in a deal which was driven
by a planned expansion in services.
The deal, which is thought to have created
2,000 new job opportunities, will see
Direct Health continue to provide care
to people in their own homes but now
as a wholly-owned subsidiary of Accord.
Direct Health is the ninth largest home care
provider in the UK. Turnover at Direct
Health in the year to 30 September 2010
was £31.4m.
The Accord Group is made up of six
organisations which provide 11,000
homes and a range services, including
care and support, to about 50,000
people. The group is one the largest
housing associations in the West
Midlands, employing almost 1,800 staff
and operating with a combined revenue
and capital spend of £106m a year.
The deal will see Accord Group nearly
doubling its health and social care
turnover. For Direct Health, the deal will
accelerate its strategy of providing a
broader range of care related services into
the communities that it serves and allow
it to expand into new geographical areas.
Jonathan Vellacott, chief executive
of Direct Health, said: “With the support
of Accord we will continue to strive
to be both an employer of choice and
the provider of choice in the communities
where we operate.”
The Mergers and Acquisition team
at BDO acted as advisers to Accord
Housing, while Devonshires provided
legal advice to the housing group.
• Midlands housing group looks to expand its health
and social care portfolio
• Supplier of care in people’s homes targeted for take-over
• Acquisition to create 2,000 new jobs
• New services within new geographical areas now being supplied
Chris Hardy, Accord Group and John Vellacott, Direct Health
THE FACTS
BDO | DEVONSHIRES
ADVISERS INVOLVED
TRAVEL
Equistone Partners Europe ininvestor buyout of Audley TravelEuropean private equity firm invests in Oxfordshire-based travel company for an undisclosed sum
Audley Travel is one of the UK’s leading
tailor-made travel businesses, offering
bespoke holidays in 80 countries and
employing 170 people. By the end of
December 2010, Audley generated £63m
revenues, an increase of 17 per cent on
the previous year.
In the deal, which was closed in March
2012, Equistone Partners Europe, one
of the leading mid-market private equity
investors, has taken a stake in the
company, with the debt finance being
supplied by Barclays and Royal Bank
of Scotland. The investment is being
used to support further continued
investment in Audley’s products, operations
and team to enable it to maintain its
market-leading offerings.
Phil Griesbach, a director at Equistone
Partners Europe, commented at the time
of the deal: “Audley Travel stands out as
a highly differentiated business, with its
uniquely bespoke product and high level
of customer service. The business has a
great team and a strong business model,
which help to explain the consistent
organic growth since its foundation.
It is well positioned as a leader in its
sector which has proved to be resilient
to the current economic climate.”
Many of Birmingham’s professional firms
advised both Audley Travel and
Equistone. For Audley, BDO Corporate
Finance provided due diligence and
tax services to Audley, PwC supplied
commercial due diligence and Blake
Lapthorn supplied legal advice.
For Equistone, Deloitte provided corporate
finance and tax advice, while Pinsent
Masons were the firm’s legal advisers.
• Independent travel agency displays solid growth
• European private equity house invests
• Investment to fund consolidation and growth in products
and operations
• Founders and senior management to be retained
Tailor-made holidays from Audley Travel
THE FACTS
BARCLAYS | BDO | BLAKE LAPTHORN | DELOITTE
PINSENT MASONS | PWC | ROYAL BANK OF SCOTLAND
ADVISERS INVOLVED
Your questions answeredThere’s nothing like a bit of free advice from an expert. The value
of learning from those who are at the coalface of dealmaking cannot
be underestimated. We have asked professionals from a range
of business areas and sectors to provide us with the benefit of their
expertise on a diverse set of issues and areas of concern.
Whatever type of deal you’re involved in or whatever stage you’re
at in the growth of your business, we’re sure there will be something
of interest for you. Whether you are thinking of selling, purchasing
� Pension liabilities
Laurence Holden, Alexander Forbes
� Selling your business
Roger Buckley, BDO LLP
� Asset-based lending
Ian Bramley, Burdale Financial Limited
� Acquisition growth
Shaun Middleton, Dunedin
ASK THE EXPERT
or growing a business, the following pages should give you much
food for thought.
Would you like to share advice on your area of expertise?
Contact Rebecca Baron, Commercial Manager, to discuss the
opportunities available – 0161 907 9718
Pension liabilitiesWill pension auto-enrolment issues derail the corporate transaction?On both the buy and sell side of any
transaction, the cost of auto-enrolment
cannot be ignored!
Those buying a business should be aware
of the potential increase in take-up of the
pension scheme (and employer contribu-
tions), as a result of auto-enrolment,
where currently there may be low take-up
rates. Those selling a business should be
able to show how the employee benefits
plan adds value to the business, together
with evidence of compliance with auto-
enrolment requirements – those that
exceed these basic requirements might
imply greater employee engagement,
a key factor for any purchaser.
With auto-enrolment just around the
corner, employers have to get up
to speed with everything that is required
in order to be ready in time, but is there
still work to be done? For employers
who want to implement auto-enrolment
efficiently within their company, getting
to a place where they fully meet the
requirements is the big challenge.
A starting point for many employers is
to undertake a full auto-enrolment audit
of their current pension scheme (where
applicable) in order to consider a suitable
route map to full implementation.
Typically, an auto-enrolment audit will
include:
• A project plan that will detail the
actions required and critical dates,
including the staging date.
• An audit of existing pension scheme(s)
against the criteria for a qualifying
scheme and, subsequently, a gap
analysis and recommendations for
any required changes.
• A calculation of the direct cost of auto-
enrolment to the business and
ASK THE EXPERT
Principal, Third party businessrelationships, Alexander ForbesConsultants & Actuaries
Tel 0161 242 8311 Email [email protected]
comparison of a range of options
to meet the requirements. Employers
should consider the impact on their
wider employee benefits and the
indirect costs associated with auto-
enrolment and explore methods to
control or even reduce them.
• Identification of the different pension
scheme options available and
recommendations of the correct strategy
for the business such as salary
exchange or a communication strategy
to create employee engagement.
• Detailed administration and process
requirements, along with
recommendations to make these
as efficient as possible.
• Detailed minimum employee
communication requirements and
recommendations for an appropriate
communication strategy.
“A starting point for manyemployers is to undertake a full auto-enrolment audit.”
View our company profile atthe Insider Business Directory
LAURENCE HOULDEN
Selling your businessIs now a good time to sell a business?
Surprisingly or not, now is a good time
for business owners to consider
their options; trade buyers have returned
to the market, private equity houses
are anxious to invest and demand for
deals is outstripping supply. Additionally
a growing number of international players
have set their sights on our region’s
businesses so putting an increasing
amount of thought into your exit options
is most definitely worth doing if it is
part of your business strategy and not
just a reaction to market conditions.
Many acquirers are cash rich, having cut
costs and chased efficiencies throughout
the recession, and are looking to
acquisitions in order to meet their growth
targets. But they are naturally still very
cautious and cannot afford to get their
M&A decisions wrong.
Trade buyers are not only looking at
competitors but are turning their attention
to ‘bolt ons’ as a way of providing a
valuable route to growth in flat markets.
Private equity houses also are actively
seeking investment opportunities,
with the weight of un-invested funds
to deploy after several quiet years lying
heavily on PE shoulders.
Many businesses have pressed the
brakes on their exit strategies over the
last few years – given the economic
environment and wavering confidence,
this is understandable. However, whether
confidence makes a comeback, more
and more buyers are looking to return
to the market to find growth.
For many there is a wide spread
assumption that vendors will not get
a good price for their businesses but
this is not always the case. The truth
is that solid businesses that have a track
record for growth can get a good price
for their business. In addition, the UKs
ASK THE EXPERT
Corporate Finance Partner,BDO LLP
Tel 0121 352 6213 Email [email protected] www.bdo.co.uk
capital gains tax (CGT) regime is still
attractive to entrepreneurs looking to sell
compared to current income or dividend
tax rates.
As with all things, preparation is key.
In order to exit successfully, you need to
start planning early and seek professional
advice. This will give you peace of mind
throughout the transaction, both pre and
post-sale, but it will also give you the
flexibility needed to mould your business
into shape and put you in a stronger
position during the negotiation process.
“Now is a good time for businesses to considertheir options”
ROGER BUCKLEY
View our company profile atthe Insider Business Directory
Asset-based lendingIs it now firmly established as a mainstream sourceof funding in the UK?The liquidity constraints of recent years
have changed the face of UK corporate
banking. As such, businesses and their
advisors now find themselves looking to
alternative sources of funding instead of
relying on traditional bank lending. This has
been coupled with tough economic trading
conditions, ‘double-dip’ recession fears
and declining leverage levels. As such,
many businesses now find themselves
‘out of formula’ and breaching covenants
even though they continue making profits
and remain stable in their markets.
ABL has emerged strongly in the UK,
especially over the past two years,
in direct response to the following:
Under-served clients. Retreating corporate
lenders such as clearers and property
funds have created opportunity.
Favourable lending structures. Unlike
other financing options, ABL is not
covenant driven. The structures are also
based on asset values and balance
sheet structures, rather than earnings
and cashflow.
Flexible structures. Evergreen or ‘revolving’
structures support corporate growth
and investment without depleting cash
reserves
Funding for inventory and working capital.
This is especially relevant for retailers in
the current market, in which retail is
out of favour with traditional lenders due
to its perceived risk and the notable
recent High Street casualties.
ABL has developed and become more
sophisticated, user-friendly and cost-
effective in the UK. It has become the
preferred financing option to increasingly
more stable and high-profile businesses,
whilst retaining its expertise and innovation
within the turnaround and rescue sectors.
ASK THE EXPERT
Director, Burdale Financial Limited, a Wells Fargo Company
Tel +44 (0)121 616 0310 Web www.burdale.co.uk
ABL structures are being used to support
organic growth, change of ownership via
acquisition/MBO/MBI and other corporate
finance activities, as well as in the
refinancing of existing corporate lending,
often away from clearing banks.
Significant liquidity has been injected
into the UK ABL market as overseas
financial institutions have identified the
opportunity and either entered it directly
or acquired an existing UK participant,
as demonstrated by the recent acquisition
of Burdale Financial Limited by Wells
Fargo and Company. This will further
enhance the ABL offering to the UK
corporate market and, to answer the
question, it will ensure that ABL is here
to stay as a mainstream form of lending
to UK businesses.
“Unlike otherfinancingoptions, ABL is not covenantdriven.”
IAN BRAMLEY
View our company profile atthe Insider Business Directory
Acquisition growthWhat makes a successful acquisition strategy?
Eleven portfolio acquisitions in a year –
Dunedin has been on the acquisition
trail in order to drive the growth and
internationalisation of its portfolio
companies. What makes a successful
acquisition strategy? Shaun Middleton,
Managing Partner of Dunedin, provides
his insight and tips:
• Start with a strong platform
for consolidation
The first rule is to expand from a
position of strength. Foundations
are key and a robust platform is
needed to successfully pursue
a buy and build strategy. A good
management team is crucial in order
to integrate acquisitions while
continuing to drive the core business.
In order for this to happen the business
must be in a robust financial and
competitive position to minimise
the risk of distraction. Finally, it is
important that the business has high
quality financial reporting, IT systems
and business processes in place
that can be exported to the acquired
companies.
• Select your acquisition
target carefully
When considering an acquisition target
take the time to carefully assess
the business, to ensure that it fits with
the long-term strategy of your platform
business. Crucially, this should include
evaluating the cultural compatibility,
particularly with a people business.
Conducting thorough due diligence
is essential so that you can be certain
of what you are buying by delving
deep into the company’s financial,
operational and legal position.
Once this is complete, build a
detailed business case outlining
why the acquisition will create
shareholder value.
ASK THE EXPERT
Managing Partner, Dunedin
Tel +44 (0)131 225 [email protected]
• Prepare and execute a rigorous
integration plan
Poor integration planning leads to bad
results, from weak decision-making
to a lost focus on everyday operations.
A smooth integration starts with
identifying, prioritising and measuring
synergies long before the deal goes
through. Take time to plan the newly
integrated organisation structure,
focusing not only on the people
and the culture of the business but
also on processes and systems such
as financial reporting, IT and internal
and external communications.
Companies that succeed in maximising
long-term value post acquisition have
a rigorous integration plan that allows
them to plan for not only short-term
issues, such as keeping the business
running, but also for long-term issues,
such as how to transform the newly
acquired business.
“The first rule is to expandfrom a positionof strength.”
SHAUN MIDDLETON
View our company profile atthe Insider Business Directory
The Lexicon of DealmakingDo you know your VIMBO from your BIMBO? If not, don’t worry. Kurt Jacobs explains all…
Go on, admit it. Have you ever considereddoing a deal, but turned away because, quite frankly, you couldn’t tackle the technical phrases or learn the lingo?
To save your blushes, Insider has spoken to a selection of top dealmakers to get theirtake on what the phrases and killer words are in the world of corporate transactions.
The next few pages contain our list of definitions that should help you pass musterat the negotiating table, and perhaps give you a few ideas into the bargain.
A–Z OF DEALMAKING
Where you see this symbol, click to view adviserswho can provide advice on this topic.
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ASSET-BASED LENDING
Finance secured against assets such
as debtors, machinery, even intellectual
property rights or trade secrets. Can
be risky for the lender, so often charges
higher interest rates.
BIMBO
In this context, not a beautiful but
intellectually challenged individual.
A buy-in management buyout is a joint
acquisition by incumbent and new
management: the love child of an
MBO and an MBI, but we’ll come to
those later.
BULLET
Repayment of a loan in a large lump
sum. So called because it comes in
one slug.
CAPITAL
Total share subscription monies injected.
CASH-OUT
Management team taking money out of
a business in a secondary buyout.
CONFIDENTIAL
DISCLOSURE AGREEMENT
Agreement to ensure non-disclosure
of confidential information exchanged
between the parties. The ‘I’ll show you
mine if you show me yours’ stage in
negotiations.
DUE DILIGENCE
The process of having a good rummage
through the files, under the desks and
across the spreadsheets to make sure
what you’ve been told about a company
is true. Due diligence is an investigation
into a company’s financial and
commercial activities in connection
with a proposed acquisition or disposal.
Typically involves professionals looking
at matters such as employment terms,
pensions, litigation and contracts, but
can go as far as intellectual property,
green issues and the quality of the
management team.
DEFERRED PAYMENT
A payment made after rather than at the
conclusion of a deal. Deferred payments
incentivise sellers who are still linked to the
business or give security to a buyer that a
vital customer relationship is strong. It’s
common for deferred payments to be
secured to give sellers confidence that they
will actually be paid. Patience is a virtue!
A–Z OF DEALMAKING
DOG
Often prefixed with “what a complete”:
A catastrophe of a company,
unattractive, difficult to manage or train,
little potential and in imminent danger
of rolling over.
EARN-OUT
A type of deferred payment where the
price paid is dependent on future profits.
Used where the seller reckons the
company is worth more than the buyer
reckons.
EQUITY STAKE
Share of a business and its profits,
with which the holder can usually vote.
FLOTATION
Putting shares in a business up for sale
on public markets such as the London
Stock Exchange, AIM, Plus or Nasdaq.
Lancashire-based Inspired Energy
floated on AIM in 2011 – the North
West’s only flotation of the year.
GAIN CAPITAL
Capital gained on a sale.
GOODWILL
The difference between price paid for
a business and value of its assets.
The guesstimated value of those vague
bits of a business such as contacts,
the value of the brand and so on.
HOLD HARMLESS
Acknowledgement that you may not rely
on a report shown to you prepared for
another party.
IBO
Institutional buyout. When a private
equity house acquires a business
directly from vendor. An MBO without
the management bit.
A–Z OF DEALMAKING
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IPO
Initial public offering: see flotation.
IRR
Internal rate of return. The average annual
compound rate of return received over
the life of an investment. A key indicator
used by institutions in appraising
investments in deals.
JOINT VENTURE
An entity created and shared by two
or more companies.
KYC
Know your customer. The customer/
client identity checks that advisers require.
LBO
Leveraged buyout. A cheeky takeover
using a target company’s own assets as
collateral to raise money to finance the
deal. Normally the loans are repaid from
the company’s cash flow, or by selling
assets.
LOAN NOTE
A loan to a business, often provided by
a private equity house.
MBO
Management buyout. Incumbent man-
agement buying a business.
MBI
Management buy-in. Same as an MBO
but to new management rather than the
incumbent guys.
MEZZANINE
Financing between bank debt and equity
in terms of risk and return. Like the
mezzanine floor in a building, these
loans sit above bargain-basement
secured debt, but below the penthouse
apartments of equity share capital.
NEWCO
The less than imaginatively named
company formed to buy the assets and
ongoing trade of a business, but usually
leaving liabilities with the old. Similar to
the old “get out of jail free” card.
NON EQUITY SHARE
A share in a business without voting
rights. The bystanders’ bit of a buyout.
A–Z OF DEALMAKING
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ORDINARY SHARES
Stake typically held by management and
family in private companies that entitles
them to income after others – such as
private equity – have had their cut.
OVERAGE
Additional consideration, payable if an
early sell-on gain is made by the acquirer.
PRIVATE EQUITY
Investing for equity in companies not
listed on a stock exchange; normally
through a fund set up for the task.
PUB
A company losing cash at an alarming
rate. Derived from the idea that
a drinker who owns a pub tends to
consume profits.
PUP
A would-be star that turns out to be a
dog. Often prefixed with “sold a total”.
QUIDS
or quid pro quo. More or less equal
exchange of goods or services.
RATCHET
A mechanism whereby management’s
equity stake is increased – or cut – on
hitting set targets.
REVERSE TAKEOVER
A backdoor flotation, where an unlisted
company acquires a smaller listed
company. A recent example in the
North West was when Nelson-based
Daisy Communications floated on AIM
following the reverse takeover of
Freedom4 to create Daisy Group.
ROLL OVER
Where vendor or management exchange
a stake in a business for part of a Newco.
SBO
Secondary buyout. Investors sell their
stake, often to the management,
in conjunction with a second private
equity funder.
SENIOR DEBT
Bank debt, usually ranks before other
loans in the event of winding up.
STAR
A shining potential or actual acquisition
around which a host of wannabe
investors and advisors orbit in hope.
A–Z OF DEALMAKING
SUBORBINATED LOAN
A loan low in the pecking order, such as
mezzanine, repayable only after other
debts have been paid off more risky
from a lender’s view.
SWEAT EQUITY
Stake in a business in exchange for work
done by the shareholder.
SWEET EQUITY
The voting shares issued on an IPO to
management and the private equity
investor which benefit the most from
capital gains on a sale.
TRADE SALE
The most common form of exit, selling
out to another business, often a rival.
UNDRAWN
Part of any funding facility available to
be used.
VANILLA DEBT
Plain debt. No complexities.
VENDOR
Posh word for seller; without whom no
deal is possible.
VENDOR FINANCE
Finance provided by the vendor, who has
the mixed pleasure of paying to sell their
own company. Becoming more common
as MBO teams struggle to raise cash,
notably banks, to get deals away.
It’s usually in the form of deferred loans
or shares in the new entity. Often used
where vendors’ expectations of the
company’s value differ from the opinions
of management/investors.
VENTURE CAPITAL
Private equity for more risky early-stage
businesses. Like Dragons’ Den but with
a bit more due diligence.
A–Z OF DEALMAKING
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VIMBO
Vendor Initiated Management Buyout.
Usually concerns an owner who wants
out but finds that his management teams
can’t stump up all the cash needed for
a clean exit. During a VIMBO the vendor
is usually forced to resort to rollovers,
deferred payments and earn-outs.
WARRANTIES & INDEMNITIES
Legal confirmation given by the seller,
regarding matters such as tax or
contingent liabilities, to assure the buyer
that any undisclosed liabilities that come
to light will be settled by the seller.
EXIT
When investors finally get out and get
their cash. Can be anything from a few
months to ten years after a deal is signed.
YIELD
Annual percentage rate of return against
capital.
ZERO COUPON BOND
A bond that pays no interest, and
therefore attracts little interest. Not
surprisingly zeroes are traded at a
substantial discount to their face value.
ZOMBIE
A zombie company is one that is
technically dead – all but insolvent due
to a large debt burden, but is kept alive
by the patience of the bank and/or the
tax authorities.
A–Z OF DEALMAKING
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Your route tobusiness financeWith bank lending continuingto be problematic, Midlands,Central and East of Englandbusinesses must look elsewherefor fund development or expansion plans. We outline some of the channels available.
So, you’re in business, things are going
relatively well, turnover is at the levels
expected, customers are placing repeat
orders, and your workforce appear to
be happy - you’re even making a profit.
But the technology you’re using needs
upgrading, you are looking to develop
a new range of products and you need
to take on more staff as demand is
increasing. You need money to fund all this.
This scenario might well be familiar to
those who have started businesses and
have ambitions to see it grow and
ACCESS TO FINANCE
expand. But an equally familiar scenario,
and an increasingly common one
these days, is that the first port of call
to discuss this – your bank – can’t,
or won’t, help.
Despite the Government’s best efforts
to ease the flow of lending from banks
to small businesses, the level of lending
to small businesses has contracted
significantly and those which are lending
are charging more for the service as the
banks seek to strengthen their balance
sheets. Government initiatives such
as the National Loan Guarantee Scheme
and the recently announced Funding
for Lending scheme are steps in the right
direction but more needs to be done.
The reticence in bank lending has been
a major opportunity for private equity
and venture capital firms and this
certainly the case in the Midlands,
Central and East of England which has
seen a major upturn in equity finance
against more traditional forms of debt
finance. And the region has benefited
hugely from the large sums of money
allocated to it from Europe, most notably
through European Regional Development
Fund (ERDF).
This, together with the fact that in
December 2011 the European Commission
published its Action Plan to improve
and expand the venture capital market,
are major factors in smoothing the
access to more financial resources
by SMEs. Furthermore, the European
Investment Bank has pledged to maintain
its SME loan activity, especially in the
cultural and creative sectors.
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So, what funds are available to businesses
in the Midlands, Central and East
of England? For companies in and around
Birmingham, two of the most important
funds are the Equity Fund and the Loan
Fund. Run by Finance Birmingham, which
works alongside Birmingham City Council,
the Funds is a £10 million package
of loans that are being made to SMEs
based in Birmingham. The loans support
a diverse range of Birmingham companies
which have previously been unable to
access funding.
Finance Birmingham also manages the
Solihull Business Loan Fund. This £1m
Fund was launched by Solihull
ACCESS TO FINANCE
Metropolitan Borough Council to be made
available for SMEs based in Solihull.
The East Midlands Early Growth Fund is
a seed venture capital fund that invests in
exciting start-up and early-stage businesses
in the East Midlands, or businesses
planning to relocate to the region. As
a ‘seed’ fund we expect to be the first
institutional investor in a company,
and can invest up to £100,000 in the
seed round, followed by another
£100,000 at least six months later.
Exceed – Midlands Advantage Fund
supports growing businesses across the
West Midlands region. Funded through
an investment by Lloyds Development
Capital (LDC), Advantage West Midlands
and the European Regional Development
Fund (ERDF), the fund is managed by
Midven, an owner-managed venture capital
company.
Midven also manages the Early Advantage
Fund. Part by the Solutions for Business
portfolio of publicly funded business
support, the £8m Early Advantage Fund
provides investment for small businesses
within the West Midlands region. The
fund makes an initial investment of up
to £125,000 if matched by private money,
and can invest a further £275,000 in
later rounds.
The route to raising finance for your
business is not necessarily easy and of
course there are no guarantees that the
fund manager will agree to provide the
cash you need but there is plenty of
expert professional advice that can be
sought and an excellent range of funds
from which to choose.
Companies that are looking to apply
for funding must concentrate on ensuring
that a good management team is in
place; quality information is available
to funders on the business and its future
prospects; and a sound business plan
is written.
The Equity Fund
Invests in: companies with min. turnover of £1m per annum and/or min. enterprise value of £1m
Typical investment: £250k-£1m Managed by: Finance Birmingham
Contact: www.financebirmingham.com 0121 233 4903
The Loan Fund
Invests in: limited companies which can demonstrate a two-year trading track record
Typical investment: £100k-£1m Managed by: Finance Birmingham
Contact: www.financebirmingham.com 0121 233 4903
The Solihull Business Loan Fund
Invests in: SMEs based in Solihull
Typical investment: £100k-£200k Managed by: Finance Birmingham
Contact: www.financebirmingham.com 0121 233 4903
The East Midlands Early Growth Fund
Invests in: start-up and early-stage businesses with clear growth potential, across all sectors
Typical investment: £100k-£400k Managed by: e-Synergy
Contact: www.earlygrowthfund.com 0115 701 0077
Early Advantage Fund
Invests in: high growth start up, early-stage & medium-sized enterprises with or without revenues
Typical investment: £125k-£275k Managed by: Midven
Contact: www.midven.com 0121 710 1990
Exceed - Midlands Advantage Fund
Invests in: growing businesses across the West Midlands region
Typical investment: £250k-£750k Managed by: Midven
Contact: www.midven.com 0121 710 1990
Key Funds available in the Midlands, Central and East of England
The art of sellinga businessThere is a great deal more to selling yourcompany than just advertising it. Making sure your business is in the bestpossible position takes skill, attention to detail and good advice. We examinewhat’s involved and offer some top hintsfor success.
For any prospective buyer or investor in
a business – be it an outright acquisition,
management buyout, or joint venture –
they need to be convinced that they are
not taking a risky punt but they are
putting their money into a well-managed,
efficient and ‘clean’ company.
It sounds obvious but it’s surprising how
many potential deals fail through a com-
bination of poor planning and ill-judged
management decisions (for more on this
see the article “A Great Deal Worse” on
page 38).
GROOMING YOUR BUSINESS FOR SALE
Knowing when to sell your business is as
important as knowing how. Of course the
choice of timing might well be dictated
by personal circumstances (ill health or
injury perhaps) but whether it’s a snap
decision or something that you’ve been
considering for a while, the principles
and ground rules for success are the
same and it all needs careful and
detailed thought and preparation.
And ‘preparation’ is the key word in all
this. Having good preparation plans in
place is the linchpin to any successful
sale. As the saying goes, fail to prepare
and prepare to fail.
And a good place to start is taking a hard,
honest and perhaps critical look at the
business. It’s worth remembering that all
aspects of your business will be scrutinised
by your prospective buyer, so it’s important
to identify and deal with any issues that
might concern a buyer to ensure your
business looks an attractive purchase.
A pre-sales review or internal due diligence
that should identify any issues before the
sale process begins. Understanding
your accounts, forecasts and projections,
and how they are prepared is important,
Prepare properlyPut plans in place early and cover all bases.
Make sure your houseis in orderTake a reality check with aholistic review of the business.
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as well as being able to explain any
unusual reductions in profit and turnover.
Preparing a SWOT analysis may help with
this. Giving your potential buyer information
regarding your Strengths, Weaknesses,
Opportunities and Threats at this stage
will highlight problems early so they can
be resolved prior to the sale.
The Sales Memorandum is the selling
document that sets out what the business
is all about and what its full potential might
be. It should really create interest and bring
your prospective buyer to the negotiating
table. It’s worth remembering that the
Memorandum is possibly the only piece
of information available to the purchaser
after the initial enquiry and is therefore
essential to kick-start the process.
The Memorandum will be taken as a
statement of fact, so any misleading
information or deliberately concealing
certain information is not something that
is recommended, as it will of course be
subject to scrutiny. Any skeletons in the
cupboard must be disclosed but it’s
a question of when rather than if.
The business’ financial record is naturally
one of the most significant pieces of the
Memorandum, and buyers ideally want
to see smoothly increasing profits with
good growth potential. Buyers will also
be looking at the structure and make-up
of the organisation. A well-organised
structure, with a strong management
team, is the ideal scenario.
The second-tier management team
members should be evaluated too.
GROOMING YOUR BUSINESS FOR SALE
Is your business planand Sales Memorandumrobust and crediblewith realistic targets?The devil might well be in thedetail but getting it rightshould be the differencebetween success and failure.
Don’t sweep anythingunder the carpetIt’ll all come out in the duediligence findings if you do.
Know your buyerTake time to understand whatthey are interested in and how they have behaved onany previous deals.
Test the marketUnderstand where your business fits in the market and how you compare withyour competitors.
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An analysis of whether they possess the
necessary skills to take on your responsi-
bilities will be necessary. A buyer may
well need to consider replacing any
dead wood within the organisation
and the senior management team is
no exception.
The selling of any business has implica-
tions for employees – after all, they will
have helped you to create the business
that you are selling. Will there be
redundancies? Will staff transfer from
one organisation to another? The plans
of the buyer on these, and other, HR
issues should be extracted as early
in the process as possible.
It is always beneficial to consider your
business from your potential purchaser’s
perspective as this will draw out all the
positive aspects of your business. It may
well be that you are having to think
about selling at short notice – business
life is never predictable of course.
This might be a difficult proposition,
especially as running the business might
well be taking up all your time. But early
preparation, as we have seen, is never
wasted time.
Finally, find a trusted team of advisers who
should be experts in corporate finance,
tax and/or the law. Having a strong team
around you and your professional adviser
should be able to guide you through the
many hoops and obstacles that you may
be encounter in any sales process.
For example, corporate finance advisers
will use their expertise to calculate
a range of valuations of the business
and to assist with price expectation.
GROOMING YOUR BUSINESS FOR SALE
Ensure your management team is strongA prospective won’t want tomake wholesale changes tothe top tier of management.
Are your processes efficient and streamlined?Make sure they are simple and well-managed.
Take advice and act on itProfessional financial, tax and legal advice will ensureyou give your prospects of a successful sale the bestpossible chance.
Don’t underestimate the amount of time it will takeIt may be a long, hard graft –after all you still have a business to run! - but it couldall be worthwhile in the end.
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A greatdeal worse
Not all deals run smoothly and, veryoccasionally, some fail completely. By understanding why failures happenand by putting some simple proceduresin place to avoid them, you could savetime, money and heartache. We explain how to recognise the signsand what to do to manage the risk.
It’s a fact of life that sometimes, despite
the best intentions of all concerned,
deals just simply don’t happen. It is true
there might be a thousand reasons why
this happens – each deal is of course
unique unto itself. But it’s also true that
some common themes do emerge and,
armed with this knowledge and applying
some commonsense into the process,
you should be able to mitigate against
such failure.
WHY DEALS FAIL
We will therefore try to encapsulate all this
by presenting ten separate, identifiable
common themes. This is clearly not an
exact science, and there are many, many
more than ten that we could mention.
But these are perhaps the most common.
Lack of early identification and
issue of head of terms
Clear and unambiguous heads of terms
between the buyer and the vendor must
be agreed upon as early as possible.
These terms should address any difficult
areas, especially around pricing.
All the principal terms of the deal, the
timetable and everyone’s role within
that timetable, should be communicated
to all parties.
Lack of honesty
All too often certain pieces of information
are either withheld by a seller or the
seller deliberately misleads about
a particular issue. As these issues always
come to light during the buyer’s due
diligence work, it can engender wariness
and distrust between the parties.
Being open and honest from the outset
is always worthwhile.
Funding issues being left late
Again, these issues should be raised
and agreed early on in the negotiation
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process, particularly if a consent or
release from an incumbent funder is
required. Third party funding issues need
to be ironed early and extra time might
need to be factored in for this. A lack
of funding is a common failure as deals
come to completion.
Difficult and unexpected issues not
being addressed and resolved
However well prepared or diligent you
have been in setting the parameters
and scope of the deal, unexpected
issues can crop up. When something
unexpected is uncovered, it is often
the role of the advisers to try to find
the answers. Sometimes, advisers
can reach an impasse with a certain
issue and this needs to be managed.
Over reliance on advisers
While it’s essential to engage professional
advisers who will work on and prepare
the minutiae of the deal, the seller
of a business should always be prepared
to act to settle any disputes. What you
don’t want is advisers fighting pointless
battles.
Overlooking tax implications
It is always the seller’s hope that they
are able to retain as much of the proceeds
of the sale as possible. But tax can
rear its ugly head. It is critical to check
the tax position at the outset, and to
structure the way the sale price is paid.
It is very much a question of managing
one’s price expectation while ensuring
the tax position is clear.
Lack of preparation at the
completion stage
It’s all very well getting the early parts
of the deal right but it’s as financial close
nears that requires everyone’s full attention.
Last minute financial and legal issues
very often occur, so all parties, especially
advisers, need to be available and
contactable at all times of the day to make
any vital decisions.
High (or low) price expectations
Meeting the seller’s or the buyer’s price
expectation is never easy. Early valuations
(on both sides) and common agreements
should be sought, although everyone
should also be prepared for price
negotiations to be an ongoing deal factor.
Lack of experienced advisers
The strength and credibility of the advice
you receive from your professionals
will most likely hinge on the experience
of that professional. It doesn’t always
follow that the more you pay for advice
the better it is but it’s the balance
of expertise and experience that counts.
The Midlands, Central and East of
England is blessed with a good cadre
of legal and financial advisers with plenty
of experience from which to draw.
Personality clashes
However well intentioned the buyer or
the seller is, and however well the two
parties and their respective advisers
know each other, personality clashes
can get in the way of a deal’s progress.
Knowing how to recognise the signs
and to resolve any conflict, is key to the
success (or failure) of any deal.
WHY DEALS FAIL
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Maddox House, Edmund Street, Birmingham B3 2HJT +44 (0)121 233 2228 www.steelcase-solutions.co.uk [email protected]
PLANNING A MOVE, A REFURBISHMENT OR A COMPLETELY NEW INTERIOR DESIGN FOR YOUR OFFICE?
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Whatever’s going on in your business, Steelcase Solutions is here to offer advice, develop and put in place a scheme that will transform the way your office works for you.
We know that a business is more than just its premises. But your workspace is your most important tool for focusing, collaborating, socialising, learning and living your brand – after all, it’s the place where your people make great things happen.
