White Papers and Case Studies
COLE ASSOCIATES CORPORATE FINANCE
WHITE PAPER ON FUNDING FOR RENEWABLE ENERGY PROJECTS
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COLE ASSOCIATES CORPORATE FINANCE
WHITE PAPER ON HOW HAS THE FUNDING MARKET FOR SMEs CHANGED SINCE THE CREDIT CRUNCH AND RECESSION?
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COLE ASSOCIATES CORPORATE FINANCE
WHITE PAPER IS PRIVATE EQUITY GOOD FOR THE ECONOMY?
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COLE ASSOCIATES CORPORATE FINANCE
WHITE PAPER ON ALTERNATIVE PROFIT SHARING STRUCTURES FOR PROFESSIONAL SERVICES FIRMS
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Management Buy-Out/Buy-In of International Development Consultancy Business
Deal value £3.2 million
Cole Associates were appointed as lead advisers to a management team comprising four members of incumbent management and an incoming member of the team who had previously been the Finance Director of the Company’s parent company. This was an MBO/MBI of a “non-core” subsidiary of a large publicly-listed group in the life sciences sector. The parent company had decided to divest itself of this subsidiary. The target company is a very interesting business. It is a management consulting business, providing advice and project management services to governments and other clients mainly in the area of overseas development aid, delivering major change programmes in the developing world and emerging economies encompassing agricultural, economic and governance reforms.
Cole Associates’ role was to assist in negotiating the terms of the acquisition, to raise the finance for the acquisition, and to project-manage the MBO/MBI process. Cole Associates also advised on equity issues within the MBO/MBI team, such as relative shareholdings, rights and Board governance. A trade purchaser (competitor) was also bidding to buy the business. The Company had quite an unusual ‘lumpy’ and volatile working capital cycle and this presented issues in both defining the terms of the acquisition (“cash-free, debt-free”) and in raising adequate working capital bank facilities. Our ability to work with the MBO/MBI team to understand the nuances of the working capital cycle and to communicate effectively with the parent company were key factors in our client being selected as the “preferred purchaser”.
The finance was provided by The Co-operative Bank PLC who were attracted by the nature of the Company’s activities, the strength of the management team and the quality of the client base.
The MBO/MBI was completed in early November 2007 – just under six months from when we first met the team.
Sale of Software Developer to Online Ticketing Company
Deal value £19 million
Cole Associates was engaged by the 13 shareholding senior managers of a software development company. The company which was listed on AIM, develops software in the area of “smart card” technology for ticketless travel. Their software is at the leading edge in its sector.
The Company had been approached by a larger private equity-backed business in the area of on-line ticketing and travel information who saw the synergy between our client’s software and their strategy for expanding the scale and scope of ticket-less travel.
Cole Associates advised the 13 individuals, whose shares accounted for 32% of all shares, on the implications of the offer for each of them. Being a plc, the acquisition of the target company was a complex process as it had to be taken private. Cole Associates liaised with the investment banks and lawyers advising the purchaser and target company, to ensure the transaction was completed as efficiently as possible. The advice we gave to the 13 individuals related to valuation, the timing and conditions relating to payments for the shares, the terms on which some of their shares were to be exchanged for shares in the purchaser, assistance in reviewing legal agreements relevant to the 13 shareholders, and assistance in understanding the funding structure of the purchaser going forward.
The acquisition was completed in August 2007, three months after Cole Associates were introduced to the 13 managers.
Re-financing of clothing business
Cole Associates advised a client, which designs and manufactures ladies fashion clothing for high street retailers, on its re-financing to support continued sales growth.
Cole Associates obtained several offers of funding to provide working capital and trade finance facilities. Having assisted the directors in preparing a business plan and financial projections and advised the directors on the merits of the various offers of funding, Cole Associates negotiated the terms and structure of the funding package with the preferred funder. Cole Associates project managed the process from start to finish, liaising closely with the directors, funders and other advisors.
Managment Buy-out of Warehousing and Haulage Company
Deal Value £8.75 million
Cole Associates advised a management team comprising the Sales Director and Operations Director. The Managing Director and Finance Director who owned the company wanted to exit the business to pursue other business interests.
The business operates warehousing and distribution services across the UK, generating turnover of £20 million.
The main terms of the acquisition were agreed between the parties at quite an early stage in the transaction and these were documented in Heads of Agreement. A trade purchaser was also interested in the Company, so there was a need to move quickly and professionally through the process.
The funding was to be provided by RBS and some vendor deferred consideration. The debt facilities from RBS included a term loan, vehicle finance and invoice discounting. The deferred consideration was backed by insurance which will pay out if the company defaults on its obligations to the selling shareholders. The overall deal value was approximately £9 million, including management equity and cash in the business.
Cole Associates guided the MBO team through the process, liaising with the vendors’ corporate finance advisers, and the lawyers and due diligence teams to project manage all the activity.
The bank needed to be convinced that the business would continue to perform strongly after the MD and FD had left. The FD agreed to remain with the business until a suitable replacement was found. The MBO team were subjected to “management due diligence” including specialist interviews, which they passed with flying colours. Other key members of staff were also identified as part of this process, and a share option plan is likely to be set up to help retain and incentivise these key employees.
The transaction was completed in June 2007, three months after Cole Associates were introduced to the MBO team.
Acquisition of Facilities Management business
Cole Associates advised a client in the facilities management (contract cleaning) sector, on the acquisition of a competing company in the same sector.
Cole Associates negotiated the terms of the acquisition with the shareholders of the target company and assisted the directors of the acquirer in preparing a business plan and financial projections. Cole Associates arranged finance to fund the acquisition and provide working capital. Lloyds TSB provided the funding facilities. Cole Associates project managed the acquisition process from start to finish, liaising closely with the other professional advisers.
The acquisition will enable the client to benefit from economies of scale. The company is actively seeking further acquisitions.
Sale of Shower Manufacturer
Cole Associates acted for the shareholders of a family-owned business engaged in the design and manufacture of specialist shower trays and enclosures for the elderly and disabled. The main shareholder had stepped back from the day-to-day running of the business several years ago and supervised a management team who ran the business. The company generates turnover of £6 million and profits of £1.8 million.
Cole Associates carried out research to identify potential interested parties and explored our network of professional contacts. The successful purchaser, a venture capital fund, was sourced through one of our connections with a bank, who had an interested customer.
Cole Associates' role included handling the preparation and dissemination of information on the business to interested parties, negotiating with interested parties on behalf of the shareholders and project-managing the sale process, through the purchaser's due diligence to the legal contracts. The deal value was approximately £9 million.
Acquisition of a group of residential children's homes
Cole Associates advised a fast growing group, which provides residential care for young people suffering from emotional and behavioral difficulties, on the acquisition of a company operating 8 residential children's homes.
Cole Associates negotiated the terms of the acquisition with the shareholders of the target company and assisted the directors of the acquirer in preparing a business plan and financial projections. Cole Associates arranged a total funding package of £5.5 million to fund the acquisition, re-finance existing debt and provide working capital. Merseyside Special Investment Fund provided a mixture of equity and mezzanine funding and debt funding was provided by Royal Bank of Scotland. Cole Associates project managed the acquisition process from start to finish, liaising closely with the other professional advisers.
The acquisition leaves the combined business well placed to continue its growth, both organically and by making further acquisitions.
Management Buy-out/Buy-in of Value Retail Chain
Cole Associates advised a management team comprising an existing manager of the company and a team of three incoming managers. All four members of the team had worked together previously. The target business is a discount retail chain, selling bedding, curtains, homeware and giftware from nine stores in the north of England. The company has 250 employees and generates annual sales of approximate £12 million.
The business was founded more than ten years ago, and is highly profitable. The founder realised that he had taken the business as far as he could, and recognised the need for fresh management and for investment in the business.
Cole Associates' role comprised negotiating the deal on behalf of the Management Buy Out/Buy In team, raising the finance and project-managing the transaction. Cole Associates arranged bank debt from Bank of Scotland Corporate Banking, and the deal includes a retained minority shareholding for the founder. The overall deal value was £4 million. We also introduced a non-executive Chairman through our contacts.
The new management team intend to introduce systems and procedures to facilitate the controlled growth of the business, and to open a series of new stores during the next three to four years.
Secondary buy-out of systems integration business
Having previously advised a four-person management team in 2001 on the acquisition of two IT businesses out of an American parent, we subsequently advised one member of that team on the secondary buy-out of one of the businesses in March 2005.
The business, based in Merseyside installs IT systems for blue-chip retailers and other large corporates, specialising in EPOS systems. Cole Associates' role was to assist in negotiating the terms of the acquisition, and to secure the funding, including preparing financial projections and an outline business plan.
Acquisition negotiations were delicate at times because the vendors and purchaser were all part of the same original MBO team. There was a good rapport between ourselves and the vendors' corporate finance advisers, and this helped smooth the 'bumps' in the process. Our client was also very proactive in dealing with issues that arose in a commercial and common sense manner.
Venture capital was obtained from Merseyside Special Investment Fund and debt facilities were obtained from Royal Bank of Scotland (loan) and Euro Sales Finance plc (confidential invoice discounting). The total deal value was £4 million.
Acquisition of toughened glass manufacturing business
Our client is a manufacturer of double glazed windows, doors and conservatories, based in Manchester. They spent a large amount of money each year buying-in toughened glass panels, and decided to bring this process in house either by purchasing the necessary plant, or by acquiring a company in the sector.
They decided on the latter route, and identified a company in Lancashire that was available for sale. Cole Associates assisted in negotiating the terms of the acquisition and arranging the necessary funding. We helped in the preparation of financial projections and an outline business plan, and introduced the client to a number of suitable banks. We also assisted in project-managing the latter stages of the transaction, when the lawyers are involved, to facility a timely completion.
The client ultimately selected Cooperative Bank to provide a property loan and Euro Sales Finance to provide confidential invoice discounting facilities. Total funds raised were £1.5 million. The combined business has sales of £6 million and is poised for significant growth.
Management buy-out of electronics company
Our client was the management team of an electronics company in the Potteries. It designs sophisticated electronic assembly turn-key solutions for a wide variety of sectors including the military, vending and emergency services sectors. The owner had no day-to-day involvement in the running of the business, and decided to sell it, to concentrate on other business interests.
Our role was to assist in preparing financial projections and evaluating the funding implications of various growth scenarios, assisting in negotiating with the vendor, and project-managing the funder's process. Funding was provided by Royal Bank Invoice Finance.
Development capital for multimedia company
Cole Associates was engaged by this fast-growing digital media business, based in Manchester to advise on appropriate funding structures to finance growth. The company develops digital content in the areas of e-learning and sales tools.
We assisted in preparing a business plan and financial projections, and introduced the client to a selection of venture capital funds and banks.
We negotiated with the funders on behalf of the client, and obtained several offers of equity and debt funding. The client decided to select Bank of Scotland, utilising a £250,000 Small Firm Loan. The client's decision to reject the venture capital route was partly driven by a desire to keep the funding and ownership structure simple, and to avoid ownership dilution.
Development capital for water cooler business
Cole Associates was engaged by a client in Yorkshire whose principal activity is the supply of water coolers and bottled water to SMEs. The business was growing rapidly and needed additional working capital facilities to fund the growth.
Cole Associates assisted with the preparation of a business plan and financial projections, and advised the client on the relative merits of various growth scenarios.
We introduced the opportunity to several banks, and ultimately the client decided to go with Cooperative Bank who provided £250,000 of facilities.
Management buy-in of a sports fashionwear clothing brand
Our client was a management buy-in (MBI) candidate experienced in sales & marketing roles for blue-chip groups, looking for an acquisition target. The company identified is a clothing brand in the extreme sports sector, with its routes in the surfing community of the South West. The company designs and manufactures clothing for sale to independent fashion and sports stores. The business was founded in 1985 by two brothers who were proficient surfers, and they were now ready to sell the business, recognising that it needed professionalizing before further growth.
Cole Associates' role was to assist in bringing together additional members of the MBI team, negotiating the deal on behalf of the MBI team and raising the necessary finance.
Through our contacts, we introduced a finance director and a design & sourcing director, to ensure the MBI team had all the major functions covered.
We negotiated the terms of the acquisition, which required diplomacy and tact due to the sensitive nature of the vendors. We put together a funding package comprising venture capital from YFM Group, deferred consideration, a bank loan, a Small Firm Loan Guarantee Scheme loan, factoring facilities, an overdraft and letter of credit facilities, all from bank of Scotland. The total funding facilities to finance both the acquisition and working capital requirements was in excess of £4 million.
Management Buy-in of Professional Photograph Album manufacturer
Cole Associates was introduced to a management buy-in candidate in November 2002. The individual had previously been a Chief Executive of a large listed company in the print and packaging sector. He was now actively looking for management buy-in acquisition opportunities. A suitable target company had been refereed to him, being a division of a listed company in the stationery and packaging sector.
The company had turnover of £9 million, and was profitable, although profits had been declining for a number of years. The group had determined that its activities were non-core, and it was therefore identified as part of the group's divestment programme.
Cole Associates' role was three fold: firstly to lead the negotiations with the listed company and their advisors on behalf of the management buy-in candidate. Secondly, to lead the process of raising finance for the acquisition and working capital requirements. Thirdly, to project-manage the acquisition process to facilitate a timely completion. The target business had been widely marketed by the vendors' advisors.
We reviewed the information available on the target business, and prepared a brief business plan and detailed 3-year financial projections, to assist in determining the valuation of the business and the working capital requirements. This included working with our client, to clarity his thoughts on the right strategy for the business going forward.
We discussed the opportunity with a number of asset-backed lenders and banks. We submitted an indicative offer to the vendors, and embarked on a series of negotiations with them. This led to agreement of Heads of Terms as the 'preferred purchaser'.
Simultaneous to the negotiation of the Heads we secured offers of funding from two asset-backed lenders relating to the two freehold properties, and the other working capital assets (primarily stock and debtors).
The transaction then proceeded through financial and legal due diligence and the negotiation of legal contracts relating to both the acquisition and the funding. The transaction reached successful legal completion within six weeks of the Heads of terms being signed.
The client is now implementing its growth strategy, including research for further acquisitions. From beginning to end, the transaction lasted three months.
Management buy-out of utility metering company from its German parent
Our client, a management team was invited to undertake a management buy-out of a UK subsidiary of a German group. This company is a supplier of metering systems for domestic and industrial and commercial applications. The German group had itself been the subject of a management buy-out in June 2003, and regarded the UK subsidiary as non-core.
Negotiations were complex, involving cross border issues and cultural differences in negotiating styles. However the buy-out was completed in less than three months. Funding was provided by Euro Sales Finance plc in the form of a confidential invoice discounting facility.
Cole Associates led negotiations with the vendors, structured the deal and arranged the funding.
Acquisition of a German company for a UK client
Our client is the UK's leading manufacturer of flues and chimneys. Its largest competitor went into administrative receivership and our client was interested in acquiring the competitor's German sales and distribution business.
This presented our client with an excellent opportunity to enter the German market, in which it had no presence, with an established network and infrastructure. Negotiations were complex as they involved both the UK administrative receiver and subsequently a German receiver.
Cole Associates handled negotiations with the receivers alongside our client and assisted the client in securing increased bank facilities from its existing primary funder in the UK.
Management buy-out of a contract flooring company from its Dutch parent
Our client was the management team of a contract flooring company serving both the public and private sector, with a turnover of approximately £4 million. The company, based in the North West was a subsidiary of a large Dutch group specialising in contract cleaning. The management team was invited to undertake a management buy-out as its activities were classified as non-core.
The buy-out was funded by Co-Operative Bank plc which provided a loan and an overdraft facility to finance the acquisition and provide adequate working capital. Funding companies in the construction industry can be difficult as debt providers are particularly cautious when dealing with the construction industry.
Cole Associates led the negotiations with the vendors on behalf of the management team, structured the deal and arranged the necessary funding. Despite the complexities of negotiating with an overseas parent company the acquisition was completed in just over three months.
Management buy-out of systems integrator and distributor
The two target companies are UK subsidiaries of a publicly-quoted American group with combined sales of £15 million, providing systems integration services and equipment for point of sale applications in the retail sector. The parent company had some cash flow challenges and invited the management team in the UK to undertake a buy-out, to release some cash for the group. Jeremy Cole was approached in October 2001.
Jeremy put in place an asset-backed lending facility of £2 million from G E Commercial Credit, together with other funding from Bank of Scotland, both in Manchester, at a time when the funding marketplace was in an extremely cautious mood.
Negotiations with the parent company were complex and protracted, involving cross-border complications. Despite this, the deal was completed within six months.
This buy-out demonstrates that, even in a difficult market place, with a top quality management team running a business with good prospects, there is generally a route to a successful completion. In such a market place, that route can be more difficult to navigate, and requires a great deal more innovation and persistence by the corporate finance advisers.
Management buy-in/buy-out of shop-fitting company
The target company, established in 1888 by the grandfather of the outgoing shareholder, provides high quality interior fit-out, architectural joinery and building design and consultancy services throughout the UK to a diverse range of blue-chip customers in the supermarkets, retail, hotel and leisure, health, education and corporate sectors. The company employs more than 80 people.
The management buy-in/buy-out was led by an incoming buy-in candidate with extensive management and financial experience but no specific sector experience, and one of the senior members of the company's existing management team.
Jeremy Cole provided advice to the buy-in/buy-out team. Funding for the deal was provided by Co-operative Bank plc. An important aspect of the transaction was handling negotiations with the vendor in a sensitive and diplomatic way, recognising that he was selling a third generation family business - an emotional as well as financial experience.
Sale of ophthalmic equipment manufacturer
Jeremy Cole was engaged by the shareholders of the company, comprising the founders and 3i PLC, to identify a purchaser and to negotiate the sale of the company. The shareholders identified a price threshold that they wanted to achieve.
Jeremy worked with the shareholder directors to identify the 'preferred purchaser', a large PLC operating in a related sector, and led the negotiations with the purchaser. The initial offer was well short of the required purchase price and further negotiations ensued. These led to a much-improved offer in line with the shareholders' requirements, resulting in a successful sale of the company.
Project management of this transaction was important, dealing with a large PLC which had many other projects on at the same time. Jeremy worked with them, providing information and handling their concerns and questions, to ensure they felt comfortable with the final agreed deal.
Development capital for medical technology company
The company, an early-stage distance learning and communication portal for General Practitioners, was seeking c£700,000 of development capital to finance expansion. Jeremy Cole worked with the founders to understand fully the unique attributes of the business proposition and revenue model. He identified a short list of venture capital funds likely to be interested and assisted the founders in the presentation of their business to the funders. A 'preferred funder' was selected, and Jeremy helped project manage the due diligence and legal documentation process, through to a successful completion.
The company was subsequently sold to a large Group just 16 months later, providing the venture capital fund with a return more than four times its original investment, and providing the founders with an excellent financial outcome.