Every business owner requires an exit plan, and for many this will revolve around eventually selling the company that they have often spent years nurturing and growing, but it’s easy to underestimate the amount of groundwork required to achieve a successful sale and maximise a company’s value. Crucially, it’s never too early to think about the foundations that need to be laid to sell a business. Even people who are many years away from retirement or those who presume a company will follow a natural progression, such as staying in the family, will benefit from having the basics in place. This is especially true because it’s impossible to predict what the future holds, be it health related or an attractive offer suddenly arising for the business. One of the most important aspects in any business sale, is how it will function once the current owner has handed over the keys to the kingdom. This can also be one of the most difficult aspects to get right. The vast majority of buyers will expect to see a strong management team in place, who can run the business with minimal input from the shareholders, so an owner manager who can effectively make themselves redundant, will have a much better chance of securing a higher price. A simple test of this is to look at how the business functions when the owner goes on holiday. If they spend their downtime glued to their phone, Skyping the office and having to continually make decisions...
In the last two years merger and acquisition (M&A) activity returned in full force, with 2015 and 2016 becoming two of the three busiest years in global M&A history, along with the pre-recession boom seen in 2007. There are a number of factors contributing to this, ranging from economic confidence through to pressure from shareholders who want to see growth. In addition, continued low interest rates combined with funding providers loosening the purse strings, has resulted in more deals completing. Ambitious and forward thinking companies considering whether to grow organically or by acquisition, recognise that M&A is often the best way of accelerating the achievement of strategic goals. This certainly seems to resonate with our region’s businesses with 2016 seeing a number of North Derbyshire firms either snapping up competitors or bolting on acquisitions that complemented their offering. The biggest deal of 2016 was technology firm Servelec Group acquiring Tribal Group’s Synergy children’s services management information system business for £20.25 million in April 2016.Servelec quickly followed this with the acquisition a month later of Target eSolutions a specialist software provider in the social care sector. Another highlight was private equity-backed NFT Distribution, which specialises in temperature controlled freight, acquiring haulage company NR Evans, along with its seven depots across England and Wales. The estimated transaction value was reported to be in the region of £20 million. Both Servelec and NFT secured new debt funding facilities to complete their acquisitions, highlighting the important role that banks have in lubricating the wheels...
Working capital is the capital (cash investment) that is needed to fund the everyday operations of a business. The amount of working capital a business requires will generally, but not always, increase as the business grows.
Warranty and Indemnity (“W&I”) insurance is one of the many risk management options available to those carrying out merger and acquisition type transactions. We have seen an increase in the use of W&I insurance on transactions that we have worked on and more generally in the lower mid-market.
BHP Corporate Finance recently had the privilege of advising on the acquisition of iconic UK mountain bike manufacturer, Orange Bikes. Our team includes a number of keen riders so it was particularly satisfying to advise on a transaction involving such a well-regarded industry name. Reflecting on the deal afterwards it became obvious that there were a number of parallels between a good trail rider and a successful acquisition.
There have been a number of media stories over the last few weeks focussing on the fact that British businesses are failing to innovate. Reports by both the government and the private sector have highlighted that there is less investment in research and development in the UK economy now than has been the case in the recent past. From this, the conclusion is often drawn that there is a lack of innovative ability in the country. However, it is not ability that is missing - the problem is a lack of funding for innovation.
Building a successful business takes patience, knowledge, diligence and a huge amount of energy. Ensuring you receive maximum financial recognition for all those years of hard work (as well as finding a good home for the business) usually requires detailed planning and execution. But what should you do if you receive an approach out of the blue?
If the UK economy is going to continue to grow then access to finance will play a key role. This has led many SMEs to ask one very important question: do banks want to lend money to companies like mine?
The investment landscape is changing and the key beneficiary appears to be the private business sector. Private businesses clearly operate across all sectors and range from small, family owned concerns to large corporates servicing global markets. There are over 5 million such companies in the UK, making them a very significant force.