BusinessRecoveryServices
Securing Value for Intangibles in TurnaroundAMA – A Different Way
7 March 2007
BusinessRecoveryServices
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Who am I?
Karen Dukes – Director• Specialist in business reviews, exits and work-outs since 1990 in the mid-market• Leads the BRS practice in Kent, Surrey and Sussex, part of South Deal Team• Examples of assignments include: advising management of £60m turnover retail group on
management strategy for return to profitability, and expansion into foreign markets, the AMA of Accuracy International Ltd a manufacturer of precision rifles, the managed exit of an investment in a £10m turnover manufacturer, and the AMA of Zenith Entertainment Limited in 2006.
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Agenda
1. Key Messages
2. Why are intangibles important
3. Matrix of issues
4. What is AMA?
5. Case Study
6. Questions
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Key Messages
•Several ways of preserving value of intangibles
•Timing is important
•AMA is a tool TDs can trust; maximises value
•There is always time to investigate an AMA
•Requires an advisor who knows the market place
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Background
Britain in 1960 Britain in 2007
Manufacturing
Heavy Industry
Mining
B2B
Media
B2C
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The corporate life cycle©
IDEA
M&A ACTIVITY
GOING PUBLIC
RAPID GROWTH
MATURITY
Fix it
Flog it
Finish it
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Intangible Assets: a matrix
Impairment Review
Knowhow Ownership
Commodity Or “USP”? Third Party
RiskLifetime Of Asset
Location,Location,Location
Financial Operational
Security of Asset
Commercial Reality
Brand Valuation
Relationship Management
RegistrationLicencesEvidence
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Historical Playing Field
The Usual Game
• IP introduced to client in difficulty
• Significant intangible value
• IP recommends an insolvency appointment
• Tries to sell the company’s assets to recover the chargeholder debt
The Final Score
• Loss of intangible value
• Loss of jobs
• Loss of reputation
• An unhappy outcome
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What is AMA?
Corporate Finance
RestructuringTax Skills
InsolvencyCorporate Finance
RestructuringTax Skills
Insolvency
Corporate Finance
RestructuringTax Skills
InsolvencyCorporate Finance
RestructuringTax Skills
Insolvency
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When is AMA appropriate?
Potential AMA assignment
Problems trading in insolvency
Burning platformValue in parts of business but not all
Value in goodwillFew tangible assets / many
intangible
Overgeared / Cashburn
Company experiencing
difficulties
Non-core Activities
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Interested parties sought
Confidentiality letters issued
Offers reviewed
and contract issued
Sale documentation
agreed
Administration order and sale
completed
IM issued
Data room opened
Offer deadline
Buyer due diligence
1/02 2/02 24/0224/026/02 7/02 14/02 15/02 16/02
What actually happens in the process?
Marketing Negotiation CompletionStrategy
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Window – Case Study
• Group of Media Companies
• £17m turnover
• History of successful programmes
• Lack of commissioning in 2005/2006
• End of a key series
• Failed share sale
• Immediate cash crunch!
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Window – Issues and Solutions
Potential AMA assignment
Other assets
to sell
Comfort in market
exposure
Vendor Due Diligence
Competing
purchasers
Acceleration Directors Personal risks
– wrongful trading
Nature of
contracts
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Window – Benefits
Benefits
• Preserved intangible asset values
– goodwill
– contracts
• Robust and reliable process
• Avoids tyre kickers
• Stakeholders on course to be repaid
• Preservation of jobs
• Avoids adverse publicity, key in reputational business
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Key Messages
•Several ways of preserving value of intangibles
•Timing is important
•AMA is a tool TDs can trust; maximises value
•There is always time to investigate an AMA
•Requires an advisor who knows the market place
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