navigating growth ebook

8/10/2019 Navigating Growth eBook

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Contents

p2. Foreword

p3. Introduction

p4-5. The Experts

p6-7. Part 1: A Change of Direction

p8. Case Study: Devine Deli

p9-14. Part 2: Choosing your Vehicle

p15. Case Study: Investors in Engineering

p16-18. Part 3: Charting your Growth

p19. Part 4: Where Next?


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Foreword

For the UK to fully recover from the

recent nancial crisis, it is critical that

businesses succeed, whether through

the birth of start-ups or existing

companies continuing their path to

growth. In either case, access to

external nance is imperative for newbusinesses, investment and ultimately,

sustainable economic growth.Navigating Growth explores how the UKs small

and medium-sized enterprises feel about the state

of their business, their attitudes toward expansion

and whether they believe they have the tools and

capabilities to deliver on plans. It also explores the

avenues for change and brings in best practice

from leading advisors on how to execute changes

effectively.

The good news is that according to the research,

UK SMEs are ready to start making changes. They

have weathered the storm of the economic crisis

and are starting to plan for growth. Many have

realised the benets of being exible and are ready

to invest in their longer-term futures. And now is

the time for many of them to take that next step.

SMEs make up a huge percentage of the UKs to-tal businesses so it is these organisations that will

make all the difference to the countrys

economic recovery and ongoing prosperity.

Navigating Growth helps provide the guidance and

best practice SMEs need to progress.

Navigating Growth

Clive Lewis,Head of Enterprise, ICAEW

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Although the forecast isnt cloud-free,

the subject of growth nally seems to

be making a comeback. Our recent

research nds that over two thirds

(69 per cent) of SMEs are planning to

grow over the next two years.

As a growth-focused funder, weve been

encouraging businesses to grow at their own pace

and whenever the time is right for them. But the

recent tough economic climate put a real dampen-

er on things and saw investment screech to a halt.

Over half(55 per cent)of the business own-ers we spoke to told us they had delayed decisions

in the difcult economic period. During the reces-

sion, we also saw numerous businesses stockpil-

ing prots, while many of our customers abstained

from drawing down nance, in preparation for an

uncertain future.

But now the

economic winds

appear to be

changing, how

are businesses

adapting?

Our research

has found that nearly six in ten(58 percent)are now more actively considering growth

opportunities than they were last year. Thankfully,it looks like businesses are starting to rediscover

their ambitions - great news for them and for the

economy at large.

Unfortunately though, our research also reveals

that two in ve business owners feel their company

is stuck in limbo, putting their growth goals in

peril. Almost a quarter(22 per cent)ofdecision makers believe it is the differing priorities

of those running the business that are holding

them back. Nearly half (44 per cent) even said they

dont believe they have the right people or nance

in place to achieve their objectives.

Introduction

Guy Walsh, Regional Director,

ABN Amro Commercial FinanceSo while the desire for growth is there, the problem

comes in translating these ambitions into action if a

business isnt ready to grow. More than ever SMEs

need to get their houses in order, to put the right

people in charge, get the backing they need and

forge a clear direction of travel if they are ever to

turn their business ambitions into economic reality.

But where should businesses start on the path to

growth? When business owners no longer have

the drive they need and want to step back, when

owners want to bring in the new ideas and nance

of a new partner, or an ambitious management

team want to take the reins of their company, how

do they go about it and what are the things they

need to consider?

ABN AMRO Commercial Finance sits at the centre

of this kind of business change, so we feel well-

placed to bring you the insight you need. However,

we know we dont have all the answers, which iswhy we work with some of the best advisors in

the business. To help you take the right rst steps

on your path to growth, weve brought together a

crack team of experts to impart their knowledge.

From MBOs to mergers, it is their expert advice

and ideas that have made this guide possible.

Enjoy and let us know what you think by joining our

LinkedIn group entitled The Loop (ABN AMRO

Commercial Finance )

or email:[email protected]

3Guy Walsh


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Mark Crosseld, Partner Corporate Finance, The M Group

The Experts

Guy Walsh, Regional Director, ABN Amro Commercial Finance

Based in Birmingham, Guy has more than 30 years

experience in corporate nance and has helped

countless owner-managed businesses achieve

their ambitions through asset based

lending. Having worked for some of the largest

funding providers in the UK, Guy has a broad

knowledge of different business nance

requirements including renancing, management

buy-ins and buy-outs and working capital.

Jonathan joined Bermans in January 2012 from

a niche commercial nance rm in Manchester.

He specialises in transactional and contract work

within the SME and owner managed sector. His

commercial approach and down to earth attitude is

highly valued by his entrepreneurial client base.

Mark began his nance career with Lloyds Bank

in the late 70s, moving into the burgeoning asset

based lending market in the 90s. As Corporate

Finance Partner in the structured nance team,

Mark works on projects for clients of up to 50

million turnover, building funding lines up to 10

million. He also has deep experience in debt andequity nance and structuring MBO/MBI deals in

the SME sector.

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Jonathan Davage, Partner, Bermans


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The Experts

Jonathan Bell, Managing Director, Investors in Engineering Ltd

Andrew Chadwick, Managing Director, Divine Deli Supplies Ltd

Richard Mason, Commercial Finance Industry Expert, Ludgate Finance

After qualifying as a chartered accountant with

Deloitte in the early 90s, Jonathan has been

involved in buying and selling small companies for

over 20 years. Involved in deals up to 5 million

in value, Jonathan has seen the process from all

sides, having acted on behalf of a wealthy investor,

been a corporate nance advisor and undertaken a

number of transactions on his own account. He is

currently building a group of traditional engineering

businesses through his Investors in Engineering

vehicle.

Andrew Chadwick is the Managing Director of

Divine Deli Supplies Ltd. With almost 30 years of

experience in building and growing SME

businesses, Andrew has worked in a range of

industries in both sales and management focused

roles. Now at the helm of Divine Deli, Andrew is

working to cement the business position and

increase its reach in the ne foods and gifts

market.

Richard is an award-winning commercial nance

industry specialist, working with SME

businesses with nance issues to raise, manage

or repay nance. One of his specialisms is the

peer-to-peer lending sector. In the last year alone,

Richard has raised over 9 million in loans forsmall businesses.

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Whether youre a long-term business

owner planning to sell-up, a majority

shareholder looking to inject some new

blood into the board, or an aspiring

manager wanting to take a share in a

business youve helped to build, there

are a host of things to consider.

If youre reading this guide, hopefully yourethinking about the future of your business: how

can you prepare for the unforeseen, while also

putting the company on the best possible growth

trajectory? The key to deciding which options will

work best for your business is to understand your

drivers: what is the end goal for the business?

How do you t into the picture?

Does the business just need new ideas and the

drive of a new shareholder? Or is there also a

need to unlock growth nance as part of the deal?

Do you want to be a part of helping the NewCo

grow? Or do you want to cut ties entirely?

These decisions will affect the shape of the deal

and how it is nanced. The most common

approaches taken by SME businesses are:

PART 1:A Change of Direction

.

Sales and buyouts are most common among SME

businesses, with mergers becoming more popular

with larger rms, so it is worth looking at them all in

more detail:

Trade Sale

A trade sale is the sale of a business entire share

capital, or a controlling interest in it. The business

is often sold to a competitor or a nancial buyer

looking for a return through growing the business.

There are numerous reasons for conducting a

trade sale and you should be clear about your own

personal drivers - whether you are retiring, have

reached your personal exit point or want to unlock

funds from what is probably your most important

nancial asset.

Make sure the sale is positive - if the business is

underperforming it is usually best to persevere until

things are back on track. It will help to achieve a

better return and let you leave with your head held

high. It is also important to consider upfront

whether you want to retain any interest in the

company going forward, as this will affect how the

nal deal is structured.

Generally, a trade sale is a more clean and simple

process than an MBO/MBI as the buyer is

experienced and well-established. Experienced

buyers may also pay a strategic premium for the

business and are more likely to be able to meet the

sale price requirements and risk prole.

SALE: This is the most common exitstrategy for SME owners, where thebusiness is sold to another individual,

company or private equity rm for an

agreed fee.

BUYOUT: Also a common SMEapproach, where the business owner is

bought out by someone who takes over

the business, usually via a management

buy-out or buy-in (MBO/MBI).

MERGER: Where two strategicaly-aligned businesses come together to

form a single entity.

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MBO/MBI

This is a sale of a majority stake in the company

to a new company, which is owned and funded

by the senior management team. In this situation,

the senior management retain responsibility for

running the day-to-day trading activities of the

company.

MBOs and MBIs are popular among business

owners keen to ensure the long-term success oftheir business. The seller knows the management

team and can usually be comfortable in their ability

to perform and maintain the business legacy going

forward.

These deals tend to be more nancially complex

as the business value is often tied to its

performance. As management teams are not

personally nanced, there will be a funding gap

between equity investment, debt nance and the

sale price. In these circumstances, vendor

assistance will be required to fund the deal, which

usually comprises deferred consideration,

increasing the risk to the vendor.

Merger

A merger is the coming together of two like-minded

and strategically aligned businesses that believe

they can produce higher returns together than they

could as individual entities. While merger activity isstill relatively suppressed across UK PLC, smaller

businesses are increasingly seeing and seeking

out opportunities to join forces. This type of deal is

attractive because it can provide both companies

with greater access to customers, market or

intellectual property (IP) or clear synergies

between products and services.

The deal must create value without destroying

the existing value of your business. In the current

climate it can be tempting to look at merging with

distressed businesses including competitors,

suppliers and customers. In such a case it is

important to ensure you have the skills and experi-

ence necessary to turn a failing business around.

It is also important to consider the background

of the business selected for merger. While it is

certainly possible to merge with smaller, family run

businesses, these deals tend to be more compli-

cated as there is a higher degree of personal

investment. Where a business workforce is made

up of family and friends, merger deals can be de-

layed and complicated by emotional ties.

There are any number of different nancial and

structural arrangements involved in mergers, but

the main nancial considerations will relate to the

borrowing structure of the newly merged entity and

ensuring you have the upfront capital needed for

the acquisition itself. The deal in this sense is less

about raising nance and more about combining

the debts and structuring borrowing for the long

term.

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PART 1:A Change of Direction


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The companys founder saw a growing market for

ne food based on more than just jam and chut-

neys. Beginning in 2007 with the Wildly Delicious

range, he introduced a variety of products that

combined food and non-food (mainly ceramics)

to provide retailers with exciting concepts that

were fresh and accessible to potential customers.

However, having built and grown the business over

more than ve years, he decided it was time for a

change.

Divine Deli Supplies Ltd is a ne foods and gift distributor. This innovative company

works with suppliers all over the world to provide high quality and beautifully

presented products to some of the best-known retailers in the UK including

John Lewis, Lakeland and Booths, as well as a huge range of farm shops, delis and

department stores.

CASE STUDY:Devine Deli Supplies Ltd

As a result of careful planning, a solid business

plan and having the right advisors in place, Andrew

was able to secure invoice factoring and a person-

al loan that enabled him to take over the business.

He is now running Divine Deli with a combination

of old and new management, with the previous

owner still involved on a part-time basis.

It was a very complicated dealbecause there was so little capital put

down at the start. But by working with

specialists who understand these

types of deals and who were prepared

to be exible, we were able to structure

a deal that worked for everyone.

Andrew Chadwick, Managing Director

Meanwhile, Andrew Chadwick had been looking for

a business project and felt Divine Deli was perfect.

He reviewed the business with its existing manage-

ment team and was impressed by its product range

and processes and felt he could make a difference

to the future of the company. He worked closely

with the existing team to create a detailed business

plan in order to raise the appropriate nance.

Having worked through the planning stages

relatively quickly and agreed in principal the terms

on which the sale would go ahead, Andrew

approached an advisor to assist with the deal.

With his capital resources tied up in other property

investments, he recognised that he needed help to

identify appropriate funding options.

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So its time for a change and the most appropriate options for the business have been

considered. Now how do you make it happen? Financing the deal is always going to be

the main concern. Up until the economic crisis many deals were nanced through some

form of bank cashow loan or traditional senior debt nance, but the environment for

funding has shifted signicantly. While loans were rarely pinned to business assets, most

banks will now only offer securitised nance, which means other options become more

attractive, more viable and more suitable for SMEs.

Todays deals often include one, or a combination, of private equity, cash, asset based lending and vendornancing. Financiers and advisors are able to be increasingly creative and, with a reasoned approach, can

create the right funding mix for your deal. In this section, we have outlined the key considerations for each

type of nance including how to access the various funding options.

PART 2:Choosing your Vehicle

Many companies have been building up big

rainy day funds as they have waited for the

business environment to improve. Our re-

search during the recession found that almost

half of SMEs were sitting on cash and not

investing it because of the uncertain econom-

ic climate. For many, now could be the time to

put those funds to work and invest in growing

and moving forward.

The main advantages of using your cash sav-

ings to fund a transaction are that decisions

wont have to be justied to third party advis-

ers and are not tied in to loan repayments or

interest charges. It may also look impressiveto nanciers in the future, should they be

required. The cons are, of course, that the

security buffer will have been used and will no

longer be there to fall back on should things

go wrong. Acquisitions are also expensive

and cash can become very stretched once the

initial transaction has taken place.

Before making a decision, ensure this is the

best option by creating a detailed business

plan and calculating a realistic return oninvestment. Also make sure you explore your

other options, some of which are outlined

below.

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Cash in the Bank


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What is it?

One of the main barriers facing ambitious businesses is a lack of working capital to enable growth.

Often caused by late payments from customers, invoice nance helps to increase cashow quickly

and securely by releasing the funds tied up in invoices without taking on further debt or surrendering

equity or control.

Essentially, the invoice nance provider will release an agreed percentage of an invoice total (likely to

be 80-90 per cent) within 24 hours. Once payment is made in full the remainder will be released to the

business minus a small admin fee. In an acquisition, invoice nance also allows you to draw money

based on the combined debt of both the existing company and the company being purchased even

before the transaction has taken place.

How do I access it?

Once the lender has been selected, it will assess the business books and accounts to ensure it

is the right solution for you. There are standard requirements but lenders can often be exible.

Invoice discounting facilities are normally made available to established businesses with turn-

overs in excess of 500k that have good systems in place to ensure reliable collections from

customers. For example, businesses should be collecting debts within a reasonable timeframe

and should offer industry standard credit terms. Generally, no single debtor should account for

more than 25-40 per cent of the business.

To access invoice nance, speak to an accountant or nancial advisor or contact the lenderdirectly for advice and further information. The Asset Based Finance Association (ABFA) has an

online tool for nding relevant providers on its website.

Invoice Finance

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What is it?

Asset based lending (ABL) is often offered in conjunction with invoice nance as a bolt-on service.

ABL is particularly suited to asset-rich business sectors, such as manufacturing, wholesale,

importing and distribution. It is designed for situations where a clear funding need is identied

such as expansion, acquisition or renancing.

Essentially it provides a single source of funding against corporate assets such as invoices,stock, plant and machinery, and property. The cash held within these assets is released to give

additional funds and can often provide a greater level of nance than traditional solutions.

The funding is closely matched to the business working capital requirements so it grows in line

with the sales performance. It also helps to ensure healthy cashow after the initial acquisition.

Asset Based Lending

While individual lenders may have different criteria in terms of a minimum turnover, 1-2 million

businesses would be suitable for this type of nance. The more important requirements are the

business ability to demonstrate its resilience. While it doesnt need to have been prot-making

every year of its operation, it does need to show it has been well run and carefully managed.

How do I access it?

Asset based lending tends to have less nancial covenants than traditional forms of lending,

providing a more comfortable way of raising money and without needing to resort to venture

capital or loss of equity.

Providers will look beyond historical performance and the present balance sheet to provide

funds when other sources may not be available. A more holistic lending criteria will be applied,

taking the proven track record of the management team as an important driver within a more

balanced consideration.

While individual lenders may have different criteria in terms of a minimum turnover, 1 million

businesses would be suitable for this type of nance. The more important requirements are

the business ability to demonstrate its resilience and viability. While it doesnt need to have

been prot-making every year of its operation, it does need to show it has been well run and

carefully managed.

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What is it?

Private equity is suitable for both large and small businesses. Private equity rms raise funds

from investors such as pension funds, insurance companies, endowments, and high net worth

individuals. They use these funds to invest in companies with a potential for high growth.

This option has become increasingly popular following the economic crisis. As banks have tight-

ened up on traditional loans, business owners have recognised the importance of being more

open-minded and exible with the equity in their business.

The benets of this are obvious - investors can bring their money and skills to the business, there

is no loan to repay and you all share the risk. However, it also means a certain loss of control and

a smaller share of the prots.

Private equity could be an ideal choice post-recession. It is quite resilient to periods of economic

uncertainty and can respond quickly to changing market conditions. In fact, many private equity

rms particularly seek out debt-laden businesses in the hope of realising greater prots when they

turn them around.

Private Equity


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How do I access it?

Attracting private equity partners can be a

time-consuming and drawn out process. With

its rise in popularity, private equity rms have

become more selective with their investments.

A business seeking investment now needs to

be more adept at packaging the company and

presenting its opportunity and value.

The business owner will need to develop a

clear and robust business strategy broken

down into short, medium and long-term goals

and addressing growth targets, performance

enhancements and succession policies. This

will show the companys direction as well as

promoting the strength and focus of its

leadership team.


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Mezzanine Financing

What is it?

Mezzanine nancing is becoming an increasingly popular choice for the middle market. It is particu-

larly useful for MBOs due to the exibility of its terms and conditions.

Mezzanine nance is a hybrid of debt and equity nancing that is often used to fund the expansion

of existing companies. Lenders provide nance on the same basis as a bank, advancing money that

will be repaid with interest over an agreed term. However, many lenders will also look to receive a

share in growth by including an element of equity investment in the deal. This means that the

mezzanine provider would receive an increased return on investment when the company sells.

How do I access it?

Mezzanine nancing is usually provided very quickly with little due diligence and auditing. As a

result, it is quite aggressively priced with lenders seeking an average return of 20-30 per cent.

To secure mezzanine nancing, you will need to demonstrate strong historic performance with

an established reputation and product as well as having a clear and robust growth plan for the

business.

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What is it?

Peer-to-peer lending is a relatively new nancial

concept. P2P lenders operate as an online market-

place, matching savers with individuals who want

to borrow money.

Crowdfunding, or social funding, is a variationof P2P lending that links investors with start-up

companies and other projects. It is a viable solution

for businesses that have found themselves, often

through no fault of their own, to be undercapital-

ised or suffering from a deciency in cashow.

Often, investors are paid back in rewards or given

an equity stake in the business.

This form of lending removes the bank or building

society from the lending process but can involve

quite a bit of time, effort and risk as well asrewards. The process is different from a bank in

that the borrower lls out their application for the

loan, including its intended use. When a combined

group of lenders meets the borrowers amount,

the loan is granted and then paid back just like a

traditional loan.

The advantage is that borrowers can get nance

they may not have accessed from traditional

lenders and the rates can often be lower than other

loan providers.

From the lenders point of view, they are able to

tell the borrower what interest rate they are offer-

ing which can be higher than traditional saving

accounts. With P2P lending, lenders can choose

who they lend their money too or at least see the

borrowers risk prole. However, in most cases

lenders take all or some of the risk if the borrower

cant repay or the company facilitating the

payments stops trading. Ultimately, this couldmean lenders lose money.

How do I access it?

To access a loan via P2P lending, bor-

rowers will often be subject to an identity

check. They will also need to have a clear

credit history and an income that makes

the loan affordable.

Borrowers are unlikely to be accepted if

they have very high levels of unsecured

debt or a poor debt history.

Peer-to-peer (P2P) Lending

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Investors in Engineering Ltd was founded by Jonathan Bell in 2011. Jonathan had

bought and sold businesses over a number of years and has a background in

corporate nance and as a chartered account. He was keen to build a group of

companies and began to research potential acquisitions.

Jonathan was looking for particular industry and

business characteristics when deciding where to

invest, and chose the engineering industry as asolid investment opportunity.

At this point, various traditional engineering busi-

nesses were up for sale many of these family

businesses with no successor. There was also

limited interest in purchasing rms in what was

considered an unfashionable industry, particularly

at the smaller end of the market.

All of these trends meant that Jonathan felt con-

dent he could secure good prices for the busi-

nesses he selected. He also saw through these

short-term issues, seeing the potential for solid,

longer-term acquisitions and recognising that many

engineering businesses had secure ongoing

turnovers and sought-after products.

CASE STUDY:Investors in Engineering

The complications started when Jonathan began

reaching out to these companies. At the smaller

end of the market, many business owners hadchosen to sell through brokers, which he found

introduced a level of inexibility. Asking prices had

already been set and businesses were often with-

out additional advisors who may have been able to

help broker deals more efciently.

Jonathan eventually found the business he wanted

to acquire and worked with his advisors to push the

acquisition through. Having completed that deal,

he has since gone on to acquire two further

businesses to compliment the groups offering.

It is so important to allow

for some exibility when youare selling your business,comments Jonathan.

Yes a tidy balance sheet,

business process and paper-

work are all important, but at

the right price, a lot of other

problems can be solved.

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Jonathan Bell, Managing Director


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Seeking out and securing nance for

a sale, purchase or merger is a big

part of the battle. With any transaction,

planning and preparation are required

and there are common mistakes that

can be costly and affect whether the

deal even makes it to completion.

There is also an understandable lack of experience

among senior SME executives that can lead toproblems.

Research conducted by ABN

Amro Commercial Finance in

2012 found that 85 per cent of

SME leaders had never bought

or sold a business before.

They get bogged down in taking orders, chasing

sales, serving customers and generally running the

business.

But setting aside planning time is vital and will help

to avoid many of the most common pitfalls. Below

are some of our experts top considerations for

those thinking about buying or selling a business.

Start Planning Early

Business owners that have built a company witha future sale in mind should already have a clear

view of its strategic priorities, and an ideal exit

point. If not, its important to start with the owners

ultimate goals the price to be achieved and when

the sale should happen and then work back-

wards to determine the steps needed to get there.

The aim is to create a valuable, viable business

that is attractive to potential purchasers.

Even if a future sale isnt the specic aim, it is still

vital to plan for change as there will come a point

where the business leader will want to take a lessactive role, cash-in, or hand over the business to

the next generation. Think ahead by up to three

years or longer to ensure everything is in order

when the time comes.

PART 3:Charting your Growth

On a personal level, the business owner needs

to consider the ambitions for the business: what

will it look like when it has achieved all that was

planned? Will it be the most recognised name in

a particular eld? Have won a certain share of the

market? Be a stable and respected local business?

Planning a likely exit point is the rst step in under-

standing when and how to make a change.

As a potential business buyer it will be important to

dedicate time to playing the eld and seeking outthe business opportunity that best ts with invest-

ment goals. Internal buyers will want to conduct

appropriate due diligence into the viability of buying

into the business, whether it can be funded, who

else will need to be involved and what all the po-

tential opportunities and risks might be.

Build a Robust Business Plan

Wherever third-party funding is required, a robust

and reasoned business plan will be vital. Especially

if the plan is to bow out after sale, showing a clear

plan with projected growth and prots is an

important factor in convincing a buyer of the

business future viability.

Too frequently a business is simply put on the mar-

ket with the seller only thinking about the next step

once an offer is received. A prospective buyer will

go through everything meticulously and if records

and plans arent in order the purchasers canleverage it to reduce the asking price.

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Know the Business Value

In the current economic climate, many businesses

are being valued at less than they should be. How-

ever, it is important not to confuse price with value.

The price is just a gure which someone is willing

to offer for the business, while value involves a real

calculation of what a business, its IP, assets and

people are worth as a going concern.

The saying that something is only worth what

others will pay is very true. That said, there is a

benchmarking process that those putting the deal

together will go through. They review the business

in detail and determine a value, often based on a

multiple of prots or expected prots and variable

by business sector.

A sellers view will be very different from that of the

prospective buyer, and a business that is heavily

dependent on one person, product or customer

may be difcult to sell. A strong management team

supported by a strong brand and reputation shows

a strength and depth which is attractive to potential

buyers, especially in a trade deal. Based on these

factors, a value will be calculated and used to not

only determine a fair sale price, but also the

vendors access to funding.

Involve lawyers and accountants in this process to

ensure all appropriate due diligence is covered and

that the business has been valued fairly.

Agree Terms

With any sale or MBO, the seller should be

comfortable with the price they are receiving and

not commit until they are truly happy.

In an MBO situation sellers are often unable to

achieve the asking price a trade buyer would

pay. As a result, they can ask too much from the

management team, who in turn are reluctant tonegotiate too hard due to their loyalty and commit-

ments. The considerations put in place, including

share rollovers and tough performance targets, can

create tension post-sale.

Management teams can also be too relaxed in

seeking robust warranty and indemnity protec-

tion, due to their involvement in and knowledge of

the business. Warranties and indemnities should

divide risk fairly between the seller and buyer and

compensate the buyer if a loss causing issue arose

during the sellers ownership.

Management teams should also be wary of giving

the seller too many protections post sale

regarding the management of the business or

access to nancial information. A balance needs to

be struck between the needs of the business and

the needs of the seller.

Employ Expertise

To ease the progress of the deal it helps to nomi-

nate owners for key parts of the process,

especially where there is prior expertise. This is

much easier if the business is being bought in

partnership with others, but key business advisors

can help. Consider nominating heads for:

The acquisition: Guiding and crafting the share

sale and purchase agreement

Post completion relationships: Setting theterms of the relationship between management

and the sellers in a shareholders agreement

Funding: Setting terms and conditions for the

sellers contribution to funding.

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Divide and Conquer

Completing a transaction involves multiple individ-

ual discussions, negotiations and agreements. To

make things simpler, it helps to treat the deal as

two discrete transactions:

Funding: structuring the nance needed to

make it happen will you be working with a bank,

nance provider, private equity, the sellers or acombination?

Sale and Purchase: who gets what and what

will the company look like after the deal is

completed?

Prepare to be Patient

Transactions can be long and drawn out. They will

involve numerous meetings, intense negotiations,

potential personal risk (and reward) for

management. Prepare for late meetings and tough

conversations and potentially not to see your family

much during negotiations. Remember the hard

work will be worth it in the end!

Many owners put in decades of hard work building

their business, only to throw away some of the

rewards at the last minute by not properly

considering the sale process. Selling and buying

takes time, so patience is vital.

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This report has outlined many different approaches and advice points for future

growth and expansion.

So the deal is done and the business is on the path to success, but what other

opportunities might there be out there to really boost your performance?

We asked our experts,

what do you see as the biggestopportunities for SMEs?

The following answers may give you inspiration on how to take the next steps:

PART 4:Where Next?

19

Mark Crosseld, Partner,

Corporate Finance, The M Group

To maximise value by considering allthe available options when planningto exit a business and give yourselfsufcient time to explore them with anappropriate advisor.

Jonathan Bell, Managing Director,

Investors in Engineering Ltd

Very difcult to spot at this moment intime. However, in the current environmentthose that are successful will be thosethat most clearly differentiate themselvesfrom their competition, either in terms oftheir products or the way they organisetheir business.

Andrew Chadwick, Managing

Director, Devine Deli Supplies Ltd

I think the biggest opportunity forSMEs lies with our ability to be able toreact quickly to the requirements of ourcustomers. Being able to recognise andrespond quickly to regional differencesis key to our business.

Richard Mason, Commercial

Finance Industry Expert, Ludgate

Finance

The biggest opportunity for SMEs

is understanding the availability offunding in the current marketplace andrecognise that is not likely to be fromconventional sources such as banks.

Guy Walsh, Regional Director,

ABN Amro Commercial Finance

The changing economic environment.Particularly in the engineering andmanufacturing sectors, where nichegoods are produced with fast leadtimes and in smaller volumes, we areseeing expertise return to the UK frombig markets like China.

Jonathan Davage,

Partner, Bermans

To drive prots through the cost sav-ings applied through the downturn andto use these new efciencies to invest,acquire and grow by utilising the UKs

excellent services and funding

infastructure.


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Further Information

We know making big business

decisions can be tough, but

hopefully weve inspired you to

consider your options.

Whether youre planning to sell

up or want to create the next big

business, were always keen to

hear about your plans.

navigating growth ebook

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