Case study: Management Buy Out (Debt only)

Retained by the management team to lead the prospective acquisition of a specialist group of companies supplying the construction industry.  The Group had a turnover of circa £15 million and was to be acquired from owners who wished to dispose of their non-core activities.  The managing director already had a 40% interest in the shares of the target.

Conducted business appraisal and made approaches to banks that may be willing to lend in this difficult sector.   Then advised and assisted in negotiations with vendors and prospective backers leading to outline agreement with the vendors to acquire the business based on a valuation of some £5 million.  This was to be financed by a debt-only package.

Thereafter, instructed and supervised solicitors leading to the successful completion of the transaction.

Work included overseeing the conduct of the transaction including: -

• Preparing a spreadsheet-based financing model to assist in the financial engineering and undertaking sensitivity analysis;

• Advising on valuation;

• Bringing in and co-ordinating the role of a tax consultant to ensure the tax efficiency of the transaction;

• Preparing and negotiating heads of agreement;

• Making approaches to prospective backers and assisting evaluate and negotiate offers;

• Advising in the formulation of the strategic plan and funding proposal;

• Dealing with due diligence issues as they arose;

• Advising the management team on the implications of the transaction;

• Advising and assisting the managing director in formulating and negotiating terms for participation of other members of the senior management team;

• Assisting formulate and implement an employee share option scheme.

Within 18 months of completion all debt finance had been repaid out of profits.