Funding In The Current Funding In The Current ClimateClimate

Phil Gray

Commercial Director

Agenda for todayAgenda for today

• The Market Today

• Funding An Acquisition

• Preparation

• Structuring A Deal

• Preparing For Exit

• Questions

The Market TodayThe Market Today

• The banks are very much open for business with an appetite to lend

• Each deal “very much” on its own merits

• Lower debt multiples – 2 x EBIT

• LIBOR now back at its usual level is a clear indication of the lenders confidence slowly returning.

The Market TodayThe Market Today

• Great focus on equity contribution and strength of balance sheet

• Cost of funds still relatively cheap

• Good house keeping is key

• Good opportunities exist offering excellent value

Funding An AcquisitionFunding An Acquisition

Lenders look at the following

• Management credentials – incoming and remaining

• Sector Knowledge

• Serviceability – sustainable EBIT and how this translates into cash

• Strength of business within its market

Funding An AcquisitionFunding An Acquisition

Lenders also look at the following

• The effects of the loss of key individuals

• Market Conditions, product life cycle

• Competition

• Environmental, legislation

Preparation Is Essential!Preparation Is Essential!

• Professional Business Plan

• 36 months projections

• A full pack of financials for target business

Sounds basic but in the past decade of “fast cash” good preparation has been forgotten

Preparation Is Essential!Preparation Is Essential!

• If Lenders do not understand it they will decline it!

• What exactly are you buying?

• How is deal to be structured?

• What is your contribution/commitment to the deal - “hurt money”?

Structuring A DealStructuring A Deal

• Cash Contribution

• Commercial Mortgage

• Invoice Finance

• Asset Finance

• Cash Flow Loan

• Deferred Consideration

• Enterprise Finance Guarantee

• Personal Debt

• Private Equity

Structuring A DealStructuring A Deal

Airport Vehicle Company – Gatwick

Deal structured as follows

£365,000 Invoice Discounting

£400,000 Personal Remortgage

£100,000 Fleet refinance

£400,000 Deferred Consideration

£135,000 EFG Loan

£1,400,000 Total acquisition price

Preparing For ExitPreparing For Exit

• Work out your tax plan with your accountant to achieve the best exit strategy for you!

• Give thought pre sale to deferred considerations / earn outs

• Is it possible to re finance your assets or debtor book now to release cash and reduce the purchase price accessing a wider range of purchasers?

Preparing For ExitPreparing For Exit

• Have a full pack of information available for potential purchasers

• Be patient with the purchaser funding DOES take longer!

Thank you for your time Thank you for your time todaytoday

Any Questions?Any Questions?