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MOVING FORWARDDEALING WITH THE BUSINESS CHALLENGE OF CORONAVIRUS
FOCUSING ON HOW WE CAN HELP YOU
Introductio
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Jon Dodge MA FCA CF MEWI
Coronavirus has wreaked havoc upon our daily lives and in our businesses. But while some things may never be the same again, JDC’s desire to help our clients – whether through dealing with difficult times or in seizing the moment of opportunity – has never been stronger.
Speaking as a team, we hope you will find something of interest in this one-off review, prompted by our reflections on how we might be able to help you and your business through these most difficult and strangest of times. If you think we can, please let us know.
With cautious optimism … Onwards and Upwards!
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JON DODGEfca cf mewi
Managing [email protected]
07775 696809
ROB WHITEFOOTfca
Senior [email protected]
07552 964005
FIONA HOTSTON MOORE
fca cta mae acfsDirector of Forensic
and Advisory [email protected]
07770 642491
MATT FIELDcta
Senior Tax [email protected]
07796 716078
CHRIS ADLAMfcca
Director of Business Growth Services
[email protected] 166927
JOSH CADWALLADER
acaAccounts Executive
[email protected] 07717 570855
DAVE HOWESfca mba cfDirector of
Corporate [email protected]
07500 858143
RYAN SYMONDSacca
Corporate Finance Senior Manager
[email protected] 07795 905138
TONY LONGMANcta
07342 887680
JAMES COOPERaca cf
Corporate Finance Manager
[email protected] 07717 570973
JANET PARKERmba
Senior [email protected]
07780 008055
ALEX HUNTONaca
07884 584288
JOANNE PRICEfca
Corporate Finance Senior Manager
[email protected] 494357
JACKIE COLLIERPA
ADAM CROFTCorporate Finance
Senior [email protected]
07788 861039
MARIA RIXba(hons)
Senior Executive Assistant
Meet the team
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Shareholder reorganisation and succession planning projects, including founder shareholder exits and tax planning solutions.
Acquisition due diligence and pre-investment reviews.
Major business growth and refinancing projects alongside the ongoing corporate advisory services provided to many of our retained clients.
Full corporate sales mandates.
Private equity transactions.
Specialist share valuation assignments including those undertaken through our sister company Walton Dodge Forensic.
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Our services
Acquisitions:
Whether a first time purchaser, a serial acquirer or an MBO/MBI team, we have the knowledge and experience to assist in all aspects of the acquisition process including:
target searches • target appraisal • valuations • funding • due diligence • negotiation • deal structuring • integration strategy.
Disposals:
We specialise in advising on full, partial or structured exits, retirement sales, divestments and equity release. Our services include:
pre-sale advice and preparation • information memoranda • contacting targets • negotiating and structuring the deal • advising on post deal issues • accelerated M&A.
Private Equity:
We are very well connected to many private equity and venture capital funds and focus on matching the best placed investor to the right deal. We can help with:
pre-investment preparation • deliverable deal structures and IRR models • investor profiling • business plans and sensitised financial models • leading management presentations • negotiating the deal • project management • advising on post deal issues.
Business Valuations:
We have extensive experience of valuing interests in companies and businesses. The directors at JDC have valued over 500 businesses in a variety of sectors including manufacturing, technology, property,
farming, professional services, and media. We undertake valuations to facilitate:
business decision making • tax reporting • shareholder and commercial disputes • succession planning • incentivisation planning.
Business Growth:
Through our business growth services we provide external advice or hands-on interim management support to a wide range of clients. Our services include:
business plans • financial projections • refinancing • tailored MI • non-exec services • cash flow management • development strategy • turnaround.
Reorganisations:
The restructuring of a company or a group of companies involves financial, structural, strategic and tax based considerations. We are specialists in:
financial restructuring and refinancing • de-mergers • divestments • succession planning • capital extraction including company purchase of own shares.
Specialist Tax:
Understanding the tax planning opportunities and avoiding tax traps and pitfalls is at the core of all our planning work. We are specialists in:
corporate reconstruction • share option arrangements • investment and re-investment relief • tax effective income extraction • tax effective capital extraction • inheritance tax planning • specialist tax clearances.
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A reminder of our specialist services:
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2020: Quo
Vadis?
Jon DodgeManaging Director07775 [email protected]
The impact of Coronavirus on business has been Unprecedented. Extraordinary. Unparalleled. Dramatic. Catastrophic … and yet.
None of us have lived through anything like this before, but it is my experience that the owner manager is a resilient and resourceful breed, and the instinct of many (where it is not already simply too late or too much) will be to rise to the challenge, look for the opportunity and either bounce or claw their way back.
Our instinct at JDC is also to rise to the challenge of the times. We are fortunate in having several strands to our specialist business, enabling us to help our clients respond to whatever opportunity or challenge the economic environment throws at them and we have already assisted many clients over the last few months.
It is this opportunity to make a positive difference that has prompted us to reach
out through this review to other business owners who might need our help. I hope that the selection of features we have included will be of real interest.
Firstly, we should properly acknowledge that many owners face a significant challenge in emerging from the current crisis. For them, our focus piece on our hands-on working capital and cash management expertise might be of particular interest.
Others will consider the time is now right to re-visit and re-evaluate the strategic options now available to them in the short, mid and long term. We have also explained how we can assist in this objective.
Every business owner is interested in the value of their business. Our valuation experts are able to explain how to identify and focus on (in a challenging environment) the key valuation drivers which will make a huge difference to an owner’s aspirations, and so we have covered that too.
Unlike 2008/09 the current crisis has not (so far) been a liquidity crisis and many banks, alternative asset based lenders and private equity investors have been keen to remind us they are still looking to lend to or invest in good quality businesses. We have included a section for those interested in this opportunity.
Lastly, Q1 of 2020 saw a very active M&A market (see opposite for some of our own transactions). We think there will still be a lot of interest in quality businesses from focused buyers and a real market for committed sellers in the second half of the year. If contemplating a sale or restructuring, we have explained how we are here to help.
Whatever your own way forward from here, we wish you a successful onward journey and would be privileged to help you along the way.
2020 deals to date
Project HugoSector: Manufacturing & DistributionLocation: Eastern RegionDeal: Leveraged Buy-Out & Acquisition
Woodward VetsSector: HealthcareLocation: DerbyshireDeal: Disposal
Brentwood Communications Sector: CommunicationsLocation: EssexDeal: Acquisition
Climatec Group Holdings Sector: ManufacturingLocation: EssexDeal: Management Buy-Out
Broham Forecourt Developments Sector: ConstructionLocation: EssexDeal: Trade Disposal
Fiducia Group Sector: Financial ServicesLocation: EssexDeal: Management Buy-Out
Bateman Groundworks Sector: ConstructionLocation: NorfolkDeal: Management Buy-Out
VMS Sector: Fleet ManagementLocation: Hertfordshire / DevonDeal: Acquisition
Zaks Sector: HospitalityLocation: NorfolkDeal: Management Buy-In
ECS Power & Control Sector: Construction / EngineeringLocation: NorfolkDeal: Structured Management Buy-Out 5
How can JDC help?
In all circumstances, our approach to working capital and cash management has one single goal; to protect and grow shareholder value. There are many tools and levers than can be used and no two situations are the same, but the JDC difference is to provide senior hands-on support sitting alongside the senior management team – not just advising, but rolling our sleeves up and getting stuck in.
For us, cash management is not all about spreadsheet work and playing with financial models. Yes, these are important to underpin the wider delivery of a plan, but for us communication is the number one tool.
Communication with the board
Our approach allows you as directors to make timely and accurate decisions before cash and headroom run out. Good management information results in good decisions and we can provide regular reporting and advice at board meetings as needed.
Communication with the bank
We help in all aspects of lender negotiations and can sit alongside you in bank meetings, adding credibility to your forecasts and requests for funding. Our team have extensive experience in bank credit processes and know how best to present and negotiate your case.
Communication with creditors
We do deals. In a cash management assignment we can pick up the phone and negotiate improved terms or payment holidays with creditors and headroom for the business. This may include HMRC landlords, HP providers or general trade ‘creditors’. Rolling our sleeves up and delivering cash savings.
Communication with shareholders and other key stakeholders
If you are not 100% owner of the business, there may be financial investors, third parties and other key stakeholders who need to be kept informed and even asked for financial assistance. We help you with this and can introduce financial investors if needed.
Other services:
Refinancing and debt advisory
We access the whole lending market on your behalf matching your borrowing requirements with the right type of lender to deliver the best price, leverage and overall terms available.
Financial projections
Whether it is a very detailed daily short term cash forecast or a longer term integrated model to support bank borrowings or equity investment we can do the heavy lifting for you and build robust projections that pass third party scrutiny.
Chris AdlamDirector of Business Growth07786 [email protected]
What are you currently experiencing within the East of England mid-market?
The COVID-19 outbreak has caused a short term liquidity shock to many of the businesses in our region but most of them have been able to make good use of the generous Government furlough scheme, HMRC deferrals and the general goodwill of their customer and supplier relationships.
Banks have been supportive wherever possible and, whilst there has been some negative media coverage suggesting in certain cases they could have been quicker, in our experience, as long as the business case and information supporting any loan application has been presented clearly and
credibly, our clients have had few problems accessing additional funds.
We have been supporting a number of East Anglian businesses with cash management but, in general, these were fundamentally sound companies that had strong balance sheets coming into 2020.
There is some obvious concern amongst business owners about the long term impact of COVID-19 but our local entrepreneurs are resilient and resourceful and whilst there will be challenges ahead we expect most businesses to bounce back very strongly.
What do you anticipate the second half of 2020 to hold for the East of England?
As the Government support is gradually removed and businesses start returning to full operational capacity we expect there will be a liquidity squeeze. Access to support schemes such as employee furlough, CBILS loans, credit insurance guarantees and HMRC and rent deferrals will come to an end but most of this support has been in the form of debt which needs to be repaid. As a consequence, local companies need to stay fully focused on cash and liquidity through the rest of 2020 and beyond.
Business owners need to draw up detailed medium term cash forecasts factoring in the repayment of new loans and/or increased creditor balances. They will also need to consider the likelihood of reduced or slower debtor collections and seek to agree creditor payment plans if necessary.
In the coming months there could be further liquidity shocks and external impacts so having lenders, creditors and other key stakeholders on board and supportive of your plans will be essential.
“Early engagement and over-communication with key stakeholders is vital. If you man-age cash and working capital wisely in the short term you will protect and grow share-holder value in the long term. Those businesses that have been reassessing strategic options, focussing on liquidity and cutting costs will emerge strongly when the economy returns to some form of normality.”
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SectorMarine Construction
LocationSuffolk
DealRestructuring
The business
I&C Ltd (trading as Red7 Marine) is a specialist offshore construction and plant hire business providing services to companies across the UK and beyond.
Headquartered in Ipswich and owning some very unique and high value flat top and jack-up barges, the business has grown rapidly in recent years.
Between 2017 and 2019, turnover increased from £6.8m to £18.6m but during the last six months the industry suffered a sharp slowdown.
The deal
The market slowdown led to significant cash pressure on the business and its existing owners decided not to provide further capital.
As a consequence, the directors sought additional funding in the form of both debt and equity.
After an accelerated sale process, a solvent solution was achieved with new owners taking control and providing significant new funding for the business.
JDC value add
Reviewing and managing cash during a critical time and implementing improvements to the forecasts.
Regular reporting and advice to the board on funding options, deal structure and future funding for the business.
Managing all stakeholders during the sale process including the bank, shareholders and advisers.
Ongoing cash management and implementing and driving post-deal restructuring and cost cutting.
Red7 on JDC“Having JDC Corporate Finance on board for our recent voyage across some rather choppy water, was a very calming experience. Having seen our market drop away by some 50%, Chris and Alex engaged with our creditors to forge some strong relationships, negotiating support to enable us to climb back to a more comfortable position.
The JDC team showed great leadership to our finance team, giving them the confidence to engage with our supply chain and strengthen our financial position. They engaged with our directors and new investors, supplying fast and accurate cash forecasts to enable us to plan meaningfully and steady our ship. It was great to work with you both, thanks again for your fantastic support.”
Nick Offord, CEO of Red7 Marine
Restructuring and Refinancing of Red7 Marine
www.jdccorporatefinance.co.uk
SectorFood Preparation/Manufacturing
LocationEssex
DealEquity Investment
The business
Anglia Crown Ltd is the only independent chilled and frozen prepared meal manufacturer to the healthcare sector in the UK.
Founded in 1992, the business has historically focused on the healthcare sector, working with over 100 hospitals in the UK.
In 2018, the senior management team completed a management buy-out (‘MBO’) with a plan to develop new products and target new markets including travel, defence and care homes.
The deal
Having been under-invested by the previous owners, the new shareholders required investment to support their growth plans.
Hilco Capital invested in the business and also provided a significant working capital and capex funding facility.
The investment allows the shareholders to deliver their growth plans along with support from Hilco Capital’s operational expertise.
JDC value add
Rapidly ran and managed a competitive investment process with strategically selected private equity houses.
Acted as lead adviser, project managing the deal from inception to a successful completion and negotiating with numerous external stakeholders.
Allowed management to focus on running and growing the business whilst JDC delivered the deal.
Anglia Crown on JDC“When we took over Anglia Crown in 2018 we knew that to meet our ambitious business plan we would need to seek investment to help fund the equipment we needed and to support the necessary increase in working capital. We went to the market to find a partner who would advise us on the best possible deal from a selection of investors. JDC understood that our requirement was to find a partner who was truly interested in us as a company. Chris and Jo at JDC worked really closely with us and got to know us as a business then went to market to seek the right investors. We were consulted and excellently advised at each stage of the process, culminating in a very satisfactory conclusion.”
Andrew Lone, Director of Anglia Crown
Equity Investment in Anglia Crown
Raising the bar
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How can JDC help?
Our team has a wealth of experience to independently challenge and review your business strategy. We add value (not just tell you what you already know) and we draw on our experience and knowledge to provide essential insight and advice.
Market Position
We will analyse your market (including utilising our worldwide market analysis tools) and your competitors and provide advice and insight into where we believe you are positioned and where we believe the key opportunities/challenges are.
Financial and Funding Assessment
A typical strategic review includes a financial assessment and a summary of future funding needs. We will illustrate the options available in terms of different debt and equity raising options, the pros and cons of each route and advise on what we believe is right for your business.
Assessment of Management Team and Structure
We will meet with each member of the senior team to obtain their personal input into both historic performance and future strategy and to fully understand their aspirations. We will then present our findings to you together with our appraisal of the strength and completeness of your team.
Acquisition Strategy
Alongside our review of your core business, we can assist in defining an acquisition strategy and identify potential targets that are going to add the greatest strategic shareholder value. This can then form part of a wider business plan (including financial forecasts) adding significant credibility to your plans if external funding is required from either debt or equity houses.
Valuation and Exit Options
We provide our experienced view on the current and potential future value of the business as well as helping you understand and plan for future sale options including identifying who we believe might be the right strategic acquirer of your business.
Implementation and Follow Up
Our strategic review documents are punchy and precise. We focus on what matters most. We will provide a list of key actions and responsibilities for you and your senior management team to follow up and implement. To ensure the review delivers best value we always stay in regular contact to ensure progress is being made and provide further support.
Dave HowesDirector of Corporate Finance07500 [email protected]
What are you currently experiencing within the East of England mid-market?
After the shock of COVID-19, the initial focus on making sure employees can continue to work safely and ensuring sufficient funding to see their business through the lockdown period, business owners are now focusing on what their business might look like on the other side of the crisis.
The same entrepreneurial spirit that successfully drove the building of many businesses to their pre COVID-19 position is now being focused on securing new opportunities for both the businesses and their owners.
We are advising a number of leading businesses across the East Anglian region looking for bolt-on acquisitions of competitors who might not have fared so well and raising finance to support these acquisitions. We are also helping our clients to develop business plans supported by integrated financial forecasts to be in a position to raise private equity funding as soon as the restrictions lift. What do you anticipate the second half of 2020 to hold for the East of England mid-market?
It is going to be vital for businesses to either fully detail their strategy for rebuilding after being hit by COVID-19, to capitalise on their strong position post COVID-19 or, unfortunately in some circumstances, wind down or close loss-making activities or divisions where it is untenable to continue.
Business owners will want to fully understand what opportunities are available for re-capitalising a weakened balance sheet, funding working capital requirements, making acquisitions to diversify or strengthen their market position and whether it is the right time to de-risk some or all of their personal wealth in the business.
We believe our extensive experience in providing an independent third party appraisal of a business position and advice around all the options available will be invaluable to help business owners navigate and decide on the best route forward for them, their employees and their business.
“Having a fully defined strategy and knowing all the options available in emerging from the COVID-19 crisis will be crucial to all businesses. Our aim is to build a long term trusted adviser relationship with you and we would be delighted to have the opportunity to prove the value we could add by undertaking a strategic review for you which we are sure you will consider exceptional value for money.”
SectorInfrastructure & Telecommunications
LocationUK
DealStrategic Review & Refinancing
The business
One of the UK’s leading independent telecom providers, specialising in providing project management services and end to end solutions for the UK’s mobile and fixed line network operators.
The company has grown to provide the full range of infrastructure services encompassing acquisition, design, build and fixed line, servicing a number of major blue chip customers.
Located in strategic locations across the UK.
The situation
Company had reached an important stage in its life cycle, with numerous opportunities within its market space.
Requirement for the shareholders and management team to be presented with the full range of options open to them in order to evaluate and define a plan to crystallise the next stage of growth to maximise shareholder value.
Significant investment by directors to date, with further development and working capital required to unlock growth.
JDC value add
Evaluated the company’s current and future position, assessing the key value drivers, areas of risk and reviewing the full range of options.
Worked with management to create a comprehensive three year business plan with detailed financial forecasts that were able to stand up to third party scrutiny.
Presented the full range of funding options to the directors including debt and equity structures to allow the directors to make an informed decision before securing a new facility from HSBC.
Project Network on JDC“We met with a number of corporate finance advisers to assess what each had to offer. From our first meeting with JDC it was clear that their hands-on senior led service was the differential to competitors.
JDC took the time to understand our business and provided us with the options available. They assisted us in presenting our business plan to funders where we secured the necessary funding to fulfil our ambitious growth plans.
We look forward to continuing to work with JDC to achieve our objectives and would highly recommend them to SME owners seeking advisers who can add real value.”
Director of Project Network
Refinancing of Project Network
www.jdccorporatefinance.co.uk
SectorHealthcare
LocationEssex
DealBusiness Growth
The business
The Wylie Veterinary Centre was opened in 1908 and was owned by three generations of the Wylie family before Richard Doyle and Morkel Pienaar took over the reins in 2015.
Practice comprised a RCVS accredited hospital in Upminster (the highest standard possible for a private practice) and a new Pet Hub site located in Brentwood.
Gained an excellent reputation as the leading independent veterinary practice in the area, with an unrivalled reputation for the highest quality of service and staff retention.
The situation
Next phase of growth comprising the launch of a second hospital in the Chelmsford area, alongside a number of value add propositions including their own raw pet food range and accessory products.
Requirement for the full range of options to be evaluated and a plan defined to crystallise the next stage of growth to maximise shareholder value.
Requirement to fully understand the full investment costs of the various options, including full visibility on working capital in order to manage cash flow.
JDC value add
Evaluated the company’s position, assessing the key value drivers, areas of risk and reviewing the full range of options.
Worked with management to create a comprehensive integrated financial model that illustrated several sensitivities that were able to stand up to third party scrutiny.
Presented the integrated model to the incumbent funder and secured their commitment to support the long term plan.
Wylie on JDC“We reached a pivotal point in the life cycle of our practice where we needed external expert advice in order to implement our strategy for growth. JDC came highly recommended and from our first meeting it was clear that not only did they understand the veterinary space, but they were able to debate and challenge the strategy to ensure that we have fully considered all of the complexities involved.
Dave, Alex and Adam spent time with the shareholders and the wider management team before focussing their work in the key areas where their expertise added real value. We look forward to working with JDC on the next stage of our exciting journey.”
Richard Doyle, Managing Directorof The Wylie Veterinary Centre
Strategic Review for The Wylie Veterinary Centre
Raising the bar
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How can JDC help?
We can help you to understand the drivers of the value of your business. This understanding is key to effective decision making which will enable the business owner to protect, build and realise the value in their business. As a firm, we have valuation expertise that is unrivalled within the East of England.
Business Valuation
We have a wealth of experience in valuing companies for the purposes of deals, dispute resolution, and restructuring. The combination of our strong technical experience and our involvement in real life transactions enables us to provide comprehensive assessments of the valuation of a business and importantly the factors driving current and future value.
The challenge for us as business valuers is to assess both the immediate and the potential mid term impact on the business in question – whether temporary or permanent. Recent and properly forecast sales and profits; order book; supply issues; impact on key customers; impact on competitors; cancelled contracts; new debt structures – all this, alongside the strategy of the business, will need to be assessed in the valuation process.
Understanding the Market
In terms of the wider market and availability of reliable comparator data, with the likelihood of a smaller number of
transactions completing in the mid-market as a whole and with deal multiples being heavily influenced by business specific factors and a volatile economy (with Brexit still on the horizon) there will be significantly greater uncertainty in business valuations generally.
However, our access to both published market data as well as our own extensive database of valuations and completed transactions, will still allow us to analyse your market position and the opportunities for you to build value or realise your investment. In today’s circumstances, the right advice really will make a real difference to real deals and real business values achieved.
Setting Strategic Direction and Incentivising the Leadership Team
We will help you to understand both the current value of the business as well as the opportunities to build future value. This will assist in business planning and may involve the introduction of remuneration and share incentives that will encourage the right focus in your senior team.
Ongoing Support
The depth of our valuation experience and specialist skills allows us to provide proactive commercial support (far beyond the technical valuation) at every stage of your journey. Our retained clients enjoy our advice in areas such as tax planning, fund raising, restructuring, acquisitions and eventual exits.
Fiona Hotston MooreDirector of Forensic and Advisory Services07770 [email protected]
What are you currently experiencing within the East of England mid-market?
The M&A market in Q1 2020 was very active, in some part due to a drive to complete transactions ahead of the Budget on 11 March in anticipation of a cut to Entrepreneurs’ Relief.
Very few of the 10 transactions we completed in Q1 were impacted by the COVID-19 pandemic, with substantive terms having been agreed before the pandemic really started to impact deal flow and with deal momentum and careful deal management carrying through completions at agreed values.
News of the pandemic started to impact the value of shares listed on the London Stock Exchange in late February and the falls became pronounced by mid-March, falling further until the announcement of lockdown at the end of March. Since then share prices have been volatile and the FTSE Index has bumped along at approximately 30% lower than it started in 2020.
Clearly the pandemic, lockdown and the resulting global contraction have all had an immediate impact on the value of companies. In most cases the impact will be a significant reduction in value and some previously strong businesses will run out of cash in Q3 and beyond and cease to be a going concern. However, in some sectors (online retail, pharmaceutical, healthcare and technology to mention just a few) the impact has been less severe and values will have held up or have increased.
What do you anticipate the second half of 2020 to hold for the East of England mid-market?
As businesses start to emerge from the immediate economic slowdown and shock of COVID-19, many will be struggling to manage cash flow and move in to ‘distressed’ mode, but others will bounce back. We are hearing some positive mood music from financial investors, trade purchasers and owners which promises to support transaction levels in the second half of 2020. Valuation will of course be an issue, but with the right focus on persuasive value drivers, sellers will still have a good chance of achieving a highly satisfactory price and with the right sector focus and applied targeting and research, buyers should be able to acquire quality assets at attractive prices.
“Understanding the key drivers of business value is essential in business decision making, particularly in a volatile economy that presents both challenges and opportunities. Our aim is to provide you with the information, challenge and support to survive, thrive and ultimately realise the value of your business. Now is the time to start the discussion of how to properly harness the drivers of business value and we can help you do that.”
SectorCommunications
LocationLondon
DealCapitalRestructuring
The business
A London based agency specialising in research based customer communications.
Headquartered in Farringdon and successfully looking after the needs of a blue chip client portfolio since 1991.
“MiC take our ideas to another level and make our communications more impactful” – Google representative.
The deals
Two separate exits, at different times, of founder shareholders.
Co-founding shareholders moving on in an amicable re-organisation at agreed values with structure designed to ensure continuous smooth operation of the business.
On both occasions, company left brilliantly positioned for a new chapter of growth and development.
The company is now 100% owned by founder shareholder, Sarah Edwards.
JDC value add
Acted for the shareholders in their MBO in 2007 and through two subsequent share re-organisations.
Planned and structured the agreed exit routes for the departing shareholders, providing expert advice on and helping to negotiate an agreed valuation.
Provided all tax planning advice and obtained all necessary tax clearances.
Make it Clear on JDC“Over a period of 12 years JDC have guided us through our original MBO and now through two further re-organisations. Their deal advice and knowledge has been excellent throughout.
The departure of a significant executive shareholder could have been difficult and disruptive to our business. As it turns out, we needn’t have worried. Jon helped us negotiate a fair value, reach a reasonable compromise on the terms of departure and helped us restructure the business going forward. His expertise and hands-on approach really was key to achieving a successful outcome to the process. I really could not recommend JDC more highly.”
Sarah Edwards, Owner of Make it Clear
Founder Shareholder Exits fromMake it Clear
www.jdccorporatefinance.co.uk
SectorPharmaceuticals
LocationNorfolk
DealShareholder Exit
The business
An East Anglian based group operating in the pharmaceutical industry.
Founded in the mid 90s with established track record as leaders in its specialist field.
Expansion and growth potential, but with a requirement to re-align its shareholder and executive team, with a co-founder looking to move on.
The deal
Purchase of founder-shareholder’s interest through group restructuring.
Initial and deferred consideration over an agreed timescale.
Restructuring and realignment of shares between continuing shareholders in new holding company.
JDC value add
Introduced to help shareholders seek resolution to a potentially fractious situation and agree an effective way forward.
Designed deal structure for resolution of problem.
Represented exiting shareholder throughout, negotiating share value through protracted negotiations and agreeing terms of deal.
Assisting shareholders in going their separate ways on a satisfactory basis for all.
Founder Shareholder on JDC“JDC were my representatives when I sold my shares back to a company that I had started and co-owned. They gave me most valuable advice, had outstanding knowledge of the structural aspects of the deal and provided a cogent and well-argued valuation of the company. During the difficult negotiations, they proved to be excellent advocates and I felt completely in safe hands. Their specialist knowledge and negotiating skills meant that the potentially fraught process was carried out with professionalism and without drama. I am verygrateful for their help.”
RA, Founding Shareholder
Shareholder Exit - Project Freedom
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How can JDC help?
Refinancing Existing Facilities
We have an extensive contact base and relationships with all the major high street lenders and many alternative funders. This means we can quickly and honestly advise you whether current or potential new facilities for your business are fit for purpose.
If you do not currently have an offer available, we are experienced in managing competitive processes to ensure that the right deal is achieved for your business. We cover all types of borrowing and consider the various security, pricing and repayment options and then, most importantly, provide you with our input and influence the outcome.
Raising Additional Finance
Our extensive knowledge of raising debt means that we know the challenges of the process and we can prepare you for them. We will ensure that your business plan is stress-tested, you have a clear explanation of how the new money will be utilised and how it benefits the business, that your historic financial information is well presented and we will speak to a range of different lenders who are likely to have differing appetites during these exceptional times.
Raising Equity Investment
Our team has a wealth of experience in raising equity finance including from VCT funds and from traditional private equity.
We have established relationships with investors and understand what they are looking for, enabling us to present your business in the best light, including business plans and integrated financial models with sensitivity analysis and internal rate of return (‘IRR’) modelling, managing equity transactions and advising you on the best fit partner and terms for your business.
Equity funding can be raised to:
De-leverage balance sheets: Equity can be used to replace existing debt that has been accumulated either through COVID-19 facilities or other previous financing events in the business. Equity investment will improve the balance sheet position along with carrying less covenant and cash flow pressures on the business going forward; and/or
Provide development / acquisition capital: A business may not be able to raise sufficient funds to achieve its plans to grow organically or through acquisition if relying on traditional bank loans., Private equity provides an alternative opportunity for the right businesses to raise capital to support and execute growth strategies to unlock business growth potential; and/or
Enable shareholders to de-risk or exit: private equity can provide funding to enable shareholders to exit or partially realise the current value of their shareholding and ‘roll-over’ the remaining value to participate in a future exit and realise further upside.
Ryan SymondsSenior Corporate Finance Manager07795 [email protected]
What are you currently experiencing within the East of England mid-market?
Following the outbreak of COVID-19, we have seen a pause in transaction volumes in the general M&A market as the focus from investors for the first few weeks was on supporting their existing portfolio companies. Now the initial shock has passed we are having conversations with investors who are actively looking for new opportunities in the short and medium term as well as acquisition targets for existing portfolio companies.
Since the lockdown was introduced, we have seen a large amount of support being made available to SME businesses through
banks and other lenders which many businesses have utilised, whilst others have extended traditional commercial funding.
We initially experienced some teething problems with CBILS and gaining access to the support, which was not a surprise due to the short timeframe it was implemented in. However, we are now seeing CBILS being much more readily available with varying criteria (such as the requirement of personal guarantees and costing levels) being lender specific.
What do you anticipate the second half of 2020 to hold for the East of England mid-market?
Whilst banks have provided vital support to businesses in recent months, much of the short term focus has been on allowing businesses to survive. When businesses look to re-start, or increase activity to pre COVID-19 levels of trading, this will require working capital funding and in some instances result in the existing debt facilities not being adequate. We expect refinancing or raising additional funding will bring some unique challenges for businesses where current debt levels have increased and recent trading performance has suffered. This could make it difficult to get the right level of funding to support working capital and investment requirements, which in turn could slow business recovery or lead to new opportunities being missed.
As private equity investors have remained active over recent months, we anticipate that raising equity will remain a viable option for the right businesses throughout the rest of the year. Additionally, now the initial storm has passed, banks and alternative lenders will likely start looking at new business and longer term solutions for their existing customers.
“Having a full understanding of what financing options are available to you and your business will be very important given the current climate and its inherent uncertainties. We would be delighted to provide our views on the options available and help you model which is the most appropriate. Please feel free to contact us confidentially to discuss how we can assist.”
SectorAutomotive & Motor Sport
LocationNorfolk - Head OfficeEurope - Operations
DealMinority Investment
The business
Founded in 1994, headquartered in Diss, Norfolk with manufacturing facilities in the UK and Romania.
A global leader in designing, manufacturing and distributing high precision components to the automotive and motor sport industries.
BF1 Systems have an established blue chip client base across motor sport including Formula One, GT racing and Formula E along with high performance road car manufacturers.
The deal
Minority investment from the Business Growth Fund, the UK’s most active investor in small and medium companies.
Experienced industry chairman added to the board.
Support and funding in place to implement the detailed business growth plan.
JDC value add
JDC have worked with the company and shareholders since 2015.
Acted as lead adviser to both the company and shareholders throughout the transaction to a successful completion.
JDC provided tax planning advice to ensure the most tax effective deal structure.
BF1 on JDC“JDC have fantastic private equity knowledge and provided invaluable advice and support throughout the entire process.
It was great to work with the JDC team and I would highly recommend them to any company looking to raise private equity investment.”
Graham Peel, Managing Director of BF1 Systems
Minority Investment in BF1 Systems
www.jdccorporatefinance.co.uk Raising the bar
CONFIDENTIAL
SectorManufacturing & Distribution
LocationEastern Region
DealLeveraged Buy-Out & Acquisition
The business
A strategic investment vehicle created through back to back buy-outs of two complementary businesses involved in the manufacture, distribution and installation of office and leisure furniture.
Both businesses have built market leading competencies through different sourcing capabilities and exclusivities. Together, they are uniquely positioned as an agile and successful contract manufacturer and installer with access to global market supply.
The deal
The deal was comprised of two phases; the leveraged buy-out of Company A, followed by the subsequent leveraged buy-out of Company B.
With a combined Enterprise Value of £31m, the transaction was supported by £13m of bank debt facilities and £18m of shareholder funding.
The enlarged Project Hugo group reports combined annual revenues of £28.1m and EBITDA of £4.2m, with further future additional upside opportunities.
JDC value add
As lead adviser designing, coordinating and integrating a complex deal structure to meet the objectives of all stakeholders.
Integrated financial modelling and business planning, running a competitive debt fund raising process, leading on all negotiations and project managing external FDD.
Obtaining all requisite tax clearances without HMRC query.
Advising on commercial and tax aspects of the legal documents and driving the deal to successful completion.
Project Hugo on JDC“JDC were the perfect partner for a deal of this type, acting as a trusted adviser from start to finish, they showed resilience, tenacity and creativity in helping the large number of stakeholders navigate the challenges of an inherently complex but very exciting deal. I wouldnt hesitate in using them again.”
CEO of Project Hugo
Creation of New Group to Support Two Back to Back Buyouts for Project Hugo
How can JDC help?
We can help with the following services:
Vendor Initiated MBOs
We can help with the implementation of a managed succession plan which allows business owners to de-risk their position and crystallise value today at attractive tax rates whilst still protecting their businesses.
A structured MBO could be the right strategic solution during the current pandemic as it is possible to achieve a full or partial exit with or without third party debt/investment (although the latter is predicated on the current owner’s appetite to receive consideration over a deferred term, typically repayable out of future profits). This does not mean selling the business to the management team at undervalue.
From the ambitious management team’s perspective, this type of structure can be very attractive. They will typically be asked to buy in at a level which is meaningful (but affordable) in exchange for an equity stake in the business and the ability to benefit in taking the business to the next level.
Full and Partial Exits - Front Foot
We believe strong businesses will still be attractive to UK and overseas buyers. We also expect some business owners, having traded through the crisis, might now find the time is right to de-risk and realise value for the years of hard work they have committed. For strong businesses, we expect values to hold-up.
Full and Partial Exits - Back Foot
We can help businesses which are vulnerable and may have been exposed through the current crisis and can be better sheltered in the future by being part of a bigger strategic organisation. A number of strong businesses may also find re-building working capital levels or refinancing debt a challenge. For these, it may be advantageous to receive some inward equity investment for a non-controlling stake in the business to ensure they are able to take advantage of opportunities and return to pre-COVID-19 performance as soon as possible.
Distressed / Accelerated M&A
We can help with accelerated M&A processes for distressed businesses. This may realise more equity value for the shareholders compared to a winding up/liquidation process. The key is speaking to us early. We have experience of running sales processes to trade buyers and turnaround private equity in very short order with transactions completing in only a few weeks.
Employee Ownership Trusts (EOT)
For certain businesses, we can help owners to sell some, or all of their shares to an EOT (subject to satisfying certain conditions) for full market value without incurring any capital gains tax liability, in a way which also benefits the employees by facilitating wider employee ownership, albeit via an indirect holding.
Exi
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plan
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James CooperCorporate Finance Manager07717 [email protected]
What are you currently experiencing within the East of England mid-market?
Q1 2020 was a busy period for JDC, with 10 exit and succession planning deals completed, driven in part by our successful acceleration of ongoing transactions in anticipation of changes to Entrepreneurs’ Relief which were announced during the Budget.
Looking to Q2 of 2020, the spread of the coronavirus has caused some deals to be delayed, but many deals are continuing and some new sales processes are being launched. Amidst all of the current uncertainty, we were delighted to have completed in June the sale of Woodward 10
Vets to Linnaeus with a number of exit and succession planning transactions still on track to complete during Q3 of 2020.
We are still seeing companies, business owners and investors engaging in M&A where there is a clear strategic rationale, but some delays have been inevitable as dealmakers and principals have had to adjust to new ways of working. What do you anticipate the second half of 2020 to hold for the East of England mid-market?
Ultimately corporate finance fundamentals have not changed and exit and succession planning still needs to happen.
We would anticipate disruption to continue in the short term, however we expect transactions to occur alongside this and then pick up again as we adjust to the ‘new normal’. We expect strong businesses to continue to be as attractive to trade acquirers and private equity as they were pre-COVID-19. We also expect the current crisis may encourage business owners to pursue a complete or partial exit in order to de-risk their position.
The current situation is different to 2008/09; in that this is not a banking liquidity crisis and private equity funds have raised capital which they need to deploy by seeking new investments and bolt-on acquisitions for their existing portfolio companies.
Whilst Brexit talks have been delayed, UK investments remain attractive to overseas buyers, helped by the devaluation of sterling compared to 2016 rates. Capital gains tax rates also remain very attractive, although this is likely to change as the Government seeks to clawback reliefs and grants provided during the pandemic.
“Given the current climate it is critical to plan early for your exit and succession. We would be delighted to have the opportunity to learn about your business and to present our ideas to you on how you could implement your preferred exit and succession strategy. Please contact us for a free, confidential, informal conversation.”
SectorConstruction
LocationEssex
DealTrade Disposal
The business
Broham is a leading specialist principal contractor in retail forecourt and commercial fuel installation, providing construction, remediation, refurbishment and maintenance of fuel forecourts.
Founded in 1980, Broham has an established industry reputation, offering a high quality service to a blue chip client base.
Strong platform for future growth with significant market opportunities.
The deal
Strategic trade disposal of 100% of the shares to Baxter Holding Group Limited.
Baxter Holding Group Limited is backed by Mark Hughes, an entrepreneur with a number of associated businesses providing further growth opportunities.
Significant cash consideration on day one, with continued commitment from the purchaser to the current operation and employment of staff.
JDC value add
Acted as lead adviser throughout every stage of the transaction.
Creation of a detailed information memorandum to present the company and the numerous growth opportunities in a professional and credible manner.
JDC ran and managed a competitive sales process with a number of strategically selected parties.
Negotiated the deal structure that aligned the interests of both parties.
Broham Forecourt Developments on JDC“Having built and nurtured Broham Forecourt Developments Ltd for the past 29 years the day finally came to entrust the sale through JDC Corporate Finance. The enthusiasm, knowledge and professionalism in every aspect from the JDC team has been outstanding and a great experience. Look no further if you are looking to put together a similar transaction.”
Kevin Porter, Managing Director of Broham Forecourt Developments
Trade Sale of Broham Forecourt Developments
www.jdccorporatefinance.co.uk Raising the bar
SectorConstruction
LocationNorfolk
DealManagement Buy-Out
The business
Bateman Groundworks was founded in 1997 by Richard Bateman.
Head office located in Norwich with over 200 employees.
Bateman Groundworks is the leading provider of groundworks and civil engineering services across East Anglia.
The business has experienced year on year growth in recent years through delivery of a first class service and becoming a trusted supplier within the construction industry.
The deal
Structured management buy-out with founding shareholder securing a partial exit and implementing a succession plan for the business.
Founder retained a significant equity stake with management holding the largest combined shareholding in the company.
The MBO structure has been designed to enable further incentivisation of the wider management team in the future.
Exciting and established platform for further growth to be led by the management team.
JDC value add
Designing and advising on an attractive MBO structure for all parties.
Providing tax planning and obtaining requisite tax clearances to ensure beneficial tax treatment for all.
Financial modelling with deal structure overlaid to ensure fundability.
Advising on commercial, banking and tax aspects of the legal documentation and guiding the deal to an efficient and successful conclusion.
Bateman Groundworks on JDC“Not only did JDC identify the potential for and design the shape of our recent management buy-out, but they also dealt with every other aspect of it from start to finish providing superb service with attention to detail. We all knew we were in safe hands. There is no substitute for knowledge and experience and JDC have it in spades.
Thank you for a great job well done.”
Richard Bateman, Founder and Chairman of
Bateman Groundworks
Management Buy-Out of Bateman Groundworks
FA
Qs How can we help you? Here are
some of the answers to questions we have been asked in recent weeks.
How can you help my business survive and thrive post the pandemic?In this volatile economy it is more important than ever to obtain proactive and creative advice from experienced advisers.
At JDC our focus is on finding the right solution for our clients. Our directors have advised over 1,500 business owners on strategy and have specialist experience in the challenges businesses are facing in 2020, including cash management, fund raising, reorganisations, exit planning and acquisitions. Whether your business has been adversely impacted or you are relatively unscathed and looking at growth opportunities, our hands-on commercial experience will help move you forward into the second half of 2020 and 2021.
How much will the initial meeting cost us?Nothing. We make a significant investment of time into first meetings and are focused on identifying the right advice as early as possible. We believe that after spending a few hours with us, you will see the real value we could add to your business.
We will not look to engage a new client unless we truly believe we can add value and deliver success. Our integrity as a firm is built on open and honest advice from day one.
What are your fees like?Very fair. Very competitive. As an independent firm, we are able to offer a tailored, bespoke service that incentivises us to deliver the best deal for our clients and significant value for money. We work hard to structure our fees in ways that work for our clients.
Aside from corporate finance and strategic advice can you help in other areas?We are leading independent tax advisers and also have a general practice limb. We do not take audit appointments but do prepare year end accounts, deal with tax planning and regulatory reporting and provide all of the business and tax services you expect from an accountant. We approach all of our work from an advisory perspective. Our aim is to manage the routine compliance efficiently and cost effectively, build value in your business through our ongoing involvement and accompany you along the journey.
How do we contact you confidentially?
Where?Dencora Court2 Meridian WayNorwichNR7 0TAt: 01603 703177
Office A, The Dutch BarnOld Park FarmFord EndCM3 1LNt: 01245 210310
Who?You can find individual contact details for our entire team at the front of this brochure or you can visit:
www.jdccorporatefinance.co.uk
11
Main Office
Dencora Court2 Meridian WayNorwichNR7 0TA
Essex Office
Office A, The Dutch BarnOld Park FarmFord EndCM3 1LN
Also at
3 Gray’s Inn SquareLondonWC1R 5AH
Raising the bar
JDC Corporate Finance is not authorised under the Financial Services and Markets Act 2000 but we are licensed by the Institute of Chartered Accountants in England and Wales and are able in certain circumstances to offer a limited range of investment services to clients. We can provide these investment services if they are an incidental part of the professional services we have been engaged to provide.
