Cambridge Caledonian

Planning for an exit

Many business owners don’t explicitly plan their exit from the business.  This is for a host of good reasons; it may feel too early in the evolution of the business, they may have no realistic idea of its worth, or there may be no-one at board level with whom to discuss it.  Just as likely they will be too busy dealing with the day to day pressures of managing growth to think about it.

It’s never too early to start planning.  In an ideal world, with perfect markets, one might wish to plot the growth in value of the business over time and with perfect foresight sell just as the graph reaches its peak.  Sadly this is not possible in the real world.  As a result too many business owners fail to maximise value as a result of not planning their exit.   The worst outcome would be to sell once the business is past its peak.   Selling before the peak at least allows the seller to persuade a buyer to pay handsomely on the basis that the business has growth to come.

A further complication is that some businesses are just difficult to sell.  Any planning must incorporate some recognition of the need to change the company to make it more marketable in the future.

Research suggests that Business Exit Strategies are in the top five topics business owners wish their advisers could talk with them about.  Too often this doesn’t happen.   PEM Corporate Finance is holding a seminar on 21 February specifically for business owners to address these issues.

We work with business owners to devise strategies for business exit at some time in the future.   This involves an early appreciation of what they want not just from the business, but in life, an assessment of business value, and what will drive value in the future.  Very often this leads to a process of grooming, or preparing the business for a sale.  The sale may be in the short term plan, or a long way off, but it’s often still very important to begin the grooming process. 

The exit when it comes can take many forms, a sale to management in a succession buyout, the piecemeal sale of subsidiaries and assets, through to a planned disposal of the entire business.

As Edison said “Good fortune is what happens when opportunity meets with planning”.  So rather than hope that a buyer with deep pockets will emerge at the right time, whenever that may be, start planning your exit now.

Financial Services Acquisition

We are seeing a lot of M&A activity in all sectors of the local economy.   Here is news of another completion this time in financial services. 

Gibbs Denley, the Cambridge based insurance brokers and financial advisers, have now become one of the largest independent, locally owned insurance brokers in the East Anglian region following a recent merger with Ling Cook of Bury St Edmunds.   

My colleague Tony Stairs (who at the right of the front row and appears to be leaning against the railing in this photo) advised Gibbs Denley on this one, which meets its strategic objective to expand further into East Anglia via a synergistic acquisition.   More details on our website.

Timber

I boasted in an earlier post of having completed three deals in three weeks - and no this is not a representative running rate!  Here are some more details on one of them.

Scott Timber Group acquired Crofton Pallets in Huntingdon, boosting its turnover from £57 million to over £75 million and increasing staff numbers from 600 to nearly 700.

Crofton has manufacturing sites at Huntingdon, Grimsby and Wisbech.  The sites ‘complete the map’ for Scott Timber which has built its manufacturing bases around its customers.  It will also be able to enhance its timber import operation in Riga, Latvia, which will be complemented by a similar operation conducted by Crofton out of Wisbech. This paves the way for the shipment of over 25,000 cubic metres of timber every month.

As one of the UK’s largest pallet manufacturers, Crofton is renowned for its new pallet supply and quality of service. Scott Timber will look to build on this with the support of the Crofton management team, which will remain in place.

More on our website.   The picture shows - from left to right - my colleague Tony Stairs,  Paul Davidson and Paul Watkins, Directors of Crofton, and myself.

Its all about Perceptions

More info on oneof the deals mentioned in my last post.  Perceptions 2000 acquired Bury St Edmunds based design consultancy KWD with funding from The Royal Bank of Scotland.

Perceptions is a corporate communications business with large blue chip customers like French Connection for whom it designed their annual report shown here, Hannover Life Re, Unilever, Isotron, API Group, Encore Management SA, and The General Medical Council.

KWD is a long established ISO accredited design consultancy providing Corporate & brand communications, Financial report design, Packaging & technical illustration, Website & e-media

The two businesses have worked closely together for over 6 years and are well known to each other.

We worked with Gordon Murray, Managing Director of Perceptions on all stages of the purchase from negotiation through to funding.  It is a great fit for them both geographically and in terms of their range of services.  Val Dring and Paul Marks at The Royal Bank of Scotland who helped to deliver the financing package for the transaction, and Clive Wadham-Smith of Kester Cunningham John did the legal work.

Selling your business

As the owner of a successful business you may have thought of selling it at some stage.

I'm speaking on the subject at a breakfast meeting at the Maltings in Ely this week. 

I intend to cover how you go about making the decision to sell and the process? How can you groom the business for disposal? Timing is key - what factors should influence it? Business valuations are quite artificial - what will drive the real value of the business in a sale?

If you are to sell how can you identify potential buyers? Should the business be auctioned or is a succession buyout a viable alternative? How do you obtain competitive tension? How to safely entice a buyer and manage the provision of sensitive information to potential buyers. And of course tax planning - maximising the net proceeds.

Join us for breakfast, find out if your business has 'selling' potential and take the opportunity to make some valuable business contacts.

To book contact Jo Morgan of Morgan Event Management on 01638 565880

Practical M&A advice - making an acquisition

To grow by acquisition get the early stages of the process right saving cost and anguish later. 

1.        Planning; Do you have a strategic intent that your acquisition will support?  If so you should know what type of business you seek.

2.        Get your own house in order; if you are not fully in control now, you surely won’t be during and following and acquisition. Are you management and systems up to it?  Make the necessary investments first.

3.        How much to pay?  What is your target worth?  Research on what others are paying for acquisitions in the sector will give a benchmark, but beyond that what you can pay will be a figure quite unique to your business, given any synergies that you have with the target

4.        Funding.  Some funding can be raised against the balance sheet of the target, but what can you contribute?  Could you raise venture capital?  Best of all will the vendor allow you to pay some of the consideration on a deferred or earn-out basis.

5.        The Pareto Effect.  People waste time on deals that don’t happen.  The trick is to make a quick assessment of a realistic fundable price, and strike an early deal with the Vendor.  Of course this is not always possible and some good deals take months to put together. 

Approach acquisitions with clarity of purpose, and to do some quality practical thinking about price, funding and negotiation.  Do it that way and it might even be fun!

This item originally appeared in Business Weekly M&A supplement in February 2006

Disposal of local manufacturer

Another completed M&A transaction announced. PEM Corporate Finance advised on the sale of Hanworth Laboratories to Disperse plc.  Hanworth is a local specialist manufacturer of cosmetics, and a business with lots of know how too in matching unusual colours and formulations, with designer label and high street retail customers as a result.  Disperse is an acquisitive AIM listed plc which has purchased various cosmetic brands but until this deal lacked a manufacturing facility.  The strategic logic of the acquisition is further enhanced as Disperse will also benefit from the know-how of the Hanworth team, particularly Chris Sandy and Terry Hartin.   Lots more on our website on this and other M&A work we have undertaken.   James Allen and Parmjit Bhogal of Cambridge based solicitors Taylor Vinters acted for Chris and Terry on the disposal.

Artfully crafted deal

An interesting transaction; we advised local retail chain Tindalls the Stationers on its acquisition of the Arts and Graphics business of Heffers.   Heffers is Cambridge's long established book retailing chain which was sold to Blackwell's a few years back.

Its a classic case of a non-core business.  As far as I can tell Blackwell’s business is publishing and book retail; this was its only art materials outlet - acquired incidentally to the main Heffers deal.   That said it is the prime art material retailer in the town and has a strong and loyal customer base - a good buy for Tindalls who already sell art materials in their other outlets and had been looking to get into Cambridge.

Tindalls is an interesting business.  It is nearly as long established as PEM having started 1887 as a printer of sheet music.  It has grown rapidly over the last decade or so and now has a chain of shops and a wholesale operation. 

It was great to work with two businesses both of which are strong local brands.  The deal generated good appetite amongst the banking community and we were grateful for the support of Phil Carruthers of  Barclays who funded the transaction.

The picture, taken at Heffers Arts and Graphics, shows my collegue Tony Stairs and myself with Peter Drayton the Managing Director of Tindalls.   Full press release,  should you wish to know more,  is on our website.

Sale of Cambridge CAD software company

Another completion for PEM Corporate Finance!  We advised on the disposal of Quintic Limited a Cambridge based CAD software company to Dusseldorf based CAD Schroer.  We were able to achieve this quite speedily due to the close cooperation between buyer and seller.

Quintic has a long-standing relationship with CAD Schroer having been instrumental in developing its MEDUSA and STENO/PRO CAD SYSTEMS. 

This M&A transaction is a good example of a very close working relationship between supplier and customer being cemented with the customer acquiring the key supplier.   Quintic becomes a division of CAD Schroer UK, but will continue to service its other customer such as Lloyds of London.

Anthony McGurk and Brigitta Naunton of Eversheds in Cambridge provided the legal advice to Quintic on the transaction.

There is lots more detail in the full press release, if you're interested have a look at the news page on our site or at the coverage in Business Weekly.