What do we do?

Buying another company can be a transformational experience if you get it right. There may be opportunities for synergies both from a revenue and cost perspective, however you need to make sure you have assessed all the risks associated with the transaction. We can assist you through this complex process.

Identify target – if you have not already identified a target we can use our extensive network and research resource to do this for you. We can also approach the target on your behalf.

Valuation and feasibility – we can undertake a valuation of the target and an assessment of whether the acquisition is suitable and feasible taking into account synergies with your own business.

Offer and Heads of Terms – based on this assessment we can draft an offer letter and if there is interest from the target work with you to agree Heads of Terms.

Due diligence – to identify the key risks you should undertake financial, legal and commercial due diligence. We can do a financial due diligence review which will highlight the key risks, explain how they can be mitigated and make recommendations on price and structure.

Legal contracts – we will work closely with your legal team to ensure that the legal documents reflect the deal agreed and appropriate warranties and indemnities to protect you after the deal has concluded.

It is important that you undertake proper due diligence before investing into or buying another company. This allows you to gain a more detailed understanding of the target company, identify the key value drivers, understand the key external issues affecting the business and gives assurance over business value. Whether you are a lender, investor or corporate buyer we can tailor a suitable financial due diligence which involves the following.

Summary findings – our initial approach is to quickly identify any key business risks or red flags and prepare a Summary Findings Report within on week of receiving the main information.

Focused review – this summary report will inform us of the key areas to focus our diligence enquiries which may result in a variation to the scope.

Fieldwork – our fieldwork will focus on historic, current and future trading, balance sheet position including a working capital review and key financial risks. We provide regular updates highlighting issues as they arise.

Tax diligence – we work closely with our tax colleagues to assess the key corporation tax, VAT, payroll and other taxes risks.

Reporting – at the end of our review we will provide a detailed report providing analysis, insight and an executive summary of key recommendations. As well as highlighting the key risks, the report will be a useful document for reference post transaction.

A management buy-out (MBO) can provide an ideal exit for business owners who want to reward their management team for their contribution to building the business. An MBO often addresses concerns over losing business identity or independence if sold to trade or private equity and can secure ongoing employment for staff. Our corporate finance team can guide the MBO team members through the whole process.

Approach – an MBO can either be led by the MBO team where they are given the remit and resources to seek finance to make an offer to the vendors or it can be vendor led where the business owner packages up a deal for the MBO Team to implement.

Feasibility – it is critical at an early stage to establish the owner’s price expectation to avoid any conflict further down the process.

Price and structure – the MBO Team should seek an independent valuation of the company and assess whether a suitable structure can be put in place which both meets the vendor’s expectation but importantly, is affordable for the business going forward.  

Funding – the purchase price for an MBO often consists of existing cash, deferred consideration, management equity and sometimes retained shares by the vendor. We can help structure a transaction and assist in raising debt and equity funding as appropriate.

Vendor negotiations – this is a very sensitive area as you and the vendor are on the same side during your day job but on the other side of a deal negotiation. Our team understands the sensitive nature and can lead these discussions to avoid conflict.

Transaction management – an MBO can be complex and we can manage the deal through diligence and the completion stage to ensure an efficient process.

Employee ownership is an increasingly popular succession option for business owners and is usually facilitated by establishing an Employee Ownership Trust (EOT). The structure was established in 2014 to encourage business owners to sell a controlling stake to employees to provide a clear framework for employee ownership. The structure can offer significant tax advantages to sellers where the EOT owns greater than 50% of the shares post transaction and where the EOT owns shares for the benefit of the employees. If you are considering selling to an EOT or are an employee or management presented with the opportunity, we can assist you through the process.

Feasibility study – assist you in preparing a feasibility study which will consider the key aspects of an EOT transaction including valuation, structure, funding, employee engagement, share plan options etc.

Valuation and structure – an independent valuation of the company should be undertaken to assess whether a suitable structure can be put in place which both meets the vendor’s expectation but importantly, is affordable for the business going forward.  

Funding – the purchase price for an EOT transaction often consists of existing cash, deferred consideration, retained shares by the vendor and sometimes external funding. We can help structure a transaction and assist in raising debt and equity funding as appropriate.

Tax clearance – if structured properly there are significant tax advantages for the vendors and the company. We work closely with our tax team to ensure that clearance from HMRC is obtained to secure these advantages.

Employee engagement – transitioning to an employee owned company will be a new experience for all involved. We can use our experience to walk all parties involved through the process including governance, employee council meetings, information sharing etc.

If you are considering raising finance for a transaction or for growth but are concerned about diluting your equity stake, you should consider debt finance. Lenders will assess your suitability for debt finance based on track record, ability to service debt repayments and security being offered. There are many sources of debt finance and it is important to choose the right lender whether it be from a main high street bank, alternative or secondary lender. We are familiar with lender’s criteria and can assist you through the process.

Identifying the debt requirement – you need to be clear on the quantum and reason for raising debt whether it be for working capital, capital expenditure, acquisition or re-finance. This is often best laid out in a Business Plan including financial projections.

Introductions – we can use our extensive networks to introduce you to suitable lenders who we know can deliver.

Structure – we can advise you on what debt package is suitable which could include working capital finance (overdraft or invoice finance), term debt or mezzanine finance.

Affordability – it is critical that you can demonstrate firstly to yourself and then to a lender that the debt package is affordable based on future cashflows and based on downside sensitivities. Lenders will typically based their lending on historic trading unless you can demonstrate secure, contracted income going forward.

Covenants – lenders may ask for covenants which may be tested quarterly or annually. The main covenant is often a ratio of CFADS (Cashflow available for debt service) to Debt Service. We can advise on the suitability of the covenants being requested and negotiate on your behalf.

Valuation is at the core of all transactions whether it be considering the sale of your business, raising equity finance or making an offer to buy another business. Unless a valuation can be agreed between the parties the deal will not happen and is therefore fundamental to your decision making. Valuations are not an exact science and involve an element of subjectivity. The true test is what a willing buyer or investor is prepared to pay and what a willing seller is prepared to sell for or give away in terms of shares. Our experienced team can assist you in assessing a value for whatever purpose.

Adjusted underlying EBITDA – earnings before interest, tax, amortisation, depreciation and amortisation is a common factor in assessing value. Assessing the underlying position is not always straight forward and can be based on historic trading, current trading but could also factor in future trading if there is secure or contracted revenue going forward. Adjustments to give a “normal” position will also need to be factored in. Our experts can advise on how to get to a underlying position.

Multiple – for profitable, trading businesses a suitable multiple is applied to EBITDA to give an Enterprise Value. We have access to transactional information which can support the valuation multiple or range of multiples based on business activity and sector.

Cash and debt adjustments – the Enterprise Value will be adjusted for cash and debt like items to give an Equity Value, which is the net value to shareholders (before tax).

Valuation report – to give an informed view on value we need to fully understand your business and therefore need to spend sufficient time with you. The output from our review will be a comprehensive written report setting out our methodology and assumptions.


The importance of a business plan and financial projections

What is a Management Buy-Out and what is the process?

Get in touch

Rod Mathers

Ian McDonald

Robin Denissen-McIntosh

Who have we helped?

Management buy-out

Holyrood Asset Management

Management buy-out

Alba Gaskets