Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Growth Masterclass


Published on

Growth Masterclass slides by Duncan Reid, Watson Burton LLP

Published in: Economy & Finance, Business
  • Be the first to comment

  • Be the first to like this

Growth Masterclass

  1. 1. Growth Masterclass 24th September 2013 Duncan Reid, Watson Burton LLP David Colclough, Business Growth Fund Paul Mankin, PwC John Sands, Wear Inns Limited Graeme Lee, The Springfield Group
  2. 2. Growth Masterclass 24th September 2013 Duncan Reid, Watson Burton LLP David Colclough, Business Growth Fund PLC Paul Mankin, PwC John Sands, Wear Inns Limited Graeme Lee, The Springfield Group
  3. 3. BGF is a provider of growth capital investing £2m - £10m for a minority stake Independent reviews have confirmed a growth capital funding gap exists, to the detriment of the UK’s SME base…  Project Merlin led to the BGF being established, backed by the following banks: Background Background …BGF has been created to provide a long term and flexible commitment to help fund UK SME growth  £2.5bn committed to invest into UK SMEs  31 investments to date  £170m invested  BGF operates independently and autonomously to the banks 31  30 to 40 new investments annually  7 BGF offices across the UK  BGF was created to plug the funding gap and help UK SMEs access the capital they require  The BGF has been established for the long term and offers a differentiate funding option  BGF has 90 employees  50+ are experienced investment professionals… 90+  …many of which have industry and/or entrepreneurial experience BGF offer a new and differentiated investment proposition for UK SMEs and entrepreneurs
  4. 4. BGF Feature Benefit to you £2m to £10m investments (with appetite and firepower for further investments) To support future, long term growth 10% - 40% of equity Always a minority partner – you retain control Up to 50% cash out For shareholder realignment / de-risking Flexible structures – equity / loan notes To meet the need / align with shareholders and management Long term money – no closed fund pressures No forced exit Fairer legal approach Less onerous investor legal protections A fast and focussed investment process Minimal disruption and distraction to the business, and a focus on minimising fees Access to a huge network and support To provide on-going support to the business Industry / entrepreneurial experience Understand what you are going through A flexible, patient and supportive offering to back Britain's best Entrepreneurs What we offer
  5. 5. BetterBathrooms York Mailing £10.0m June 2013 £10.0m July 2013 Multichannel Bathrooms retailer UK largest brochure printing business Springfield £4.4m June 2012 Independent provider of domiciliary care in Yorkshire and Humberside Barburrito £3.25m March 2012 Fast-casual Mexican restaurants to eat in or take away Boost Juice Xercise4less £2.5m December 2012 £5.0m August 2013 Healthy take away juice bar operator UK out of town budget gym operator GCI £10m February 2012 Cennox £3.0m June 2012 Managed communication providers Specialist ATM service provider Trunki Stats Group £3.9m April 2013 Designer and manufacturer of innovative, multifunctional travel products for children Magma Global £9.3m December 2012 Manufacturer of carbon fibre and composite structures and pipes £7.8m March 2012 Provides isolation services for onshore and offshore oil and gas pipelines Unruly £4.0m December 2011 One of the world’s fastest growing social video distribution companies Wear Inns Aubin SkyDox Petrotechnics £8.0m May 2012 £2.25m January 2013 £7.25m September 2012 £6.0m May 2013 Specialist cementing and stimulation chemicals Provider of cloud-enabled document collaboration software Freehold community pubs across the North East and Yorkshire Oil and Gas software and services business Selection of our investments to date
  6. 6. Conclusions As the leading growth capital investor in the UK  The BGF has the; • capital • team & infrastructure • network  We have invested in 31 businesses so far  We have a continued passion to find and back ambitious, high quality management teams  Flexible offering to meet the needs of individual situations Capital, resource and flexibility to support your goals
  7. 7. Andy Gregory 07760 325 490 Neil Inskip 07557 923 212 Matt Widdall 07881 816 011 David Colclough 07971 977 726 Loren Holland 07557 747 303 Barry Jackson 07799 433 572 Richard Taylor 07747 780 474 Sam Davies 07867 455 109 BGF Manchester office (Level 10, Tower 12, 18-22 Bridge Street, Manchester M3 3BZ) tel: 0845 266 8861 BGF Leeds office (Park House, Park Square, Leeds, LS1 2PW) tel: 0845 600 0142
  8. 8. Growth Masterclass 24th September 2013 Duncan Reid, Watson Burton LLP David Colclough, Business Growth Fund Paul Mankin, PwC John Sands, Wear Inns Limited Graeme Lee, The Springfield Group
  9. 9. Growth Masterclass 24 September 2013
  10. 10. Is my business right for growth capital? Value Drivers Exit Equity Story Investor Predictable Future Financials PwC Robust Historic Financials 12
  11. 11. Value drivers Upsides Continuing growth story Acquisitions / merger New service/ product provision Scalable operation Business Innovations Value drivers Reputation and perception Experienced mgt team Secure supply of business Strong forecast growth Impact of new regulations Potential detractors Risk of new entrants Margin pressure Adverse reputation Key staff retention Defensible position Value is unlocked by demonstrating the upside driver qualities PwC 13
  12. 12. Equity story Market dynamics PwC  What is Management’s vision for the business?  What are the key strategic goals and imperatives?  What opportunities excite Management the most?  Why is the business ideally placed to exploit these opportunities? Can we quantify the size/potential of these opportunities?  What support is the business looking for from a Partner?  Level of funding required to deliver transaction priorities? What protection does the business have from new market entrants?  How competitive is the market?  Partner support How do management see the business in 3-5 years time?  Market opportunities   Clear strategic direction and vision Does the business plan rely on overall market growth or growth in market share? 14
  13. 13. Transaction process– preparing for growth capital The preparation phase is critical. The topics below should be considered prior to approaching investors Growth potential Positioning / Planning Preparation Competitive tension 1 2 3 4 5 Hold a management / PwC workshop to discuss each of the factors that influence value and agree actions and timetable Analyse historic and projected sales by market segment and identify those with the greatest growth potential Identify potential strategic partners for key products/services in development and seek to improve contractual position Analyse potential investor pool and assess their appetite for your particular business based on past investments Review contracts – clarify potential issues and identify areas for due diligence and prepare 6 7 Prepare a clear and substantiated Business Plan. PwC to provide challenge to management’s financial plan Identify and substantiate growth opportunities in existing markets. Develop strategy and timetable pre and post investment 11 Financial information Education Prepare integrated financial model with three year projections and present historic financials on a normalised basis PwC 12 Analyse and optimise working capital through review of supplier agreements and customer payment terms etc 8 Identify technology / service gaps and consider impact on capital expenditure plan 13 Identification of debt like items 9 10 Consider potential for new products / services or markets Consider strength of management team and succession plan. Address any gaps or over reliance issues 14 15 Tax issues identified and resolved in advance where possible Key objective of enhancing shareholder value prior to the investment process Consider timing of investment versus demonstrating your current financial year results 15
  14. 14. Transaction process - education Education as to why your business is a strong investment is critical to understanding and driving investor appetite Preparation Education Competitive tension Discreet market intelligence gathering with key investors Confirm key value drivers with individual investors as each will weigh the value of the various components differently Identify and mitigate factors which may detract from value Model equity returns and hold early meetings with selected investors The pre-marketing process provides a strong ‘read’ on investor appetite which allows the flexibility to decide on a tightly run accelerated process with a narrow investor pool or a wider more open process Outputs of Phase 2 PwC • Clear understanding of investors’ appetite, strategic rationale and objectives 16
  15. 15. Transaction process – competitive tension The process needs to retain focus on the on-going attractiveness of the investment and maintain competitive tension Preparation Education Competitive tension Launch process with investment memorandum and remain conscious of ability to fast track investors with significant appetite Reconfirmation of offers Management presentations including site visit and Q&A session Preferred investor selected and granted exclusivity. Restricted top up due diligence Indicative offers received and negotiated Finalise legal documents Shortlisted investors selected and provided with further information on the business including access to a dataroom Completion Outputs of Phase 3 PwC • • • Deliverable offers following site visits and management presentations Restricted transaction timetable to maintain competitive tension Completion 17
  16. 16. How can we help? Meet the team PwC Corporate Finance can help by advising on: M&A Advisory Debt advisory Public Company Advisory Public to Private transactions Project Finance and Public Private Partnerships Private Equity Advisory Accelerated M&A IPOs Integrated service At PwC, we have advisers for every aspect of business in the good times and through challenging economic environments. Our experts in all areas of strategic, tactical and transactional advice can bring to bear the full effect of the firm. Sector expertise We have expertise across all industries. Our in-depth sector knowledge, global networks and understanding of specific issues that may be affecting a business, means we can provide the specialist knowledge needed. Recognised in the local market… Paul Mankin Partner +44 (0) 191 269 4035 +44 (0) Gareth Marshall Assistant Director +44 (0) 191 269 4035 +44 (0) 7889 645200 Lynn Shearing Assistant Director +44 (0) 191 269 4030 +44(0) 7734 607462 Simon Johm Manager +44 (0) 191 269 4272 +44 (0) 7754 893464 Alex Marsh Senior Associate +44 (0) 191 269 3340 +44 (0) 7824 440400 Kate Campbell Senior Associate +44 (0) 191 269 4321 +44 (0) 7792 933326 Charlotte Macintyre Senior Associate +44 (0) 191 269 4159 +44 (0) 7951 030509 Lucy Mulroy Senior Researcher +44 (0) 191 269 4236 +44 (0) 7919 533591 2013 Deal of the year 2012 Deal of the year Investment in Wear Inns by BGF and NVM Private Equity Sale of a majority stake in Tekmar Energy to Elysian Capital 18
  17. 17. This document is strictly confidential and must not be provided to or made available, by any means, to any person other than the intended recipient. This document does not constitute the giving of investment advice, nor a part of any advice on investment decisions. This document is for information purposes only and should not be relied upon, Accordingly, regardless of the form of action, whether in contract, tort or otherwise, and to the extent permitted by applicable law , but subject always to the following paragraph, PricewaterhouseCoopers LLP accepts no liability of any kind and disclaims all responsibility for the consequences of any person acting or refraining from acting in reliance on this document. Notwithstanding the above, if PricewaterhouseCoopers LLP enters into a contract for the provision of services to any person to whom this document has been provided and all or part of this document is a deliverable under such contract ("Contract"), then PricewaterhouseCoopers LLP will accept liability to such person to the extent, and subject to the terms and conditions, specified in such Contract. Accordingly, no representation or warranty of any kind (whether express or implied) is given by PricewaterhouseCoopers LLP as to the accuracy, completeness or fitness for any purpose of this document. © 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
  18. 18. Growth Masterclass 24th September 2013 Duncan Reid, Watson Burton LLP David Colclough, Business Growth Fund Paul Mankin, PwC John Sands, Wear Inns Limited Graeme Lee, The Springfield Group
  19. 19. WEAR INNS LIMITED John Sands, Chairman Growth Masterclass 24 September 2013
  20. 20. History of Wear Inns • Formed in 2005 with financial backing of NVM Private Equity • A managed pub estate, it had grown to 15 units pre BGF investment • Outlets all based in the North East and Yorkshire • By 2012 had maxed out on existing Finance Agreement
  21. 21. Investment Criteria of Wear Inns • • • • • • Community pubs in secondary towns Populations of 6000+ within walking distance Prominent positions within the towns Freehold tenure Preferably with outdoor space Underperforming (by Wear standards)
  22. 22. Why Wear Inns chose BGF • A beauty parade was organised by PWC of 5 private equity houses • 3 went to the second stage, and produced refined offers • BGF was selected because they took the most flexible approach and could accommodate follow on investment
  23. 23. What BGF has added to the business • • • • Broader business view Very approachable on all matters Not short term in their thinking Keen for follow on investment
  24. 24. Lessons learned from the experience • Don’t attempt fund raising and an acquisition completion simultaneously • Be more ambitious in your original investment requirement • Have a follow on plan worked out at the first stage investment
  25. 25. Future • Will continue to expand our Estate, but a revision of our Business model relating to our site criteria is required • There will be a further funding requirement to fund the expansion and BGF will play a major part in the process
  26. 26. Growth Masterclass 24th September 2013 Duncan Reid, Watson Burton LLP David Colclough, Business Growth Fund Paul Mankin, PwC John Sands, Wear Inns Limited Graeme Lee, The Springfield Group
  28. 28. History of the Springfield Group    Springfield Care Services Ltd Springfield Home Care Services Ltd Springfield (The Grange) Care Village Ltd 30
  29. 29. Pre-BGF investment       Group turnover, £10m pa and 800 employees Yorkshire and Humberside regional focus Quality care provider Regional and National Award winner Strong opportunity for sector growth Historic private equity interest in Springfield not attractive 31
  30. 30. Why not traditional private equity?      B and B platform too aggressive/hidden agenda? Often want a majority stake Business plan is their own, not yours Recognised value and quality of company, but not prepared to pay No added value demonstrated post deal 32
  31. 31. Why Springfield chose BGF     Historically, Group funded by bank senior debt and personal investment Lack of investment appetite from the banks Capital investment requirement in Care Village company increased dramatically Extra investment needed for Group growth strategy 33
  32. 32. Why Springfield chose BGF BGF: 1) 2) 3) 4) 5) 6) 7) Listened Understood our vision and supported Springfield business plan No BGF hidden agenda Appreciated value in the company Bought in to management team Flexible approach to the investment strategy Believable and realistic 34
  33. 33. What BGF has added to the business The deal  £4.4m investment into: - Springfield Home Care Services Ltd - Springfield (The Grange) Care Village Ltd  5 year business plan  Mixture of share capital and loan notes  BGF - minority shareholding in each company  G Lee - retained majority shareholding in each company and Board control  Lump sum cash out on front end  Enabled extra £6m of match funding from NatWest and HSBC to deliver growth strategy 35
  34. 34. What BGF has added to the business During the deal  Open to good and bad news – rational and commercial  Flexible approach to deal structure  DD process a positive experience  BGF support given  BGF never chipped the price 36
  35. 35. What BGF has added to the business Post deal  Credibility  Political influence  Set strong platform for growth  Greater professionalism through the Board process  Very supportive partner  Even more supportive and competitive banking relationships  User friendly  Proactive  Networking 37
  36. 36. Lessons learned from the experience      The deal process took too long The costs were excessive – especially legal In hindsight, we would probably have negotiated a slightly better deal! Honesty and trust are vital and a two-way process BGF are a real added value partner 38
  37. 37. The future? Springfield Group’s 5 year plan  £30m Group revenues  >£3.5m EBITDA  2000 employees  Increase geographical area from 5 branches to 12 and improve regional dominance  Quality of care never compromised  Aim to achieve 5 year plan in 4 years 39
  38. 38. In summary      Springfield Healthcare Group strategy is a reality Genuine partnership relationship with BGF The Group is stronger and robust as a result Exit strategy is now clearer and more defined Our journey is more enjoyable! 40
  39. 39. Growth Masterclass 24th September 2013 Hosted by: Duncan Reid, Watson Burton LLP David Colclough, Business Growth Fund Paul Mankin, PwC John Sands, Wear Inns Limited Graeme Lee, The Springfield Group