Horwath Bastow Charleton Limerick

Why Invest?

For most, the only way of building real wealth is by sensible investment and balanced risk-taking. Investment fads come and go but the key to success is understanding the risk/reward balance that you seek and the risk/reward balance inherent in investment opportunities.

Good investments come in all shapes and sizes. It may be property-related, manufacturing or technology, retail or services, catering or leisure. Investors must focus on the markets that are accessible to them. A businessperson can always find a suitable investment opportunity if they have an appetite for risk, investment management and commitment.

For some, the route to becoming a business owner will mean starting from scratch. For many, however, it will involve taking over an existing business, either buy way of acquisition or as often happens, by way of a Management Buy-Out (MBO) or a Management Buy-In (MBI).

A MBO is the purchase of a business by its management, usually in co-operation with outside financiers. Buy-outs vary in size, scope and complexity but the key feature is that the managers acquire an equity interest in their business, sometimes a controlling stake, for a relatively modest personal investment. The existing owners sell most or usually all of their investment to the managers and their co-investors. If the outside financier (e.g. venture capital firm) takes a majority stake, then the deal is not an MBO but rather an IBO (Institutional Buy-Out).

In a MBI the company is sold to a combination of a new team of managers, with the new management team taking a majority stake. This often happens with family firms who have no one to pass the company on to, so they sell the company to a management team. The old owners sometimes retain a small stake.

There are many reasons to consider an acquisition or a new business unit start-up, e.g.: to gain entry to a market, to build a large business, to consolidate, to diversify, to obtain synergies/economies of scale or to take advantage of a bargain opportunity.

If you decide that purchasing a business or setting up a new business unit is the right move for you, it is vital to engage the services of an expert in this area and carefully plan the way forward.

You need an advisor who has proven stamina for backing new ventures, prising out opportunities and assessing the risk inherent in a deal. You need an advisor who has experienced everything from selling an independent high street retailer to complex management buy-outs (MBO), management buy-ins (MBI) and other variants (BIMBOs - A combination of management buy-out and buy-in where the team buying the business includes both existing management and new managers).

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Your needs

We can help you with:

Developing an expansion/ acquisition strategy
Identifying targets/ assessing the fit
Valuing and forming an appraisal of the target/ new unit
Approaching targets/ site owners and negotiating a deal
Due diligence
Financing the acquisition/ expansion
Managing the acquisition/ expansion process

We can help identify, analyse and complete business transactions that match your investment profile. Financial analysis and risk/reward structuring are our stock in trade.

If you have not already identified an acquisition target, you need to decide on the profile of the business you wish to acquire or start-up. With your knowledge of the players in your market and our M&A experience we will identify potential targets and carefully select those to pursue.

We are experienced ‘door openers’ and not only will we initiate discussions on your behalf but we will also partake in negotiations.

We will assist in obtaining and analysing key information and together we will determine whether the target is a “good fit”.

Once this process is complete we will assist in valuing the target and recommend the most suitable way to structure the transaction.

Together we will negotiate the best possible terms, arrange finance and manage the transaction to its completion.

If initial negotiations are successful and you wish to proceed, it is vital to undertake a comprehensive due diligence. This involves an in-depth investigation of the target and provides protection, assurance and objective reporting. Our experience in this area will guarantee that all critical issues are researched thoroughly. We have been through everything from unforeseen pension obligations to contingent environmental liabilities, large tax exposures to redundancy costs, process re-engineering needs to imperfect intellectual property rights.

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Our credentials

We have carried out acquisitions, management buy-outs, management buy-ins and new business unit start-ups with a wide selection of clients in the past. Transactions have included: multiple-site targets, foreign currency/ cross border targets, distribution and trading businesses, manufacturers, engineering companies, financial and other service companies, IT and software companies, retail outlets, hotels, hospitality, pubs and catering businesses, property portfolios, hospitals, nursing homes and professional service firms.

Our role generally involves a number of phases. The steps are not always sequential. For example, one’s views on the value of the target and the bid strategy often evolve throughout the negotiations and even during the due diligence:

Initial approach/pre-negotiation

Includes initial client discussions, desk research on target, and initial calls/ meetings with target to scope out the possibility of a deal
Confidentiality/ non-disclosure agreements
Securing exclusivity terms.

Shaping the deal

Includes valuation of the business, cash flow analysis and projected financial impact of the deal for the client
Determining the bid level and strategy.
Meetings with clients
Often involves determining/ building a model for maintainable earnings based on current year, target projections and client proposals post-acquisition.
Impact of redundancies post-acquisition, reorganisation costs,
integration costs, etc.

Negotiations

Includes visit to target and inspection of business
Meetings with target to negotiate
Telephone negotiations
Financial analysis to support one’s assertions to the other side

Heads of agreement

Includes the physical drafting of the heads and the fine-tuning
negotiation of the heads with the target.

Finance

Advice and coordination of dealings with banks/ financiers.
Negotiation of terms, presentation of deal to financiers, etc.
Mix of acquisition finance (cash-flow-based), term loan mortgages, working capital funding, overdraft, letters of guarantee, etc.

Due diligence – pure financial

Depends on how clean, co-operative, complex, important or sensitive
We go through whole P&L and balance sheet with client to identify items to be excluded from review on a risk basis
Often/usually includes audit file review at target’s auditors
More efficient when the target prepares and provides up-to-date audited accounts.

Due diligence – tax

Also depends on how clean, compliant, well documented, co-operative, complex, important/sensitive etc.
Payroll taxes, overall compliance, corporation tax, capital taxes, stamp duty, etc.

Due diligence – business issues and legal

Clients usually like our views on broader business issues (not just pure financial) and in some cases, we are asked to specifically target/research certain aspects of the target which are not purely financial.
Solicitors will lead the due diligence investigations of legal issues but we will often be involved in quantification and research.

Contract review and drafting

Typically we draft, review and/or edit warranties and indemnities (especially regarding tax, accounting information, pensions, contingencies, etc.)
Advise on requirement for retention of consideration.

Tax planning

Sometimes the only available structure is so simple that there is little apparent need/opportunity for tax planning (e.g. vendor will only accept sale of shares)
However, it is rare that a planning review by a tax partner will not throw up something of value to be factored into how the deal is structured or integrated post-acquisition.

Project management

If the client does not have the resources or experience to project
manage the process, we will do so to a greater or lesser extent
(e.g. set up the meetings, brief and follow up on the solicitors, co-ordinate with banks, act as conduit for exchange of information, etc.)

Closing

Attendance at the actual closing
Available to deal with last minute queries or crises
Possibly attendance at stock take on closing

Post-closing

Review and interrogate closing balance sheet
Advise on agreement of net asset adjustments, retentions, etc.

Features of our service

We at Horwath Bastow Charleton Limerick have a culture of deal making.

Every deal is different and at Horwath Bastow Charleton Limerick you will work with people who have wide experience and a solid understanding of mergers and acquisitions, Management Buy-outs and Management Buy-ins.

We have a proven stamina for “difficult” deals – we embrace opportunities that may seem daunting to others. Our commitment to the client and a viable deal is second to none.

In spite of our enthusiasm for tough deals, we will only engage if we feel that a project is feasible and has the backing of credible people. We never engage a client on a “no foal, no fee basis” - if you retain us as advisors, you can rest assured that you will receive value for your money. Clients expect us to add sufficient value to a transaction to justify being retained; if we don’t see the prospect of doing so, we will not engage.

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Benefits to you

An acquisition is an absorbing, expensive and time-consuming process. Unless the target turns out to be a “turkey”, it is essential that the deal is clinched. In hiring us, you know that we have the experience and motivation to make the deal happen.

We are not in the business of wasting our time or yours. Once engaged, the commitment you will receive from the Horwath Bastow Charleton Limerick team is second to none.

Very often, the involvement of advisors is essential to bridging the gap between sides while still permitting the two parties to reserve their positions.

It is critical from a credibility and a deal-making perspective that your advisors are respected by their counterparts on the other side and that you are not at a disadvantage because your advisors are less experienced than their counterparts.

With Horwath Bastow Charleton Limerick, you know that you have excellent advice and innovation in structuring your deal.

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For further information contact:

Con Quigley

Brian McEnery

Ger Blake

E: cquigley@hbcl.ie

E:bmcenery@hbcl.ie

E: gblake@hbcl.ie