business recovery services tma meeting – brighton 7 th march 2007

BusinessRecoveryServices

TMA Meeting – Brighton7th March 2007


Securing Value for Intangibles in TurnaroundAMA – A Different Way

7 March 2007


PricewaterhouseCoopers LLP 3

Who am I?

Karen Dukes – Director• Specialist in business reviews, exits and work-outs since 1990 in the mid-market• Leads the BRS practice in Kent, Surrey and Sussex, part of South Deal Team• Examples of assignments include: advising management of £60m turnover retail group on

management strategy for return to profitability, and expansion into foreign markets, the AMA of Accuracy International Ltd a manufacturer of precision rifles, the managed exit of an investment in a £10m turnover manufacturer, and the AMA of Zenith Entertainment Limited in 2006.


Agenda

1. Key Messages

2. Why are intangibles important

3. Matrix of issues

4. What is AMA?

5. Case Study

6. Questions


Key Messages

•Several ways of preserving value of intangibles

•Timing is important

•AMA is a tool TDs can trust; maximises value

•There is always time to investigate an AMA

•Requires an advisor who knows the market place


Background

Britain in 1960 Britain in 2007

Manufacturing

Heavy Industry

Mining

B2B

Media

B2C


The corporate life cycle©

IDEA

M&A ACTIVITY

GOING PUBLIC

RAPID GROWTH

MATURITY

Fix it

Flog it

Finish it


Intangible Assets: a matrix

Impairment Review

Knowhow Ownership

Commodity Or “USP”? Third Party

RiskLifetime Of Asset

Location,Location,Location

Financial Operational

Security of Asset

Commercial Reality

Brand Valuation

Relationship Management

RegistrationLicencesEvidence


Historical Playing Field

The Usual Game

• IP introduced to client in difficulty

• Significant intangible value

• IP recommends an insolvency appointment

• Tries to sell the company’s assets to recover the chargeholder debt

The Final Score

• Loss of intangible value

• Loss of jobs

• Loss of reputation

• An unhappy outcome


What is AMA?

Corporate Finance

RestructuringTax Skills

InsolvencyCorporate Finance


Insolvency

Corporate Finance


InsolvencyCorporate Finance


Insolvency


When is AMA appropriate?

Potential AMA assignment

Problems trading in insolvency

Burning platformValue in parts of business but not all

Value in goodwillFew tangible assets / many

intangible

Overgeared / Cashburn

Company experiencing

difficulties

Non-core Activities


Interested parties sought

Confidentiality letters issued

Offers reviewed

and contract issued

Sale documentation

agreed

Administration order and sale

completed

IM issued

Data room opened

Offer deadline

Buyer due diligence

1/02 2/02 24/0224/026/02 7/02 14/02 15/02 16/02

What actually happens in the process?

Marketing Negotiation CompletionStrategy


Window – Case Study

• Group of Media Companies

• £17m turnover

• History of successful programmes

• Lack of commissioning in 2005/2006

• End of a key series

• Failed share sale

• Immediate cash crunch!


Window – Issues and Solutions

Potential AMA assignment

Other assets

to sell

Comfort in market

exposure

Vendor Due Diligence

Competing

purchasers

Acceleration Directors Personal risks

– wrongful trading

Nature of

contracts


Window – Benefits

Benefits

• Preserved intangible asset values

– goodwill

– contracts

• Robust and reliable process

• Avoids tyre kickers

• Stakeholders on course to be repaid

• Preservation of jobs

• Avoids adverse publicity, key in reputational business


Key Messages

•Several ways of preserving value of intangibles

•Timing is important

•AMA is a tool TDs can trust; maximises value

•There is always time to investigate an AMA

•Requires an advisor who knows the market place

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business recovery services tma meeting – brighton 7 th march 2007

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