growth masterclass
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Growth Masterclass slides by Duncan Reid, Watson Burton LLPTRANSCRIPT
MasterclassGrowth
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
MasterclassGrowth
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
Background
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:
BGF operates independently and autonomously to the banks
BGF offer a new and differentiated investment proposition for UK SMEs and entrepreneurs
…BGF has been created to provide a long term and flexible commitment to help fund UK SME growth
31 investments to date
£170m invested
30 to 40 new investments annually
31
7 BGF offices across the UK
BGF has 90 employees
50+ are experienced investment professionals…
…many of which have industry and/or entrepreneurial experience
90+
£2.5bn committed to invest into UK SMEs
BGF is a provider of growth capital investing £2m - £10m for a minority stake
Background
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
What we offer
A flexible, patient and supportive offering to back Britain's best Entrepreneurs
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
Selection of our investments to date
Multichannel Bathrooms retailer
£10.0mJune 2013
£10.0mJuly 2013
£7.8mMarch 2012
Provides isolation services for onshore and offshore
oil and gas pipelines
UK largest brochure printing business
Stats Group
York MailingBetterBathrooms
Springfield
Independent provider of domiciliary care in
Yorkshire and Humberside
£4.4mJune 2012
Specialist ATM serviceprovider
Cennox
£3.0mJune 2012
£10mFebruary 2012
Managed communication providers
GCI
£3.9mApril 2013
Trunki
Designer and manufacturer of innovative, multifunctional travel products for children
£3.25mMarch 2012
Barburrito
Fast-casual Mexican restaurants to eat in or take
away
Aubin
£2.25mJanuary 2013
Specialist cementing and stimulation chemicals
Boost Juice
Healthy take away juice bar operator
£2.5mDecember 2012
£9.3mDecember 2012
Manufacturer of carbon fibre and composite structures and pipes
Magma Global
£4.0mDecember 2011
One of the world’s fastest growing social video
distribution companies
Unruly
£8.0mMay 2012
Freehold community pubs across the North East and
Yorkshire
Wear Inns
Xercise4less
£5.0mAugust 2013
UK out of town budget gym operator
SkyDox
£7.25mSeptember 2012
Provider of cloud-enabled document collaboration
software
Petrotechnics
£6.0mMay 2013
Oil and Gas software and services business
Conclusions
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
As the leading growth capital investor in the UK
Andy Gregory Neil Inskip Matt Widdall
07760 325 490 07557 923 212 07881 816 011
[email protected] [email protected] [email protected]
David Colclough Loren Holland Barry Jackson07971 977 726 07557 747 303 07799 433 [email protected] [email protected] [email protected]
Richard Taylor Sam Davies 07747 780 474 07867 455 109 [email protected] [email protected]
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
MasterclassGrowth
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
Growth Masterclass
24 September 2013
www.pwc.co.uk
PwC
Is my business right for growth capital?
12
Value Drivers
Robust Historic
Financials
Exit
Predictable Future
Financials
Equity Story
Investor
PwC
Value drivers
13
Upsides
Value drivers
Defensible position
Strong forecast growth
Secure supply of business
Experienced mgt team
Reputation and
perception
Business Innovations
Scalable operation
New service/product
provision
Impact of new
regulations
Risk of new entrants
Margin pressure
Adverse reputation
Potential detractors
Key staff retention
Acquisitions / merger
Continuing growth story
Value is unlocked by demonstrating the upside driver qualities
PwC
Equity story
14
Clear strategic direction and vision
How do management see the business in 3-5 years time?
What is Management’s vision for the business?
What are the key strategic goals and imperatives?
Market opportunities
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?
Partner support What support is the business looking for from a Partner?
Level of funding required to deliver transaction priorities?
Market dynamics
What protection does the business have from new market entrants?
How competitive is the market?
Does the business plan rely on overall market growth or growth in market share?
PwC
Transaction process– preparing for growth capitalThe preparation phase is critical. The topics below should be considered prior to approaching investors
15
Posi
tion
ing /
P
lan
nin
g
Key objective of enhancing shareholder value prior to the investment process
Fin
an
cia
l in
form
ati
on
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
1 2 3 4
Review contracts – clarify potential
issues and identify areas for due diligence and
prepare
5
Identify and substantiate growth
opportunities in existing markets. Develop strategy and timetable pre
and post investment
Prepare a clear and substantiated
Business Plan. PwC to provide challenge
to management’s financial plan
Identify technology / service gaps and consider impact on capital expenditure plan
Consider potential for new products /
servicesor markets
6 7 8 9
Gro
wth
pote
nti
al
Identification of debt like items
Prepare integrated financial model with three year projections and present historic financials on a
normalised basis
Analyse and optimise working capital through
review of supplier agreements and
customer payment terms etc
11 12 13
Consider timing of investment versus
demonstrating your current financial
year results
15
Tax issues identified and resolved in advance where
possible
14
Consider strength of management
team and succession plan.
Address any gaps or over reliance issues
10
Preparation Education Competitive tension
PwC
Transaction process - educationEducation as to why your business is a strong investment is critical to understanding and driving investor appetite
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
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
• Clear understanding of investors’ appetite, strategic rationale and objectivesOutputs of Phase 2
16
Preparation Education Competitive tension
PwC
Transaction process – competitive tensionThe process needs to retain focus on the on-going attractiveness of the investment and maintain competitive tension
• Deliverable offers following site visits and management presentations• Restricted transaction timetable to maintain competitive tension• Completion
Outputs of Phase 3
17
Preferred investor selected and granted exclusivity. Restricted top up due diligence
Finalise legal documents
Shortlisted investors selected and provided with further information on the business including
access to a dataroom
Management presentations including site visit and Q&A session
Completion
Launch process with investment memorandum and remain conscious of ability to fast track
investors with significant appetite
Indicative offers received and negotiated
Preparation Education Competitive tension
Reconfirmation of offers
How can we help?PwC Corporate Finance can help by advising on:
Meet the team
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.
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
18
Recognised in the local market… 2013 Deal of the year
Investment in Wear Inns by BGF and NVM Private Equity
2012 Deal of the year
Sale of a majority stake in Tekmar Energy to
Elysian Capital
Paul MankinPartner+44 (0) 191 269 4035+44 (0) [email protected]
Gareth MarshallAssistant Director+44 (0) 191 269 4035+44 (0) 7889 [email protected]
Charlotte MacintyreSenior Associate+44 (0) 191 269 4159+44 (0) 7951 [email protected]
Lucy MulroySenior Researcher+44 (0) 191 269 4236+44 (0) 7919 [email protected]
Alex MarshSenior Associate+44 (0) 191 269 3340+44 (0) 7824 [email protected]
Kate CampbellSenior Associate+44 (0) 191 269 4321+44 (0) 7792 [email protected]
Lynn ShearingAssistant Director+44 (0) 191 269 4030+44(0) 7734 [email protected]
Simon JohmManager+44 (0) 191 269 4272+44 (0) 7754 [email protected]
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.
MasterclassGrowth
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
WEAR INNS LIMITEDJohn Sands, Chairman
Growth Masterclass24 September 2013
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
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)
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
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
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
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
MasterclassGrowth
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
WATSON BURTON GROWTH MASTERCLASS PRESENTATION BY GRAEME LEE, CEO
SPRINGFIELD HEALTHCARE GROUP
29
Tuesday 24th September 2013
History of the Springfield Group
Springfield Care Services Ltd Springfield Home Care Services Ltd Springfield (The Grange) Care Village Ltd
30
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
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
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
Why Springfield chose BGF
BGF: 1) Listened
2) Understood our vision and supported Springfield business plan
3) No BGF hidden agenda
4) Appreciated value in the company
5) Bought in to management team
6) Flexible approach to the investment strategy
7) Believable and realistic
34
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
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
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
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
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
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
MasterclassGrowth
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