“The Baby Boomer Ratcheted Equity & Refinancing Exit Solution” – A Construction Case Study

Confidential not to be copied or shared without permission. www.icebreakerexecutive.com

A Scenario & Opportunity

The 63 year old CEO & owner of a £26

turnover family construction business group

is looking to retire as well as see his family

business prosper. He has a loyal long serving

traditional management team who have

grown through the business. Recently the

CEO appointed a new FD who has identified

the need to sure up the funding, and reduce

the current cost of capital to support them achieve their 4 year plan to exit.

The exit options they target are an MBO, AIM listing or a trade sale. The business currently

makes £1m net profit making the enterprise value c£3m. There is £1.2m of asset based

lending in place provided by a relatively high cost provider. They have a history of

contractual difficulties that leave the business at its current level of profit vulnerable to an

insolvency event.

Their 4 year exit plan proposes a number of acquisitions with little change to their current

model. This suggests that funding the growth at their current profitability, using ABL looks

unfeasible, and the traditional management will need support to increase profit.

The business basics are strong, with a niche offering, and good sector spread. Our

experience suggests that there is an opportunity to grow the profit and transition the

business to more of a Facilities Management model to increase the multiple from 3-6x and

increase net profit from £1m to c£3-4m over that period. Leaving business value in 4 years

c£14-20m.

The Options

Further Asset / WIP / Invoice based lending – likely to lead to a fragmented solution with

limited headroom, high cost, and restrict working capital through to a downturn and a

change in mix.

Whilst ABL funding leaves ownership intact, it could be restrictive in supporting growth and

tie up key collateral in the debtor book. This funding could be misaligned with building

equity value and could limit further investment as the plan unfolds.

Our Proposed Equity investment

We understand that Construct Co. Group requires approximately £3.0m repaying all current

debt obligations and providing funding for growth.

“The Baby Boomer Ratcheted Equity & Refinancing Exit Solution” – A Construction Case Study

Confidential not to be copied or shared without permission. www.icebreakerexecutive.com

The Fund have deep experience in assisting companies grow EBITDA strategically to

ultimately maximise valuation at exit and are excited about the opportunity to invest in

Construct Co. to assist in growing and improving the business alongside you over the next 3

years or so, with the ultimate aim of exiting the business in 3 to 5 years.

Specialism:

3-5 year equity investing aligned with:

Succession

Backing and supporting existing management

Realising growth

Turnaround

Maximising enterprise value and realising an exit

Indicative Offer

The Fund would be prepared to replace the current funding as secured debt that also

carried a majority of the equity at completion.

The equity percentage on day one would therefore be minority and would be subject to a

ratchet to return you to when the agreed outcome is achieved.

Debt generally carries paid interest at a nominal fixed rate.

Target Outcome

This model is aligned to create a better return as well as providing expert management

support as and when required.

The baseline funding could be augmented and adapt upon the merits of potential

acquisitions on a case by case basis.

Next Steps

Are to formalise a heads of terms including the provision of exclusivity to conduct limited

due diligence.

Should circumstances suit the organisation, we are able to move quickly to finalise this offer

and get started.