The corporate finance network at the great british business show
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Kirsty McGregor from The CFN at Business Show June 2013, ExCel London, for Businesses for Sale Live
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The corporate finance network at the great british business show
- 1. Thank you for using our key. You have now opened up a world of advice! On this presentation you will find: 1. Any Overview of The Corporate Finance Network & contact details for advice 2. Slidedeck from presentation at the Great British Business Show, June 2013 Businesses for Sale Live “How to buy a business” (from slide 5); and “How to finance your business purchase” (from slide 21) 3. Slide 20 gives details of our special show offer
- 2. What is The Corporate Finance Network? The Great British Business Show June 2013, ExCel London @TheCFNwww.TheCFN.org.uk
- 3. What. Where. Who. • Set up in 2007 • Head office Yorkshire • Founded by Kirsty McGregor • Need for a brand of advisers who specialise in smaller deals • Members all SME accountants – Who are CF experts smaller deals • 22 firms across the UK • See details on ‘About Us’ pages – www.TheCFN.org.uk/About-us.php
- 4. Why should you use our network? net·work/ˈnetˈwərk/ Noun: An arrangement of intersecting horizontal and vertical lines or a series of points or nodes interconnected by communication paths Verb: Connect as or operate with a network Our Member firms share: – Experiences – Research – Resources – Market Knowledge – Contacts “The whole is stronger than the sum of the parts”
- 5. How to buy a business Kirsty McGregor Chairman, The Corporate Finance Network kirsty@TheCFN.org.uk @TheCFN #BFSLive
- 6. Acquisitions - the good bits…
- 7. Acquisitions - the good bits…
- 8. Age of business owners/directors • < £10m turnover • Average age director over 60 • 14% = 240,000 businesses • Nearer to 21% for better quality businesses • Getting more desperate to sell every year • Trapped – too expensive to wind up
- 9. Acquisitions - the bad bits…. 1. Financial 2. Legal 3. Operational
- 10. Identifying the business 1. What are your current weaknesses? 2. Don’t be too specific 3. Don’t assume too much 4. Determine your key parameters
- 11. What parameters?
- 14. Which sector? 1. Your skills & how they may transfer 2. Your contacts – which other markets/sectors? 3. Your interests • Large number of small businesses • Growing sector • Ability to ‘share’ overhead & location isn’t an issue
- 15. Your Target Business • Reduce your competition • People • Products • IP • Location • Membership or affiliation • Customers • Synergies on costs • Buying power • Profile or reputation • Systems • Know-how
- 16. Making the approach – some tips • Use a corporate financier or a corporate lawyer to send the letters – don’t ask info up front – offer confidentiality letter early on – involve your adviser in early stage meetings – be realistic & respectful
- 17. The Process The deal Identify & approach Due diligence Negotiate Financing? Legals Integrate
- 18. 7 Top Tips 1. Be clear 2. Be realistic 3. Be creative 4. Be persistent 5. Be organised 6. Be professional 7. Be confident
- 19. Then what?...
- 21. How to buy a business Kirsty McGregor Chairman, The Corporate Finance Network kirsty@TheCFN.org.uk @TheCFN #BFSLive
- 22. How to finance your business purchase Kirsty McGregor Chairman, The Corporate Finance Network kirsty@TheCFN.org.uk @TheCFN #BFSLive
- 23. • Investment readiness • Types of finance – Pros & cons
- 24. The Business Plan • Executive summary • Key people • Market research • Marketing/Sales plan • Accounts • Financial forecasts including cashflows • How the lender will get repaid – be realistic
- 25. Debt vs Equity • Debt – Lender – Loan capital with interest – Security (corporate & personal) • Equity – Investor – Dividends, capital exit (maybe) – Unsecured • Mezzanine
- 26. Debt or equity? • Risk • Short term / Long term - match to purpose • Timing • Security • Growth prospects
- 27. Equity finance • Friends, family & fools • Business angels • Venture capital/private equity • Flotation – Plus Markets, AIM, FTSE, Nasdaq
- 28. Friends and Family • Pros – Low / zero interest rates – Little security – Longer lending period before any repayments – Greater flexibility – Less detailed plan / due diligence requirements • Cons – May not be fully aware of the risks – Inexperienced investors – Can get personal!
- 29. Angels/VCs/Private Equity • Pros – Funding is committed to the business – Valuable skills and resource – Investors have a vested interest – Often prepared to provide further funding as business grows – No overheads/repayments • Cons – Can be a demanding process with up front costs – Owners share will be diluted – Potentially a loss of control – Regular information will have to be provided – Personality clash?
- 30. Debt finance • Bank loans & overdraft – Enterprise Capital Fund • ABLs – Factoring – Invoice discounting – Asset finance/HP/finance leases/mortgages • Crowdfunding
- 31. Bank Loans • Pros – Terms tailored to the needs of the business – Repayments straightforward and easy to budget for • Cons – Banks can be reluctant to lend money to new or acquisitive business owners – Little flexibility – Requires high level of security including directors guarantees – Enterprise Capital Fund?
- 32. Overdraft • Pros – Flexibility – only use when required – Can be quicker to arrange than loans – Regularly reviewed • Cons – Repayment on demand – Interest can be higher than for loans – Banks not keen to fund acquisitions on overdrafts – Security may still be required
- 33. Assed Based Lending (ABL) • Pros – Should generate more cash than other forms of borrowing – Attractive to growing companies as facility tracks sales – Costly administration procedures such as credit control can be outsourced – Funding based on sales ledger rather than balance sheet – Personal guarantees may not be required – Business can spread lending risk & separate from other existing (bank) lending – More flexible lenders coming into this market
- 34. Asset Based Lending (ABL) cont/d … • Cons – Limited understanding of the facility – Shrinking order books will lead to reduction in facilities – Potentially long term agreements – Some sectors or debtors aren’t suitable – Bank will have to agree to waive debts & exclude from the terms of their debenture – Lender may insist on credit insurance policy
- 35. Crowdfunding (peer to peer) • Pros - Simple Process - Less requirement for business plans/forecasts - Can be used for any purpose • Cons - New form of lending - Only available to qualifying businesses
- 36. Vendor Finance • Pros - Finance Risk (usually) remains with the vendor • Cons – Can make negotiations more difficult – Vendor may insist on guarantees or insurance
Editor's Notes
- Fast growth – diff to grow organically in this market
- It’s a buyers marketAging business ownersZombie companiesVendors’ expectations of valuations more realistic
- Furthermore, looking at the average age of the directors of those businesses which have turnover < £10m, there are 240k businesses which have an average director age of over 60. This equates to 14% of the 1.7m businesses under £10m turnover in UK.More worryingly, when just looking specifically at the better quality ‘thriving’ businesses, this figure increases to 21% - these are businesses we are going to lose unless they are sold on when director (who is prob also the business owner) retires.We estimate that 60k businesses wind up each year due to retirement because they can’t be sold – which means the loss of output to the economy, probable redundancies etc.
- Size of business – non financial eg number of employees, size of building/capacitySize of business – financial criteria – turnover/profit/balance sheet/assetsGeographic location – where in high street, where in UK, where on motorway network, Europe, further afieldWhat sector – use keywords not just SICIdeally synergies
- Use a website of business salesMake a direct approach
- Use Duedil – free but time consuming – by sectorBuy a mailing listUse a corporate financier – who subscribe to Experian and/or Fame
- Often – want a business – ‘general mgmt’ - profitable, niche sector, fast growing & runs itselfEmpire building – consolidationCorporate promotional merchandiseWebdesigners/seo/app developers etcLetting/estate agentsProperty maintenance
- If you are an existing business – start with what’s wrong in your own business
- You will need some cash
- Many strands – often work alongside each other….How long before roll out integration plan – hours!
- Clear – what are you looking to buy & why will it help;Realistic – not going to happen overnight; very few bargainsCreative – in deal structure, financing, offer different alternativesPersistent – offer different alternatives, identify what’s causing the block – financing, overall value?Organised – dd, integrationProfessional – reputation & work with lawyers & purchaser; posturing & 11th hour Confident – eg do you really want the owner? Make changes asap
- – growth, implement your strategy, don’ t let your lenders downStart to plan for your exit - don’t be vulnerable to approach without being ready