What value do you feel a private equity investment can bring?
For a management team looking to liberate a business unit from a larger group then a private equity investment can be the only way to make it possible.
A variety of finance options are out there but after doing our research we found that private equity best suited the unique circumstances of the transaction.
The board contribution and other business connections of a Private Equity partner can also bring great value. We have been introduced to a number of contacts who have enabled us to accelerate growth or improve profitability.
How does a company best prepare for the process?
Don’t underestimate the amount of work involved in completing the due diligence process. If you have good systems, processes and documentation in place then that is a great start.
However, understand that for several months most of the senior team’s available “headspace” is going to be taken up with getting the deal completed, so clear the decks of other projects as far as possible.
Why was Panoramic your preferred investor?
The quality of the deal is important and Panoramic provided us with what we felt was a fair and competitive offer of funding which suited the needs of our businesses and the transaction.
However, that is only part of the story. We needed to get the deal complete in a very tight time-frame, 8 weeks, or our Plc owners had made it clear they would take the deal off the table. Panoramic were the most credible in giving us confidence that they could complete a deal in that time-frame (which they did). The final factor was personal chemistry. It is important to realise that you will be working together for at least a few years and if you don’t have similar values and approaches then it could make for a very rocky relationship. Of all the PE partners that we met, I felt we would work best with David Wilson.
What, if anything, did you learn from the spin-out process?
It is possible to complete the process in a very tight time-frame if everyone is committed and the lawyers are kept on a relatively tight leash.
What advice would you offer to other companies seeking investment?
Have a clear, well thought out strategy for your growth plan. The biggest mistake we made when we initially presented the deal was being vague on our strategy. We thought we were being flexible as we had a lot of alternative strategies that we could pursue. Our position was: you tell us who will be the end buyer who will pay the most, and we will select the strategy that makes us most attractive to them. Whilst conceptually I think that was a valid position, it didn’t land well and turned into, “They Don’t Have a Strategy”.
Get a good Corporate Finance advisor on board. We balked the first time around because the fees looked high and they fall back on the management team in the event that a deal is not completed. However when our first deal backers pulled out leaving us only 12 weeks to find and complete a new deal we had little choice. We picked Cole Associates and Jeremy Cole earned his fees 10x over. We were introduced to a range of funders (including Panoramic), and were advised on how to present our opportunity and help negotiate the best deal.
Any final thoughts on your ambitions for the future?
We are already hitting our year 3 forecast numbers in year 1, so we are off to a very strong start.
I think it is possible for us to reach £100M turnover over the next three years and although that is a very ambitious target, I wouldn’t have it any other way!