MHA Moore and Smalley supports MBO at business finance specialist

A North West business finance firm which brokers over £150m of lending a year has been acquired by its management team in a deal supported by MHA Moore and Smalley.

Oldham-based PMD Business Finance has been bought by three members of its executive team – Tom Brown, Lee Schofield, and Rob Dermody.

The deal allows its two shareholders and founders – Peter Dobson and Mike Rodgers – to hand over day-to-day running of the firm, though both will retain a minority stake and continue to hold board positions.

PMD is one the UK’s largest independent business finance providers, facilitating business loans, asset finance, property and acquisition finance, invoice finance and supplier finance. Throughout the COVID-19 pandemic it has arranged over £65m of CBILS facilities.

Tom Brown, director of PMD, said:

“This deal marks a new chapter in our history that will cement our position as one of the UK’s largest true independents. The PMD ethos is centred around nurturing and developing talent and providing exceptional levels of customer service. I’m looking forward to continuing these values with our new management team.”

Fellow director Lee Schofield added:

“As a team that understands the DNA of the business, Tom, Rob and I are delighted to have secured PMD’s long term future. We’ll build on the foundations laid by Peter and Mike and have ambitious plans to grow the business and become the UK’s leading independent asset and commercial finance intermediary.”

Founder Peter Dobson said:

“This is an exciting development for our people, customers and lending partners. We’ve always encouraged our people to push their boundaries to reach their potential. Tom, Lee and Rob are a testament to that and Mike and I are proud to be passing the baton over to them. I’m confident they will take the business to new heights.”

The corporate finance and transaction tax team at MHA Moore and Smalley advised on the deal, providing valuation, taxation and deal structuring advice. The deal team was led by head of corporate finance Andrew Feeke and corporate finance assistant manager Rob Holgate. Colin Abrahams provided tax advice.

Andrew Feeke, head of corporate finance at MHA Moore and Smalley, commented:

“Businesses like PMD are essential to the health of our economy and business community because they provide valued funding advice to business owners and broker vital lending to support sustainable growth.

“It’s been a pleasure to enhance our relationship with PMD further by assisting Peter, Mike and the management team to facilitate this deal, which ensures a bright future for PMD and the many businesses it supports.”

Chris Ross and Nina Latham at Mills & Reeve provided legal advice to Peter Dobson and Mike Rodgers on the sale of the business. Ben Dredge at CG Professional advised the management team on their purchase.

Founded in 2010, PMD has 42 staff and is predominantly focused on the SME sector, working directly with clients, through professional referrals and suppliers of business assets. With over 100 funding lines, PMD provides solutions for clients looking for loans to expand, facilities to improve cash flow, or those looking to acquire plant, machinery and vehicles. In addition, they also assist businesses in restructuring their debt along with providing finance to assist acquisitions, MBOs and trade sales.

MHA Moore and Smalley facilitates manufacturer’s management buyout

A Manchester-based manufacturing and engineering firm specialising in the aerospace and defence sectors has been purchased by three of its management team.

Atec Engineering Solutions employs around 43 staff at its site in Worsley designing, manufacturing, and maintaining complex control and monitoring equipment for defence land, sea, and air sectors as well as the industrial oil and gas and nuclear markets.

The management buyout has been completed without any external debt or equity funding and will allow the firm to pursue its plan to expand its capabilities within existing and new customers as well as exploring new market sectors.

Our corporate finance team helped to facilitate the management buyout. Corporate finance director Stephen Gregson led the advisory team along with Michelle Taylor and Tony Medcalf providing taxation advice.

Stephen Gregson, MHA Moore and Smalley, said:

“This deal is a testament to the excellent business Andrea has helped to build over recent years and with the new management team, Atec is well positioned for its next stage of growth.

“Both parties have been hugely helpful and open throughout the whole MBO process and we are pleased to have helped structure an excellent deal for both parties.”

Chris Ross and Nina Latham from Mills and Reeve acted as legal advisors to Atec’s management team and Katie Parker at Addleshaw Goddard advised Andrea Hough.

John Bowden will become Atec’s new managing director and will be supported by Mark Poole, operations manager and Steve Atherton, finance manager as the other two managers involved in the management buyout.

Current owner and managing director Andrea Hough will remain as chairman and will assist the team in forming its business strategy and guiding it forward in line with its sales targets as well as retaining a minority stake in the firm.

Andrea Hough said:

“This exciting announcement will allow Atec to grasp the huge opportunities in developing industries such as nuclear power.

“Atec has been a huge part of my life since joining the company as an apprentice when I left school but in John and the rest of the management team, the company has a fantastic new management team who are well placed drive it forward.”

Atec has a long history in engineering under several different brands and was purchased by Andrea and her business partner Terry Madden in 2004 following a company restructure. Andrea then became sole shareholder in 2016. John Bowden said:

“Having the opportunity to lead a business with the heritage of Atec is an honour and I look forward to the journey ahead with the support of a great team. This is an exciting time for Atec and I am sure we will achieve the success that the business deserves.”

Firm advises on Lancashire builders’ merchants deal

A successful Lancashire-based builders’ merchants with a history stretching back over 80 years has been acquired by a fast-growing independent building supplies firm.

Builders Supplies West Coast Ltd – which operates from sites in Fleetwood, Cleveleys, Morecambe and Preston – has been acquired by Huws Gray.

MHA Moore and Smalley’s corporate finance team advised Builders Supplies West Coast on the transaction. The deal enables further geographic expansion for Huws Gray which has over 100 branches nationwide.

The deal team was led by head of corporate finance Andrew Feeke, supported by Ian Waddingham and Rob Holgate, with David Hackett providing taxation advice.

Matthew Owen, head of acquisitions for the Huws Gray Group, commented: “Builders Supplies West Coast Ltd have always had a commitment to efficient customer service, which fits well with the Huws Gray ethos. We are optimistic about the future, as this represents a fantastic opportunity for us to strengthen our existing presence in North West Lancashire.”  

Owners Peter and Bethan Worthington added: “We would like to thank all our loyal customers and teams for their support over the years, and for making the company the success it is today. We’re confident that Huws Gray will take the business to the next level and we’re pleased to be leaving it in good hands.”

Ian Waddingham, corporate finance senior manager at MHA Moore and Smalley, said: “Builders Supplies West Coast has been a longstanding client of the firm. We’re delighted to have supported the owners to pass on a business they have grown successfully over many years. Crucially, this development means staff and customers alike can continue looking forward to a bright future as part of a dynamic growing business.”

Builders Supplies West Coast was established in 1938 and employs 70 staff across its four locations.

Huws Gray is headquartered in Llangefni, North Wales, where it was established with a single branch in 1990.

It has made a significant number of acquisitions in recent years and grown to become one of the largest independent builders’ merchants in the UK with 1,700 staff and branches across North and Mid-Wales, North West England, and the east of England. Its other North West branches include Bolton, Wigan, Southport and St Helens.

Huws Gray is backed by private equity firm Inflexion which made a minority investment in the business in April 2018.

Coronavirus Business Interruption Loan Scheme FAQs

1. What are the current CBILS deadlines?

The current deadline for applications is 31st March 2021. Lenders then have a maximum of two months to underwrite the proposal and provide a formal acceptance (31st May). Business loans typically need to be drawndown within 1-3 months from the offer date and asset finance / refinance products 3-6 months.

2. What facilities are available under CBILS?

CBILS is available to support business loans, asset finance, asset refinance / restructuring, invoice finance, property finance and acquisition / Management Buy Out (MBO). A lot of SMEs are unaware that CBILS is available to support expansion and growth, in addition to working capital requirements.

3. Can I have multiple CBILS facilities?

Businesses can secure multiple CBILS facilities up to a maximum of £5m, subject to individual lender eligibility criteria. Many SMEs have secured a combination of CBILS facilities from different lenders to support their business through 2021 and beyond.

4. Can I still obtain a CBILS facility if I have been declined by my bank?

Yes, just because you have been declined by your bank does not mean there isn’t a lender in the alternative finance marketplace that will support your funding requirement. There are now over 100 accredited lenders who can offer CBILS facilities.

5. Can I take a CBILS facility to build up cash reserves and settle it off if I don’t need to utilise it?

Yes, many UK SMEs are accessing the CBILS scheme to build up a cash war chest to protect themselves against any unexpected changes in 2021. With many CBILS facilities, there is nothing to pay for 12 months and no penalties for settling the agreement early, therefore the funds could be paid back at month 11 with no cost to the business.

6. Can CBILS be utilised to support an Acquisition or MBO?

There is nothing stopping CBILS facilities being used as part of a wider funding package to transact an MBO, EOT, acquisition or other such transaction requiring fundraising. We have seen funders utilise CBILS in a number of different situations, be that asset finance, invoice discounting, term loans or a combination of all three to provide funding on a transaction.

7. Can CBILS be used to restructure my existing borrowings?

Yes, many business owners are using the scheme to restructure their existing borrowing structures and benefit from low or no payments for 12 months to reduce their outgoings. Restructuring your current debt profile under CBILS can help safeguard your business in the long term.

8. Can CBILS be used to invest in new equipment?

CBILS funding is available to support businesses who have been affected by COVID-19, but also those who are now looking to expand and grow. Many asset finance lenders have access to the CBILS scheme where the first year’s interest and fees are paid by the Government on hire purchase or finance lease agreements. With the Annual Investment Allowance extended to £1m for 2021, it may be the perfect time for some businesses to invest.

9. Can I have a CBILS facility alongside my invoice finance facility?

Yes, on any CBILS facility up to £250k, the facility is fully unsecured and can sit alongside any invoice finance facility. CBILS lending may be available through invoice finance providers who can provide a CBILS business loan alongside your working capital facility.

10. Will there be a successor scheme to CBILS?

The British Business Bank has stated that there will be a scheme that replaces CBILS, however it has been indicated that the terms may not be as attractive as the current scheme.

The Coronavirus Business Interruption Loan Scheme (CBILS) is managed by the British Business Bank on behalf of, and with the financial backing of the Secretary of State for Business, Energy and Industrial Strategy (BEIS). British Business Bank plc is wholly owned by HM Government and is not authorised or regulated by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA). Full details on CBILS and the list of participating CBILS lenders can be found on the British Business Bank website at: www.british-business-bank.co.uk/CBILS

If you would like to discuss the above content, please get in touch with our expert Corporate Finance partner Andrew Feeke on either:

T: 0161 519 5050
E: andrew.feeke@mooreandsmalley.co.uk

MHA Moore and Smalley oversees family-owned lubricant distributor’s sale

A long-standing distributor of industrial and automotive lubricants has been purchased by a leading UK firm in a deal supported by MHA Moore and Smalley.

Broughton Lubricants, based at Walton Summit, Preston, employs 24 staff and distributes Castrol and other industrial products across the UK.

The company has been sold to Certas Energy, the UK’s leading independent distributor of fuel and lubricants. The deal will allow Certas Energy to further strengthen its position in the market, particularly with the Castrol brand.

The Hodge family, which currently owns Broughton Lubricants, will exit as part of the transaction.

David Hodge, CEO, said: “This transaction will allow the business to build on the continuous growth of the last few years.

“Certas Energy are gaining an excellent team to continue offering the same excellent service which the customers have come accustomed to and are now well placed in the UK to grow the market share even more. I wish all our staff and customers best wishes for the future.”

The company was advised on the sale by accountancy and business advisory firm MHA Moore and Smalley. The transaction team was led by Ian Waddingham (corporate finance senior manager) along with Paul Williams (partner) and David Hackett (tax director).

Harrison Drury provided legal advice to Broughton Lubricants on the deal. The deal team included corporate solicitor Jack Stephenson, employment specialist Kate Shawcross and property specialist Amanda Marwood.

David Hodge added: “I would like to thank MHA Moore and Smalley for their usual professionalism in dealing with the sale, the same for the team at Harrison Drury.”

Ian Waddingham, MHA Moore and Smalley said: “The Hodge family has been a client of the firm for a number of years. We’re pleased to have worked alongside them on an important transaction and gained an excellent result.

“The purchase is also an important one strategically for Certas. Taking the reins at Broughton Lubricants will help the company as it looks to further growth in the coming years.”

Warrington-based Certas, which employs around 2,300 UK staff, is a subsidiary of international sales, marketing and distribution firm DCC PLC, a FTSE 100 company.

Tony Stewart, managing director, European lubricants, Certas Energy said, “We believe that this acquisition will create value both for Certas Energy and our customers. It will strengthen our position in the industrial lubricants market, which is an important part of our strategic vision for the future.”

MHA Moore and Smalley strengthens corporate finance team

We’re pleased to announce the appointment of Peter Williams as a director in our corporate finance team.

Peter joins MHA Moore and Smalley after more than seven years with the corporate finance team in the Manchester office of UK and European accounting firm Azets, where he was a director. His previous experience also includes roles with PwC and Mazars.

Peter, who will be based in our Manchester office, further strengthens our corporate finance team as we prepare for a significant increase in deal activity in 2021.

Andrew Feeke, head of corporate finance at MHA Moore and Smalley, comments:

“In the last 12-months we have consolidated our position as a North West advisor of choice for the owner-managed market. Our team has worked incredibly hard to help our clients get deals over the line in these hugely unpredictable times.

“We expect to be kept very busy in the first part of this year due to good liquidity in the funding market, the anticipated changes to capital gains tax bringing some transactions forward, and the likely increase in deals involving distressed businesses and assets.

“Peter is a highly experienced corporate finance professional who will be a great addition to our team, both in the short term as we deal with a significant number of transactions, but also as we plan to guide our clients through the longer-term recovery.”

Peter adds:

“I know most of the team through working with them on transactions during my previous roles and I had no doubt that this is a firm and a team I wanted to work with.

“These are undoubtedly very challenging times for people and businesses, but times like these also present opportunities. As an independent firm with a national and international reach, we are well placed to help our clients plan for a better tomorrow and I’m delighted to be joining the team.”

Peter will advise clients on business sales, purchases and fundraising. He has significant expertise advising business owners in the owner-managed SME market, including a broad range of experience from private equity transactions through to trade sales, MBOs and fundraising.

Peter Williams

If you would like to get in touch with our new Corporate Finance Director, please use the contact details below:
E: peter.williams@mooreandsmalley.co.uk
T: 0161 519 5050

Peter Williams

Professional: Peter joined the firm in 2021 as a Corporate Finance Director and works closely with the Manchester team.

He has significant expertise advising business owners in the “owner managed” SME market. Peter has a broad range of experience from private equity transactions through to trade sales, MBO’s and fund raising, utilising his strong accounting and commercial background.

Personal: Peter is a Manchester United fan and spends his free time playing 5 a side football, cycling and is a keen golfer.

Hat-trick of deals for corporate finance team

Our corporate finance team has made a strong start to 2021, completing three more corporate deals within the last few weeks.

The team has advised Preston-based electrical safety and testing company Lantei on its sale to British Engineering Services Group, The Angel Inn at Bowness-on-Windermere on its sale to The Inn Collection Group, and Tristone Healthcare on its acquisition of Wales-based care business ProCare (Wales) Ltd.

The deals come just a few weeks after our team revealed it had advised on deals with a value of over £200m in 2020 and anticipates significant deal activity in Q1 of 2021.

MHA Moore and Smalley’s head of corporate finance, Andrew Feeke, said:

“We’re delighted for our clients that we’ve been able to complete these significant transactions. It has been a hugely successful last 12-months for the MHA corporate finance team as we consolidate our position as the advisor of choice for the owner managed market.”

Ian Waddingham, our corporate finance senior manager, who led on the Lantei and The Angel Inn transactions, added:

“Lantei is an excellent business that has seen significant growth over a number of years and now has some high-profile, blue-chip clients on its books. Becoming part of a large national player like British Engineering Services Group, will put it on an even stronger footing for further growth.

“Meanwhile, we’re pleased to have assisted another longstanding client behind the success story of The Angel Inn at Bowness on its sale to The Inn Collection Group. As a well-managed, well-funded business with a portfolio of high-performing hospitality venues, customers of The Angel Inn can look forward to the same high standards to which they’ve become accustomed.”

The acquisition of ProCare, which employs 140 staff across two care homes and a community living service, is the second deal in the last six months for Tristone Healthcare. The investor’s strategy is to acquire high-quality businesses with strong fundamentals, delivering outstanding care and support to vulnerable people who need it most.

In recent weeks MHA Moore and Smalley has also overseen the sale of Cumbria-based AUK Investments to national petrol forecourt operator Motor Fuel Group, and the management buyout of logistics, transport, and shipping business LTS Global Solutions among others.

Valuations, Covid-19 and EBITDAC adjustments

The impact of the pandemic has been felt in many ways, and one of these is in relation to valuation approaches for businesses. This blog will give an overview of how buyers and sellers of companies are trying to factor in Covid-19 factors accurately and fairly.

In general terms, EBITDA is applied to a valuation multiple to form the headline valuation of a business. Net cash/debt and working capital adjustments are then applied to provide the valuation of the business. Hence growing EBITDA normally leads to a higher valuation.  

Corporate finance advisers usually adjust EBITDA to derive the underlying position. This means adjusting for one-off costs and income (although the latter is usually rare!), both of which can become highly subjective.

It is therefore important to note that if you are considering selling your business, the profitability used to value your business could be significantly different to the profitability in your recent financial statements.

Typical one-off costs would include excessive repairs and renewals, short term loss making contracts, above market rate directors remuneration etc. One-off income would capture items such as grant income, or the profitability arising from short term, non-recurring turnover. But, as noted above, the adjustments are often highly subjective, and many other items can be included.

Whilst some sectors have benefitted, Covid-19 has adversely impacted many businesses, and the impact of further lockdown measures announced in January 2021 means that the effect will continue to be felt well into the year and for some, very possibly, long beyond this year.

Therefore, the impact of Covid-19 could be a significant add back adjustment for many companies when assessing their underlying ‘true’ EBITDA. Hence the adjustments made to reflect the impact of Covid-19 have had, and will continue to have, a significant impact on valuations and transaction values across many sectors. The impact of adjustments for Covid-19 has led to the acronym EBITDAC.

EBITDAC (Earnings before interest, tax, depreciation, amortisation and the effects of Covid-19) has become an often used term in corporate finance transactions since the Covid-19 pandemic started.

It is important that any adjustments to the EBITDA can be clearly justified. Hence business owners need to be aware that whilst Covid-19 add backs can be significant, the “C” adjustment must be clearly justified.

Without this, acquirors are unlikely to fully accept such adjustments, with an adverse impact on business valuations.

To have any significant adjustments accepted by an acquiror, there will be a requirement for the adjustments to be clearly analysed and quantified. To do so usually requires good quality management information systems, which provide sufficient granularity to enable one off costs to be identified and quantified as they arise.

Management should consider also formally capturing Covid-19 impacts in monthly management accounts and board packs (along with other add backs and adjustments).

The typical Covid-19 adjustments we are seeing include the following:

  • extra facilities management costs such as cleaning
  • lost or deferred income due to work being postponed due to lockdown measures
  • redundancy costs
  • additional advisory fees, for example in relation to furlough arrangements

Of course, each business is different and in many ways unique; but if you are thinking of selling your business, or any of the issues highlighted are relevant to your business, please don’t hesitate to get in touch to discuss further with our Corporate Finance Senior Manager, Ian Waddingham on 01772 821021 or ian.waddingham@mooreandsmalley.co.uk