Manchester-based healthcare investment company has acquired a £4.5m care and
education provider as part of its ongoing growth strategy.
Tristone Healthcare, a
subsidiary of Tristone Capital, has acquired Southampton-based Sportfit Support
Services which offers care and education services to vulnerable young people
including those with learning disabilities and requiring supported living.
The acquisition is one of a
number planned this year as Tristone targets £35m revenues and £7.5m EBITDA in
the next 18 months through its buy, build and hold strategy.
Tristone was advised by MHA
Moore and Smalley’s Corporate Finance and Tax Advisory teams who provided
financial and taxation due diligence support alongside wider deal advisory
MHA Moore and Smalley’s
acquisition team was led by tax partner David Bennett and corporate finance
director Simon Carruthers.
Simon Carruthers said: “The
Tristone team are passionate in their plan to build a significant social care
group delivering positive social change through the alignment of commercial
returns with social impact.
“Assisting the team to shape and deliver
a transaction that will help Sportfit progress to the next level and
provide exceptional support for even more disadvantaged young people has been
“This is the second transaction in the
social care sector that our Corporate Finance team has helped deliver from
start to finish during lockdown, based on the team’s deep understanding of and
strong credentials in children’s and young person’s services in particular.”
The deal increases the
number of vulnerable young people currently supported by Tristone businesses to
Tristone founder and CEO,
Yannis Loucopoulos, said: “Sportfit is a fantastic business that perfectly
aligns with our values and helps us further deliver on our purpose of providing
safe, essential care, while enriching lives through education for vulnerable
children, young people and adults.
“It’s an excellent example
of our strategy of acquiring profitable social care businesses with a track
record of success and a strong management team.”
A leading field service management company
has acquired a North West-based lone worker protection provider in a
significant private equity-backed deal.
Lone Worker Solutions, which provides personal
GPS and emergency alarm devices and apps for solo workers in high-risk
environments, has been acquired by Belfast-based PE-backed Totalmobile for an
Totalmobile provides workforce management software
such as cloud-based job management and data analytics platforms. The company is
supported by technology-focused private equity firm Horizon Capital and says
the deal will add scale to its end-to-end suite of staff management solutions
as part of its ambition to further establish itself as the UK’s premier field service
management provider in a range of sectors.
Lone Worker Solutions was formed in 2009 and
is headquartered in Rochdale, Greater Manchester. It employs 18 staff and
services clients including NHS Trusts, county councils and National Rail.
Andrew Feeke, corporate finance partner, MHA Moore and Smalley, said: “Lone Worker Solutions has been our client for the past five years. We were extremely pleased to be able to bring in our corporate finance and transaction tax specialists to negotiate and structure a great deal at an important step in the company’s progression.
“Our corporate finance team has been busy
throughout lockdown and it is clear there is still an appetite for mergers and
acquisitions in the North West. We have advised on a number of significant
deals in recent weeks with more expected to follow over the coming month.”
George Stavrinidis, chief executive officer,
Lone Worker Solutions, said: “We are very excited about completing this hugely
significant deal for the company. Totalmobile is a business which is well-aligned
with our own culturally and will bring huge technical benefits and scale to our
“We have had a superb relationship with MHA
Moore and Smalley for a number of years and were able to call on the team’s
expertise at various points during the transaction.”
Forbes Solicitors also advised Lone Worker Solutions on the deal. The
Forbes team was led by Nick Pickup and included Pauline Rigby and Rebecca
McCann (Corporate), Mohassan Mehmood (Commercial Property) and Abigail
Lynch and Sal Chowdhury (Employment).
MHA Moore and Smalley is proud to have supported
a Cumbria-based client in securing new investment which will help it expand its
specialist support for children.
A Wilderness Way (AWW), a provider of
specialist residential childcare and crisis intervention services, has secured
backing from BGF to support its continued investment in providing critical care
to vulnerable children.
BGF has invested for a minority stake in AWW
which has a portfolio of 20 properties across Northern England and Scotland.
Founded by Geoff Jenkinson and Clare
Houghton in 2007, AWW has established itself as a leading provider of
high-acuity, life-changing residential care for children at significant risk
from exploitation, violence, crime and abuse.
BGF’s funding will be used to develop AWW’s
unique provision of individualised care which delivers trauma-informed
therapeutic care with contextualised safeguarding to keep vulnerable young
people safe. AWW’s approach promotes the focus on developing young people’s
self-esteem and confidence through outdoor adventure activities and re-engagement
in meaningful learning through AWW’s individualised education programme.
Geoff Jenkinson, CEO of AWW, commented:
“BGF’s ethos and values are well aligned with those that we hold so dear at A
Wilderness Way, allowing us to continue to put quality of care and education of
our children at the forefront of everything that we do.
“Quality, creativity, safety and creating
opportunity for some of the most marginalised children in society is what we
have excelled in over the last 13 years, and we are confident that this
partnership and investment will allow us to develop further in accordance with
MHA Moore and Smalley’s corporate finance
and tax teams advised the shareholders of AWW on the deal.
Simon Carruthers, corporate finance director at MHA Moore and Smalley, said: “Having worked with Geoff, Clare and the team for many years, we knew their ambition, strong management structure and clear plan for growth would be a great fit for an investor like BGF. It’s been incredibly pleasing to help put this deal together and see Geoff and Clare’s and their wider management team’s hard work rewarded.
“A Wilderness Way provides strong outcomes
for children because of its commitment to the highest quality care that has
been at its heart since starting the business in 2007. The investment and
additional expertise offered by BGF will help the management team take the
business to the next level and provide that exceptional support for even more
children across the region.”
Harry Jones, investor at BGF, said: “AWW has
established itself as a truly differentiated provider that delivers exceptional
outcomes for the young people in its care.
“As a business that focuses on delivering
social purpose, we are delighted that our investment will help to mobilise
additional services to provide for the overwhelming demand for these services.”
AWW will be joined by Fiona Lowry, who has
been appointed as Non-Executive Chair. Fiona brings a wealth of experience to
the role, having founded several successful businesses in the Healthcare
sector, including The Good Care Group, a former BGF portfolio company.
As part of the BGF deal, AWW has implemented
a new organisational structure, establishing a leadership platform that can
continue to deliver services of excellence and a structure of governance that
ensures the safety and progress of children, staff and the organisation. Under
the changes, Geoff Jenkinson will remain Chief Executive and Clare Houghton
will transition to Multi-Disciplinary Team Director (MDT Director), responsible for setting the agenda in
relation to the therapy model across the organisation and promoting the best
interests of children in accordance with the statutory framework.
Robbie Burke, who has worked with AWW as a
consultant and Non-Executive Director since 2015, will take on the role of
Chief Operating Officer, to oversee quality throughout the organisation,
establishing goals for care, education, outdoor education and therapy in
partnership with senior managers.
Cheri Jenkinson, who joined the organisation
in 2017 as HR Manager will take on the role of Director of People and
Organisation. Cheri will be a member of the Executive Board and accountable for
the performance of the P and O function, as well as providing strategic counsel
on all people matters.
BGF’s investment will support the growth and
development of more services to the most vulnerable young people across the
BGF’s Pinesh Mehta led the deal and Harry Jones will join the AWW board. BGF was advised by Hill Dickinson. AWW advised Browne Jacobson.
The economic impact of Covid-19
has been well document in the media, and there is currently significant
uncertainty both in terms of the timescale and shape of the recovery, and also
whether the pandemic will lead to permanent structural changes in some areas of
The above can potentially raise significant
issues for sellers who have recently sold, or who intend to sell their business
using an earn-out structure.
What is an earn-out?
Earn-outs have been a common
feature of M&A transactions, with approximately 40-50% of transactions
using some form of earn- out structure.
Consideration received for the
sale of a business can be split over time, with an amount due on completion,
and further amounts deferred to a later date.
The deferred element of the
consideration is often contingent on certain conditions being met, and where
these contingencies relate to the business achieving certain performance
targets in the post- acquisition period, the deferred consideration is commonly
referred to as an ‘earn out’.
Earn-outs are particularly useful
in bridging a valuation gap between the acquiror and seller. This can arise due
to different views on the future performance of the business, and the degree of
risk attached to the forecast performance of the business.
Earn-out periods typically range
from 1 to 4 years, thus providing the sellers with an opportunity to demonstrate
the value of the business (often through retaining an active role in the
business), and therefore receive an increase in their consideration as the
future performance is delivered.
The potential impact of Covid-19 on earn-outs
Covid-19 is likely to have impact on earn-outs in a number of ways. The impact is likely to be felt in three key areas:
1. Financial performance
Perhaps the most obvious impact
is likely to arise from the impact of Covid-19 on the financial performance of
the target business.
Earn-out payments are typically linked to the financial performance in each year of the earn-out period. It is therefore likely that if the business has been adversely impacted by Covid-19, the earn-out payments relating to this year’s performance (and possibly future years) could be significantly reduced.
2. Potential solutions could include an extension to the earn-out period, or the inclusion of Covid-19 adjustments to the earn-out profitability calculations. Demotivated management
It is important to note that a
missed Earn-Out target is potentially a significant issue for the Purchaser as
the business they have acquired is now underperforming. Faced with a significantly reduced earn-out
payment, possibly coupled with a perception that earn-out targets in future
years are now unachievable, sellers may lack an incentive to ensure that the profitability
of the business, or the division of the business which they control, is
If this issue is not addressed this could, in some cases, lead to the resignation of the seller, which could have a destabilising effect on the business.
3. Cash flow and the funding earn-out payments
For businesses sold prior to
Covid-19, and where earn out payments are now falling due, if the Purchaser is
experiencing cash flow issues arising from the pandemic they may be unable to
pay the earn-out payments on time.
An extension to the timeframe for
payment, additional interest charges, or the use of alternative forms of
consideration such as equity or loan notes may need to be considered.
The solutions to the above issues all involve discussion and negotiation between the parties and their advisers. Most share purchase agreements can only be varied in writing, and therefore any changes to the earn-out structure or payment terms would need to be properly documented. However in most cases it will be in the interests of both parties to swiftly reach a suitable compromise.
The Corporate Finance team at MHA Moore and Smalley have extensive experience advising business owners on transaction structures including earn-outs. If you would like to discuss any of the issues raised in this article, please do not hesitate to contact a member of the Corporate Finance team.
The Coronavirus Business Interruption Loan Scheme (CBILS) aims to support long-term viable businesses who may need to respond to cashflow pressures by seeking additional finance. The loan will be provided by the British Business Bank through participating providers during the Covid-19 outbreak.
is clear that the Covid-19 pandemic has posed an economic and social challenge
to the worldwide population, the only cure (Sweden’s view aside) being to
revert to medieval style containment measures that drive right to the heart of
our modern world. Looking at this from an economic perspective only, the
impact on the UK economy and infrastructure will leave a lasting impression,
BUT the question now is – how do businesses trade out of the lockdown, with a
largely furloughed workforce, a stretched working capital cycle and no end in
short, how do businesses plan for the new beginning?
owners should take this opportunity to review their core strategic business
plans surmising how the post Covid-19 world will require products or services, model
various scenarios to understand how this will manifest itself, and in essence,
prepare for the worst and hope for the best.
are numerous repositories of information and advice on what business owners should
be doing – most of which concentrate on high level plans. The focus of
this article is to get to the heart of the matter and remember ‘Cash is King’ –
particularly so for the next 12 months.
general, Government support for businesses to date has been extensive, and it is
becoming easier to access (on the whole) as funders get to grips with the
various funding strands and how to apply this to the relevant business
situation. Access to funding support (and therefore cash) right now is
less concerning than a few weeks ago, but still carries a timeline of uncertainty
as everyone is forecasting and estimating an end to the Covid-19 Government
actions – an unknown at the current time.
to the future, the key risks to be considered are now three-fold, all of which
Covid-19 restrictions go on for
longer than you expect;
Working capital stretch as economic activity
Business failures in supply chains,
but more importantly in customers, resulting in bad debts
we focus on the working capital stretch, as this is something that can be
foreseen and therefore planned for. My particular concern here is with
businesses utilising working capital style funding lines (e.g. Invoice
Discounting). Using Invoice Discounting as an example, the key security
for the funder is the customer debt itself. With the current Covid-19
restrictions, we are seeing the following:
Customers taking longer to pay,
meaning suppliers are waiting longer to get paid (working capital stretch);
Invoice Discounting providers are
working with their clients by extending the funding period (e.g. 120 days
rather than 90 days) such that older debts remain funded.
above funder response is undoubtedly a positive response to the working capital
stretch. However, as time progresses, it may be that some debtors fall outside
of the new extended funding period, and credit reference agencies review the
credit ratings of certain businesses, potentially restricting access to Invoice
Discounting cash advances due to credit concerns or concentration limits. If we
also assume that economic activity now begins to accelerate and the business in
question now starts to re-open mothballed factories and commence manufacturing
products again, we could envisage the following:
Suppliers will want payment before
releasing new raw materials;
Wages will need to be paid for
employees now not furloughed;
Other manufacturing costs will need
to be paid on shorter credit terms than may have historically been enjoyed; and
Customers may be more reticent to
settle invoices quickly or may be in financial difficulty and fail.
above is a perfect storm as the working capital cycle expands beyond historic
levels and the Invoice Discounting provider is already at the limit of their
new extended and revised credit policy.
are a number of actions that business owners can take to mitigate the above,
and indeed access to other sources of funding are certainly currently available
in most cases for viable businesses.
key takeaway from this article is to ‘plan for the new beginning’ and factor in
potential ‘shocks’ to the business via modelling various scenarios. Some funders
may not formally request a financial model for the future in assessing the
business’ viability for CBILS (or other funding
sources), but business owners need to understand the funding that they will require
for the next 12 months and beyond, together with the key assumptions that
underpin the estimated funding requirement. Keep these assumptions under
constant review as they will change, and maintain an open
dialogue with funding partners.
is also important to note that those businesses doing well during this
pandemic, shouldn’t think they are immune to the financial risks and working
capital issues noted above, and therefore should still plan appropriately. As
history proves, businesses can still unfortunately fail on the way out of
recession, and so it is essential that all business owners look to plan for the
We are here to support businesses and assist in helping business owners understand the key assumptions and working capital drivers applicable to them, not just for the purposes of fundraising, but also to enable them to plan for a post Covid-19 world, and capitalise on the opportunities that they will encounter.
With ‘some’ certainty surrounding Brexit and a clear majority Government, many business owners started out in 2020 contemplating the sale of their business, and then along came Covid-19 and shattered their hopes and dreams. Or did it? Well, there is no disputing that the current lockdown measures have had a significant impact on the mergers and acquisitions market, but how serious is it for SME businesses who are thinking of selling their business? And what can you do now to prepare to sell your business post Covid-19?
‘Legacy deals.’ These were
pretty much agreed in principle before Covid-19 kicked in. Both the buyers and
sellers still wish to conclude these deals without delay, and we’re actively
working on these deals to get them over the line.
‘Delayed deals’ whereby
business owners are guarding their relatively stable businesses and waiting
patiently for the effects of the government restrictions to be lifted to
establish their new ‘normal’ before taking their businesses to market, perhaps
later this year.
‘Abandoned deals’ involving
businesses that have been seriously damaged by Covid-19. They first need to
concentrate on surviving, before pivoting their business models and
demonstrating this works ahead of taking their restructured business to market.
So, yes, Covid-19 is having an impact
on selling a business. On a positive note, not all businesses are struggling,
but for those that are, when we eventually return to some form of normality
many business owners may still want to sell their businesses at the earliest
opportunity. As for buyers, funding may be more difficult for some, but plenty
will still be active, including Private Equity who need to deploy funds to
generate their required returns.
The North West, Manchester in
particular, has a Private Equity sector second only to London hence we
anticipate a continuation of strong Private Equity backed investment in the
So, what three key actions can business owners who have ‘delayed deals’ carry out now in readiness for a future sale?
1. Continue to maintain excellent management information
Yes, I know accounting might be a bit boring(!) but it will be crucial to demonstrate to prospective buyers the underlying strength of the business before, during and after Covid-19. Reliable monthly management accounts will demonstrate this, but also spend some time adding commentary so you’ll be able to easily recall the events and explain the actions you took in carving out a Covid-19 financial impact in presenting the underlying financial performance.
2. Forecast the future
If a seller is confident of the future of their business, then it’s very much in their interest to invest the time to quantify these future upsides to prospective buyers using financial forecasts. This means monthly integrated profit and loss accounts, cash flows and balance sheets, with detailed written assumptions to support the numbers. In the current climate it’s recommended to run two or three scenarios to show you’re considering a variety of outcomes.
3. Start preparing for due diligence now
It’s a pretty monotonous task but rest
assured, if you’re going to sell your business, you’ll need to do it at some
point. Better to get your house in order now rather than wait for the sale
process itself when you’ll be weighed down with a million and one tasks. I have
a client who has been preparing his ‘data room’ for over a year and he won’t regret
a single minute of this when he’s handling due diligence enquiries for real.
Business owners with ‘abandoned deals’
will need to adjust their business models before considering a sale. Having
said that, if a sale is the intended end game, then it’s important to
understand how your new business model will be valued in the future. The
likelihood is that it will be valued on a multiple of profits, but what that
multiple will be depends on a number of factors and will differ from sector to
sector. In general terms, the greater the risk the lower the multiple. For
instance, a property business would derive a higher multiple on its recurring
lettings income as opposed to its one-off agency work. So, knowledge of these
future valuation factors should help drive your decision making now.
My Corporate Finance team and I are experienced in advising SME business owners on preparing their business for sale. If you would like to explore any of the above in further detail, then please get in touch.
lending support scheme will require applicants to provide a set of at least 12-month
projections. As most will know, projections are usually a standard
requirement when applying for a loan during normal times – but, as we also
know, these are not normal times.
thought it would be helpful to pull together a few key reminders of what a good
set of projections should look and feel like – and highlight some of the
pitfalls to avoid.
So, what are the key points and characteristics of a compelling set of financial projections?
They are integrated across the
profit and loss account, balance sheet and cash flow statement.
In other words, if one input is
changed in relation to, say, sales volumes, the model is set up so that the
impact of this automatically flows through to the balance sheet (trade debtors
and cash receipts of course, but perhaps also stock ordering and holding levels
and thus trade creditors) and the cash flow statement (the cash implications of
There are many proprietary software forecasting packages which can be used for many businesses; but if yours is more complex or nuanced then you should consider having a bespoke excel based model created.
Funders expect that, particularly in
the case of complex business models, there will be simplifying
assumptions. But you must explain these in the assumptions or covering
narrative to the projections so that users can understand the impact.
Your accountant can advise you on what simplifications are appropriate given your specific set of circumstances.
It is not just about the
numbers. You will need to include some narrative.
Not ‘War & Peace’ but enough to scene set (particularly if applying to a funder who does not know your business very well) and explain clearly and concisely what the key assumptions are.
The (cash balance) Devil may be in the
Forecasts are usually prepared on a monthly
basis, but your business might have significant cash swings within any one
month. That doesn’t mean you must do a weekly or, even worse, a daily
forecast; but you must have an awareness of what the impact on the cash
position is within any given month – and discuss this with the potential
If not, you run the very real risk of quickly breaching the covenant requirements which are part and parcel of any funding. You don’t want to do that as it undermines the relationship with the funder and can quickly erode any goodwill.
If you have a seasonal business,
ensure that you have modelled as best you can the seasonality profile of your
This is necessary as it will point to those parts of the year when the cash might get a bit tight, and forewarned is forearmed for any discussions with funders about what both you and they can do to mitigate the impact of these pressure points.
Your business might be about to
experience significant growth as result of receiving the funding; but you must
be able to rationally explain why this is so.
Where is your market research and hard data to support your growth projections (particularly if the growth is significantly better than the current run rates)?
Exponential growth may be possible for a while, but there are whole mountain ranges of business plans which forecast hockey stick growth rates which did not come to pass.
Make sure the projections are
logical (much easier if you have followed the first point).
What we mean is, if, say, sales volumes go up then it is logical to expect your trade debtors to increase pro-rata. If they do not, then you need to explain why.
Make it very clear how you intend to
use the funding you are seeking and what the impact of this will be.
It may seem obvious, but it does no harm to perhaps bring this out in the narrative to the plan.
Linked to the above, be very clear
about the medium-term strategic goals for the business.
How will the funding move your
business nearer to where it wants to be in, say, 3 years?
Strategic goal setting is a whole other topic but try and keep the goal clear, as well as the pathway to achieving it flexible and able to react to changes (which, as we are seeing, can be significant, unpredictable and swift).
We cannot cover everything in here, but these are some of the more common themes we see when clients ask for our help in preparing projections. For further information on how we can assist you in your funding application please see our factsheet here. Or contact our specialist members of the Corporate Finance Team on BH@mooreandsmalley.co.uk