Maximising the value of your business: Insights and Best Practices - - PowerPoint PPT Presentation

Maximising the value of your business: Insights and Best Practices

21 May 2015 | The Runnymede-on-Thames Hotel

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Welcome agenda

08:20 “Maximising value, more than just about the numbers’’ Ian Barton, HMT LLP 08:40 “Maximising the value of your business: tax implications’’ Holly Bedford, HMT LLP 09:00 “Enhancing operational efficiency to maximise value” Fabrice Rodrigue, BIE Executive 09:20 Panel Q&A 10:00 Close

Maximising value, more than just about the numbers

Ian Barton, HMT LLP

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Market overview

Transactions in mid market on increase supported by improved funding appetite

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• Deal volumes increased by 2% in 2014 compared to 2013 showing steady and continued confidence
• Improving market sentiment generally reflected in confidence surveys of CFO’s
• Election results likely to support volumes, rather than spike of Entrepreneur’s Relief now
• Both corporate and institutional buyers are highly active following several years of uncertainty.
• Recession has made businesses' more robust
• Best deals have always got done, and more better performing businesses now
• Businesses made lean during the recession now seeking inorganic growth too.
• Banking market is there for transactions – although pricing is higher, appetite is strong
• Alternative funders (ABL’s, HNW clubs etc) have become more prevalent
• Transaction multiples have increased and vendors expectations remain within buyer’ s funding parameters.

2015 proving to be best year for some time to be disposing of businesses – just see sales being made by PE houses – even the IPO market has been re-opened for bigger opportunities

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Successful processes

Preparation, control and anticipation

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Why acquirers win auctions?

• Strategic Rationale
• Highest bidder
• Last man standing

What makes a successful process?

• Knowing what you want
• Certainty of delivery
• Control, anticipating flexibility

‘first best opportunity to sell’

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Controlling the controllable

Being prepared to manage an effective process

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Positioning for sale

Management succession Data room support IT systems Regulatory and Governance Tax review and structuring SPA and working capital support Transaction and market monitoring Commercial and strategic analysis and review Financial reporting procedures and accounting policies KPI analysis Historical Financial Analysis Forecasts

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Migrating your business from a successful enterprise to a sellable company

Exit strategies are not just about the numbers

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Scarcity/ IP Profitability growth Industry growth Company Size Low market share Customer concentration Recurring revenues Scalability Independence Management team

V A L U E D E L I V E R E D

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What you need from your financial adviser

Getting the deal done

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Expertise & Relationships Credibility & Flexibility Knowledge & Insight Process & Control

“Competitive tension” “Ability to extract value” “One size doesn’t fit all” “Knowing when to negotiate and when to agree”

A great deal is worth our advice

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Contact

Ian is a lead advisory partner with some 20 years experience of leading transactions and providing corporate finance advice. Ian spent 20 years at Deloitte and for almost 10 years prior to joining HMT built and led their South East corporate finance advisory business as a partner. His focus is supporting UK mid market and

• wner manager businesses either sourcing investment and

acquisitions or enabling exit strategies and maximising value across a range of industry sectors. Ian also works extensively with private equity houses and has lead several of the region’s most prestigious transactions, winning Thames Valley Deal of the Year in both 2007, 2011 and being nominated every year since the awards began. In the last 12 months Ian has advised on the MBO of Intuitive, HMT’s first £100m+ deal being the sale of Swift Worldwide Resources to a US private equity house, the refinancing of Southern Communications, the MBO of seismic consultancy firm The EPI Group, the disposal of Friarwood Ltd and the MBO of Acal Enterprise Solutions Ltd back by NVM Private Equity, as well as winning the 2013 Blake Lapthorn Poker Tournament! In 2014, Ian was voted ‘Corporate Finance Adviser of the Year’ at the Thames Valley Deals Awards. Ian is a keen sports fan – more watching than participating – and has rekindled his enthusiasm for football in recent years being a lifelong Manchester City fan.

Ian Barton

Partner

Contact

Phone 01491 579740 Email ibarton@hmtllp.com

Maximising the value of your business: tax implications

Holly Bedford, HMT LLP

Tax Traps and Planning on a Disposal

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What are you selling?

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Company Shares Corporate Trade and Asset Sales A Subsidiary Company

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Sale of Company Shares

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• 10% rate of tax with Entrepreneurs Relief (ER)
• Can we go home now?

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Bear Traps

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• Losing ER:
• Income tax rather than CGT:

28% rather than 10% Up to 45% plus NIC

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CGT Entrepreneur’s Relief – a quick recap

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• 10% rate of tax on first £10m of lifetime gains
• Conditions – selling shares:
• EMI option holders <5%
• Pitfalls

5% of voting rights and “ordinary” share capital (nominal value) for 12 months, and employee or director for 12 months leading up to disposal, and

company has been a trading company, or holding company of a trading group, for at least a 12 month period in last 3 years

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What am I getting?

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• Immediate Cash – taxed up front
• Deferred cash – taxed up front – can you fund the tax?
• Cash earn-outs –a value that is taxed up front with later adjustments. ER issues
• Buyer’s shares or loan notes. Automatic tax free rollover unless election made. ER

issues.

• Example: Sale in Jan 2016. Tax bill on 31/1/17

Immediate Cash £500,000 Deferred cash £100,000 Paid March 17 Loan note £100,000 Redeemed June 17 and 18 Shares £ 50,000 Earn out ? % of PBT above hurdle. March 18 and 19

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Bear traps?

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Losing ER

• Do you qualify for ER at all?
• Buyer shares and loan notes –

elect to disapply

• Earn- outs, No ER on additional

amounts taxed in future

Income Tax or CGT?

• Earn outs and continued

employment

• Partial exits: Transactions in

Securities

• Employment Related
• Securities. Disposal for more than

market value

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Transactions in Securities

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• Very wide ranging for close companies.
• Where a tax payer has a tax advantage – CGT rather than income tax.
• Partial exits where the company has reserves that it could use to pay a dividend
• HMRC “counteract” and tax as a dividend to the extent the company has reserves available
• Advance clearance from HMRC.
• Safe harbour – 25%

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Reinvesting in Buyer / MBO

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Reinvesting in Buyer / MBO Automatic Tax-free rollovers on shares and loan notes Disapplying the tax free rollover for ER purposes Employment Related Securities and S431 elections – income tax issues Transactions in Securities – income tax issues

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Pre-sale Planning

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Pre-sale Planning ER Spousal Transfers ER Share Rights ER Trading Status Asset Extraction Pre- Sale Subsidiary demerger. HMRC attitude? HMRC Advance Clearances Deal Structuring

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What you need from your tax adviser

Getting the deal done

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Expertise & Relationships Adaptability & Flexibility Knowledge & Insight Process & Control

“Integrated tax and CF advice” “Specialist tax skills and deal experience” “One size doesn’t fit all” “Knowing how to deal with HMRC”

A great deal is worth our advice

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Contact

Holly is a director and transactional tax specialist with over 20 years tax experience. Holly qualified in 1994 with Arthur Andersen in London and following 2 years in Corporate Tax, moved to Ernst & Young to specialise in International Tax. She returned to Arthur Andersen in 2000 and was seconded to the USA to work in International Tax in Chicago. Holly returned to the UK in 2006 and joined HMT to specialise in transactional tax. She has gained extensive experience, working

• n a broad range of acquisitions, buy outs, disposals and capital
• restructurings. She has also advised on the implementation of

employee share incentive schemes and a variety of personal tax planning issues covering income tax, capital gains tax and inheritance tax. Holly has recently advised on several transactions including the MBOs of Veritek Global Ltd and Jellyfish Solutions, the acquisition

• f Oki-Ni Ltd by French group Meninvest SAS, the disposals
• f Keltec Ltd, The History Press Inc. and Green Board Game

Company. Holly has 4 children and 2 badly behaved dogs. When not dealing with their demands she is a dedicated coffee drinker and is working towards her black belt in karate.

Holly Bedford

Tax Director

Contact

Phone 01491 579740 Email hbedford@hmtllp.com

Enhancing operational efficiency to maximise value

Fabrice Rodrigue, BIE Executive

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About BIE

BIE provides advisory and recruitment services for clients across a wide range of sectors, including UK Plc’s, multinational corporations, private companies and private equity backed businesses.

Advisory Recruitment

Solutions Programme Initiation Programme Turnaround Programme Delivery Ad-Hoc Capability Provision Functional Expertise Executive Leadership Team Financial Management Human Resources Supply Chain & Procurement

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Food for thought…observations?

• Do you believe you have the right product and services mix? (Portfolio profitability)
• Do you have the right client vs product services alignment / optimisation?
• More importantly, are you able to articulate where value is created generated?
• TOM helps understand ‘WHERE’ you want to take the business
• This will be different and tailored to each organisation:

–Become the ‘leader’ in a given market –Become the ‘biggest’ player in a particular vertical –Be most ‘profitable’ supplier or ‘easiest to do business with’ etc.

• That will determine the ‘WHAT’ interventions you need to perform in the business
• What’s then left is to articulate the ‘HOW’ you’re going to get there
• Invariably the ‘WHAT’ and the ‘HOW’ will involve ‘PEOPLE’, ‘IT’ and ‘PROCESSES’
• But often understanding what needs to be done is the easy part – executing and getting it done to cost,

time and quality… is the difficult task

• The programme management/execution experience alongside the right skillset and capability is what

differentiates successful from failing programmes

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How do you improve operational efficiency?

SPOT INTERVENTIONS: Initially an experienced resource to help define NEED and build capability as appropriate

When does it apply? 1. Independent business review. External validation of current business 2. Planning and execution. Translating vision and strategy in delivery terms 3. Cost reduction/ cost transformation. Ruthless delivery and realisation of identified benefits 4. Efficiencies and standardisation. Specialist skills to drive out cost and inefficiencies for value creation 5.

• Integration. Realising synergies from

integrating multiple business acquisitions and / or infrastructure

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Efficiency programmes – intervention options

Benefits

• Experienced resources
• Cost-effective solution
• Hand-picked team
• Programme de-risking

Mobilisation and parameter definition for transformation programmes External intervention for programmes which are

• ff pace

External delivery capability and subject matter expertise for effective delivery Capacity, bandwidth and specific skillsets on demand

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Benefits of intervention support

1. Additional ‘Delivery’ SME. Proven track record to bolster existing management team skillset and capability to accelerate value creation (i.e. safe in traffic) 2. Pedigree of candidates. Exceptional breadth and range of experience from top tier consultancy firms and industry 3. Flexibility and tailored solution. Interventions tailored to progress at the pace and capability of the incumbent management team 4.

• Sustainability. Provision of tools and techniques geared to embedding continuous

improvement

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Contact

Fabrice is an accomplished Programme Transformation delivery director with 17 years experience with top tier professional services firms such as Ernst & Young, Atos-KPMG, Chaucer Consulting and Accenture. Before joining BIE, Fabrice led, shaped and delivered a number of complex large scale transformation programmes, across the whole lifecycle (from scoping through to go live). In addition to his background of process, technology and change, he brings additional experience in supply chain and procurement. He is able of offering insight and expertise to clients who are looking for an alternative solution to consultancy-led business transformation so that they can retain control of their project and create a lasting legacy within their business. He has led programmes for organisations across a wide range of blue chip organisations and sectors such as National Grid, the MoD, NatWest, Sainsbury's, BP, Caterpillar and Ericsson to name but a few. Fabrice has French and British nationality. He is a keen traveller who enjoys discovering new countries and is also holds a black belt in Tae Kwon Do

Fabrice Rodrigue

Head of Advisory Services

Contact

Phone 02034405260 Email fabrice.rodrigue@bie-executive.com

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Contact

Richard King

Non-Executive Chairman

Contact

Email Richard.king@bie-executive.com

Richard was appointed to the Board in October 2014. He spent 35 years with Ernst & Young LLP, becoming Managing Partner of UK & Ireland and a member of both the EMEIA Board and Global management group. Richard is a Fellow of the Institute of Chartered Accountants in England and Wales and works extensively with growing businesses. He is Chairman at Corac Group and the Grass Roots Group Plc, Non-Executive Director of Allocate Software plc, an advisory partner at Rockpool Investments LLP, and he is on the advisory board of Frogmore Property Group. He is also Chair of Trustees for the Willow Foundation, a charitable organisation for seriously ill children and adults.

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Contact

Ben has over ten years of recruitment experience across Business Transformation programmes. He is a specialist interim management provider with a passion for change management and has worked on assignments with many companies from FTSE 100 to SMEs. Ben works in partnership with organisations going through major

• change. He builds a partnership with companies by understanding

their change agenda, what works well within the organisation and culture, where there are skill shortages and knowing when people need to be engaged on the programme. With this detailed knowledge he creates a Flexible Talent Pool. This group of pre-screened people ensures an efficient and effective recruitment process tailored specifically to the needs and culture of an organisation. Using an interim Flexible Talent Pool ensures that you work with people who not only get the job done, but are able to transfer appropriate skills to your organisation. This transfer of knowledge ensures a legacy of delivering transformation programmes. Ben was part of the MBO team taking BIE into private ownership.

Ben Hawkins

Executive Director

Contact

Phone 02034405250 Email ben.hawkins@bie-executive.com

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Contact

Rob is well known in the City for his successful business and market leadership in the ever-changing recruitment industry. He founded Walker Hamill in London in 1989 and built it into an international recruitment business with an exceptional reputation for delivery amongst blue chip

• clients. Subsequently, Rob co-led the float of Imprint plc in

2001 – the first start-up recruitment company to float on AIM. In September 2006, he joined the Hexagon board as non- executive Chairman, and following a management restructure in September 2009, assumed operational leadership of both the Cornhill Partnership, formerly Hexagon Human Capital PLC, and BIE Executive. In May 2013 he led the MBO taking BIE into private

• wnership.

Rob Walker

CEO

Contact

Phone 02034405250 Email rob.walker@bie-executive.com

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About the presenters

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HMT LLP is one of the leading independent advisers in the UK, advising on all aspects of corporate finance transactions as well as providing specialist audit, tax, and outsourcing advice to support entrepreneurs build and protect value. HMT is a finalist for ‘Independent Firm of the Year – South East’ at the British Accountancy Awards 2014. Ian Barton is a managing partner at HMT LLP with 20+ years experience of leading transactions and providing corporate finance advice and is the Corporate Finance Adviser of the Year at the 2014 Thames Valley Deal Awards. Holly Bedford is a director and transactional tax specialist with over 20 years tax experience. www.hmtllp.com – 01491 579740 BIE provides advisory and recruitment services for clients across a wide range of sectors, including UK Plc’s, multinational corporations, private companies and private equity backed businesses. Fabrice Rodrigue is an accomplished Programme Transformation delivery director with 17 years experience with top tier professional services firms such as Ernst & Young, Atos-KPMG, Chaucer Consulting and Accenture. www.bie-executive.com - 02034405250

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Questions and Answers

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