Contents

p2.

Foreword

p3.

Introduction

p4-5.

The Experts

p6-7.

Part 1: A Change of Direction

p8.

Case Study: Devine Deli

p9-14.

Part 2: Choosing your Vehicle

p15.

Case Study: Investors in Engineering

p16-18. Part 3: Charting your Growth

p19.

Part 4: Where Next?

Navigating Growth
Foreword
For the UK to fully recover from the
recent financial crisis, it is critical that
businesses succeed, whether through
the birth of start-ups or existing
companies continuing their path to
growth. In either case, access to
external finance is imperative for new
businesses, investment and ultimately,
sustainable economic growth.
Navigating Growth explores how the UKs small
and medium-sized enterprises feel about the state
of their business, their attitudes toward expansion
and whether they believe they have the tools and
capabilities to deliver on plans. It also explores the
avenues for change and brings in best practice
from leading advisors on how to execute changes
effectively.

Clive Lewis,
Head of Enterprise, ICAEW

The good news is that according to the research,

UK SMEs are ready to start making changes. They
have weathered the storm of the economic crisis
and are starting to plan for growth. Many have
realised the benefits of being flexible and are ready
to invest in their longer-term futures. And now is
the time for many of them to take that next step.
SMEs make up a huge percentage of the UKs total businesses so it is these organisations that will
make all the difference to the countrys
economic recovery and ongoing prosperity.
Navigating Growth helps provide the guidance and
best practice SMEs need to progress.

Introduction
Although the forecast isnt cloud-free,
the subject of growth finally seems to
be making a comeback. Our recent
research finds that over two thirds
(69 per cent) of SMEs are planning to
grow over the next two years.
As a growth-focused funder, weve been
encouraging businesses to grow at their own pace
and whenever the time is right for them. But the
recent tough economic climate put a real dampener on things and saw investment screech to a halt.

Over half (55 per cent) of the business own-

ers we spoke to told us they had delayed decisions

in the difficult economic period. During the recession, we also saw numerous businesses stockpiling profits, while many of our customers abstained
from drawing down finance, in preparation for an
uncertain future.
But now the
economic winds
appear to be
changing, how
are businesses
adapting?
Our research
has found that nearly six in ten (58 per
cent) are now more actively considering growth
opportunities than they were last year. Thankfully,
it looks like businesses are starting to rediscover
their ambitions - great news for them and for the
economy at large.
Unfortunately though, our research also reveals
that two in five business owners feel their company
is stuck in limbo, putting their growth goals in
peril. Almost a quarter (22 per cent) of
decision makers believe it is the differing priorities
of those running the business that are holding
them back. Nearly half (44 per cent) even said they
dont believe they have the right people or finance
in place to achieve their objectives.

Guy Walsh, Regional Director,

ABN Amro Commercial Finance
So while the desire for growth is there, the problem
comes in translating these ambitions into action if a
business isnt ready to grow. More than ever SMEs
need to get their houses in order, to put the right
people in charge, get the backing they need and
forge a clear direction of travel if they are ever to
turn their business ambitions into economic reality.
But where should businesses start on the path to
growth? When business owners no longer have
the drive they need and want to step back, when
owners want to bring in the new ideas and finance
of a new partner, or an ambitious management
team want to take the reins of their company, how
do they go about it and what are the things they
need to consider?
ABN AMRO Commercial Finance sits at the centre
of this kind of business change, so we feel wellplaced to bring you the insight you need. However,
we know we dont have all the answers, which is
why we work with some of the best advisors in
the business. To help you take the right first steps
on your path to growth, weve brought together a
crack team of experts to impart their knowledge.
From MBOs to mergers, it is their expert advice
and ideas that have made this guide possible.
Enjoy and let us know what you think by joining our
LinkedIn group entitled The Loop (ABN AMRO
Commercial Finance )
or email:navigatinggrowth@abnamrocomfin.co.uk

Guy Walsh

The Experts
Guy Walsh, Regional Director, ABN Amro Commercial Finance

Based in Birmingham, Guy has more than 30 years

experience in corporate finance and has helped
countless owner-managed businesses achieve
their ambitions through asset based
lending. Having worked for some of the largest
funding providers in the UK, Guy has a broad
knowledge of different business finance
requirements including refinancing, management
buy-ins and buy-outs and working capital.

Jonathan Davage, Partner, Bermans

Jonathan joined Bermans in January 2012 from

a niche commercial finance firm in Manchester.
He specialises in transactional and contract work
within the SME and owner managed sector. His
commercial approach and down to earth attitude is
highly valued by his entrepreneurial client base.

Mark Crossfield, Partner Corporate Finance, The M Group

Mark began his finance career with Lloyds Bank
in the late 70s, moving into the burgeoning asset
based lending market in the 90s. As Corporate
Finance Partner in the structured finance team,
Mark works on projects for clients of up to 50
million turnover, building funding lines up to 10
million. He also has deep experience in debt and
equity finance and structuring MBO/MBI deals in
the SME sector.

The Experts
Jonathan Bell, Managing Director, Investors in Engineering Ltd
After qualifying as a chartered accountant with
Deloitte in the early 90s, Jonathan has been
involved in buying and selling small companies for
over 20 years. Involved in deals up to 5 million
in value, Jonathan has seen the process from all
sides, having acted on behalf of a wealthy investor,
been a corporate finance advisor and undertaken a
number of transactions on his own account. He is
currently building a group of traditional engineering
businesses through his Investors in Engineering
vehicle.

Andrew Chadwick, Managing Director, Divine Deli Supplies Ltd

Andrew Chadwick is the Managing Director of

Divine Deli Supplies Ltd. With almost 30 years of
experience in building and growing SME
businesses, Andrew has worked in a range of
industries in both sales and management focused
roles. Now at the helm of Divine Deli, Andrew is
working to cement the business position and
increase its reach in the fine foods and gifts
market.

Richard Mason, Commercial Finance Industry Expert, Ludgate Finance

Richard is an award-winning commercial finance

industry specialist, working with SME
businesses with finance issues to raise, manage
or repay finance. One of his specialisms is the
peer-to-peer lending sector. In the last year alone,
Richard has raised over 9 million in loans for
small businesses.

PART 1: A Change of Direction

Whether youre a long-term business

owner planning to sell-up, a majority
shareholder looking to inject some new
blood into the board, or an aspiring
manager wanting to take a share in a
business youve helped to build, there
are a host of things to consider.
If youre reading this guide, hopefully youre
thinking about the future of your business: how
can you prepare for the unforeseen, while also
putting the company on the best possible growth
trajectory? The key to deciding which options will
work best for your business is to understand your
drivers: what is the end goal for the business?
How do you fit into the picture?
Does the business just need new ideas and the
drive of a new shareholder? Or is there also a
need to unlock growth finance as part of the deal?
Do you want to be a part of helping the NewCo
grow? Or do you want to cut ties entirely?
These decisions will affect the shape of the deal
and how it is financed. The most common
approaches taken by SME businesses are:

SALE: This is the most common exit

strategy
for SME owners, where the
business is sold to another individual,
company or private equity firm for an
agreed fee.
BUYOUT: Also a common SME
approach,
where the business owner is
bought out by someone who takes over
the business, usually via a management
buy-out or buy-in (MBO/MBI).
MERGER: Where two strategicaly
-aligned
businesses come together to
form a single entity.

Sales and buyouts are most common among SME

businesses, with mergers becoming more popular
with larger firms, so it is worth looking at them all in
more detail:

Trade Sale
A trade sale is the sale of a business entire share
capital, or a controlling interest in it. The business
is often sold to a competitor or a financial buyer
looking for a return through growing the business.
There are numerous reasons for conducting a
trade sale and you should be clear about your own
personal drivers - whether you are retiring, have
reached your personal exit point or want to unlock
funds from what is probably your most important
financial asset.
Make sure the sale is positive - if the business is
underperforming it is usually best to persevere until
things are back on track. It will help to achieve a
better return and let you leave with your head held
high. It is also important to consider upfront
whether you want to retain any interest in the
company going forward, as this will affect how the
final deal is structured.
Generally, a trade sale is a more clean and simple
process than an MBO/MBI as the buyer is
experienced and well-established. Experienced
buyers may also pay a strategic premium for the
business and are more likely to be able to meet the
sale price requirements and risk profile.

PART 1: A Change of Direction

MBO/MBI
This is a sale of a majority stake in the company
to a new company, which is owned and funded
by the senior management team. In this situation,
the senior management retain responsibility for
running the day-to-day trading activities of the
company.
MBOs and MBIs are popular among business
owners keen to ensure the long-term success of
their business. The seller knows the management
team and can usually be comfortable in their ability
to perform and maintain the business legacy going
forward.
These deals tend to be more financially complex
as the business value is often tied to its
performance. As management teams are not
personally financed, there will be a funding gap
between equity investment, debt finance and the
sale price. In these circumstances, vendor
assistance will be required to fund the deal, which
usually comprises deferred consideration,
increasing the risk to the vendor.

It is also important to consider the background

of the business selected for merger. While it is
certainly possible to merge with smaller, family run
businesses, these deals tend to be more complicated as there is a higher degree of personal
investment. Where a business workforce is made
up of family and friends, merger deals can be delayed and complicated by emotional ties.
There are any number of different financial and
structural arrangements involved in mergers, but
the main financial considerations will relate to the
borrowing structure of the newly merged entity and
ensuring you have the upfront capital needed for
the acquisition itself. The deal in this sense is less
about raising finance and more about combining
the debts and structuring borrowing for the long
term.

Merger
A merger is the coming together of two like-minded
and strategically aligned businesses that believe
they can produce higher returns together than they
could as individual entities. While merger activity is
still relatively suppressed across UK PLC, smaller
businesses are increasingly seeing and seeking
out opportunities to join forces. This type of deal is
attractive because it can provide both companies
with greater access to customers, market or
intellectual property (IP) or clear synergies
between products and services.
The deal must create value without destroying
the existing value of your business. In the current
climate it can be tempting to look at merging with
distressed businesses including competitors,
suppliers and customers. In such a case it is
important to ensure you have the skills and experience necessary to turn a failing business around.

CASE STUDY: Devine Deli Supplies Ltd

Divine Deli Supplies Ltd is a fine foods and gift distributor. This innovative company
works with suppliers all over the world to provide high quality and beautifully
presented products to some of the best-known retailers in the UK including
John Lewis, Lakeland and Booths, as well as a huge range of farm shops, delis and
department stores.
The companys founder saw a growing market for
fine food based on more than just jam and chutneys. Beginning in 2007 with the Wildly Delicious
range, he introduced a variety of products that
combined food and non-food (mainly ceramics)
to provide retailers with exciting concepts that
were fresh and accessible to potential customers.
However, having built and grown the business over
more than five years, he decided it was time for a
change.

It was a very complicated deal

because there was so little capital put
down at the start. But by working with
specialists who understand these
types of deals and who were prepared
to be flexible, we were able to structure
a deal that worked for everyone.
Andrew Chadwick, Managing Director

Meanwhile, Andrew Chadwick had been looking for

a business project and felt Divine Deli was perfect.
He reviewed the business with its existing management team and was impressed by its product range
and processes and felt he could make a difference
to the future of the company. He worked closely
with the existing team to create a detailed business
plan in order to raise the appropriate finance.

As a result of careful planning, a solid business

plan and having the right advisors in place, Andrew
was able to secure invoice factoring and a personal loan that enabled him to take over the business.
He is now running Divine Deli with a combination
of old and new management, with the previous
owner still involved on a part-time basis.

Having worked through the planning stages

relatively quickly and agreed in principal the terms
on which the sale would go ahead, Andrew
approached an advisor to assist with the deal.
With his capital resources tied up in other property
investments, he recognised that he needed help to
identify appropriate funding options.

PART 2: Choosing your Vehicle

So its time for a change and the most appropriate options for the business have been
considered. Now how do you make it happen? Financing the deal is always going to be
the main concern. Up until the economic crisis many deals were financed through some
form of bank cashflow loan or traditional senior debt finance, but the environment for
funding has shifted significantly. While loans were rarely pinned to business assets, most
banks will now only offer securitised finance, which means other options become more
attractive, more viable and more suitable for SMEs.
Todays deals often include one, or a combination, of private equity, cash, asset based lending and vendor
financing. Financiers and advisors are able to be increasingly creative and, with a reasoned approach, can
create the right funding mix for your deal. In this section, we have outlined the key considerations for each
type of finance including how to access the various funding options.

Cash in the Bank

Many companies have been building up big
rainy day funds as they have waited for the
business environment to improve. Our research during the recession found that almost
half of SMEs were sitting on cash and not
investing it because of the uncertain economic climate. For many, now could be the time to
put those funds to work and invest in growing
and moving forward.
The main advantages of using your cash savings to fund a transaction are that decisions
wont have to be justified to third party advisers and are not tied in to loan repayments or
interest charges. It may also look impressive
to financiers in the future, should they be
required. The cons are, of course, that the
security buffer will have been used and will no
longer be there to fall back on should things
go wrong. Acquisitions are also expensive
and cash can become very stretched once the
initial transaction has taken place.
Before making a decision, ensure this is the
best option by creating a detailed business
plan and calculating a realistic return on
investment. Also make sure you explore your
other options, some of which are outlined
below.

PART 2: Choosing your Vehicle

Invoice Finance
What is it?
One of the main barriers facing ambitious businesses is a lack of working capital to enable growth.
Often caused by late payments from customers, invoice finance helps to increase cashflow quickly
and securely by releasing the funds tied up in invoices without taking on further debt or surrendering
equity or control.
Essentially, the invoice finance provider will release an agreed percentage of an invoice total (likely to
be 80-90 per cent) within 24 hours. Once payment is made in full the remainder will be released to the
business minus a small admin fee. In an acquisition, invoice finance also allows you to draw money
based on the combined debt of both the existing company and the company being purchased even
before the transaction has taken place.

How do I access it?

Once the lender has been selected, it will assess the business books and accounts to ensure it
is the right solution for you. There are standard requirements but lenders can often be flexible.
Invoice discounting facilities are normally made available to established businesses with turnovers in excess of 500k that have good systems in place to ensure reliable collections from
customers. For example, businesses should be collecting debts within a reasonable timeframe
and should offer industry standard credit terms. Generally, no single debtor should account for
more than 25-40 per cent of the business.
To access invoice finance, speak to an accountant or financial advisor or contact the lender
directly for advice and further information. The Asset Based Finance Association (ABFA) has an
online tool for finding relevant providers on its website.

10

PART 2: Choosing your Vehicle

Asset Based Lending

What is it?
Asset based lending (ABL) is often offered in conjunction with invoice finance as a bolt-on service.
ABL is particularly suited to asset-rich business sectors, such as manufacturing, wholesale,
importing and distribution. It is designed for situations where a clear funding need is identified
such as expansion, acquisition or refinancing.
Essentially it provides a single source of funding against corporate assets such as invoices,
stock, plant and machinery, and property. The cash held within these assets is released to give
additional funds and can often provide a greater level of finance than traditional solutions.
The funding is closely matched to the business working capital requirements so it grows in line
with the sales performance. It also helps to ensure healthy cashflow after the initial acquisition.
While individual lenders may have different criteria in terms of a minimum turnover, 1-2 million
businesses
beit?
suitable for this type of finance. The more important requirements are the
How do Iwould
access
business
abilitylending
to demonstrate
resilience.
Whilecovenants
it doesnt need
to have been
profit-making
Asset based
tends to its
have
less financial
than traditional
forms
of lending,
every
year
of
its
operation,
it
does
need
to
show
it
has
been
well
run
and
carefully
managed.
providing a more comfortable way of raising money and without needing to resort
to venture
capital or loss of equity.
Providers will look beyond historical performance and the present balance sheet to provide
funds when other sources may not be available. A more holistic lending criteria will be applied,
taking the proven track record of the management team as an important driver within a more
balanced consideration.
While individual lenders may have different criteria in terms of a minimum turnover, 1 million
businesses would be suitable for this type of finance. The more important requirements are
the business ability to demonstrate its resilience and viability. While it doesnt need to have
been profit-making every year of its operation, it does need to show it has been well run and
carefully managed.

11

PART 2: Choosing your Vehicle

Private Equity
What is it?
Private equity is suitable for both large and small businesses. Private equity firms raise funds
from investors such as pension funds, insurance companies, endowments, and high net worth
individuals. They use these funds to invest in companies with a potential for high growth.
This option has become increasingly popular following the economic crisis. As banks have tightened up on traditional loans, business owners have recognised the importance of being more
open-minded and flexible with the equity in their business.
The benefits of this are obvious - investors can bring their money and skills to the business, there
is no loan to repay and you all share the risk. However, it also means a certain loss of control and
a smaller share of the profits.
Private equity could be an ideal choice post-recession. It is quite resilient to periods of economic
uncertainty and can respond quickly to changing market conditions. In fact, many private equity
firms particularly seek out debt-laden businesses in the hope of realising greater profits when they
turn them around.

How do I access it?

Attracting private equity partners can be a
time-consuming and drawn out process. With
its rise in popularity, private equity firms have
become more selective with their investments.
A business seeking investment now needs to
be more adept at packaging the company and
presenting its opportunity and value.
The business owner will need to develop a
clear and robust business strategy broken
down into short, medium and long-term goals
and addressing growth targets, performance
enhancements and succession policies. This
will show the companys direction as well as
promoting the strength and focus of its
leadership team.

12

PART 2: Choosing your Vehicle

Mezzanine Financing
What is it?
Mezzanine financing is becoming an increasingly popular choice for the middle market. It is particularly useful for MBOs due to the flexibility of its terms and conditions.
Mezzanine finance is a hybrid of debt and equity financing that is often used to fund the expansion
of existing companies. Lenders provide finance on the same basis as a bank, advancing money that
will be repaid with interest over an agreed term. However, many lenders will also look to receive a
share in growth by including an element of equity investment in the deal. This means that the
mezzanine provider would receive an increased return on investment when the company sells.

How do I access it?

Mezzanine financing is usually provided very quickly with little due diligence and auditing. As a
result, it is quite aggressively priced with lenders seeking an average return of 20-30 per cent.
To secure mezzanine financing, you will need to demonstrate strong historic performance with
an established reputation and product as well as having a clear and robust growth plan for the
business.

13

PART 2: Choosing your Vehicle

Peer-to-peer (P2P) Lending

What is it?
Peer-to-peer lending is a relatively new financial
concept. P2P lenders operate as an online marketplace, matching savers with individuals who want
to borrow money.
Crowdfunding, or social funding, is a variation
of P2P lending that links investors with start-up
companies and other projects. It is a viable solution
for businesses that have found themselves, often
through no fault of their own, to be undercapitalised or suffering from a deficiency in cashflow.
Often, investors are paid back in rewards or given
an equity stake in the business.
This form of lending removes the bank or building
society from the lending process but can involve
quite a bit of time, effort and risk as well as
rewards. The process is different from a bank in
that the borrower fills out their application for the
loan, including its intended use. When a combined
group of lenders meets the borrowers amount,
the loan is granted and then paid back just like a
traditional loan.
The advantage is that borrowers can get finance
they may not have accessed from traditional
lenders and the rates can often be lower than other
loan providers.
From the lenders point of view, they are able to
tell the borrower what interest rate they are offering which can be higher than traditional saving
accounts. With P2P lending, lenders can choose
who they lend their money too or at least see the
borrowers risk profile. However, in most cases
lenders take all or some of the risk if the borrower
cant repay or the company facilitating the
payments stops trading. Ultimately, this could
mean lenders lose money.

How do I access it?

To access a loan via P2P lending, borrowers will often be subject to an identity
check. They will also need to have a clear
credit history and an income that makes
the loan affordable.
Borrowers are unlikely to be accepted if
they have very high levels of unsecured
debt or a poor debt history.

14

CASE STUDY: Investors in Engineering

Investors in Engineering Ltd was founded by Jonathan Bell in 2011. Jonathan had
bought and sold businesses over a number of years and has a background in
corporate finance and as a chartered account. He was keen to build a group of
companies and began to research potential acquisitions.
Jonathan was looking for particular industry and
business characteristics when deciding where to
invest, and chose the engineering industry as a
solid investment opportunity.
At this point, various traditional engineering businesses were up for sale many of these family
businesses with no successor. There was also
limited interest in purchasing firms in what was
considered an unfashionable industry, particularly
at the smaller end of the market.
All of these trends meant that Jonathan felt confident he could secure good prices for the businesses he selected. He also saw through these
short-term issues, seeing the potential for solid,
longer-term acquisitions and recognising that many
engineering businesses had secure ongoing
turnovers and sought-after products.

The complications started when Jonathan began

reaching out to these companies. At the smaller
end of the market, many business owners had
chosen to sell through brokers, which he found
introduced a level of inflexibility. Asking prices had
already been set and businesses were often without additional advisors who may have been able to
help broker deals more efficiently.

It is so important to allow
for some flexibility when you
are selling your business,
comments Jonathan.
Yes a tidy balance sheet,
business process and paperwork are all important, but at
the right price, a lot of other
problems can be solved.
Jonathan Bell, Managing Director

Jonathan eventually found the business he wanted

to acquire and worked with his advisors to push the
acquisition through. Having completed that deal,
he has since gone on to acquire two further
businesses to compliment the groups offering.

15

PART 3: Charting your Growth

Seeking out and securing finance for

a sale, purchase or merger is a big
part of the battle. With any transaction,
planning and preparation are required
and there are common mistakes that
can be costly and affect whether the
deal even makes it to completion.

On a personal level, the business owner needs

to consider the ambitions for the business: what
will it look like when it has achieved all that was
planned? Will it be the most recognised name in
a particular field? Have won a certain share of the
market? Be a stable and respected local business?
Planning a likely exit point is the first step in understanding when and how to make a change.

There is also an understandable lack of experience

among senior SME executives that can lead to
problems.

As a potential business buyer it will be important to

dedicate time to playing the field and seeking out
the business opportunity that best fits with investment goals. Internal buyers will want to conduct
appropriate due diligence into the viability of buying
into the business, whether it can be funded, who
else will need to be involved and what all the potential opportunities and risks might be.

Research conducted by ABN

Amro Commercial Finance in
2012 found that 85 per cent of
SME leaders had never bought
or sold a business before.
They get bogged down in taking orders, chasing
sales, serving customers and generally running the
business.
But setting aside planning time is vital and will help
to avoid many of the most common pitfalls. Below
are some of our experts top considerations for
those thinking about buying or selling a business.

Start Planning Early

Business owners that have built a company with
a future sale in mind should already have a clear
view of its strategic priorities, and an ideal exit
point. If not, its important to start with the owners
ultimate goals the price to be achieved and when
the sale should happen and then work backwards to determine the steps needed to get there.
The aim is to create a valuable, viable business
that is attractive to potential purchasers.
Even if a future sale isnt the specific aim, it is still
vital to plan for change as there will come a point
where the business leader will want to take a less
active role, cash-in, or hand over the business to
the next generation. Think ahead by up to three
years or longer to ensure everything is in order
when the time comes.

Build a Robust Business Plan

Wherever third-party funding is required, a robust
and reasoned business plan will be vital. Especially
if the plan is to bow out after sale, showing a clear
plan with projected growth and profits is an
important factor in convincing a buyer of the
business future viability.
Too frequently a business is simply put on the market with the seller only thinking about the next step
once an offer is received. A prospective buyer will
go through everything meticulously and if records
and plans arent in order the purchasers can
leverage it to reduce the asking price.

16

PART 3: Charting your Growth

Know the Business Value

Agree Terms

In the current economic climate, many businesses

are being valued at less than they should be. However, it is important not to confuse price with value.
The price is just a figure which someone is willing
to offer for the business, while value involves a real
calculation of what a business, its IP, assets and
people are worth as a going concern.

With any sale or MBO, the seller should be

comfortable with the price they are receiving and
not commit until they are truly happy.

The saying that something is only worth what

others will pay is very true. That said, there is a
benchmarking process that those putting the deal
together will go through. They review the business
in detail and determine a value, often based on a
multiple of profits or expected profits and variable
by business sector.

In an MBO situation sellers are often unable to

achieve the asking price a trade buyer would
pay. As a result, they can ask too much from the
management team, who in turn are reluctant to
negotiate too hard due to their loyalty and commitments. The considerations put in place, including
share rollovers and tough performance targets, can
create tension post-sale.
Management teams can also be too relaxed in
seeking robust warranty and indemnity protection, due to their involvement in and knowledge of
the business. Warranties and indemnities should
divide risk fairly between the seller and buyer and
compensate the buyer if a loss causing issue arose
during the sellers ownership.
Management teams should also be wary of giving
the seller too many protections post sale
regarding the management of the business or
access to financial information. A balance needs to
be struck between the needs of the business and
the needs of the seller.

Employ Expertise
A sellers view will be very different from that of the
prospective buyer, and a business that is heavily
dependent on one person, product or customer
may be difficult to sell. A strong management team
supported by a strong brand and reputation shows
a strength and depth which is attractive to potential
buyers, especially in a trade deal. Based on these
factors, a value will be calculated and used to not
only determine a fair sale price, but also the
vendors access to funding.
Involve lawyers and accountants in this process to
ensure all appropriate due diligence is covered and
that the business has been valued fairly.

To ease the progress of the deal it helps to nominate owners for key parts of the process,
especially where there is prior expertise. This is
much easier if the business is being bought in
partnership with others, but key business advisors
can help. Consider nominating heads for:
The acquisition: Guiding and crafting the share
sale and purchase agreement
Post completion relationships: Setting the
terms of the relationship between management
and the sellers in a shareholders agreement
Funding: Setting terms and conditions for the
sellers contribution to funding.

17

PART 3: Charting your Growth

Divide and Conquer

Completing a transaction involves multiple individual discussions, negotiations and agreements. To
make things simpler, it helps to treat the deal as
two discrete transactions:
Funding: structuring the finance needed to
make it happen will you be working with a bank,
finance provider, private equity, the sellers or a
combination?
Sale and Purchase: who gets what and what
will the company look like after the deal is
completed?

Prepare to be Patient
Transactions can be long and drawn out. They will
involve numerous meetings, intense negotiations,
potential personal risk (and reward) for
management. Prepare for late meetings and tough
conversations and potentially not to see your family
much during negotiations. Remember the hard
work will be worth it in the end!
Many owners put in decades of hard work building
their business, only to throw away some of the
rewards at the last minute by not properly
considering the sale process. Selling and buying
takes time, so patience is vital.

18

PART 4: Where Next?

This report has outlined many different approaches and advice points for future
growth and expansion.
So the deal is done and the business is on the path to success, but what other
opportunities might there be out there to really boost your performance?
We asked our experts,

what do you see as the biggest

opportunities for SMEs?
The following answers may give you inspiration on how to take the next steps:

Guy Walsh, Regional Director,

Jonathan Bell, Managing Director,

ABN Amro Commercial Finance

Investors in Engineering Ltd

The changing economic environment.

Particularly in the engineering and
manufacturing sectors, where niche
goods are produced with fast lead
times and in smaller volumes, we are
seeing expertise return to the UK from
big markets like China.

Very difficult to spot at this moment in

time. However, in the current environment
those that are successful will be those
that most clearly differentiate themselves
from their competition, either in terms of
their products or the way they organise
their business.

Jonathan Davage,

Andrew Chadwick, Managing

Partner, Bermans

Director, Devine Deli Supplies Ltd

To drive profits through the cost savings applied through the downturn and
to use these new efficiencies to invest,
acquire and grow by utilising the UKs
excellent services and funding
infastructure.

I think the biggest opportunity for

SMEs lies with our ability to be able to
react quickly to the requirements of our
customers. Being able to recognise and
respond quickly to regional differences
is key to our business.

Mark Crossfield, Partner,

Corporate Finance, The M Group
To maximise value by considering all
the available options when planning
to exit a business and give yourself
sufficient time to explore them with an
appropriate advisor.

Richard Mason, Commercial

Finance Industry Expert, Ludgate
Finance
The biggest opportunity for SMEs
is understanding the availability of
funding in the current marketplace and
recognise that is not likely to be from
conventional sources such as banks.

19

Further Information

We know making big business

decisions can be tough, but
hopefully weve inspired you to
consider your options.
Whether youre planning to sell
up or want to create the next big
business, were always keen to
hear about your plans.

If youd be interested in discussing your ideas with one of our

expert advisors, dont hesitate to get in contact.
Call us on 0808 163 9416
Email us at navigatinggrowth@abnamrocomfin.co.uk
Join the debate at our LinkedIn Group:
The Loop (ABN AMRO Commercial Finance)