deal team times. north. issue 6 october 2013 deal …private boiler installation market. help-link,...
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Debt advice helps Willerby secure refinancingEarlier this year, PwC advised SCAID Investments, parent company to Willerby Holiday Homes, on its £43m refinancing.
Jigsaw24, based in Nottingham and with a service operation in MediaCityUK in Salford, offers IT solutions to businesses across the UK and has particular expertise in Apple, Adobe and creative solutions.
The company, founded in 1992, has an impressive 21-year track record of year-on-year growth and has capitalised on the growing popularity of Apple products and mobile devices. Jigsaw24 employs 143 staff and has turnover of £60m, and plans to open a base in London later this year.
The due diligence team was led by Christine Adshead and Patrick Meades (Financial) and Simon Viner (Tax) supported by Andy Stewart, Peter Stephenson, Stephen Woodhouse and Usman Choudhary.
NorthEdge Partner Ray Stenton said:
Although the major European markets plummeted during this period, by the end of the quarter they had recovered to some degree – and that recovery has continued with the Eurofirst 300 index up 11.5% on a year ago by mid August.
Andy Parker added:
Deal Team TimesNorth
Deal Team Times. North. Issue 6 October 2013
Deal Team Times North – Issue 6 October 2013
http://pwc.blogs.com/north/
Meet the North Deal Team
Valuations
Sale & Purchase Agreement Advisory
Business Recovery Services
Corporate Finance
Stuart Warriner0113 289 [email protected]
Andy Parker0161 245 2388 [email protected]
Paul Mankin0191 269 [email protected]
Transaction Services
Nigel Ward0113 288 2277 [email protected]
Christine Adshead0161 245 2529 [email protected]
Jonathan Cooper0161 245 2313 [email protected]
Jeff Nye07775 [email protected]
Debra Halcrow0113 288 2137 [email protected]
Ian Logan0113 288 2050 [email protected]
M&A Tax
Dan Stott0113 289 4670 [email protected]
Gordon Singer0113 288 [email protected]
Simon Viner0161 247 4257 [email protected]
Financial Decisions and Analysis
Mark Webster0191 269 4011 [email protected]
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
© 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
Design Services 28249 (07/13).
IPOs are back on the agendaA surge in initial public offerings during the first half of 2013 may be the first signs of a recovery in the UK float market.
Europe’s Initial Public Offering (IPO) markets have continued to gain momentum in Q2, building on the successful start to the year, with €5.2bn being raised, a 58% increase on the €3.3bn raised in the first quarter of 2013.
Andy Parker Corporate Finance Partner at PwC Manchester, said:
Over 81% of proceeds raised in Q2 were generated from the top 10 deals. With the announcement of a planned IPO for the UK’s postal services, of note is the IPO of bpost, Belgium’s national postal service on Euronext and Platform Acquisition Holdings, the first major special purpose acquisition company to IPO in London since Vallares in Q2 2011.
The post-float performance of the PE-backed IPOs in 2013 has been encouraging, particularly in London where they have achieved significant gains on the price since listing and have also outperformed the FTSE index over the period since IPO. Manchester based Conviviality Retail, formerly owned by ECI, gained nearly 2% in value over its first ten days of trading. Elsewhere in Europe, with the exception of Moleskine and Evonik, which are trading below their respective IPO prices, the majority of PE-backed IPOs have held their price since listing and remain generally in line with the market.
The European equities market showed some volatility in the second quarter of 2013, with indices strengthening in the first half as investor confidence grew across the eurozone, with the FTSE reaching near record levels in mid-May.
In June volatility returned to global equity markets due to concerns over the Chinese economy and the U.S. Federal Reserve announcing its intention to wind down its programme of quantitative easing.
NorthEdge invests in Jigsaw24 and makes Yorkshire debut with £11m Help-Link investmentPwC provided financial and tax due diligence and tax structuring in support of the Jigsaw24 investment, and a lead corporate advisory role to NorthEdge, as well as financial and tax due diligence and tax structuring, in support of the investment in Help-Link.
David Kelly0161 245 [email protected]
Ian Green0113 289 4274 [email protected]
Toby Underwood0161 245 2552 [email protected]
“ Despite the challenging market conditions over the past month, the IPO market has proved relatively resilient, with over 55% of the quarter’s proceeds being raised in June.
We are seeing a healthy and growing list of companies entering Europe’s IPO pipeline encouraged by the success of recent IPOs and their performance in the after markets. We anticipate that the momentum gathered over the first half of 2013 will continue as the year unfolds.”
“ It has been another strong quarter in Europe with consistent activity across a number of different exchanges. London topped the quarter again with just under half of overall proceeds raised.
In the North West, the relative drought of floats on the London markets was broken with Outsourcery in May and Conviviality Retail in July. With renewed investor appetite in the capital markets, we are expecting to see businesses looking to raise money in London much more as they look to the markets as a viable option.”
Andy Parker0161 245 2388 [email protected]
Quartely European IPO activity by value and volume
Q2 2012
Q3 2012
€5,225
60
Q4 2012
€397
Q1 2013
€838
Q2 2013
100
80
60
40
20
0
Volu
me
of IP
Os
€8,000
€7,000
€6,000
€5,000
€4,000
€3,000
€2,000
€1,000
€0
Valu
e of
IPO
s (€
m)
Christine Adshead0161 245 [email protected]
Stuart Warriner0113 289 [email protected]
“ Jigsaw24 is an established player in the Apple and creative IT solutions market with a well-established growing customer base. The business has enjoyed sustained growth through operating in sectors such as the creative industry and education, and capitalising on the increased acceptance of Apple solutions in the workplace.”
“ PwC were very quick to get to grips with the business and understand the key drivers and the areas where they should focus their work. The timetable was fairly tight but they managed to deliver a quality product, on time whilst still remaining flexible and pragmatic. They were a pleasure to deal with.”
Help-Link, based in Leeds, installs and replaces over 20,000 boilers across the UK each year. The company, founded in 1998, has seen considerable growth over the past three years after successfully entering the private boiler installation market. Help-Link, the only significant national operator in their market, employs over 600 staff, has turnover of over £30m and plans further growth over the coming years both in the private boiler installations market and through the government’s Affordable Warmth scheme, designed to help combat fuel poverty.
The Corporate Finance team was led by Stuart Warriner, supported by Andrew Kerr, Charlie Ross and Penny Mellor. The due diligence team was led by Nigel Ward and Kevin Barnard (Financial) and Gordon Singer (Tax), supported by Christopher Bullough, Thomas Bennett, Mark Wilson.
NorthEdge Director, James Hall added:
PwC advises on the £62m MBO of Angus Fire from UTCPwC Transaction Services in the North carried out buy-side financial and tax due diligence on behalf of the private equity backed MBO of Angus Fire from NYSE-listed United Technology Corporation (UTC).Established in 1946, Willerby Holiday Homes is the
market leading manufacturer of static holiday homes with turnover of c.£110m all generated from its production facility in Hull. Its famous brands include the Winchester, Atlanta, Meridien and the new Cameo. The Company also manufactures holiday lodges and sells its products in the UK and into Europe. As the UK’s number one manufacturer in this sector, the Company prides itself on its innovation, production excellence and staying ahead of market trends.
The outcome of the refinancing saw a significant improvement to the Group’s balance sheet through the capitalisation of some long term debt, and the introduction of new finance to the Group, both working capital facilities and term debt. Cavendish Square Partners, who were already invested in the business, have now become the majority shareholder.
PwC, in a team led by Chris Rooney with support from Jonathan Nuttall, supported by our Business Valuations team lead by Ian Logan, advised the Company on its options ahead of the refinancing, and assisted the Company during the process.
Group chief executive, Jim Meredith, was pleased to have completed the transaction and said:
Chris Rooney a Director in PwC’s Debt Advisory team commented:
This case is also an example of how PwC’s Debt and Capital Advisory offering can add real value to helping our clients navigate the challenges of refinancing across the North.
The Angus Fire entity has been formed via the acquisition of four international trading divisions of UTC: Angus Fire Products, Angus Fire Engineering, National Foam (USA) and Eau et Feu (France).
Angus Fire designs and manufactures fire hoses, industrial hoses, foam concentrates and engineered fire fighting systems. It also makes large diameter industrial hoses for a variety of industrial applications, including water transfer for the large and growing US hydro-fracking market. For the year to 31 December 2012, the group recorded sales of £95.6m across its four divisions.
The private equity investment will be used to increase capacity and drive operational improvements that will support the continued organic growth of the company.
PwC provided financial and tax due diligence advice across the UK, US and French divisions, with teams led by Jonathan Cooper and Syedul Hussain (Financial) and Simon Viner (Tax).
Chris Rooney0113 289 [email protected]
Cash extraction in the deal cycleThe ability of shareholders to readily extract cash can have a substantial impact on pricing and/or deal execution risk.
Recently, we have seen a wide variety of transactions where cash extraction (both pre and post deal) has been a key area of focus for deal participants. This is an area requiring consideration on most deals, whatever the industry or deal-size, but the most significant issues are often found where a business has historically been highly leveraged, as debt service expenses result in blocks preventing distributions in holding company structures.
For acquirers the ability to extract cash from the business in the future can be an important consideration in pricing the deal. This has been particularly relevant on deals in infrastructure and similar sectors where acquirers have priced the deal on a discounted cash flow basis and have required assurance that the target’s structure does not inhibit the ability to regularly remit cash back to the shareholders.
For disposers of a business, there may be a requirement or desire to extract cash from the business prior to exit in order to complete the sale on a “cash free, debt free” basis. Often, disposers are also keen to ensure there is no opportunity for bidders to “price chip” because cash extraction blocks exist.
In our experience, this is also becoming an area of greater focus on deals involving overseas investors, as there is typically a lack of awareness or experience of the UK capital maintenance framework.
The PwC Deal Team have advised clients on the UK legal framework underpinning distributions and identified a number of potential mechanisms to facilitate cash extraction for the existing or future shareholders of the business. Such mechanisms could include internal restructuring (such as release of intercompany obligations or internal transfers, if carefully structured) or, if necessary, capital reductions by means of Court approval or solvency statement process. The most appropriate mechanism will depend on the specific circumstances of the target group. Early consideration of potential issues will minimise deal execution risk or impact on pricing.
Joga Singh07808 328 [email protected]
“ The funding will play a key role in helping accelerate product development and market expansion including our growing interests in the European arena”.
“ This is a great example of how businesses with a good story to tell, a differentiated offering, a strong management team and the right approach can access new and improved funding. We were delighted to help Willerby achieve its goals”.
€7,599
€3,263
93
74
45
76
Jonathan Cooper0161 245 2313 [email protected]
2 3
Round 4 of the Regional Growth Fund is expected to drive further investment across the NorthSuccessful applicants of Round 4 of the Regional Growth Fund (“RGF”) were announced on 11 July 2013, with 39 organisations based across the North receiving conditional offers totalling £179m .
Cutting the cost...Our Corporate Finance team have advised Costcutter, a subsidiary of Bibby Line Group, in a transformational deal to create a leading symbol group with 2,500 convenience stores nationally.
The RGF is administered by the Department for Business, Innovation and Skills (BIS). The successful applicants of Round 4 funding were announced on 11 July 2013. The aim of the Government is to support projects and programmes that push private sector investment creating economic growth and sustainable employment.
PwC has supported a number of organisations in the first 3 rounds with their applications, either assisting companies to put together their application to the RGF, or by performing due diligence on the applicant organisations and their projects (which is a requirement of the process).
We have worked with a large number of companies in the North across a range of industries, including automotive, technology, aerospace and defence, renewable energy, construction, manufacturing, engineering and the public sector.
Kevin Barnard, our national programme leader noted:
Kevin Barnard focuses on providing transaction and due diligence services to PwC’s private and public sector client based in the North, and is supported by a local team of financial due diligence specialists. Kevin would be keen to speak with you if you are a successful applicant and wish to discuss likely due diligence requirements or any other aspect of the application process.
PwC have been advising Bibby on their retail strategy for over two years, and this transaction sees the formation of a unique joint venture buying company with £5bn of purchasing power, designed to create a genuine rival to the power of the supermarkets on the high street. Our deep sector knowledge and relationship with Sir Michael Bibby were key to winning this work.
Costcutter Supermarkets Group (“Costcutter”) and Palmer and Harvey (“P&H”) have agreed to form a new joint venture buying company to serve the Costcutter stores and P&H’s existing independent retailers. As part of the transaction, P&H’s 800 Mace convenience stores will transfer to Costcutter, creating a leading symbol retailer with 2,500 stores and 15% of the UK symbol market.
In a unique move for the sector, the two companies are launching The Buyco, a new joint venture buying company that will command an unrivalled £5bn negotiating and buying power. The Buyco will provide Costcutter with access to the largest volume buying power in the sector, resulting in the most competitive prices for its members. This strategic partnership will transform the symbol group sector, predicted to grow by 31% by 2017 to £17.8bn, representing 40% of the total convenience retail market.
The transaction is unique in the retail sector, and PwC supported Costcutter on the negotiation of the terms of the joint venture to ensure Costcutter and its members could access the best possible prices.
Kevin Barnard0191 269 [email protected]
Conviviality Retail lists on AIM in £64m IPOPwC provide multi-disciplinary support to the largest IPO on AIM in 2013 to date, providing a successful exit for its private equity backer, ECI Partners.
With over 600 franchisee-owned stores, Conviviality Retail is a leading off-licence and convenience store group, operating under six fascias including Bargain Booze and Thorougoods. The IPO pays down all existing debt and provides a strong platform from which Conviviality Retail can expand its footprint further outside its traditional heartland of the North West.
Diana Hunter, CEO of Conviviality Retail commented:
PwC supported the IPO across a number of areas, providing Working Capital and Long Form reports to the board and Nomad, Zeus Capital, assisting in IFRS conversion, and designing and implementing an innovative share option plan to incentivise the franchise base. The multi-disciplinary PwC team was led by Christine Adshead and Graham Watson, with Rupert Hutton advising on incentive scheme design.
ECI’s John Hayhurst, who represented ECI on the board of Conviviality Retail prior to its listing commented:
“ We think Vado is an excellent fit with our other businesses and look forward to working with management to grow both Vado and Norcros in the coming years. Thorough due diligence is always critical to a good acquisition, and in this case it was particularly important because of the private family ownership structure of Vado. I’m pleased to say the PwC team delivered on this helping us to understand the business and its strengths and weaknesses.”
PwC Corporate Finance advise Goody Good Stuff on sale to Swedish listed company, Cloetta ABCloetta AB (“Cloetta”), the leading Swedish confectionery company has acquired the all natural confectionery company Goody Good Stuff (“Goody Good Stuff”).
Tax avoidanceFew people will have missed the recent media coverage concerning the tax affairs of a number of multinational groups. Whilst one might argue the emotive reporting does nothing to further a well informed public debate, there is no doubt it has brought the issue of morality and fairness right to the top of the agenda when the boardroom discussion turns to tax planning.
Vertu Motors Plc acquires three Land Rover dealershipsOur Transaction Services team in the North carried out buy-side financial due diligence for Vertu in support of its recent £50m placing and strategic acquisition of Albert Farnell Limited from Co-operative Group Motors Limited for £31m.
The vast majority of tax payers (individual and corporate) will be fully compliant with UK and, where relevant, international tax laws but if the last few months have taught us anything it is that being right isn’t necessarily the decisive factor in the court of public opinion. In recent months we have seen businesses operating entirely legal tax structures (and in some cases structures officially blessed by HMRC) suffer reduced customer footfall putting sophisticated organisations and their leaders on the back foot and, in one well publicised case, resulting in an extraordinary voluntary tax payment to the UK Exchequer.
Increasingly, corporate groups of all sizes are beginning to see the merit in taking a more holistic and proactive approach to managing tax in their business. Even with falling corporate tax rates, it is likely that tax will continue to be a significant business cost that needs to be managed but the impact of getting it wrong is no longer limited to a less than friendly chat with the taxman.
Business leaders are beginning to appreciate the value of developing an appropriate tax strategy that supports the commercial goals of the business whilst at the same time engaging with all stakeholders – employees, customers, suppliers and actively communicating the contribution their business makes to the UK tax base. Businesses large and small act as collectors of VAT and facilitators for the payment of income taxes, they suffer business rates and employers national insurance contributions. A business that pays zero corporation tax may still incur a significant overall tax charge whilst acting as an unpaid collection agent on behalf of the Government.
That doesn’t sound like tax avoidance to the well informed but when written in an unflattering headline the true contribution is soon lost in the clamour to offer a cheap sound bite.
At PwC, our Total Tax Contribution group are experts at helping businesses measure and communicate their contribution to UK Government receipts. If you would like more information about how we can help you in this important area just call your usual PwC contact.
Farnell operates four outlets within the West Yorkshire region comprising three award winning Land Rover dealerships in Leeds, Bradford and Guiseley and one multi-franchise premium used vehicle outlet in Guiseley. The Farnell brand has represented Land Rover in West Yorkshire for 65 years.
PwC’s due diligence team was led by Jonathan Cooper and Syedul Hussain of the North Deals Team.
Michael Sherwin, Vertu’s Finance Director, said:
Norcros buys Vado for £16mPwC North Transaction Services provided financial, tax and IT due diligence support to Norcros Plc, on its strategic acquisition of Eurobath International Ltd (which trades as Vado).
Vado, based in Somerset, manufactures and distributes mid to high end tap and bathroom accessories. It has a strong UK presence but also exports to over 60 countries. The business has shown strong resilience and continued to grow sales and operating profits during tough economic conditions.
PwC’s work was led by Patrick Meades and Mathew Edwards. Martin Payne, Group Finance Director, said:
Patrick Meades0161 245 [email protected]
The deal sees Cloetta increase its presence in the UK market and strengthen its product offering in the natural confectionery space. Goody Good Stuff are producers of an all natural vegetarian gummy confectionery range, the business has seen impressive growth since its launch in 2010 building up an enviable lists of stockists now exceeding 15,000 outlets worldwide across multiple markets including the UK, UAE, and its largest market the USA.
PwC were appointed as lead financial advisor to the shareholders of Goody Good Stuff, drawing upon our global network to identify the optimal buyer. PwC ran a full trade process , articulating the value of the product’s IP and the unique proposition that Goody Good Stuff offered each buyer. This identified Cloetta as the key buyer, with a strong strategic fit for broadening its range within the growing segment of natural confectionery. After intense negotiation a deal was concluded which generated significant additional value for PwC’s client.
Melissa Burton, MD of Goody Good Stuff, said:
Daniel Gallagher0161 245 2243 [email protected]
“PwC were the adviser of choice for us due to their excellent understanding of our business, deep sector knowledge and ability to access the global buyer population through their international network. An outstanding integrated local Manchester based and sector specialist team ensured the right approach to the transaction, which resulted in us finding the right buyer for our brand and vision.”
Simon Viner0161 247 4257 [email protected]
Syedul Hussain0161 247 [email protected] “ The acquisition of Albert Farnell is
strategically important for Vertu as we further establish our representation of premium marques, which have been gaining market share over volume marques in recent years in the UK. It also coincides with exciting times for the Land Rover brand which has a strong pipeline of new products to drive customer demand. We appreciated the flexible support provided by PwC during a tight transaction timeline.”
“ RGF has helped unlock private sector funding across the North which will both create and safeguard employment and help improve the economic prosperity of the region at an important time. The Northern region is already seeing benefits from the investment made during previous rounds.”
Daniel Gallagher0161 245 2243 [email protected]
Graham Watson0161 245 [email protected]
“ We are delighted to be starting life as a public company and have an exciting future ahead of us with our new debt free capital structure, an incentive plan to align our franchisees with shareholders, and capital to expand our footprint of stores from our heartland in the North West.”
“ Bargain Booze has been a very strong and resilient investment for ECI over the past seven years, and we are delighted with its successful IPO. ECI and the Conviviality board were hugely impressed by the speed and range of advice PwC was able to provide, and their support throughout the process was invaluable.”
2,000 jobs saved as PwC help UK Coal restructure after the worst coal mine fire in 30 yearsPwC worked with management and numerous other stakeholders to deliver the restructuring of UK Coal via a ground breaking administration.
After the restructuring of UK Coal plc (renamed Coalfield Resources plc) in December 2012, the newly formed mining business was performing well until it was hit by the worst coal mine fire in 30 years which forced the closure of its largest mine at Daw Mill.
PwC worked with the business to stabilise the position after the fire and help deliver an innovative restructuring to preserve value and jobs at the other mines. An insolvent restructure facilitated the sale of the remaining 2 deep mines and a further 6 surface mines (through administration) to a new subgroup free from the pension scheme deficit and with the benefit of £15m of initial working capital. A negotiated compromise saw the Pension Protection Fund’s claim in the insolvency being waived in return for economic interest in the new business.
Rob Hebenton, a Director in PwC’s Deal Team said:
Energy Minister Michael Fallon commented:
Rob Hebenton0161 245 [email protected]
“ The impact of the Daw Mill fire could not have been predicted and led to major losses for UK Coal. Since then, the management team and key stakeholders have been working to find a solution to save the business, and this would not have been possible without the support of the Pension Protection Fund, customers, suppliers, all parts of government, unions, employees and their families.”
“ I would like to thank all parties involved for the tremendous effort they have made to ensure a future for UK Coal at this very difficult time.”
Deal Team Times. North. Issue 6 October 2013