Background

Our client was a secured creditor to a solar panel retailer and installer operating in 3 States.  Whilst our client had a nominee Director sitting on the Board of the Company, the information available was late, inaccurate and focussed on the wrong metrtics.  In particular, a former Director of the Company was acting in excess of his authority and without the knowledge of the Board and / or the secured creditor – placing the Company’s future at risk.

Our client lost patience with the situation when the Company made a further request for funding that was unsupported by the data presented.

Strategy and Solution

We met with the secured creditor to discuss the options available and to provide an engagement framework and agreed process and, after all parties had signed appropriate no-disclosure and non-circumvention agreements, commenced the analysis of the acquisition target.

We considered the target’s most likely business outcomes under 3 different scenarios and determined that they were unlikely to grow having regard to the existing owners’ appetite for further investment in the business, the existing marketing and sales skills within the business and the overall positioning of the business.  We also had a candid discussion with the existing Managing Director including his personal aspirations, both personal and professional.  This provided us with a baseline position upon which to develop a transactional solution.

Understanding that any deal must work for both parties to have any chance of success, our suggested solution involved clear metrics for the calculation of a delayed payment for the target business (thereby enabling the vendor to increase the value of his business using the resources of our client in exchange for a vendor finance deal), increased salary revenue for the vendor and a senior management role within the larger entity, rules for the application of revenues from strategic divestments to related debt (to ensure transactional integrity in case of a meltdown before final settlement) and an agreed growth strategy for the business overall.

Outcome

Both our client and the target vendor accepted our suggested process and signed a non-binding Heads of Agreement that paved the way for a detailed investigation and modelling exercise that involved senior staff from both businesses and one of our senior consultants to both facilitate workshops and to guide the process.

Once a final business plan had been mapped, we progressed to final contracts that incorporated a floor position for the vendor, metrics to be applied in a calculation of the final price and clear pathways for the vendor’s owners to progress to the next stage of their personal and professional lives.