Growth Masterclass slides by Duncan Reid, Watson Burton LLP

1. Growth
Masterclass
24th September 2013
Duncan Reid, Watson Burton LLP
David Colclough, Business Growth Fund
Paul Mankin, PwC
John Sands, Wear Inns Limited
Graeme Lee, The Springfield Group

2. Growth
Masterclass
24th September 2013
Duncan Reid, Watson Burton LLP
David Colclough, Business Growth Fund PLC
Paul Mankin, PwC
John Sands, Wear Inns Limited
Graeme Lee, The Springfield Group

4. BGF is a provider of growth capital investing
£2m - £10m for a minority stake
Independent reviews have confirmed a
growth capital funding gap exists, to the
detriment of the UK’s SME base…
 Project Merlin led to the BGF being
established, backed by the following banks:
Background
Background
…BGF has been created to provide a
long term and flexible commitment to
help fund UK SME growth
 £2.5bn committed to invest
into UK SMEs
 31 investments to date
 £170m invested
 BGF operates independently and autonomously
to the banks
31
 30 to 40 new investments annually
 7 BGF offices across the UK
 BGF was created to plug the funding gap and
help UK SMEs access the capital they require
 The BGF has been established for the long term
and offers a differentiate funding option
 BGF has 90 employees
 50+ are experienced investment
professionals…
90+
 …many of which have industry
and/or entrepreneurial experience
BGF offer a new and differentiated investment proposition for UK SMEs and entrepreneurs

5. BGF Feature
Benefit to you
£2m to £10m investments (with appetite and
firepower for further investments)
To support future, long term growth
10% - 40% of equity
Always a minority partner – you retain control
Up to 50% cash out
For shareholder realignment / de-risking
Flexible structures – equity / loan notes
To meet the need / align with shareholders
and management
Long term money – no closed fund pressures
No forced exit
Fairer legal approach
Less onerous investor legal protections
A fast and focussed investment process
Minimal disruption and distraction to the
business, and a focus on minimising fees
Access to a huge network and support
To provide on-going support to the business
Industry / entrepreneurial experience
Understand what you are going through
A flexible, patient and supportive offering to back Britain's best Entrepreneurs
What we offer

6. BetterBathrooms
York Mailing
£10.0m
June 2013
£10.0m
July 2013
Multichannel Bathrooms
retailer
UK largest brochure
printing business
Springfield
£4.4m
June 2012
Independent provider of
domiciliary care in
Yorkshire and Humberside
Barburrito
£3.25m
March 2012
Fast-casual Mexican
restaurants to eat in or take
away
Boost Juice
Xercise4less
£2.5m
December 2012
£5.0m
August 2013
Healthy take away juice bar
operator
UK out of town budget gym
operator
GCI
£10m
February 2012
Cennox
£3.0m
June 2012
Managed
communication providers
Specialist ATM service
provider
Trunki
Stats Group
£3.9m
April 2013
Designer and manufacturer of
innovative, multifunctional
travel products for children
Magma Global
£9.3m
December 2012
Manufacturer of carbon
fibre and composite
structures and pipes
£7.8m
March 2012
Provides isolation services
for onshore and offshore
oil and gas pipelines
Unruly
£4.0m
December 2011
One of the world’s fastest
growing social video
distribution companies
Wear Inns
Aubin
SkyDox
Petrotechnics
£8.0m
May 2012
£2.25m
January 2013
£7.25m
September 2012
£6.0m
May 2013
Specialist cementing and
stimulation chemicals
Provider of cloud-enabled
document collaboration
software
Freehold community pubs
across the North East and
Yorkshire
Oil and Gas software and
services business
Selection of our
investments to
date

7. Conclusions
As the leading growth capital investor in the UK

The BGF has the;
•
capital
•
team & infrastructure
•
network

We have invested in 31 businesses so far

We have a continued passion to find and back ambitious, high quality
management teams

Flexible offering to meet the needs of individual situations
Capital, resource and flexibility to support your goals

9. Andy Gregory
07760 325 490
andy.gregory@bgf.co.uk
Neil Inskip
07557 923 212
neil.inskip@bgf.co.uk
Matt Widdall
07881 816 011
matt.widdall@bgf.co.uk
David Colclough
07971 977 726
david.colclough@bgf.co.uk
Loren Holland
07557 747 303
loren.holland@bgf.co.uk
Barry Jackson
07799 433 572
barry.jackson@bgf.co.uk
Richard Taylor
07747 780 474
richard.taylor@bgf.co.uk
Sam Davies
07867 455 109
sam.davies@bgf.co.uk
BGF Manchester office (Level 10, Tower 12, 18-22 Bridge Street, Manchester M3 3BZ) tel: 0845 266 8861
BGF Leeds office (Park House, Park Square, Leeds, LS1 2PW)
tel: 0845 600 0142

10. Growth
Masterclass
24th September 2013
Duncan Reid, Watson Burton LLP
David Colclough, Business Growth Fund
Paul Mankin, PwC
John Sands, Wear Inns Limited
Graeme Lee, The Springfield Group

11. www.pwc.co.uk
Growth Masterclass
24 September 2013

12. Is my business right for growth capital?
Value Drivers
Exit
Equity Story
Investor
Predictable
Future
Financials
PwC
Robust
Historic
Financials
12

13. Value drivers
Upsides
Continuing
growth story
Acquisitions /
merger
New service/
product
provision
Scalable
operation
Business
Innovations
Value drivers
Reputation
and
perception
Experienced
mgt team
Secure supply
of business
Strong
forecast
growth
Impact of new
regulations
Potential
detractors
Risk of new
entrants
Margin
pressure
Adverse
reputation
Key staff
retention
Defensible
position
Value is unlocked by demonstrating the upside driver qualities
PwC
13

14. Equity story
Market dynamics
PwC

What is Management’s vision for the business?

What are the key strategic goals and imperatives?

What opportunities excite Management the most?

Why is the business ideally placed to exploit these opportunities?
Can we quantify the size/potential of these opportunities?

What support is the business looking for from a Partner?

Level of funding required to deliver transaction priorities?
What protection does the business have from new market entrants?

How competitive is the market?

Partner support
How do management see the business in 3-5 years time?

Market
opportunities


Clear strategic
direction
and vision
Does the business plan rely on overall market growth or growth in market share?
14

15. Transaction process– preparing for growth capital
The preparation phase is critical. The topics below should be considered prior to
approaching investors
Growth potential
Positioning /
Planning
Preparation
Competitive tension
1
2
3
4
5
Hold a management /
PwC workshop to
discuss each of the
factors that influence
value and agree actions
and timetable
Analyse historic and
projected sales by
market segment and
identify those with the
greatest growth
potential
Identify potential
strategic partners for
key products/services
in development and
seek to improve
contractual position
Analyse potential
investor pool and
assess their appetite for
your particular
business based on past
investments
Review contracts –
clarify potential issues
and identify areas for
due diligence and
prepare
6
7
Prepare a clear and
substantiated Business
Plan. PwC to provide
challenge to
management’s
financial plan
Identify and
substantiate growth
opportunities in
existing markets.
Develop strategy and
timetable pre and post
investment
11
Financial
information
Education
Prepare integrated
financial model with
three year projections
and present historic
financials on a
normalised basis
PwC
12
Analyse and optimise
working capital
through review of
supplier agreements
and customer payment
terms etc
8
Identify technology /
service gaps and
consider impact on
capital expenditure
plan
13
Identification of debt
like items
9
10
Consider potential for
new products / services
or markets
Consider strength of
management team and
succession plan.
Address any gaps or
over reliance issues
14
15
Tax issues identified
and resolved in
advance where possible
Key objective of
enhancing
shareholder
value prior to
the investment
process
Consider timing of
investment versus
demonstrating your
current financial year
results
15

16. Transaction process - education
Education as to why your business is a strong investment is critical to
understanding and driving investor appetite
Preparation
Education
Competitive tension
Discreet market intelligence gathering with key investors
Confirm key value drivers with individual investors as each will weigh the value of the various components
differently
Identify and mitigate factors which may detract from value
Model equity returns and hold early meetings with selected investors
The pre-marketing process provides a strong ‘read’ on investor appetite which allows the flexibility to decide on a
tightly run accelerated process with a narrow investor pool or a wider more open process
Outputs of
Phase 2
PwC
•
Clear understanding of investors’ appetite, strategic rationale and objectives
16

17. Transaction process – competitive tension
The process needs to retain focus on the on-going attractiveness of the investment
and maintain competitive tension
Preparation
Education
Competitive tension
Launch process with investment memorandum and
remain conscious of ability to fast track investors
with significant appetite
Reconfirmation of offers
Management presentations including site visit and
Q&A session
Preferred investor selected and granted exclusivity.
Restricted top up due diligence
Indicative offers received and negotiated
Finalise legal documents
Shortlisted investors selected and provided with
further information on the business including access
to a dataroom
Completion
Outputs of
Phase 3
PwC
•
•
•
Deliverable offers following site visits and management presentations
Restricted transaction timetable to maintain competitive tension
Completion
17

18. How can we help?
Meet the team
PwC Corporate Finance can help by advising on:
M&A Advisory
Debt advisory
Public
Company
Advisory
Public to
Private
transactions
Project Finance
and
Public Private
Partnerships
Private Equity
Advisory
Accelerated
M&A
IPOs
Integrated service
At PwC, we have advisers for every aspect
of business in the good times and through
challenging economic environments. Our
experts in all areas of strategic, tactical
and transactional advice can bring to bear
the full effect of the firm.
Sector expertise
We have expertise across all industries.
Our in-depth sector knowledge, global
networks and understanding of specific
issues that may be affecting a business,
means we can provide the specialist
knowledge needed.
Recognised in the local market…
Paul Mankin
Partner
+44 (0) 191 269 4035
+44 (0)
paul.mankin@uk.pwc.com
Gareth Marshall
Assistant Director
+44 (0) 191 269 4035
+44 (0) 7889 645200
Gareth.r.marshall@uk.pwc.com
Lynn Shearing
Assistant Director
+44 (0) 191 269 4030
+44(0) 7734 607462
Lynn.shearing@uk.pwc.com
Simon Johm
Manager
+44 (0) 191 269 4272
+44 (0) 7754 893464
Simon.d.john@uk.pwc.com
Alex Marsh
Senior Associate
+44 (0) 191 269 3340
+44 (0) 7824 440400
Alexander.d.marsh@uk.pwc.com
Kate Campbell
Senior Associate
+44 (0) 191 269 4321
+44 (0) 7792 933326
kate.l.campbell@uk.pwc.com
Charlotte Macintyre
Senior Associate
+44 (0) 191 269 4159
+44 (0) 7951 030509
Charlotte.macintyre@uk.pwc.com
Lucy Mulroy
Senior Researcher
+44 (0) 191 269 4236
+44 (0) 7919 533591
Lucy.mulroy@uk.pwc.com
2013 Deal of the year
2012 Deal of the year
Investment in Wear Inns by
BGF and NVM Private Equity
Sale of a majority stake in
Tekmar Energy to Elysian
Capital
18

19. This document is strictly confidential and must not be provided to or made available, by any means, to any person other than the intended recipient.
This document does not constitute the giving of investment advice, nor a part of any advice on investment decisions.
This document is for information purposes only and should not be relied upon, Accordingly, regardless of the form of action, whether in contract, tort or otherwise, and to the
extent permitted by applicable law , but subject always to the following paragraph, PricewaterhouseCoopers LLP accepts no liability of any kind and disclaims all responsibility for
the consequences of any person acting or refraining from acting in reliance on this document.
Notwithstanding the above, if PricewaterhouseCoopers LLP enters into a contract for the provision of services to any person to whom this document has been provided and all or
part of this document is a deliverable under such contract ("Contract"), then PricewaterhouseCoopers LLP will accept liability to such person to the extent, and subject to the terms
and conditions, specified in such Contract.
Accordingly, no representation or warranty of any kind (whether express or implied) is given by PricewaterhouseCoopers LLP as to the accuracy, completeness or fitness for any
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© 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP which is a member firm of PricewaterhouseCoopers
International Limited, each member firm of which is a separate legal entity.

20. Growth
Masterclass
24th September 2013
Duncan Reid, Watson Burton LLP
David Colclough, Business Growth Fund
Paul Mankin, PwC
John Sands, Wear Inns Limited
Graeme Lee, The Springfield Group

21. WEAR INNS LIMITED
John Sands, Chairman
Growth Masterclass
24 September 2013

22. History of Wear Inns
• Formed in 2005 with financial backing of NVM Private
Equity
• A managed pub estate, it had grown to 15 units pre BGF
investment
• Outlets all based in the North East and Yorkshire
• By 2012 had maxed out on existing Finance Agreement

23. Investment Criteria of Wear Inns
•
•
•
•
•
•
Community pubs in secondary towns
Populations of 6000+ within walking distance
Prominent positions within the towns
Freehold tenure
Preferably with outdoor space
Underperforming (by Wear standards)

24. Why Wear Inns chose BGF
• A beauty parade was organised by PWC of 5 private
equity houses
• 3 went to the second stage, and produced refined offers
• BGF was selected because they took the most flexible
approach and could accommodate follow on investment

25. What BGF has added to the business
•
•
•
•
Broader business view
Very approachable on all matters
Not short term in their thinking
Keen for follow on investment

26. Lessons learned from the experience
• Don’t attempt fund raising and an acquisition completion
simultaneously
• Be more ambitious in your original investment
requirement
• Have a follow on plan worked out at the first stage
investment

27. Future
• Will continue to expand our Estate, but a revision of our
Business model relating to our site criteria is required
• There will be a further funding requirement to fund the
expansion and BGF will play a major part in the process

28. Growth
Masterclass
24th September 2013
Duncan Reid, Watson Burton LLP
David Colclough, Business Growth Fund
Paul Mankin, PwC
John Sands, Wear Inns Limited
Graeme Lee, The Springfield Group

29. WATSON BURTON GROWTH MASTERCLASS
PRESENTATION BY GRAEME LEE, CEO
SPRINGFIELD HEALTHCARE GROUP
Tuesday 24th September 2013
29

30. History of the Springfield Group



Springfield Care Services Ltd
Springfield Home Care Services Ltd
Springfield (The Grange) Care Village Ltd
30

31. Pre-BGF investment






Group turnover, £10m pa and 800 employees
Yorkshire and Humberside regional focus
Quality care provider
Regional and National Award winner
Strong opportunity for sector growth
Historic private equity interest in Springfield
not attractive
31

32. Why not traditional private equity?





B and B platform too aggressive/hidden
agenda?
Often want a majority stake
Business plan is their own, not yours
Recognised value and quality of company,
but not prepared to pay
No added value demonstrated post deal
32

33. Why Springfield chose BGF




Historically, Group funded by bank senior
debt and personal investment
Lack of investment appetite from the banks
Capital investment requirement in Care
Village company increased dramatically
Extra investment needed for Group growth
strategy
33

34. Why Springfield chose BGF
BGF:
1)
2)
3)
4)
5)
6)
7)
Listened
Understood our vision and supported Springfield
business plan
No BGF hidden agenda
Appreciated value in the company
Bought in to management team
Flexible approach to the investment strategy
Believable and realistic
34

35. What BGF has added to the business
The deal

£4.4m investment into:
- Springfield Home Care Services Ltd
- Springfield (The Grange) Care Village Ltd

5 year business plan

Mixture of share capital and loan notes

BGF - minority shareholding in each company

G Lee - retained majority shareholding in each company and
Board control

Lump sum cash out on front end

Enabled extra £6m of match funding from NatWest and HSBC
to deliver growth strategy
35

36. What BGF has added to the business
During the deal

Open to good and bad news – rational and commercial

Flexible approach to deal structure

DD process a positive experience

BGF support given

BGF never chipped the price
36

37. What BGF has added to the business
Post deal

Credibility

Political influence

Set strong platform for growth

Greater professionalism through the Board process

Very supportive partner

Even more supportive and competitive banking relationships

User friendly

Proactive

Networking
37

38. Lessons learned from the experience





The deal process took too long
The costs were excessive – especially legal
In hindsight, we would probably have
negotiated a slightly better deal!
Honesty and trust are vital and a two-way
process
BGF are a real added value partner
38

39. The future?
Springfield Group’s 5 year plan

£30m Group revenues

>£3.5m EBITDA

2000 employees

Increase geographical area from 5 branches to 12 and improve
regional dominance

Quality of care never compromised

Aim to achieve 5 year plan in 4 years
39

40. In summary





Springfield Healthcare Group strategy is a
reality
Genuine partnership relationship with BGF
The Group is stronger and robust as a result
Exit strategy is now clearer and more defined
Our journey is more enjoyable!
40

41. Growth
Masterclass
24th September 2013
Hosted by:
Duncan Reid, Watson Burton LLP
David Colclough, Business Growth Fund
Paul Mankin, PwC
John Sands, Wear Inns Limited
Graeme Lee, The Springfield Group