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 overviewTransactions 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 processesPreparation, 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 controllableBeing prepared to manage an effective process

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Positioningfor sale

Management

succession

Data room

support

IT systemsRegulatory and

GovernanceTax 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 companyExit 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 adviserGetting 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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ContactIan 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

owner 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 BartonPartner

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

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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 adviserGetting 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

on 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

of Oki-Ni Ltd by French group Meninvest SAS, the disposals

of 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 BedfordTax 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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What Issues are you facing?

People

Processes

Technology

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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

off 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 RodrigueHead of Advisory Services

Contact

Phone 02034405260

Email fabrice.rodrigue@bie-executive.com

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Contact

Richard KingNon-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 HawkinsExecutive 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

ownership.

Rob WalkerCEO

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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