Maximising the value of your business: Insights and Best Practices 21 May 2015 | The Runnymede-on-Thames Hotel
Welcome agenda “Maximising value, more than just about the numbers’’ 08:20 Ian Barton, HMT LLP “Maximising the value of your business: tax implications’’ 08:40 Holly Bedford, HMT LLP “Enhancing operational efficiency to maximise value” 09:00 Fabrice Rodrigue, BIE Executive 09:20 Panel Q&A 10:00 Close www.hmtllp.co m
Maximising value, more than just about the numbers Ian Barton, HMT LLP
Market overview Transactions in mid market on increase supported by improved funding appetite 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 www.hmtllp.com 4
Successful processes Preparation, control and anticipation What makes a successful Why acquirers win auctions? process? • Strategic Rationale • Knowing what you want • Highest bidder • Certainty of delivery • Last man standing • Control, anticipating flexibility ‘first best opportunity to sell’ www.hmtllp.com 5
Controlling the controllable Being prepared to manage an effective process Financial reporting Commercial and procedures and strategic analysis Transaction and accounting policies and review market KPI analysis monitoring Historical Management Financial succession Analysis Positioning for sale Data room Forecasts support IT systems Regulatory and SPA and working Tax review and Governance capital support structuring www.hmtllp.com 6
Migrating your business from a successful enterprise to a sellable company Exit strategies are not just about the numbers Scarcity/ IP V A Profitability growth L Industry growth U E Company Size Low market share D E Customer concentration L I Recurring revenues V Scalability E R Independence E Management team D www.hmtllp.com 7
What you need from your financial adviser Getting the deal done Expertise & Relationships “Ability to extract value” Process & Credibility & Control Flexibility “Competitive tension” “One size doesn’t fit all” Knowledge & Insight “Knowing when to negotiate and when to agree” A great deal is worth our advice www.hmtllp.com 8
Contact Ian 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 Ian Barton Solutions Ltd back by NVM Private Equity, as well as winning the Partner 2013 Blake Lapthorn Poker Tournament! In 2014, Ian was voted ‘Corporate Finance Adviser of the Year’ at the Contact Thames Valley Deals Awards. Phone 01491 579740 Ian is a keen sports fan – more watching than participating – and has Email ibarton@hmtllp.com rekindled his enthusiasm for football in recent years being a lifelong Manchester City fan. www.hmtllp.co m
Maximising the value of your business: tax implications Holly Bedford, HMT LLP
Tax Traps and Planning on a Disposal
What are you selling? Company Shares Corporate Trade and Asset Sales A Subsidiary Company www.hmtllp.co 12 m
Sale of Company Shares 10% rate of tax with Entrepreneurs Relief (ER) Can we go home now? www.hmtllp.co 13 m
Bear Traps Losing ER: 28% rather than 10% Income tax rather than CGT: Up to 45% plus NIC www.hmtllp.co 14 m
CGT Entrepreneur’s Relief – a quick recap 10% rate of tax on first £10m of lifetime gains Conditions – selling shares: 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 EMI option holders <5% Pitfalls www.hmtllp.co 15 m
What am I getting? 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 18 Shares £ 50,000 Earn out ? % of PBT above hurdle. March 18 and 19 www.hmtllp.co 16 m
Bear traps? Income Tax or CGT? Losing ER • Earn outs and continued • Do you qualify for ER at all? employment • Buyer shares and loan notes – • Partial exits: Transactions in elect to disapply Securities • Earn- outs, No ER on additional • Employment Related amounts taxed in future Securities. Disposal for more than market value www.hmtllp.co 17 m
Transactions in Securities 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% www.hmtllp.co 18 m
Reinvesting in Buyer / MBO Automatic Tax-free Disapplying the tax free rollovers on shares and rollover for ER purposes loan notes Reinvesting in Buyer / MBO Employment Related Transactions in Securities Securities and S431 – income tax issues elections – income tax issues www.hmtllp.co 19 m
Pre-sale Planning ER Share Rights ER Spousal Transfers ER Trading Status Pre-sale Planning Asset Extraction Pre- Deal Structuring Sale HMRC Advance Subsidiary demerger. Clearances HMRC attitude? www.hmtllp.co 20 m
What you need from your tax adviser Getting the deal done Expertise & Relationships “Specialist tax skills and deal experience” Process & Adaptability & Control Flexibility “Integrated tax and CF “One size doesn’t fit all” advice” Knowledge & Insight “Knowing how to deal with HMRC” A great deal is worth our advice www.hmtllp.co 21 m
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 Holly Bedford of Oki-Ni Ltd by French group Meninvest SAS, the disposals of Keltec Ltd, The History Press Inc. and Green Board Game Tax Director Company. Contact Holly has 4 children and 2 badly behaved dogs. When not dealing with their demands she is a dedicated coffee drinker and is Phone 01491 579740 working towards her black belt in karate. Email hbedford@hmtllp.com www.hmtllp.co m
Enhancing operational efficiency to maximise value Fabrice Rodrigue, BIE Executive
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