Case study

Management Buy Out of automotive business funded with Structured Finance


KSA provides services to the automotive industry and specialises in the calibration, supply and installation of new and existing equipment. With the current directors preparing to retire, an agreement was reached for future directors Gary Hennah and Phillip Halstead to purchase the business through a Share Purchase Agreement, a process supported by Ultimate Finance providing a tailored Structured Finance solution to raise the funding required to complete the MBO and keep the business moving at pace into the future.

Tailoring the right funding

Having agreed on the transaction, Gary was looking to meet funding partners that could support the purchase of the business and reached out to Richard Appleby, director of brokerage Factoring Finance. He explains, “We had all the details ironed out and were looking to exchange contracts as quickly as possible to ensure a smooth operational transition. We wanted to use the existing debt book to help fund 85% of the transaction, and when Dick introduced us to Vinnie Dobie, Regional Director at Ultimate Finance, we were impressed with their reputation as a lender and how straightforward their processes sounded”.

The team at Ultimate Finance set out to design the £300,000 Invoice Finance facility that would not only provide direct access to the liquidity required for the transaction go ahead, but also provide an ongoing source of working capital afterwards to future proof the business.

Vinnie says, “At Ultimate Finance we have over 20 years’ experience in tailoring asset-based lending solutions to the unique needs of each business we partner with, and we are perfectly positioned to support Management Buy Outs. So, once we had had the opportunity to find out more about the business and its ambitions it was easy for us to get the facility ready to go live as quickly as possible to enable the business to complete the MBO transaction on time”.

Reacting to the unpredictable

Before the contracts were able to be exchanged, however, a VAT bill threatened to disrupt the transaction by leaving an unexpected cash shortfall. Vinnie recalls, “The VAT bill caused an issue as suddenly there wasn’t enough cash  to complete the transaction, and in other hands it could have made for a very different outcome. At Ultimate Finance, our team are used to reacting to unplanned events promptly and expertly with MBO transactions, and in this case were able to provide further funding to complete the transaction and give the business the breathing room necessary to complete the deal”.

The team at Ultimate Finance were able to add a £25,000 cash injection within the Structured Finance solution which includes access to a Cashflow Loan option to supplement the access to working capital. Gary says, “Vinnie and the rest of the team were quick to act and helped us complete the purchase as we had planned without delay, which comforted us in our choosing Ultimate Finance as our funding partner. They’re a lender who doesn’t just talk the talk, they efficiently proved that they also walk the walk and do exactly what they say they’re capable of doing”.

New phase means new ambitions          

With the MBO completed, the team carried on the legacy of KSA with no disruption to its operations, and Gary and Phillip are working to expand geographical reach to continue to bring in manageable growth, especially with the Invoice Finance solution in place and the opportunity to finance key machinery through Ultimate Finance’s Asset Finance proposition.

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