In March 2016 Peter engaged the services of Deloitte Debt Advisory to raise £40m of debt to create a liquidity event for Apex’s shareholders via the share repurchase. Whilst this is common practice for private equity, providers of debt are more sensitive to funding liquidity events in owner managed businesses. Peter explains his reasons for going down this route:
“I explored the various options available to create value for our shareholders that had supported the Company over a number of years. This included a sale of the business, and key to my moving forward was an ability to control the debt, whilst keeping equity intact until future potential investors were prepared to provide a fair valuation for the company. Based on the current size of the business, and its growth trajectory, this didn’t feel like aggressive leverage.”
Peter and Deloitte worked together to secure the debt from an alternative investment management firm. The transaction was not straightforward because it involved multiple jurisdictions across 11 different regulatory regimes and from the outset Peter set a challenging timetable to complete the financing within three months. Peter describes his decision to choose his preferred lender:
“The Alternative Lender knew our business as Deloitte had introduced us to them a year before. Through this process I felt they stood out as the front runner as they took the time to understand the future growth of the business, instead of simply focusing on the numbers.”
Contrasting his experiences of interacting with Alternative Lenders versus large banking institutions, Peter acknowledged that the Alternative Lending route is more costly, but appreciated that they delivered what they said they could and provided flexibility, he added “they were able to get comfortable with certain aspects of our operations – for example, the global nature of our business with headquarters in Bermuda – that the banks struggled with.”
Robust negotiations followed, with Peter advising, “Be prepared to dig into every layer of detail – it’s a very energy-intensive process” – however the deal was agreed within three months, and this included background negotiations with the PE partner shareholder. The Alternative Lender now have Board observer rights at Apex, and Peter describes the ongoing relationship positively – “we have good, open, frequent dialogue.”
When asked what advice he would give other individuals or companies considering Alternative Lending, Peter recommends thinking ahead around how to manage any minorities associated with the business, and pre-planning for how to maximise their support for the deal. He also considers becoming intimately acquainted with the finer detail of the terms of any agreement to be of particular importance.
Click Here to download the full report.
By clicking the button you confirming that you’re agree with our following Terms and Conditions