- Clients: UK-based businesses
- Combined Revenue: £20 million+
- Funding: £7 million across two facilities
- Purpose: Working capital to support a merger
Enness was approached by the directors of several businesses operating within the same sector who were considering a merger. By bringing the companies together, they had identified an opportunity to remove duplicated costs and create efficiencies across the combined group, ultimately improving profitability.
The businesses had, however, been through a difficult period following COVID-19. Rising operating costs and disruption across their supply chains had put pressure on margins, and profitability had fallen over the preceding two years. Their existing bank was therefore unwilling to provide the additional funding required and wanted greater comfort around the businesses’ ability to service new borrowing.
The structure was further complicated by the limited amount of unleveraged equity available within the businesses. There was therefore little conventional security that could simply be used to support the new borrowing, meaning a more creative approach was required.
Enness took a broad view of the transaction rather than limiting the search to the client’s existing banking relationship. We assessed options across high-street banks, challenger lenders and specialist providers, considering how different facilities could work alongside the proposed merger and the businesses’ existing financial position.
Rather than presenting a single solution, Enness provided the directors with a range of potential structures, including a comparison of the costs and benefits of each. This allowed the clients to consider the different ways of funding the transaction before selecting the structure that best suited their plans.
The eventual structure provided £7 million of funding across two facilities to support the working capital requirements associated with the merger. This gave the businesses greater flexibility as they worked towards combining their operations and capturing the efficiencies they had identified.
The case demonstrates why event-driven transactions such as mergers can require a broader approach to corporate finance. Where historic profitability, limited security and changing business structures make conventional borrowing difficult, considering the wider lending market can uncover alternative ways of structuring the required funding.
If you or your clients are considering a merger, acquisition or another event-driven transaction and require additional working capital, speak to a corporate finance specialist to explore the available options.
Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or accounting advice. Finance is subject to status, underwriting and lender criteria. Terms and availability will vary depending on individual circumstances, business performance and the proposed transaction.
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