Doing our bit for the trade deficit
One of our clients, a manufacturer, negotiated to purchase a related enterprise, whose assets included a £450,000 freehold building and £200,000 of machinery. However the intrinsic value of the business totalled far in excess of its tangible assets, incorporating £150,000 worth of ‘goodwill’. Meeting the asking price not only exceeded the funds our client had comfortably available at the time, but would have blocked further opportunities for investment, leaving the board risk averse at a time when they should expand.
Creative™ stepped in and set about obtaining funding for the whole acquisition. We were able to identify a panoply of funding solutions which, when applied together, amounted to the full asking price. In this case that meant a commercial mortgage, the refinance of the machine floor equipment, equity release in unencumbered assets already on the client’s balance sheet and a crowd-funded unsecured loan which made up the remainder. A lot of work for us, but to a certain reward: we’d fully addressed the requirement of our client.
The upshot of our intervention was that this client gained purpose-built heavy equipment and a skilled labour force to provide a reliable component in the manufacturing process which had been expensively outsourced before. This not only represented a saving on production costs after taking full account of the cost of funds but also delivered control and consistency which had been lacking previously. Therefore our client improved their own offering, and added further value quickly to the incoming company by introducing it to quality distributors with whom they had prior relationships. The net worth of their acquisition saw a fivefold increase within thirty-six months, whereas the greater part of repayment liabilities had by this point been satisfied.