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CASE STUDIES

CASE STUDIES

Is there anything asset finance can’t be used for? At Davenham, we know the trials and tribulations that business owners go through in order to make their company successful, and while this empathetic approach has played a core part across most of the proposals we have financed over the past five years, for a recent deal in particular, our reputation in corporate transactions really was the overriding factor that won us the work, and more importantly, got the finance raised for the client.

Paul Burke Managing director Davenham Asset Finance

I

t’s a well-known fact that traditional finance arms are still putting up tough barriers when it comes to lending money, which has paved the way for alternative finance providers such as ourselves. In July 2018, the FLA revealed that the market was worth £32bn. We recently supported an SME to raise some capital for a truly alternative purpose: a management buy in. For this deal, our South East-based sales director Paul Lovelock was approached by one of his business contacts, a local asset finance broker, whose client required £400,000 via asset finance as part of an overall million-pound-plus management buy in deal that he was confident we were going to be able to assist with. The original directors of the business, who set up the company over 40

30 | NACFB Magazine

years ago – providing services such as prototype development and batch production of components for bluechip clients in the aerospace sector and the Ministry of Defence – were looking to retire, having built up the business to a multi-million-pound turnover during this time. A new management team had recognised the massive potential to grow the business further and wanted to purchase the firm. The deal had been agreed at over £1m and of the £400,000 funded through asset finance, Davenham helped to raise £300,000. However, we took the lead in project managing the entire amount – showcasing our attention to detail, structuring abilities and customer service capabilities. There were a number of challenges that came up as part of this complicated asset finance transaction: First and foremost there were over 80 assets made up of different types of engineering machinery that needed to be individually documented. Furthermore, we had to determine the value of each of these 80 assets bearing in mind

‘value’ in all its guises. To help the Davenham credit team consider and assess these risks, we appointed Tallons Associates (an experienced Manchester-based firm of specialist asset valuers) to undertake a detailed valuation which included visiting the premises, inspection and verification etc. Ensuring we obtained clear title to the assets concerned was imperative, but caused major challenges due to the age of certain assets. A further challenge was the overall sensitivity element of the deal – staff not being aware of the impending management change (understandably until the deal had been approved) meant we could not simply call the finance team for invoices, for example, to source the original purchase paperwork or legal asset ownership documentation. Davenham managed this sensitivity by ensuring that our teams were fully aware of the project intricacies, and only dealing with the client’s senior management when it came to requesting information.

As there were only a few other advisers, we took a lead role in the responsibility of coordinating and completing the deal with the other funders (such as the bank), including detailed negotiations to manage creditor priorities, debentures etc. In dealing with the lawyers, we worked on drafting and negotiating certain elements of the SPA to include the required warranties, thus focusing on minimising title risk and ensuring that the structuring, documentation and ultimately the provision of the finance dovetailed together in accordance with various detailed legal undertakings. The impact of this deal was significant for every stakeholder involved, from the incumbent directors who were parting ways with their ‘baby’ to start a new phase of their lives, through to the new management team looking to be rewarded for their commitment to the business’s future success. Our involvement in this deal reiterated to our national introducer and client network the very essence of the

The deal had been agreed at over £1m and of the £400,000 funded through asset finance, Davenham helped to raise £300,000. However, we took the lead in project managing the entire amount – showcasing our attention to detail, structuring abilities and customer service capabilities.

Davenham Asset Finance ethic: a team with a personal, partnership approach, using our specialist skills and experience of all types of corporate transactions and their various constituent parts, including advisers, process and varying agendas making Davenham a perfect funding partner for such transactions. Furthermore, the transaction was also an opportunity to showcase yet another way in which the Davenham team and asset finance can be used by the UK’s owner-managed SME businesses as part of an exit strategy for small businesses. Most importantly, and for the purpose of this article, we proved yet again that despite being a small funder, we can deal with complicated transactions via the depth and experience of our multi-faceted team – which in this case provided the finance in a speedy turnaround and overall smooth process; small but perfectly formed!

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