Business Acquisition of Underperforming Company with Private Equity

Following the successful turnaround of a business in the transport and logistics sector in which management held shares with the rest being held by a number of financial institutions the business was approached by another Private Equity firm that had an investment in a company in a similar market that was significantly underperforming.

On meeting the Private Equity firm concerned a potential acquisition looked an exciting prospect as the company concerned was of a similar size to that of the one in which management already held shares in, but in a slightly different whilst complementary sector. The investors and bank were approached to see if they would be interested in extending their investments and support management with an acquisition. 

Having received confirmation to proceed with the acquisition, a credible detailed business plan was prepared an offer structure was agreed, which facilitated management increasing their own overall shareholding. 

The key deal elements making it an attractive proposition were: -


• No goodwill payment and a discount to net assets
• Funding largely through asset financing
• Strong customer base in a parallel sector with the opportunity to cross sell services and expand overall sales
• Large overhead duplication to be saved post deal providing sufficient savings to curtail losses
• Good geographic location to improve current network
• Modern commercial properties with capacity for expansion and increased revenue stream
• Seamless transaction to provide a business as normal situation for customers and suppliers

The deal completed quickly and without disruption to either the current or the new business, and integration plans were executed that provided the rewards as depicted in the business plan.