The Deal Makers: Mark Selby & David Kaplan
The Deal Makers: Mark Selby: Ashgates Accountants & Business Advisors, Corporate Finance team and David Kaplan: Nelsons Solicitors
The Transaction: Discovery Foils’ acquisition of a business owned by Novelis
The Deal: Confidential Invoice Discounting, Plant & Machinery Loan, Cashflow loan
A team of advisers and lawyers helped secure acquisition finance for foil-printing company Discovery Foils. Vfiles tells the story
Sometimes negotiations can take forever. The consultations that precede the acquisition of a business can drag on for months, as vendors, buyers and advisers struggle to hammer out a deal that is right for all concerned. Weeks pass as they pore over the finer points of the contract and address the myriad of practical issues associated with the handover. As a rule, the more complex the deal, the longer the negotiations.
But in the case of Discovery Foils’ acquisition of a business put up for sale by aluminium rolling company Novelis, a protracted period of negotiation wasn’t an option. As David Kaplan, Corporate Director at Nelsons Solicitors, recalls, “This was a complex transaction that would normally take five months or so to complete. Because of the circumstances, we did it in two.”
The negotiations were complex because of the nature of the deal on offer. Discovery Foils wanted to buy a packaging business (printing foil for confectionery) operated by Novelis from a plant in Bridgnorth, Shropshire. Negotiators had to agree on a plan to separate the business that Discovery wanted to buy from other operations that were also taking place at the site. And the clock was ticking. Novelis placed a time-limit on negotiations and any slackening in the pace would result in the owner closing the plant and the deal falling through.
The funding factor
Getting the funding in place was essential. David Kaplan and his team at Nelsons Solicitors handled the transactional negotiations, while advisers led by Mark Selby, from the Corporate Finance team at accountancy and advisory firm Ashgates, worked with Discovery Foils to agree a funding package with Venture Finance.
“Discovery Foils had already been introduced to Venture by Nelsons’ David Kaplan,” says Mark. “So when we became involved, Discovery was already in a dialogue with Venture, but they were under a lot of time-pressure to proceed with the deal and needed some help.”
As Mark explains, Ashgates worked with Discovery to gather the disparate pieces of information required by Teresa Geraghty at Venture, to formulate a business plan and come up with the funding figure required to make the acquisition work. “Once that was done, we assisted Discovery Foils in its negotiations with Venture,” he says.
A tight schedule
The preparations and negotiations had to be carried out within a relatively short time. “We began work on 20 January and at that time we were told the deal had to be completed by the end of the month,” says Mark. “In the event, we got an extension to 28 February, but it was still a very, very tight schedule.”
The key to securing the necessary funding was the information provided by Discovery Foils. “We were lucky in that there was a lot of resource in the back office and the MD, Steve Westwood, had done a lot of analysis,” says Mark. “However, we had to look at all the information provided and decide whether the financial plan was robust.”
Meanwhile, David Kaplan and his team were pressing ahead. “The main challenge we faced was in untangling the various businesses that were operating at the site,” he says. “We had to arrange things so that those businesses could continue to operate.” Kaplan’s team had no direct input into the financial negotiations, but he stresses the outcome of the contractual talks depended on Discovery successfully raising the required finances.
The deal
According to Chris Wrigley, Director of Discovery Foils, it was the fact that funding had to be agreed quickly that motivated his decision to look beyond his existing bank. “Clearing banks have a bigger structure and in this case our bank couldn’t make a decision quickly enough,” says Chris. “So we chose Venture.”
However, speed wasn’t the only factor. As Mark Selby explains, asset based lending (ABL) was particularly suited to the requirements of Discovery Foils. “The company had a strong debtor book and it also had assets in the form of plant and machinery that could be used as collateral,” he says.
When the funding package – worth close to £3m – was agreed, it included a Confidential Invoice Discounting facility, a Plant & Machinery Loan and a ‘term’ Cashflow Loan. Crucially, Venture provided this package from a single set of negotiations. This sole point of contact appealed to Chris Wrigley, who had previous experience of talking to several different people when seeking multiple facilities. Venture’s focused approach undoubtedly played an important part in ensuring that the money was in place in time to meet the completion deadline set by Novelis.
“We wasted no time in quickly getting to grips with Discovery Foils’ funding requirements to buy the business,” says Teresa Geraghty, Venture’s Business Development Manager for the Midlands. “Our broad range of services meant we were able to offer the headroom needed for the deal to take place and provide dependable ongoing working capital to promote financial confidence for future growth.”
Going that extra mile
Mark Selby agrees that Venture took a positive approach to the negotiations. “They really went the extra mile,” he says, citing the ABL provider’s willingness to help Discovery put its financial information in order by calling in Ashgates. “Some lenders might simply have said ‘no’ at that point. Venture saw there was value in the deal and called us in.”
Further down the line, Venture’s ability to make a quick decision kept negotiations on track. “Novelis asked for a non-refundable deposit,” says Mark. “At that point we needed to know we had the funding in place. Venture were able to provide us with a strong commitment, allowing us to move forward.”
Discovery Foils has now completed its acquisition of the target business, saving more than 100 jobs in the process. It was a transaction negotiated with a multinational conglomerate, funded through the efforts of a Midlands-based team of advisers, lawyers and funders, working in close partnership towards a common goal.