Funding Expansion

Background

An MBO was spun out of a parent company some three years ago with a reputation for making a down market commodity product.

By Autumn 2003, having built up the management team and improved its product range in terms of quality, diversity and differentiation, the company was in need of new finance to fund an ambitious product development programme and a large contract with a new customer.

Alerted to a pressing need, Avocet made a site visit within 24 hours of the initial approach, to appraise the situation and meet the management team. Following this visit and a lengthy telephone conversation with HBOS to kindle their interest, a further visit with this bank was made within 3 days. Further discussion and the preparation of a new business plan with Avocet’s help, produced an underwritten offer of business finance from HBOS just 8 weeks after the initial enquiry.

The Melodrama

At this point and with the champagne corks hardly popped, the deal hit a major snag with a potential breach of one of the conditions of support . Under the strong leadership and reslience of the Managing Director various options were explored with Avocet to mend this breach. This resulted in an eventual hard won solution which attracted the continued support of HBOS.

Solution

The company now has a complete refinance package involving a bank loan, bank overdraft, invoice discounting facility and commercial mortgage with which to sustain its ambitious product development programme and successfully fulfil the large order for its new customer, thus improving overall profitability.

Morals

Don’t count your chickens

Always have a plan B and even C