After 9 months of false dawns & false starts, Avocet's MBO Team clients finally completed their transaction to purchase a 750k turnover business
generating 200k EBITDA.
The final price at a 2.5 exit multiple, reflected the owner's weak negotiaitng position, with the absence of trade interest due to the size of transaction.
Even at this low price level, funding was an issue, but was solved by a combination of:
- large customer lending 200k at 1.25% above base rate
- deferred consideration of 8 years
- a second mortgage on the clients' house
Commented Roger Bibby Director at Avocet:
"Whilst activity in the sub £5m turnover sector remains strong, there is an increasing tendency towards an MBO as the Exit Solution.
However because of the lack of equity in private houses these days to facilitate a meaningful second mortgage amount, Avocet as in this case,
spends considerable time exploring less conventional funding & deal structures, to get transactions across the line.
Fortunately the lack of imagination by banks & challenger banks is now countered by some really innovative funding solutions from the independents market.
Avocet will be very happy to tlak to any prospective MBO Team about these issues & any need to strengthen the Team for MBO transaction"