Supporting a complex share acquisition

Our client, Penair Medical Ltd (Penair), saw the opportunity for a share acquisition of engineering company, Anderson Hydraulics (Doncaster) Limited (Anderson), from the retiring owner, with considerable scope for operational improvement and improved profitability.

This was a complex share acquisition deal involving multi-finance arrangements, including property finance, plant and equipment finance and invoice financing secured with legal charges and fixed and floating charges over the property and assets owned by Anderson.

The client was impressed by the resilience and ability of Farringford Legal to deal with the matrix of legal issues and negotiating, coordinating and closing the deal within tight timelines.

Many thanks to you and your team for helping to complete this difficult acquisition, I would like to say a special thanks to Milan for his hard work and support, without him I think I could have walked away from the whole process

Penair’s Funding Dilemma

The client had been reviewing opportunities to acquire a business for over a year and, despite a couple of mis-hits, found the current opportunity that allowed it to make a mark with improvements to the business to increase the bottom line and the ability to finance the deal using assets from the target company.

One of the main issues faced by the client was how to finance the deal, with limited resources available to itself. This was ultimately resolved by a multi-pronged approach to utilise the target’s assets to secure funding for the deal, including invoice financing and property financing over the freehold property owned by Anderson.

A further complex issue was how the directors of Anderson could repay the large directors’ loan accumulated over the years, especially with limited cash in Anderson. To solve this, Farringford Legal proposed a split consideration: the initial consideration, which would be paid to the shareholders, who would use the proceeds to repay the directors’ loan to Anderson. In turn, this would inject vital cash into Anderson for it to declare a dividend back to the shareholders.

By virtue of the declaration of trusts in favour of Penair (coming into effect as soon as the share purchase agreement came into force), the shareholders would immediately account to Penair the amount of the dividend. Penair would then utilise the same funds to pay the deferred consideration to meet the target price payable, thus acquiring Anderson debt-free, other than the acquisition funding arrangements mentioned above.

The client was introduced by its finance partners, who had previously worked with our firm and were impressed by the depth of knowledge the firm brought to corporate deals such as share acquisition. With our expertise in the SME and high-growth sector, and the timely and efficient manner in dealing with the matrix of issues raised (including the corporate, finance and security documentation) and coordinating the various advisors, we were able to bring the deal to a successful completion within tight timeframes.

The Results

The client was impressed with finalising this complex deal, especially when things seemed upended and finance companies were changed half way through the deal. Had it not been for our firm’s experience and perseverance, the client would have walked away from the deal.

As such, since closing the deal, they were pleased to finally be in the business to start the turn around and were extremely complimentary about our patience and professional and efficient manner in getting the deal over the line