Complementing the turnaround and transformation work, MCR engages in a number of critical advisory assignments. Previously such assignments have been undertaken for longstanding institutional relationships but due to the demand for the MCR insight, an advisory team has been created.
The Advisory Services are high quality and value added with a range of capabilities best illustrated by a cross section of case studies.
MCR was contracted by one of the UK’s largest private equity firms to advise on potential £100m to £1bn turnaround and stressed debt acquisition projects. Deals reviewed included a national DIY chain, a national food manufacturer, a private education provider, a domiciliary care & primary healthcare company and an international POS software business. MCR’s role was to help originate the deals and lead the team to build a fully diligenced and structured offer, complete with a deliverable business plan. The role also included active participation in existing portfolio and asset reviews.
MCR advises a number of other PE firms on investment opportunities in both turnaround and growth situations. The MCR team adds a diverse experience of hands on management roles to the appraisal process. Growth investment appraisals have included the successful completion of a £75m deal for the UK’s leading sports nutrition business. This was followed by Iain MacRitchie taking the role of Chairman of the group.
A significant amount of work is carried out on behalf of the UK clearing banks in particular those with significant leveraged investments. MCR’s opinion is sought to provide a business management/company side perspective. This often includes precarious financial positions that require careful consideration and significant restructuring. Recent advisory work has been carried out on sectors from Oil & Gas to agricultural supplies and food services as well as technology based and telecommunications infrastructure businesses.
The key differentiator of MCR Advisory is the commitment to implement any changes recommended or required. This underlines the quality and depth of advice. Following MCR’s reviews, challenges have included the global repositioning of one firm based on a new business model and management team changes on behalf of one of Europe’s largest PE firms. The company was a capital equipment manufacturer which had experienced a sharp profit decline and questions over its sustainability. MCR advised on and helped initiate a major restructuring programme, gained the commitment of the funders and set out a path to recovery.
Other assignments have focused on the construction of viable business models and plans. This has involved in depth analysis of the company’s market position, competitive advantages and management’s ability to execute. MCR also provide ongoing support and advice often at the request of the management post restructuring. Formal and informal arrangements have lasted years as evidence of both the open and direct approach and sustainable techniques applied.
In the current climate many leveraged deals are unable to service their debt structures and balance sheets are stressed. MCR has advised on debt restructuring in the context of how robust or viable the underlying business models are. There is considerable activity in this area in both the banking and private equity communities. Typical recent examples have included a major US private equity firm which engaged MCR to review the financial structure of a supplier of hardware and software services business. Results had fallen short of the aspirational forecasts set out at the date of acquisition and consequently the banking covenants would breach within 6 months. The review highlighted a number of operational improvements as well as the maximum debt capacity of the business. MCR led the negotiations with the banking syndicate to negotiate a debt for equity swap and secure a more manageable gearing level based on deliverable earnings and cash forecasts.
A number of Banks will often ask MCR for their opinion on a particular business or sector as a case goes through refinancing or restructuring talks. One such example was where MCR’s views were canvassed of a healthcare company operating in sectors familiar to MCR. A brief report was prepared in 48 hours based on the information provided and the inherent knowledge of the team. These value added and discreet services are provided as part of the ongoing relationships.
Given MCR’s ability to manage a portfolio of diverse businesses, each with particular challenges, the advisory services extend to reviewing entire portfolios. A private equity fund based in Paris, were looking to acquire a portfolio of companies from a UK fund. MCR was engaged to contribute to the acquisition process and subsequently manage the portfolio with the objective of selling all the individual parts within two years. MCR has also been involved in placing portfolios and groupings of companies for sale and ensuring that the management and processes are coordinated. The range of MCR services plays well into the requirements of a bid or sale of a portfolio.
MCR has the depth of relevant experience required to take corporate entities through solvent liquidations when required. Initially representing a banking syndicate MCR undertook a break up of a service station and convenience store business. Taking care of a complex Opco/Propco structure complete with a number of franchisees, MCR parcelled the business in to going concern packages for sale, settled various claims and litigation and managed the return of capital over an intense 24 month period. Given the level of returns and issues taken care of, other projects have followed.
One of the major UK banks asked MCR to help wind up the remaining part of an investment which had various property lease commitments for 5 years on a complex site with sub tenants and an unco-operative landlord. Through a series of careful negotiations the group extricated itself from these leases and released the remaining funds held as rent guarantees against the sub tenants. In all cases negotiations are carefully managed to ensure agreements are reached and returns maximised.
Often the conclusion of a Review is the desire of stakeholders to seek an exit in the short term. In parallel with starting to implement the recommended changes, MCR arranges and leads the corporate finance process. Examples are many and projects initiated from one or all stakeholders. Exits arranged have included complex restructurings and the necessary use of administration and Chapter 11 processes.
MCR was asked jointly by one of the UK’s leading private equity firms and one of the major banks to review the cash requirements of one of their investments supporting the global entertainments business with operations in the UK, US and Asia. Significant delays in the launch of a new product range had impacted the order book and cash flows and new funding was required. MCR worked with management to present the business to potential buyers including trade buyers in the US. Financial systems were close to breaking down and the quality of information deteriorating. A deal was agreed with a US buyer and matters handed to insolvency practitioners to complete a pre-pack to execute the deal.
Various business start up projects approach MCR on a regular basis to seek advice on all aspects of their growth and development. Advice and assistance in preparing business plans including marketing plans, financial plans and operational plans are provided without charge to help new businesses take their first tentative steps. Many of these are very early stage businesses, often unincorporated at the time they approach MCR, and are seeking advice on the systems and disciplines to set them on the way. Others are more developed and are approaching the stage of requiring seed corn or growth capital. MCR helps stress test business models adding specific marketing perspectives and insights. Having started up 3 businesses in their own right, the partners of MCR are well placed to advise on helping build sustainable and competitively differentiated business models. Sector experiences have ranged from IT consultancy, e-commerce, lighting, chemical coatings, biotech through to packaging innovations.