This Article appeared in the Business Money Magazine 

HOSKYN CHILD INTERNATIONAL 

Building a truly integrated funding package or “Financial Partnering” as it is rapidly becoming known takes the basic method of Networking up a notch for clients and professionals alike. Whilst Networking in its basic form provides valuable introductions between brokers, funders and professionals alike, “Financial Partnering” looks to integrate the services and opportunities  generated from Networking into viable and exciting packages for the client companies. 

A 2002 Case Study for your evaluation:

At the end of 2001 Hoskyn Child had taken on a new client based in the South of England that specialised in design and manufacturing. The Directors had brought in the HCI team as a last gasp attempt to turnaround a rapidly declining financial position. With the Company having lost in excess of £2 million over a two year period, and continuing to bleed losses at a rate of £100,000 per month, rapid action was needed.

Following an initial overview, we obtained agreement from Directors, shareholders and staff to put in place a radical and rapid restructuring package that would immediately stem the losses and reduce overheads. Given the financial contacts and partners that we have in the market, we were immediately able to bring in new funders to support the existing financiers and put in place the agreed strategy package. Over the next few months, with the cooperation of all involved, the following actions were agreed and put in place:

• An agreed strategy with the creditors, shareholders and existing funders.
• A Company Voluntary Arrangement writing off approximately £1.8m worth of debt.
• Retention of the current banking facilities as well as maintaining the existing overdraft of £250,000
• A new factoring arrangement providing an annual facility of approx £5m.
• An additional advance from the factoring company of £50,000 to meet exceptional one-off costs.
• Projected annual overhead reductions of approximately £800,000
• Asset funding of £120,000.
• Write off of tax losses in exchange for £50,000 of working capital tax grant.

By March 2002 the Company was stabilised and back to a break-even trading base. 

Hoskyn Child, with the Board and its advisors, developed a strategy to utilise the Company as a vehicle to identify rival players in a similar field with a view to drawing them together into a successful Group of Companies suitable for a possible market float. It is at this point that the principle of “Financial Partnering” really comes into its own. 

We approached a well known city accountancy firm that specialises in Initial Placements - or as they are most commonly known - IPO’s. It was agreed that the Company would secure 3 additional target companies for acquisition and get negotiations to the stage of Heads of Agreement as a pre-requisite to attempting to approach suitable investors. To ensure that the Group would have an edge in the market, part of the strategy employed would also be to source a Far East manufacturing partner for a Joint Venture arrangement to further reduce manufacturing costs. Utilising Hoskyn Childs’ contacts in Hong Kong, we were able not only to secure three suitable partners for a Joint Venture, but also an in- principle commitment to pre IPO costs and possible investment.

Over the next few months, things moved into high gear with the formation of a PLC Group and the recruitment of a high level management team to run the enlarged organisation.

As of the end of 2002 the Company had positioned itself to carry out the following:

• Acquire 3 new companies forming a £20m T/O group in preparation for floatation.
• The potential to raise £6m via an IPO being prepared by the relevant regulated professional company.
• An in-principle commitment for pre-IPO funding of £850,000.00 to meet working capital and due diligence costs incurred prior to the float.
• A commitment of support from the Banking partner for additional funds and expanded facilities.

• An in-principle agreement from the factoring company to provide a group wide facility covering approximately £20m of annual T/O, rising to a projected facility at the end of year 3 of £90m.

Looking forward into 2003 there is a strong possibility (war and markets allowing) that the Company will have entered totally new territory, not only from a structural point of view, but also with a high level of financial security and profitability.

Thanks to all the financial partners involved in this project, we will have turned a company that was in rapid cycle of terminal decline, into a potentially thriving newly floated group with viable profits and a future of impressive growth. 

Over the last 14 months we have worked with two banks, two factoring companies, three accountancy firms, two legal practices, three financial brokers, one overseas accountancy firm, two leasing companies, one valuation firm, five manufacturers, two insolvency practices, one firm of executive head-hunters, one firm of insurance specialists, two bookkeeping accountants and one interim manager!

That - folks - is how “Financial Partnering” can work. All of the professionals and companies with whom we operate understand the basics required for true success in areas such as company rescue, recovery and turnarounds. In particular, the need for flexibility, a willingness to pull a strategy together, and an ability to work as part of a total funding package is essential. These basic principles ensure that all parties succeed and the clients, shareholders and staff also benefit. We use the same principles for second stage funding as well as the more distressed company projects we deal with - in particular expansion, acquisitions, MBI’s and MBO’s.

Providing all goes well with the forthcoming IPO, the companies involved in the Group and over 300 people employed by the organisation will still be operating a successful British manufacturing firm (a rare animal in itself). They will enjoy growth through acquisition and build a new and stable company that will have an established international partner. 

We look forward to continued success with our partnering contacts, from the introducing broker through to the lenders and support professionals.

If you are interested in working with Hoskyn Child International and our team, please feel free to contact us on 01322-424594 or email us at info@hoskynchild.co.uk – facts, timescales and amounts relating to the case study example given have been altered to protect client confidentiality.