Frequently asked questions about MBI opportunities
Who is Auxilium Advisory ?
Auxilium Advisory Limited (company reg number 06714851) is a corporate finance firm which helps buyers to find, fund and transact on SME purchases, typically under £20m value.
What does Auxilium do ?
AUXILIUM works proactively to support buyers in handling the purchase of a private company. Buyers can include Board/management level candidates, corporate businesses and private equity/venture capital. Typically the target business will be an SME with turnover < £10m and EBITDA < £2m. All sectors are considered.
What does the service include?
The service includes: a thorough search of all relevant businesses for sale via business brokers, vendor advisers and other corporate financiers across the UK to derive a target list; attending meetings in conjunction with the prospective buyer and liaising with the vendor/vendor advisers; funding arrangements; deal structuring including valuation and offer; deal management; business modelling and cashflow forecasting including “what if” scenario planning; full negotiations through to final completion of purchase.
How do I fund a transaction ?
Despite historic difficulties in funding these type of transactions, Auxilium has developed relationships with a range of funders who are happy to support buy-in transactions. A funder is most keen when the business has a history of strong profit growth, strong cash generation and a positive balance sheet. In terms of the balance sheet, businesses with a range of assets which can be leveraged are always of interest to funders. Buildings, stock, plant and machinery and debtors, can all be utilised in constructing a funding package.
What level of capital will I be expected to invest ?
Typically, MBI candidates are expected to invest personal cash which is typically around £150,000 minimum although the precise level required depends totally on the individual transaction and funding required. A good rule of thumb is to consider the investment to be equivalent to one year’s senior management salary. This injection of personal capital is often referred to rather crudely as “hurt money” or “skin in the game”.
Will I need to raise money from private equity or venture capital ?
In many deals, it is not possible to raise enough funds to complete a deal solely from a combination of asset based funding and the personal capital injection from the buyin candidate. On such deals, we could introduce some additional funding from our high net worth/business angel network. Alternatively, we could look to the private equity and venture capital community. We have strong links to a number of PE/VC houses who are proactively looking for the right opportunity and they are excited by deals below the £10m value mark.
Will I be expected to give a personal guarantee ?
In short, the answer is invariably, YES.
If you are not prepared for this, then a third party funded management buyin transaction is probably not the right option for you.
What sectors are covered ?
All sectors are covered. Auxilium has access to a range of business brokers and vendor advisers across the UK and can work proactively to source a business for sale in any sector although we do have a specific interest in manufacturing, engineering, electronics, building/construction and technology, amongst other sectors.
What is the typical size of target company in terms of turnover and profits ?
Companies which are a good target for our mbi solution are normally < £10m turnover, with corresponding EBITDA of <£2m.
Who will be my key contact ?
There are 2 key contacts:
Paul Griffiths (handles initial mbi candidate interaction; target business search process; all initial vendor adviser liaison)
Steve Robinson (handles deal structuring; valuation; business planning; funding; deal management)
What fees are involved ?
Fees are charged by Auxilium to the buy-side party of the transaction. These fees are typically paid out of funds raised (and not by the buyer personally). Please call us for further information on this aspect.
As an alternative, Auxilium can exchange part of their fee for equity in Newco and the Auxilium Directors will work as Non Execs alongside the new owners in adding value to the business post purchase. Paul has substantial experience in all aspects of people strategy & management and operational areas and Steve has financial, general management and operational expertise.
What if I introduce a business purchase opportunity to Auxilium ?
Our service can accommodate this. Many of our buyers approach us having already sourced a deal which they are keen to explore. If this is the case, we are able to reflect this in our terms of engagement with the buyer.
Who pays the fees ?
Fees are rolled into the transaction costs and included in the total amount of funding sought to complete the purchase. The mbi candidate is not expected to fund the costs of the deal in their own right.
What timeframe does it take from start to finish ?
Normally, you can expect to take at least 6-12 months to find and complete the right deal but for some this can be quicker, particularly if we are aware of a relevant target when we first speak to an MBI candidate.
What multiple is applied in the valuation of a company for sale ?
Typically 3-5 times adjusted EBITDA however, valuation is a factor of many aspects. At Auxilium, we have a matrix model of valuing a business which “normalises” one-off high/low profit years and takes account of the general run of trade over a longer period of time.
Where does AUXILIUM fit in the market for buying companies ?
Auxilium is unusual in the market for buying and selling companies. We have both the ability to generate mbi candidates and through extensive relationships with sell side advisers, we are shown details of hundreds of businesses for sale on an annual basis. Our skill is in cleverly matching the two aspects to generate a flow of deals and thereafter, manage the process through to successful completion. We specifically target opportunities to buy where the vendor/owner is considering retirement and also where he/she has a paternalistic view and wants to leave some form of legacy for their efforts. Such owners don’t necessarily wish to sell to a trade buyer for the highest price but often they would rather see continuity of trade at the existing site, full staff retention and “business as usual” once the deal has completed.
Do I need to work exclusively with you ?
We do not expect you to work exclusively with us. You may have already generated some connections from your own network when we first speak to you. That is fine. We offer a focussed proactive search which will provide a highly targetted range of businesses from the business broker/vendor adviser market which the buyin candidate is not able to access in their own right.
What if Auxilium have more than one MBI candidate interested in the same deal?
Our professional integrity and general code of conduct dictates that we will only represent one candidate per deal. Once an Auxilium MBI candidate progresses to offer stage, then this precludes us from working with another candidate on the same deal. This exclusivity aspect applies until such time as the primary buyer ceases discussions/negotiations. Thereafter, we consider it appropriate to open up the deal to other interested buyers.
What if the owners wish to remain involved and leave some equity in the business post-sale ?
This is potentially very good for the mbi candidate and for the chances of success in completing a transaction. This is due to the fact that funders are keen on the idea of existing owners selling < 100% of their equity holding and leaving a portion of equity in the business (often referred to as “rollover equity”). This can reduce the perceived risk associated with these type of transactions. Equally, an element of deferred consideration will help the funders to become comfortable with the transaction.
What if I don’t wish to purchase 100% of the share capital ?
This can normally be accommodated. If you have another individual or third party such as a high net worth or business angel with whom you would like to undertake the purchase, that is fine. Equity roll over is mentioned above but this sort of thing can help external funders to gain comfort in the business and it’s potential for successful continuation on the change of ownership.