May 2017 : Businesses never outgrow the need for critical outside advice
Business is tough. Owner managers have all the problems faced by the presidents of big corporations but usually without the back-up personnel. That is where having an outside counsellor, a trusted advisor, can be invaluable. All big business take advantage of the services outside advisors can give. In fact most would not have got big without the aid of outside counsel. It is not a luxury but a key performance driver; a must have for the benefit and prosperity of your business.
Businesses never outgrow the need for critical outside advice as new problems and challenges confront them every day. The ability to step back and see the problem in the round and then have the resource to consider, develop and implement a cool and logical solution is a valuable capability. Being free of day-to-day baggage, which can often hinder the formation of a clear view, an outside trusted advisor can assist in giving you that vital element objectivity.
An outsider will often be more effective at producing results than an insider because their greater detachment fosters the capability of thinking anew about problems. There is no job or internal reputation to lose when suggesting novel solutions to problems. Being outside the constraints of the company culture makes experimental ideas safer to generate and it is these which often set the company on a better path. In short, timely outside advice heads off bad business decisions.
April 2017 : How buyers are seeking to align their interests with sellers of companies in the current market place
The use of “Earn out” mechanisms by company acquirers in people based sectors like Media, Public Relations, Advertising, Healthcare communication, Recruitment, Consulting and Wealth Management sectors is well established. Earn outs have been traditionally been used by such acquirers as a tool to retain teams and senior management in the business along with their contacts, relationships, company processes and know-how with the aim of ultimate integration into the acquirer’s operations. In this respect people based businesses are fundamentally different to those in many other sectors that may have Intellectual Property, Technology, Asset backed or patents for example.
We have seen trends towards the increasing use of earn out acquisition structures to address different types of risk to those associated with the retention and integration of business knowhow and people into an businesses. Please see two examples below:
March 2017: Exiting People Based Businesses
Our experience of acting for owners and acquirers of numerous companies in “people” based sectors like PR, Advertising and Training, is that company owners may be offered an “Earn out” mechanism on completion of any transaction for the sale of their company. We have found that such transactions generally involve an element of consideration payable on completion of the acquisition of the business (“Initial Consideration”) and consideration payable at some point(s) in the future (“Deferred Consideration”) based on specific future events. These future events may include, for example, business performance or other goals and metrics. From the point of view of the acquirer of a people based business, an earn out structure can address key business risks including retention of key staff and alignment of business goals between both sides.
We are of the view that if you are a company owner in a people based business that you should consider (in addition to the usual factors) the implications of an Earn out structure in terms of succession planning for your company, length of any potential earn out period and aligning your commercial interests with those of a future acquirer.
February 2017 : Brexit Implications for the Financial Services Sector
According to the FCA, some 5,476 companies in the UK hold at least one passport to offer financial services across the EU (Source: FCA). The press has noted how various companies are contingency planning for the potential outcome that UK financial service and insurance companies are not granted passporting rights (post Brexit) to continue to offer their services within the remaining 27 EU states.
In restructuring or contingency planning for Brexit, we are of the view that the Insurance, Life Assurance, pensions and Investments sectors could be presented with very specific challenges on account of the disparate issues and the scale of internal and external mobilisation that may have to be addressed in a compressed timeframe. The issues to be managed may include complex solvency, policyholder, regulatory capital, tax, actuarial, fund management and reinsurance issues for example.
Financial Front’s principals have delivered complicated Life, Pensions, Asset industry restructuring and contingency planning in scenarios that were described as “beyond challenging. “
We are in a unique position to assist in derisking and potentially compressing the time line required to create a “press the button” scenario for a post Brexit environment and can assist with the following issues:
- Project Managing diverse internal and external stakeholders where there is a lack of precedent and a potentially changing regulatory environment that may create dependency on several uncertain events.
- Mobilising and Managing Legal Complexity & Structure, Regulatory Risk & Directives and Stewardship and Governance interests.
- Synchronising the various players and delivery on time and within budget.