£7.2m Merger and Acquisition: Competitor Acquisition

Case Summary:

A freight forwarding company faced challenges in expanding operations due to stagnant growth and supply chain issues. To address these challenges, FBX assisted the company with a merger and acquisition strategy, securing a £7.2 million facility and leveraging asset-based lending to enhance financial flexibility. This enabled the company to acquire new contracts, ramp up operations, and achieve sustained growth in the freight forwarding industry.

Background:

In the dynamic sector of international logistics, our client faced a pivotal moment of transition and opportunity. The core challenge was centered around the client's ambition to successfully undertake a merger and acquisition (M&A) following the departure of a key director. This endeavor was not just a matter of changing leadership but also required navigating a complex financial landscape to secure the future of the business.

The merger and acquisition strategy demanded a sophisticated blend of financial instruments, including debt, equity, and vendor loan notes, to ensure a smooth and viable transition. The primary obstacle was assembling a debt package that would underpin the client's succession plan without compromising the operational integrity or financial stability of the business. This situation necessitated a strategic approach to financing that could support the client's objectives while ensuring the continued success of the international logistics operation.

The Problem:

This Midlands based logistics company was not able to expand operations quick enough to cater for increased demand, with stagnant growth indicators.

They experienced lag time in vehicle purchasing owing to supply chain issues and struggedto find target acquisitions.

The Solution:

With the help of the FBX team, we assisted the client with a suiable merger and acquisition strategy, allowing target negotiations (50% cash up front / 50% earn out).

We assisted in acquiring an ABL facility utilising undrawn aged receivables through invoice discounting and leveraging unencumbered vehicles and assets. This resulted in the business remaining cash positive and allowed our client to ramp up operations and take on new and existing contracts.

Benefits and Reasons for Mergers and Acquisition (M&A):

Mergers and acquisition can be powerful tool for businesses to achieve various strategic goals. The effectiveness of mergers and acquisition depends on factors like strategic alignment, financial viability, and successful integration. Common reasons for mergers and acquisitions include:

Growth: Expanding market reach, product lines, geographic presence, or service offerings.
Consolidation: Strengthening market position and achieving economies of scale in mature or competitive industries.
Diversification: Reducing reliance on a single market or product by entering new areas.
Acquiring Technology or Expertise: Accessing new technologies or specialized knowledge.
Financial Synergies: Achieving cost savings or revenue increases through operational integration.
Exit Strategy: Providing a return on investment for entrepreneurs or small businesses.
Turnaround: Restructuring businesses in distress or shedding unprofitable divisions.

The Outcome:

In response to these challenges, a comprehensive solution was devised and implemented with the expertise of the FBX team.

The strategy focused on two main fronts: facilitating target negotiations and enhancing financial flexibility. We played a pivotal role in the negotiation process, successfully arranging terms that included 50% cash payment upfront and a 50% earn-out arrangement. This balanced approach to acquisitions enabled our client to pursue strategic targets without overextending financially.

To address the financial constraints and support the company's expansion efforts, FBX assisted in securing an Asset-Based Lending (ABL) facility. This innovative financial solution leveraged the company's undrawn aged receivables through invoice discounting, alongside utilising unencumbered vehicles and other assets. By tapping into these underutilised resources, the ABL facility provided a much-needed infusion of liquidity.

The outcome of these strategic interventions was transformative for the business. The acquisition of the £7.2 million merger and acquisition facility, coupled with the strategic use of financial instruments, allowed the company to remain cash positive throughout the expansion process. This financial stability and flexibility enabled our client to expedite the ramp-up of operations, facilitating the acquisition of new contracts and the fulfillment of existing ones. Through these targeted solutions, the company overcame its growth stagnation, positioning itself for sustained expansion and success in the competitive freight forwarding industry.

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£7.2m Merger and Acquisition allows Freight Forwarding Company to Acquire Competitor