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A Bankers Perspective – securing funding for growth

A Bankers Perspective – securing funding for growth. Setting the Scene. Nursery Sector remains highly fragmented. 2014 has already seen large a number of transactions which have involved consolidation in the Sector. Most nursery businesses remained resilient in the economic downturn.

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A Bankers Perspective – securing funding for growth

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  1. A Bankers Perspective – securing funding for growth

  2. Setting the Scene • Nursery Sector remains highly fragmented. • 2014 has already seen large a number of transactions which have involved consolidation in the Sector. • Most nursery businesses remained resilient in the economic downturn. • Sector is generally viewed positively by both investors and lenders. • Positive economic outlook

  3. Character of the existing business – internal analysis • Management • Track record • Blend of skills/ succession planning. Structure and systems • Head office support or management on site? • How is performance analysed internally? • What skills are outsourced? Culture • Management style • How satisfied are your employees? • Good childcare above profit? 3 | Barclays presentation title | 30 January 2012

  4. Character of the existing business – external analysis • Trading activity • Evidence that your business is reputable and sustainable. • Financial: Management accounts, audited accounts, KPI’s. • Operational: Ofsted reports. Industry outlook/competitive positioning • Historic impact of downturn. • Government policy/support. • Regulatory changes • Existing supply in relevant areas. • Fee rates/Ofsted ratings vs key competitors. • Why would a parent choose your nursery? 4 | Barclays presentation title | 30 January 2012

  5. Position the opportunity with your bank • Key areas to cover: • Is it an acquisition, a new development, or an extension? • How does this opportunity compliment your existing settings? • Track record/reputation of target? • Source of introduction to the opportunity? • Rationale for sale of target • Projected costs/purchase price & proposed funding sources. • How does the opportunity fit into your wider strategy?

  6. Financial analysis • Focus areas for your bank will include: • How your financials/KPI’s benchmark against your peer group. • Trend analysis over the past three years. • Forecasts and assumptions underpinning these. • Sensitivities. • Free cash flow analysis. • Ability to repay. • Accounting policies • Breakeven analysis. 6 | Barclays presentation title | 30 January 2012

  7. Integration plan – share it with your Bank! • Key areas to cover: • How do you intend to integrate the company? • Have you developed a 100 day plan? • Operational assumptions? • How will progress be monitored? • Is any extra resource being taken on for the integration process? 7 | Barclays presentation title | 30 January 2012

  8. Due Diligence • Valuation • Has the vendor prepared a valuation that could be shared with the Bank? • Valuation addressed to the Bank will also be required. Financial • Appropriate for larger M&A transactions. • Independent review of information supplied by vendors. • Highlights key risk factors/red flags. • Sensitivities Legal • Highlight key legal risks. • Corporate structure/legal title to property. • Employment matters 8 | Barclays presentation title | 30 January 2012

  9. Debt quantum • Your Bank will typically consider the following factors: • Size/profitability of your business • Value of freehold assets • Availability of the assets as security. • Level/sustainability of cash flow • Company’s ability to scale • Company value 9 | |

  10. And finally – some other tips to keep your Bankhappy • Offer to take your Bank manager to visit your nurseries • Provide your Bank with regular and clear management accounts. • Prioritise good childcare over profit • Regular dialogue/communication. • Be transparent 10 |

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