Chemigraphic Completes Debt Refinancing
Following the management buy-out in December 2010, Livingstone has successfully advised the company's management on a debt refinancing package, supported by HSBC.
Following the management buy-out of specialist electronics manufacturing services group Chemigraphic in December 2010, backed by private equity house RJD Partners, Livingstone Partners has successfully advised the company’s management and RJD on a debt refinancing package, supported by HSBC.
An important factor in RJD securing the management buy-out was its willingness to offer a fully equity underwritten deal. By providing 100% of the finance to support the deal, rather than looking to recruit a bank to fund a part of it, RJD was able to provide a swift timetable to completion and certainty of delivery for the vendors. This approach also gave Chemigraphic the benefit of being able to take its time to negotiate the best possible debt financing terms from a bank in the months following the acquisition.
Equity underwritten deals remain the exception rather than the rule but are seen as an increasing feature of competitive sale processes, where several private equity houses are competing to acquire an attractive asset. With company vendors still nervous of the banks’ ability to follow through with a funding package on a tight transaction timeline, the increased certainty of dealing with a private equity house that is willing to fund the upfront price itself is an important differentiator when selecting a preferred partner to close a deal with.
Chemigraphic designs, assembles and installs complex printed circuit board-based components and provides a number of related services including design, full assembly and testing and final delivery for customers in the Medical Technology and Defence sectors. The business employs 125 staff and delivered an annual turnover of around £20m in the year to 31 March 2011.
The Chemigraphic buy-out and subsequent refinancing were led by Graham Carberry, Director at Livingstone Partners, who commented: ”We are delighted to continue our relationship with Chemigraphic, RJD and HSBC, to secure an optimal financial structure for the business as it grows.”
Equity Underwritten deals: Pros and Cons
- Much greater certainty for a vendor
- Enables management and the successful PE house to approach banks in their own time, with poise and the benefit of having owned the business for several months, thereby de-risking the opportunity for the banks
- Likely to be an element of ‘bridging’ finance in the deal with the PE house which can become expensive if bank debt is not raised within a reasonably short time frame following the initial deal
- An important differentiator for a PE looking to signal its interest in the deal
- Only likely to be offered by PE houses which are very keen on the particular investment opportunity
- Does not reduce the due diligence burden as the PE house will wish to ensure that its DD reports are absolutely watertight and must pass muster with the banks when raising debt after the deal
For further information contact:
Graham Carberry, Director, Livingstone London
T: +44 (0)20 7484 4728
E: carberry@livingstonepartners.co.uk