Have your cake and eat it
‘It might also be worth your while looking into areas such as loans and regional development grants, and creditor renegotiations/creditor financing,’ he suggests. ‘Ultimately, the funding option you go for [at an early stage] can depend on what type
of funding you need and what you intend to do with it. For acquisitions, you might use a mixture of all of these and get a leveraged deal together, rather than have to dilute via a private equity deal.
‘A lot of companies will assume they can’t get the leverage so get an equity provider and suffer significant dilution. So, if you get a negative reaction from the bank, at the very least be aware of what’s hidden in the balance sheet and in your cash flow.’
Sell, lease and watch it grow
When successful businesses get to a certain size, no amount of clever efficiency gains or cash flow financing options are likely to deliver the funds needed to take you to the next level in sufficient time to exploit whatever business advantage you have. This is often because quantum leaps in size and scale require a commensurate financial injection.
Charles Whelan, managing partner at HW Corporate Finance, advises owners to take a long hard look at their business assets and where they sit within the overall commercial strategy. ‘If you’ve reached a certain stage and you and your backers don’t want significant equity dilution, you need to sit down and think, “What can I best get out of this business?” If you are a widget-maker, you might take a considered view on whether you should actually own anything that is not about making widgets. In this context, sale and leaseback of assets is great for freeing up cash for growth.’
Selling property to maximise firepower and fuel growth is perhaps the best-known sale and leaseback technique, popularised in the past by high street retailing giants. As well as slashing your property management costs, it drives efficiencies by helping you to focus on your core business.
One venture to use this technique to considerable effect recently has been garden centres play Blooms Of Bressingham. It recently completed the sale and leaseback of its 26-acre freehold at Bicester with Blooms Properties Limited Partnership (BPLP), a 50:50 joint venture with LaSalle Investment Management, for £10.9 million. The joint venture will now provide Blooms with the finance to make acquisitions of rival businesses, with Blooms granting BPLP the first refusal on any property that is subsequently sold at the newly acquired sites.
Since announcing the sale and leaseback, Blooms has bought the business and assets of the Worcester Garden Centre and Stevenage Garden Centre, taking total portfolio garden centres to ten in moves that will boost the heated covered space from which it trades by more than 60 per cent over the next two years.
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