Case Study 7

Successful CVA: Company Acquiring Other Businesses.

Around 3 years ago KSA rescued a precision engineering business in the West Midlands. After a tough first year the company is now profitable but has bumpy cashflow. Its products are large ticket items, so the board decided to utilise spare factory capacity by buying in more regular work.

KSA is advising them on the acquisition of a failing precision engineering company where the owner is seeking an exit for retirement. Using a CVA as an acquisition tool (and to keep any risks at arms length) is an innovative way of building up the company without too much risk. KSA advised on the deal and around £700,000 has been added to an existing £4m turnover business.

The creditors supported the restructuring as it provided some return to them where a straight forward liquidation would not. The KSA client is now integrating the business with the following benefits.

• Termination of the landlords lease with nil cashflow costs
  

• Relocation of the business to the client’s existing factory
  

• Reduction in headcount with nil cashflow cost
  

• Freezing of £200,000 of debt
  

• Acquisition for nil cost
  

• Fees paid by acquired business