AAB secures major investment for Scottish stock exchange drive

04 April 2019 Consultancy.uk

Scottish origin professional services firm AAB has secured a key investment for a client looking to launch a new stock exchange for the region. Project Heather hopes that it can create the first Scottish stock exchange in 50 years, marking half a century of major economic and political change in the country.

In 2018, Aberdeen-headquartered accountancy Anderson Anderson & Brown (AAB) launched a new dedicated consulting firm, as it bid to boost revenue growth. Following in the footsteps of the world’s largest professional services firms such as the Big Four – all of whom branched into the lucrative consulting sector from accounting – executives at AAB Consulting hope the firm will hit revenues of £5 million in its first three years.

The company’s existing consulting arm transferred into the dedicated business in order to provide a platform for “rapid growth” following a hike in demand for its services. At its launch, the AAB Consulting division was headed up by Chief Executive Bill Kane, a former Big Four Partner. Kane joined AAB as a Director in 2017 in order to develop and grow a full-service consulting business across six key areas – strategy, operations, human capital, supply chain, IT/digital and data analytics.

AAB secures major investment for Scottish stock exchange drive

Following on from its high-profile launch, and staffing itself with an aim towards making ground on incumbent consulting firms, AAB has landed a major seven-figure equity investment for Project Heather – a client working to re-launch of the Scottish stock exchange after almost fifty years. Project Heather, headed by financial services entrepreneur Tomás Carruthers, will be headquartered in Edinburgh, with offices planned throughout Scotland.

It would be the first Scottish stock exchange since the closure of the trading floor in Glasgow in 1973. Five decades after that historic closure, however, the economic and political landscape of Scotland has shifted markedly. Devolution has seen the nation increasingly edge towards autonomy from the rest of the UK, while growth sectors such as renewable energy and biotechnology have established Scotland as a centre of global excellence. According to the team behind the stock exchange project, the venture will ensure companies can continue to find the financing they need to reach their full potential.

In late 2018, Project Heather agreed a partnership with one of the world’s largest stock exchange platforms, Euronext, to run the exchange on its Optiq trading platform. Following FCA approval, Project Heather plans to launch before the end of 2019, having already received significant national and international interest from businesses considering a listing on the exchange.

Brian McMurray and Stuart Cooper of AAB worked with Tomas and the Project Heather team in delivering fundraising advice, sourcing investors and ultimately securing the desired investment. A further institutional investment round is expected to kick off in the coming months, and interested parties should contact the team at AAB for more information.

Douglas Martin, Head of Corporate Finance commented, “We are delighted to have secured the investment for Project Heather which will help to re-establish the Scottish Stock Exchange after almost fifty years. Brian and Stuart have worked closely with Tomás and his team during this process, and we look forward to continuing the relationship and supporting the launch of Project Heather later this year.”

Tomás Carruthers, Founder and Chief Executive of Project Heather, added, “Working closely with AAB, securing this initial round of investment funding is enabling us to work on bringing a Scottish Stock Exchange to full fruition and launch in the second half of this year. We believe a stock exchange, built on the principles of raising capital to have a positive impact on society and the environment, will be a major contributor to sustainable economic growth both in Scotland and the UK as well as provide a destination for impact investors and issuers globally."

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8 tips for successfully buying or selling a distressed business

18 April 2019 Consultancy.uk

Embarking on the sale of a business is one of the most challenging experiences a management team can undertake. Even serial dealmakers acknowledge that the transaction process can be gruelling, exposing management to a level of scrutiny and challenge through due diligence that can be distinctly uncomfortable.

So, to embark on a sale process when a business is in distress is twice as challenging. While management is urgently trying to keep the business afloat, they are simultaneously required to prepare it for scrutiny by potential acquirers. Tim Wainwright, an experienced Transactions Partner with Eight Advisory, says that this dual requirement means sellers of distressed businesses must focus on presenting their business in a way that supports buyers in identifying value, whilst simultaneously being open about the causes of distress. 

According to Wainwright, sellers of distressed businesses should focus on eight key aspects to ensure they are as well prepared as possible:

  • Cash: In a distressed situation cash truly is king. Accurate forecasting and day-by-day cash balances are often required to ensure any buyer is confident that scarce cash reserves are under proper control. 
  • Equity story and turnaround plan: Any buyer is going to want to understand the proposed turnaround strategy: how is the business going to enact its recovery and what value can be created that means the distressed business is worth saving? Clear presentation of this strategy is essential.
  • The business model: Clear demonstration of how the business model generates cash is required, with analysis that shows how financial performance will respond to key changes – whether these are positive improvements (e.g., increases in revenue) or emerging risks that further damage the business.  Demonstrating the business is resilient enough to cope with these changes can go a long way to assuring investors there is a viable future.
  • Management team: As outlined above, this is a challenging process. The management team are in it together and need to be consistent in presenting the turnaround. Above all, the team needs to be open about the underlying causes that resulted in the distressed situation arising.  A defensive management team who fail to acknowledge root causes of distress are unlikely to resolve the situation.

8 tips for successfully buying or selling a distressed business

  • Financing: More than in any traditional transaction, distressed businesses need to understand the impact on working capital. The distressed situation frequently results in costs rising as credit insurance becomes more difficult to obtain or as customers and suppliers reduce credit. Understanding how these unwind will be important to the potential investors.
  • Employees: Any restructuring programme can be difficult for employees. Maintaining open communications and respecting the need for consultation is the basic requirement. In successful turnarounds, employees are often deeply engaged in designing and developing solutions. Demonstrating a supportive, flexible employee base can often support the sale process.
  • Structuring: Understanding how to structure the business for the proposed acquisition can add significant value. Where possible, asset sales may be preferred, enabling buyers to move forward with limited liabilities. However, impacts on customers, employees and other stakeholders need to be considered.
  • Off balance sheet assets: In the course of selling a distressed business, additional attention is often given to communicating the value of items that may not be fully valued in the financial statements. Brands, intellectual property and historic tax losses are all examples of items that may be of significant value to a purchaser. Highlighting these aspects can make an acquisition more appealing.

“These eight focus areas can help to sell a distressed business and are important in reaching a successful outcome, but it should be noted that it will remain a challenging process,” Wainwright explains. 

With recent studies indicating that the valuation of distressed business is trending north. With increased appetite from buyers who are accustomed to taking on these situations, it is likely that more distressed deals will be seen in the coming months. “Preparing management teams as best as possible for delivering these will be key to ensuring these businesses can pass on to new owners who can hopefully drive the restructuring required to see these succeed,” Wainwright added.