The M&A advisors behind the Catalyst - Sionic Advisors deal

15 April 2019

UK-based Catalyst Development – which has recently been expanding its capacity with a campaign of acquisitions – has joined forces with Sionic Advisors, to forge a company of over 300 people. A host of professional services firms advised on the merger, with PwC, Alvarez & Marsal, Eversheds Sutherland, Livingstone Partners, GRAPH Strategy, Stratton, Tosca Debt Capital and Lloyds Bank all playing roles.

Following a sustained period of growth, at the start of April 2019 Catalyst Development confirmed it is merging with Sionic Advisors, a US consultancy which similarly serves the financial services sector. Headquartered in New Jersey, the firm was founded in 2014, and has since grown to host 160 professionals with offices in New York, Toronto, London, Madrid, Zurich, Singapore, Stockholm, Mumbai, Chennai and Bangalore. It specialises in numerous service lines, including, among others: financial crime and compliance, client lifecycle management, and strategic technology.

After joining forces, the combined group will command a revenue of over $60 million and a staff base of more than 300 professionals, from locations across North America, Europe and Asia. The deal was backed by private equity firm and long-term Catalyst investor Livingbridge, a mid-market private equity firm with offices in the UK, the US and Australia, investing in fast growing companies valued up to £200 million. 

The M&A advisors behind the Catalyst - Sionic Advisors deal

Livingbridge Partner Pete Clarke commented on the merger, “Both firms are experts in creating value for clients in a highly demanding sector. We are delighted to support the combined international ambitions of Catalyst and Sionic, including from our US operations located near the Sionic New York HQ. This is just the beginning for the group, which will continue to grow rapidly and target further strategic acquisitions.”

A number of other professional services firms also provided insight which helped to forge the deal. The Corporate Finance arm of PwC, one of the four largest accounting and consulting firms globally, provided financial advisory support, in a team led by Simon Viner and Usman Choudhary. International professional services firm Alvarez & Marsal also advised on the merger, with a team consisting of Adrian Balcombe, Vladimir Halas, Simon Gore, and Rachel Copley.

Commercial due diligence for the transaction was performed by Jeff Merkle, Mark Stein and James Tetherton from Graph Strategy; Stratton HR’s Anna Cornwallis provided strategic and tactical HR support for the move. At the same time, legal advice was provided by Ian Moore and Dan Shilvock of law firm Eversheds Sutherland. MHP Communications provided financial PR support.

Livingstone Partners, an international M&A and debt advisory, supported the process, with a team consisting of Alex John, Will Evans, Neil Smith. The debt facility for the merger was meanwhile provided by Tosca Debt Capital and Lloyds Bank.

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8 tips for successfully buying or selling a distressed business

18 April 2019

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.