7 firms supporting Renaissance | Ballast Nedam deal

17 September 2015 Consultancy.uk

Ballast Nedam continues to be in talks with Renaissance Construction about a possible takeover of the Dutch construction firm. The takeover bid placed in July by Renaissance has however been significantly reduced over the past four months, to 20% of the original bid. Poor results posted by Ballast Nedam’s infra-division and other construction projects are cited as the cause. Seven external advisories are currently involved in the deal between the construction companies: ABN AMRO, Deloitte, Clifford Chance, KPMG, Leonardo & Co, Stibbe and De Brauw Blackstone Westbroek.

Listed on the Euronext Amsterdam stock exchange, Ballast Nedam ranks among the five largest construction companies in the Netherlands, after BAM, VolkerWessels, Heijmans and TBI. The construction firm has struggled over recent years with a sluggish construction market. Late last year Ballast Nedam reported disappointing results, which saw the group forced to implement a restructuring programme in a bid to stabilise its finances. The programme resulted in around 150 job cuts and stood at the basis of the divestment of various business units (CNG Net, LNG24, CNG Net Production and Maintenance).

Ballast Nedam - Renaissance Construction

The prospect of a takeover by the Turkish construction company Renaissance Construction has hung over Ballast Nedam for a number of months now. Set up in 1993 in St. Petersburg by the current CEO Erman Ilicak, the Turkish construction company develops and builds a wide variety of projects including shopping centres, offices, hotels, flat buildings, industrial facilities, industrial projects and a diverse range of miscellaneous infrastructure projects, in among others, the developing Middle East and Russian markets.

In July this year, the Turkish company took a 20% stake in Ballast Nedam, and a month later it added a further 5% share. In recent months, Ballast Nedam held talks with the Turks on a complete takeover of the construction company. In July, after an extensive due diligence, a bid of €1.55 per share was put on the table. Recently it emerged from a press release that the initial bid has been negotiated down five times. Earlier stipulated sales conditions, have also been altered downwards, such as the ban on the sale of Ballast Nedam business units after the acquisition.

Ballast Nedam’s particularly disappointing results from various infrastructure and construction projects as well as the additional losses the company is expected to post in the future, have resulted in the large reduction in bid value from Renaissance. The current offer now stands at €5.8 million, 80% down from the original €30 million offer.

Ballast Nedam - Renaissance Construction - dealmakers

Whether the acquisition will be successfully closed depends on the ongoing negotiations between Ballast Nedam and Renaissance Construction. Seven external independent parties (banks, consultancies and law firms) are involved in supporting the negotiations. ABN AMRO and accountancy and consultancy firm Deloitte are providing buyer Renaissance Construction with financial advice, while legal advice comes from law firm Clifford Chance. Seller Ballast Nedam is assisted by a deal team including KPMG, investment bank Leonardo & Co and law firms Stibbe and Brauw Blackstone Westbroek.

×

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.