RSM advises Kingstown Associates management buy-out

22 December 2015

Kingstown Associates vendors have been supported with corporate financial advice by RSM UK with respect to the management buy-out of the company. The new owners will continue to be supported by Managing Director Nigel Mellor as they seek to further the firm’s growth in the golden age mail order market.

Mail orders remain a way for people of a certain age to access their hobby and life-style activities. One of the UK’s larger players is Kingstown Associates. The company, based in East Yorkshire, has a number of lifestyle brands in its portfolio – focused on the 60+ year segment. The company provides “bespoke fulfilment services” through which it offers third parties a means to easily access a large consumer base of elderly people in the UK with their products. Last year, the company booked a turnover of £18 million in revenues.

RSM advises Kingstown Associates management buy-out

The management buy-out was initiated by Jody Allan, the company’s Head of Buying for the past four years, Wayne Barry, the Head of Marketing, and Paul Chambers, the company’s Head of Operations. The sellers, who bought the company in 2009, are Nigel Mellor, who has been the Managing Director at the company and David Whittle, the company’s Director.

The transaction was supported by a number of third parties. RSM UK’s corporate finance team, including Steve Hubbard, Adam Fearnley (who has recently moved on to the Royal Bank of Scotland) and James Atkinson, provided the vendors with transaction advice, while Clarion acted as their legal advisers. On the other side of the table, legal advice was provided by Shulmans, while funding for the management buy-out came from HSBC who were provided legal support from Bond Dickinson.

Steve Hubbard | Adam Fearnley | James Atkinson

Commenting on the work done for Kingstown Associates’ vendors, Hubbard, Corporate Finance Director at RSM, says: “We advised Nigel and David on their original acquisition seven years ago, and having seen them develop the business over that time and strengthen the management team, I am delighted that we have been able to assist them on the secondary buy-out as the business looks to its future success.”

As part of the deal’s structure, David Whittle will retire from the company; while Nigel Mellor will continue his current role, thereby supporting the management team. Mellor is positive about the company’s future, remarking that: “I’ve worked with the new team for a number of years during which time they have gained experience of the business and the sector in which we operate. Together we’re looking forward to continued growth and success.”

* In October 2015, RSM International harmonised the brand of all its global member firms to RSM, with the aim growing the RSM brand recognition and accelerate global growth.


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.