Graham McMullen had built the Admiral Group of companies into a significant force in the South East. Admiral’s products and services included the supply and service of photocopiers, telephone systems and call plans and IT support services.  Group turnover was c£25 million.

Within the Group, Admiral’s photocopier business accounted for c£15 million turnover and it was a “Top 10” business in its sector in the UK.  It was no surprise, therefore, when Graham received an informal acquisition approach from the Danwood Group, the leading UK player. The business was enjoying positive growth and Graham wasn’t sure whether it was the right time for a sale, but he decided to follow up the enquiry and recognised that he would need expert help to progress matters. His legal adviser, Philip Ross-Smith at Camerons Solicitors, introduced him to Clive Sanford.

 

 

Business partnership proved vital in acquisition deal

 

Graham decided to gauge the extent of interest and engaged Clive’s firm. They set about reviewing the Admiral group with a view to extracting information relevant to the photocopier business. This was a complex exercise for two reasons - firstly, because the group included several businesses which were not kept entirely separate – mutual customers, shared staff, etc – and, secondly, because the quality of management information, whilst perfectly adequate for management reporting and audit purposes, wasn’t sufficiently detailed for the purposes of a multi-million pound transaction. 
At the same time, other potential purchasers were identified, researched and approached.  A number expressed interest, signed Non-Disclosure Agreements and were brought into the sale process by being provided with information and invited to meetings.

Attractive offers were received from several parties, but it was clear that the Admiral business offered most value to Danwood – finding the party which can benefit most from an acquisition is a key strategy of any sale. 

After months of discussions and negotiations, Graham McMullen chose to accept an offer at a level more than 2 times the initial level.  Reaching this point involved Graham and Clive working closely together as a team – playing different roles as appropriate and combining the emotional perspective that only a principal can bring to negotiations with a robust analytical approach that an expert intermediary can contribute. 

Although a deal had been agreed in principle, there was much to do before a transaction could complete.  Whilst a great deal of work had been carried out to identify the underlying trading record of the photocopier business, this had to be demonstrated to the satisfaction of Danwood and its advisers during the “due diligence” phase, a point in the deal process where any vendor is very vulnerable - the purchaser’s interest, inevitably, is to seek to find reasons to renegotiate the agreed terms.

A small matter of paperwork

The other feature that was particular to the Admiral / Danwood transaction was what were named “separation” matters. The extent of the operational integration between the photocopier and other Admiral businesses was significant and this needed to be identified in detail and “undone” on an agreed basis to allow the sale of the business to proceed.  This involved many hours of meeting between senior teams from both companies, with the resulting negotiations and agreements requiring substantial additional documentation. 

The transaction completed in September 2010.  There was no downwards renegotiation of terms and both Graham and Danwood are very happy with the outcome.

 

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