Asset-based lending brings flexibility to dealmakers

Chris Hawes, managing director of Venture Structured Finance, outlines how asset-based lending can complement equity using the example of the institutional buy-out (IBO) of Walkers Mcr.

The asset-based lending (ABL) industry continues to gain momentum, as proved by a report recently released by the Asset Based Finance Association, which showed that in 2007 there was a 30 per cent increase in advances against assets over the previous year.

Our own ABL activity certainly supports this – achieving growth of 43 per cent during the same period. One reason for this growth is the higher numbers of venture capitalists and private equity houses that are including an element of ABL in their deal structures.

Support – before and after the deal

Increasingly dealmakers are using ABL to structure a package that supports both the post-deal phase as well as the initial acquisition – providing seamless working capital for the management team. This is especially relevant if a business needs to implement operational changes after a deal, which is common when a private equity firm is involved.

An excellent example of a deal which combined ABL with equity investment is the £5 million IBO of Manchester-based Walkers Mcr Ltd by Amin Amiri Enterprises (AAE), completed in 2007. Venture Structured Finance supported AAE’s equity finance investment with an ABL facility comprising confidential invoice discounting, term loans on property, plant and machinery as well as a Cashflow Loan.

Flexible finance for the future

Walkers Mcr is a provider of point of sale printed products for the UK market. Founded more than 110 years ago, the company offers a total solution that includes manufacturing, project management, design and implementation. It lists many blue-chip retailers, as well as brand owners and agencies among its clients.

AAE is a mini conglomerate of industrial companies owned by Amin Amiri, who is also the managing director and founder of a2e Venture Catalysts. After the Walker family decided to exit the business, a2e supplied strategic and financial advice throughout the IBO to the senior management team.

a2e was keen to incorporate an element of ABL in the deal that would provide the Walkers Mcr management team with post-deal headroom. The deal was structured so that the facility can flex post-deal, as sales grow, to increase availability in the receivables line.

Financial Fuel

Venture Structured Finance provided the finance required to get the deal off the ground. Talking about the deal, Steve Currigan, company secretary of Walkers Mcr, says: “The facility provided by Venture Structured Finance has operated well since the acquisition last year. The mechanics of the system have proved simple and straightforward. The facility runs trouble free and with this financial cornerstone firmly in place we were are to focus on the other foundation blocks – customers, operations and personnel.

“Our customer base and profitability have both grown in the last 12 months, with a number of major contracts being secured. The funding that Venture provided was central to this success and the nature of our facility will allow us to continue to grow and compete favourably in our dynamic market place.”

By taking a more individual approach to assessing a business’ eligibility for funding, greater opportunities can be explored than with traditional bank-led finance. As the ABL industry continues to reach maturity in the UK, we have witnessed a greater awareness and appreciation by dealmakers of the pre- and post-deal flexibility ABL can offer.

See also: The facts about asset based finance

Adam Wayland

Adam Wayland

Adam was Editor of from 2006 to 2008 and prior to that was staff writer on sister publication BusinessXL Magazine.

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Asset-based lending