Show all answersHide all answers Whilst our equity investments have to date ranged from 18% to 100%, a turnaround situation often requires the execution of an urgent, proactive and targeted restructuring plan, which is best driven by the majority equity investor. One of the benefits of being an independent private equity house, however, is that we can be completely flexible to suit each situation. Our belief in a partnering with management teams, with banks and with other key stakeholders within the business, means that we look to align the interests of all parties, regardless of the various weightings that may exist in the split of equity holdings.
We are entirely flexible on this, as we believe you have to be in turnaround investments – the one thing you can be certain of in turnaround investing is that things won’t go exactly to plan every time and you have to react and adapt. We have been able to exit some investments relatively quickly in the past for good strong gains, but we are also longer term holders of others. We do expect our investment horizon to be shorter than more traditional private equity houses, since once a business has successfully turned around it may be time for a new owner to take it on. In general, we plan for a 3 year investment horizon but we also consider shorter and longer periods.
Due to the complexity of turnaround and financial restructuring situations, there is no prescribed structure for a particular transaction – we look to match the requirements of the business to those of key stakeholders and the required capital structure going forward. Whilst Endless look to take majority equity stakes in most instances, the alignment of interests across all stakeholder groups is a key priority in encouraging a successful turnaround situation.
Yes, we invest in UK headquartered businesses and have a team of 16 investment professionals operating from 4 offices in Leeds, Manchester, Birmingham and London. Our current portfolio includes businesses from Dundee to Brighton with many having divisions, subsidiaries or operations across the globe. We continue to work as a single team across the UK and further cement our position as the UK’s leading turnaround investor, at both the regional and national level.
Our minimum size of investment in terms of funding is generally £1 million, although this may not necessarily relate to acquisition cost, but more to post acquisition working capital funding given many businesses in turnaround are often struggling with headroom. We can invest up to £25 million in a single transaction, underwriting the entire sum from our own balance sheet and refinancing at a later stage as required. Our total new money funding package can be higher, through partnering with our investors where required.
We pride ourselves in our ability to adopt flexible funding structures in all situations, part of which may be to give exiting stakeholders cash in situations where recovery of a historic position may have become unrealistic. Endless is not, however, a distressed debt trader but a turnaround investor. Whilst capital may be required to fund the initial acquisition, there is also frequently a need for Endless to provide additional working capital above and beyond the entry cost to allow the business to meet its 3 to 5 year strategic plan.
No, we have invested and continue to invest across a variety of sectors. Understandably we have some focus in retail, manufacturing and other key regional industries but this does in no way preclude us from considering opportunities in other sectors. There are some sectors we cannot invest in in order to observe our own ethical or regulatory guidelines but these are in the minority. Please refer to our Portfolio page for further details of our investments to date and also to our What We Don’t Do section for more specific examples.
Our preference is to understand a business early and if possible avoid an insolvency and the resultant implications with the supplier base, employees and other stakeholders of a business. However, we recognise that in some cases an insolvency structure is unavoidable and have experience and expertise in buying from an insolvency process where this has become the only realistic option.
No. Some of our early deals under Endless Fund I included property, given this was and still remains one of our key areas of expertise, that of maximising the value inherent in property assets for the benefit of all stakeholders. In turnaround situations we often consider the quality and quantum of the underlying asset base to determine downside protection and therefore inherent investment risk, but property is just one component of this consideration. In our more recent investments under Endless Fund II, approximately 50% of our investments have had no property assets.
Different skills are required in a turnaround or restructuring situations and we have strengthened management teams in the majority of our investments. However, our philosophy has and continues to be backing a strong management team in a robust, profitable and sustainable business plan. Whether the business will benefit from short term assistance from a Chief Restructuring Officer to help manage the immediate cashflow forecasts or lender and banking negotiations, or whether a longer term non-executive chairman is best placed to help develop medium term goals or introduce key industry contacts, we look to create the best management team we can to maximise the chance of success for all parties.
We remain bearish in our outlook based on what we are seeing and believe 2010 will be a tough year for business and the economy alike, with a likely increase in the number of restructurings, refinancings and turnarounds across the UK. We are planning for a long and slow recovery.
We look to work in partnership with all stakeholders to secure the most beneficial outcome for all parties in a turnaround, restructuring or refinancing situation. The earlier we can be introduced to a business, the more options and flexibility that may be preserved in a challenging financial or trading situation. Our ability and speed of response allow us to appraise an opportunity within hours and days, rather than weeks, and we are more than happy to discuss individual or portfolio opportunities with other financial investors on a confidential basis.
We look to partner with strong management teams where possible and look to align interests of key stakeholders to deliver a transaction and investment structure that maximises the returns for all parties. We may however look for a time and/or capital commitment from incumbent equity holders in some instances where a requirement for new money has been identified.
We have extensive experience in acquiring businesses with defined benefit pension scheme deficits and in working with both the Board and the trustees before, during and after a transaction in order to mitigate the deficit through the introduction of a variety of strategic options.
The focus of Endless Fund II is to invest in UK headquartered businesses who find themselves in turnaround, restructuring, non-core and special situations. Under the current economic forecasts, there are likely to be many more good businesses who find themselves in need of additional funding in 2010 and 2011 and we will continue to support these businesses from our own balance sheet. As a single team of 16 investment professionals based across the UK, we believe we have good coverage of the national market and there are no plans to open separate offices in other locations at present.
For a stakeholder this is the courage to recognise a situation which may soon or does already require pro-active and specialist financial or non-financial assistance in the short to medium term, and securing that assistance from the most proven and qualified source. Communication is also key to keep all stakeholders informed and interests aligned and to foster a ‘no surprises’ approach to keep lenders, suppliers, customers and other key stakeholder groups on side. Once in turnaround the day-to-day fundamental for any business is cash headroom – the old adage of ‘Cash is King’ has never been more true and is an area of constant focus in any Endless investment. Finally, creating, implementing and delivering on the value creation plan will determine the success of the investment and you will always want an experienced partner for this.
At Endless we recognise the valuable contribution and the very different skill set, perspective and challenge that women can bring to the investment process and team. We are committed to building a balanced team and believe that whilst women are often believed to be under-represented in many other corporate finance roles, at Endless we are making a conscious effort to redress the balance.
Unfortunately as in other specialist or technical industry sectors, some jargon has crept in which can sometimes prove to be confusing or distracting. We have created a Glossary of some of the most commonly used jargon and acronyms, which we hope will dispel some of the confusion and help get back to the plain speaking.
We invest in UK headquartered businesses but this does not preclude our investments from operating divisions or subsidiaries outside of the UK. Indeed many of our investments operate trading or sourcing operations across the globe.
We have a wealth of experience and expertise within the team from our collective experience in private equity, restructuring, corporate finance, banking and property and believe this is an advantage in a difficult situation, rather than a hindrance. Understandably, the pace and nature of change is often more pronounced in the first 100 days post transaction and we will be involved to help develop and implement the value creation plan and any restructuring that needs to take place. We do not believe in taking over from management in the day-to-day operational running of the business, but look to provide help, support and challenge to the Board at the right times. Further detail and first hand insights on our approach can be accessed in the Testimonials section.