Longer Term Management
It is estimated that circa 3,000 licensed units are closing per annum in the UK with larger groups suffering from unsustainable levels of rent, debt and entrenched management. This has led to valuation multiples collapsing from 7-8 times EBITDA to nearer a range of 2-3 times EBITDA.
Banks looking to exit non-performing loans and venture capitalists, who have “under water” equity positions, have consequently been forced to incur significant write offs. While lenders/investors explore options to support and hold underperforming businesses, a lack of credible operational management and restructuring expertise often constrains the options.
To help solve these situations, Licensed Solutions can
- Enable lenders to hold licensed assets until valuation multiples and the financing markets improve
- Supply a management team with significant experience in the licensed and leisure sectors
- Provide the restructuring capabilities to plan, structure and execute transactions around the zone of insolvency; and
- Implement post-transaction operational restructuring measures
- Provide the vehicle, structuring and management of investments over a extended time horizon to allow lenders/investors to take advantage of improvements in earnings and valuation multiples as the sector moves through the current economic cycle (SCS)
When 3rd party offers do not reach acceptable levels, this option enables lenders/investors to minimise the level of debt write off and to participate in the upside from improving earnings and valuation multiples
Licensed Solutions work confidentially with lenders to structure transactions that include mezzanine, warrants or equity (in conjunction with the lenders/investors advisors and as appropriate) so enabling the lenders/investors to participate in upside economics whilst managing statutory/reporting requirements and constraints.
Our team will also take, as required, executive and non-executive appointments in the ongoing operation and work closely with accounting company partners to give regular and transparent financial information to the lender and realistic MI to investors.
