Atlas was engaged to assist in securing funding for an existing national & international security services company to acquire an established Australian based monitoring business. The group had several synergies whereby the applicant had been supplying armed and patrolled guards to the vendor business for servicing the underlying monitoring agreements, which meant the purchasing company had intimate knowledge of several of their key clients (including Seven Eleven, Uniting AgeWell, Woolworths, etc).
To ensure the contracts were retained the applicant entered a share sale agreement, thus preserving the pre-existing agreements without the need to enter assignment and underlying re-tendering process. The logic was to ensure that the clientele would not be impaired by a change of ownership and service would be retained. In addition, all staff from the vendor company were retained and maintaining a consistent presence and point of contact base. Another critical element of the share sale agreement was to secure the licence for the monitoring services, given each aspect of security must hold a specific licence.
The result of the acquisition was an immediate impact to the group with improved margins as third-party contractors were now immediately minimised. The group could now revisit its entire client base to remarket its additional services. The ability to cross sell has seen a significant uplift in new agreements for not only existing clients but also attracting new clients due to the full service nature.
A number of products were put in place for not only the acquisition to take place but also to support the group with intended growth and changes moving forward. A business loan was secured for the underlying purchase price under the share sale agreement, whilst a working capital facility (Invoice Finance) was established for each entity in the group. The Invoice Finance facility was integral to the ongoing cashflow needs of the business which is heavily reliant on labour. The mismatch of payroll timing and credit terms to clients saw a significant hole in the cash flow. Given the Invoice Finance offering accelerates payment to the day the invoice is issued, this provided the group with immediate access to funds for ongoing staffing and contractor payments.
Several complexities were evident in the transaction, first and foremost the financial performance of all entities including the vendor business. Each entity had been significantly impacted by Covid and labour shortages which resulted in declining Revenue and lack of profitability. Therefore, a commercial minded funder was required that could understand the critical turning points that would see the group benefit from the purchase (profitability immediately) and a flow on effect with re-engaged service agreements (which were evident in recent months revenue with significant uplift). Atlas’ skill set with transaction structuring and financier negotiations ensured that an appropriate funder was sourced, understanding of underlying issues were addressed and mitigated for the funding to be successfully secured and settled.