corporate finance handbook the Corporate Finance HDbk 3rd 28/04/2004 10:23 Page 1 sir edward george governor, the bank of england david irwin chief executive, small business service 3rd edition corporate finance handbook the forewords by jonathan reuvid consultant editor Corporate Finance HDbk 3rd 28/04/2004 10:22 Page 1 ROYAL SUN ALLIANCE 1P COL ADVERT TENON 1P COL ADVERT THE CORPORATE FINANCE HANDBOOK Third Edition LEE CROWDER 1P COL ADVERT THE CORPORATE FINANCE HANDBOOK Third Edition Publisher’s note Every possible effort has been made to ensure that the information contained in this handbook is accurate at the time of going to press, and the publishers cannot accept responsibility for any errors or omissions, however caused. All liability for loss, disappointment, negligence or other damage caused by the reliance on the information contained in this handbook, or in the event of bankruptcy or liquidation or cessation of trade of any company, individual or firm mentioned, is hereby excluded. This third edition published in 2002 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act, 1988, this publication may only be reproduced, stored or transmitted, in any form, or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms of licences issued by the Copyright Licensing Agency. Enquiries concerning reproduction outside those terms should be sent to the publishers at the undermentioned address. Kogan Page Ltd 120 Pentonville Road London N1 9JN www.kogan-page.co.uk © Kogan Page and contributors 2002 British Library Cataloguing in Publication Data A CIP record for this book is available from the British Library ISBN 0 7494 3375 2 Typeset by Saxon Graphics Ltd, Derby Printed and bound in Great Britain by Thanet Press Ltd, Margate Contents Forewords Sir Edward George xi Governor, Bank of England David Irwin xiii Chief Executive, Small Business Service About the Contributors xv Introduction Jonathan Reuvid xxi Part One: The Corporate Finance Environment 1 1.1 Strategic Considerations – Making the Right Choice 3 Shiju Varghese, Tenon Corporate Transactions 1.2 Financial Market and Business Conditions for SMEs 9 Jonathan Reuvid 1.3 Small Business Service (SBS) and SME Finance 17 Adrian Piper, SBS 1.4 Finance for Technology-based Small Companies (TBSFs) 25 Jonathan Reuvid 1.5 Modern Company Law for a Competitive Economy – Final Report from the Company Law Review Steering Group 31 Keith Baxter, Royal & SunAlliance ProFin Part Two: Debt Finance 37 2.1 Structured Finance 39 John Bagley, NMB-Heller 2.2 Asset-based Finance 45 Forward Trust 2.3 Finance for Foreign Trade 55 Jonathan Reuvid 2.4 Legal Issues for Failing Companies and Corporate Rescue 63 Carrick Lindsay, Lee Crowder 2.5 A Glossary of Debt 73 Christopher Gasson, Bertoli Mitchell Part Three: Private Equity 81 3.1 Trends in Private Equity 83 Michael Joseph, Lloyds TSB Development Capital [...]... Sanghrajka, Tenon Group 16 9 17 1 Part Six: Management Issues in Generating Investment 6 .1 The Business Plan – Making it Fly Shiju Varghese, Tenon Corporate Transactions 6.2 Building the Management Team Charles Russam, Russam GMS Limited 6.3 Enterprise Management Incentive (EMI) Schemes Maurice Fitzpatrick and Jay Sanghrajka, Tenon Group 223 225 13 7 14 5 15 3 16 3 18 1 18 7 19 7 203 215 235 245 Contents ix... Transactions are Here to Stay Charles Milner, KPMG Corporate Finance 11 3 11 5 Part Five: Mergers and Acquisitions 5 .1 Buying a Business David Houghton, TMG Corporate Finance 5.2 Thinking of Selling Your Business? Tony Sharp, KPMG Corporate Finance 5.3 Valuation Christopher Gasson, Bertoli Mitchell 5.4 Management Buy-outs – a reality check Stephen Craik, KPMG Corporate Finance 5.5 Legal Aspects of Management Buy-outs... jay.sanghrajka@tenongroup.com or by telephone on 020 7448 810 4 TMG Corporate Finance David Houghton is a director at TMG Corporate Finance, based in Manchester TMG specialises in the owner-managed business sector, advising on all corporate finance matters including M&As, MBOs, MBIs and development funding assignments Introduction This third edition of The Corporate Finance Handbook is intended for the directors and... retail price index (January 19 87 =10 0) rose from 17 0.9 to 17 4.0 over the same 12 -month period The unemployment rate continued to fall from 3.5 per cent in Q3 (2000) to 3 .1 per cent for Q3 (20 01) , but rose marginally in October However, the most recent reports of the Purchasing Managers Institute (PMI) released in the first week of November provide gloomier reading 10 The Corporate Finance Environment For... unlikely that the appetite for corporate finance will be much diminished More challenging financial markets will raise the demand for expert advice in managing external corporate finance Hopefully, this book will make a contribution towards a better understanding of the issues involved Jonathan Reuvid London, December 20 01 Part One The Corporate Finance Environment 1. 1 Strategic Considerations – Making... Butterworth, RPS Group Plc 2 51 Part Seven: Directory of Corporate Finance Service Providers 7 .1 Financial Advisers 7.2 Legal Advisers 7.3 Private Equity Sources 7.4 Stockbrokers and Money-makers 273 275 285 307 317 Contributors’ Contact Details 325 Index of Advertisers 327 269 RPS 1P COL ADVERT Foreword I am very happy once again to contribute this Foreword to The Corporate Finance Handbook The Bank of England... Types of corporate finance available to SMEs Debt finance In the eighth edition of its report, Finance for Small Firms (March 20 01) , the Bank of England points out that, in total, SMEs have become markedly less reliant on external finance in recent years For those that do raise external finance, traditional bank loans and overdrafts remain Financial Market and Business Conditions for SMEs 11 the primary... head of private equity for KPMG Corporate Finance in the Midlands He was named overall winner in the latest Sunday Times Rainmaker Awards Charles Milner is a partner and UK head of private equity at KPMG Corporate Finance Tony Sharp is a partner with KPMG Corporate Finance based in Leeds Mike Stevens is vice-chairman and UK head of mergers & acquisitions at KMPG Corporate Finance Lee Crowder Lee Crowder... Sources of Business Angel Capital 19 99/2000 (2000) 14 The Corporate Finance Environment compared with 86 per cent of formal venture capital investments Some 60 per cent of the business angel network investments were focused on start-ups and early-stage financing and only 11 per cent on MBO/MBI investments It was estimated in 19 99 that the United Kingdom had approximately 18 ,000 business angels and that... Southampton University ,1 which the BVCA commissioned, concluded that 280 registered business angels invested £20 million in 19 98–99 through 19 2 investments in 18 5 companies Based on the limited sample of BVCA registered angel networks, the same survey found that 51 per cent of business angel investments were for amounts of less than £50,000 and only 24 per cent of investments were over 10 0,000, 1 BVCA, Sources . to Stay 16 3 Charles Milner, KPMG Corporate Finance Part Five: Mergers and Acquisitions 16 9 5 .1 Buying a Business 17 1 David Houghton, TMG Corporate Finance. 1P COL ADVERT TENON 1P COL ADVERT THE CORPORATE FINANCE HANDBOOK Third Edition LEE CROWDER 1P COL ADVERT THE CORPORATE FINANCE HANDBOOK Third Edition