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A unique opportunity exists for an incoming investor to benefit from becoming the co-producer of a TV series featuring a household name.

An  independent production company is well progressed in the filming of a new TV series featuring a well known household name. However, it requires a modest investment to complete the series and to enable it to take the programmes to market.

The company is offering the incoming investor first receipts from the series sales to cover their investment plus 30% of all subsequent revenues from both the international TV and home entertainment markets.

Just £48,000 is required to complete the production of the series with a further £16,000 when the first sales order has been achieved.  Sales are likely to be made in the UK, North America and Australia, with very conservative projections of receipts reaching in excess of £300,000 in the first two years of a potential 10-15 year lifespan.

The production company is able to offer additional benefits including the first option to co-produce further TV series with the well known household name, and shared benefits from branded product ranges likely to become spin-offs of this innovative new series.

Due to timescales dictated by the seasons and by weather, the incoming investor must be prepared to act in a very short timescale to ensure the series is completed before the autumn sets in and also in time for the October international TV market in Cannes.

For further information and to arrange a meeting with the producer, please contact:

Guy Scorer

The MacDonald Partnership

020 7496 1010 

guy_scorer@tmp.co.uk

1. Cash flow difficulties
2. Need equity or refinancing
3. Want to merge or sell your business
4. Can’t support your lifestyle
5. Management in dispute
6. Marital difficulties
7. Loss of a major customer
8. Problems with an insurance claim
9. Onerous Leases
10. Rapid Growth

Any one or more of these can signal that your company is in trouble. Each point is explained in a little more detail below but if one or more of them are issues you recognise it might be wise to pick up the phone.

1. Cash flow difficulties

Short term cash flow difficulties can be overcome with proper financial management. Timing is an important issue in managing a business. Producing accounts is one thing, but understanding how to read the numbers and what they mean to a business is a critical skill that many managers/owners do not have. Often cash flow difficulties is one of the last indications of a business in trouble especially when monthly management accounts are not produced and the cash flow problems not predicted.

2. Need equity or refinancing

An insolvent business or a business in crisis normally sets about trying to resolve their financial difficulties by finding investment or finance of some sort before any other solutions. If the business is successful in attracting finance it may not necessarily sort out the fundamental problems of the business and could just be delaying the inevitable. With effective management some financing needs can be managed or averted completely.

3. Want to merge or sell you business

We are seeing a lot of businesses merge, consolidate and centralise cost, particularly in the current climate. This can be a good strategy when approaching trouble but a business still needs to deal with the fundamentals of its own business ‘does the model work’? Conflicts often arise between a merged business as a result of business cultures and this is yet another issue to manage.

4. Can’t support your lifestyle

Often small owner-managed businessmen make a fundamental mistake and equate cash with profit. Too much money is taken out of the business. Personal lifestyle is a critical issue for those businesses. Often we see creditors of businesses funding the director’s lifestyle. Not only is this morally wrong but it also constitutes breaches in the director’s duties. If personal lifestyles are excessive or cannot be funded properly it is often a good indication of trouble.

5. Management in dispute

All too often we see management in deadlock. This never helps a business and in the long term always compounds the problem. Whilst debate is useful and healthy, disputes taking place on a regular basis (or worse still to the point of no communication) are a sure sign that the business is destined to fail.

6. Marital difficulties

Board room stress easily converts to bedroom stress! This is only natural but it is important to recognise the warning signs and understand them for what they are. The earlier the business finds a solution the quicker calm returns to the home and personal environment. Stress at home and at work is unhealthy not only for the business but also for the individual.

7. Loss of a major customer

Often businesses have one or two key clients. A common mistake is to rely on those clients or customers without preparing for those customers to go out of business. It is wiser to be prudent and assume they will fail as it means that your business is less vulnerable to losing only one customer. Losing one major client can often make the difference between a business sinking or surviving. We call this the Domino Effect.

8. Problems with an insurance claim

This is not the most obvious pointer but often we find that a company that enters into an insolvency procedure has a number of insurance claims as well as litigation issues outstanding. These can be distracting and time wasting for the business which often should rely on its core business.

9. Onerous leases

Often, in order to try to stay dynamic, a business needs to be able to react to market change. Businesses are usually caught with obligations they cannot immediately get out of and although negotiation has been tried, it failed. This onerous obligation creates a financial drain on the company and usually tips the balance to the red when the rest of (say) cost cutting measures have been implemented correctly.

10. Rapid Growth

Rapid Growth is perhaps the worst culprit for toppling businesses. A great business concept has been conceived, the business stated, hours of hard work, limited funding and then it grows beyond what has been expected. This is every entrepreneurs dream but managing that process without running out of cash is not only hard, but critical to surviving the cost of rapid company growth. Timing and projections are of course important here but rapid growth is regularly misunderstood or commonly mismanaged.

Any one of these (and the list is not exhaustive) can put a business out of business. In my professional experience I have seen the effects of one or more of these pointers time and time again. They affect every business large and small; sole traders right up to large corporations.

The importance to surviving, I believe, is led by a number of key factors:

• Understand the key driving factors to your business and the implications if any of those change.
• Forward plan and constantly review that plan to adjust and re-plan. (Cash flows and reasonable projections are critical).
• Recognise problems and address them – never hide from them.
• Be prepared to act and be honest.
• Seek advice from professionals and if needs be have a back up plan ‘A disaster Strategy’.

There are two questions on all our lips. How am I able to avoid falling victim to the economic plaque? This one unlike some of the others in history exposes us all; no one is out of its reach. Secondly, How do I make money in the current distress, profit and improve my position for the future?

We have arrived at the generational time when man can attempt, if he so desires, to control the economic powers around him and dare, himself, to guide the ‘invisible hand’ of wealth creation.

Opportunities abound, it is the smart investor who will succeed. I believe that it is more likely that investor-led acquisitions to build turnover will be the remedy of this plaque. Businesses and assets are already available at a fraction of their value compared with only three months ago. More opportunities will emerge throughout this year and without being the voice of doom well into 2010.

Private equity investment firms are not infallible and in the recent buoyant times, like many commercial businesses will have erred in their decisions to invest. There is no reward for failure and private equity firms, like many of us, are accountable to others. They will need to deal with their rotten eggs and make better investments for the future. Simply put however, that is their business; not all investments go as planned with sky rocketing returns. Cash is in demand and with bargains to be had private equity investment in the form of turnaround finance stand in the best shoes to back growth and is already and will be, very important in the forthcoming years.

Corporate Restructuring

The starting point, to survive the recession, is to ensure your own ship is in order. Taking on water in stormy seas is a disaster waiting to happen. It is time to check for leaks, remove unwanted weight taken on in fair weather and tighten the sheets. This is a time for the captains of industry and cold reflection on what will make your business sink or cut gracefully through the troubled waters. The inability to take and implement aggressive decisions in respect of operating costs, staff, marketing and other sector issues will determine how much extra baggage and the number of leaks your ship carries forward into the storm. The lighter streamlined ship is often the stronger in the race

With the sails trimmed you need to keep a vigilant watch. Corrective action to a rogue wave will prevent untimely and unwanted course deviation. You want your ship to be streamlined, clean sailing and reactive to correction, particularly in the present climate. This strategy will give any business the best chance of a strong financial base. All this of course must happen with the assumption that things will get worse with lower turnover as the storm strengthens.

With your own business on a sound footing it is only then possible to look outward for the opportunities to be had.

Hope for Distressed Businesses

There is a lot of competition out there. Lots of businesses, investors and others are financially willing and able to take advantage of the deals. As the business values erode, the opportunities increase (as does investor interest) but not without risk of course. Any distressed investment requires focus, toughness, industry knowledge, experience and consensus. If you don’t have that, aligning yourself with those that do, could make the difference between a successful investment or otherwise.

A bridging statement is fundamental to this process and helps to visualise (and bring to life by implementation) the impact of cost cutting, operational changes and lower turnover. It is the sextant of the canny investor or turnaround practitioner and helps guide them through the darkened seas.

If for example you operate or have an existing investment in one sector there may be other business in the same sector you would like to own. Last year any valuation to those businesses would have been too high. Now it is likely that the valuation is reduced, the market is affecting that business and they may not have taken any corrective action to streamline their business. They may be distressed in which case it is an ideal arena for building your own turnover by acquisition. If this can be cost effective and done well, you can reap the full benefits of economies of scale. In time these consolidated investments would lead to strong investor returns.

Structuring deals, aside from the value brought by bridging statements is important. There is little value to be had from treating the symptoms of the plague rather than the finding a remedy to removing the course. Such remedies could include renegotiating the banks’ position. For example, a percentage compromise on loan to value (a deal better than the bank appointing a LPA Receiver). Compromising unsecured creditors is prime for consideration. This could be done with debt for equity swaps, informal workouts or insolvency process in such a way as to not damage the business. Creditors would rather have a compromised return than no return at all. After all, the plaque affects us all.

Turnaround Finance

Turnaround finance, either your own or outside investment is also critical. The deal structure is only one part of a three legged stool. Turnaround Management (plan), Corporate Restructuring (deal) and Turnaround Finance (cash) are the legs. If any of those legs are missing the stool will fall. There is a core group of experienced and storm weather turnaround investors who not only have the cash behind them to invest directly or along side other owners but they have weathered previous storms and bring the scars, knowhow and technique to the table. My advice would be sail with the experienced sailors to avoid being caught by the storm and dashed against the rocks on a plagues infested land.

How can TMP help in our troubled and turbulent times? We are currently being asked this a lot and although it sometimes seems obvious to say we go back to basics.

You have to assume that, if not already, there is a reduction in turnover. If it has not already happened it may just be you are one of the few businesses (such as domestic cleaning product businesses) that are seeing a rise in profits.

If we expect a downturn in turnover we need to assume that the rest of the business may require downsizing to cater for reduced demands. This requires independent and detached thought as you need to consider operational costs, management and plans, staffing and other logistics. A bridging statement is essential in this process. This is effectively a cost strategy guide depicting how to bridge from current cost status to cost efficiency. Finally, you require the toughness to implement the decisions made and to align the business interests correctly.

Experience in this process reaps benefits and this is where we find ourselves helping clients.

Turnaround Finance, (investing in distressed businesses) is another of our prime activities. We find our clients are primarily looking for two things. The first is cash for their own business to get it into shape and that combined with our corporate restructuring experience is invaluable but secondly clients are looking for hand holding and or cash to make investments or acquire other businesses. Those businesses, for example are those that haven’t moved quickly enough to get themselves into shape.

Business values have radically eroded in recent times and having your own business on a strong financial platform, allows you to use new money invested (through our turnaround investment fund, or partners) to buy over complimentary businesses. Clients benefit from the vertical effect of restructuring, improved stability, economy of scale and the ability, if well managed, to generate long term value and good returns.

With a small amount of cash invested, restructuring the balance sheet, (informally or through a formal insolvency process so as to not harm the business) operationally downsizing (a viable bridge for maximum cost efficiency); what better way is there is in today’s gloomy climate to benefit and build long term wealth?

Of course, all this sounds so simple and in principle it is. The reality however is that many of our clients are investment hungry either to survive or make acquisitions. They have learnt the lesson previously that it is the bold and unwise who step into the restructuring world without an army of experience behind them. At TMP we have over 16 years of restructuring experience and over 13 years of distressed business investments under our belt. That wealth of experience cannot be replaced with flash cash which is a recipe for disaster.

Really understanding the essential costs to running your business, and sticking to them can make the difference between survival and terminal insolvency.

The thing is to focus on the hardcore issues, rather than shying away or being scared of distress.

The question is – Can another business in distress dictate your own future? It is important to understand and prevent yourself being a domino in a much bigger game.

The relationship between capital and labour is at times sticky but now more than ever consensus is the best way to survive for all parties.

Very few industries are by-passed by the grip of our current economic climate. Get your business in order, accept and embrace it and find ways, creatively to use the downturn to your advantage.

In 1797 The Bank of England’s solvency was threatened by the panic following rumours of invading nations. The government stepped in, freeing the Bank from its obligation to exchange notes for cash. The suspension was to last 24 years. Today we see the government stepping into the banks in a different manner but the government’s long term exit strategy is far from clear.

Sticking to the essentials in life and business will lead to better long term value both at home and in the workplace.

Investing blindly on the basis of short-term demand and appetite for distressed assets may help to sustain an optimistic atmosphere but in the long term, unless all legs of turnaround are considered the investments are likely to fail.

By Douglas MacDonald, Founder and CEO of The MacDonald Partnership, TMP.

I would love to be able to say there is a guideline to good investing sold by Amazon for £9.99 and that knowing when to invest is easy. The simple truth is that there are books, but knowing when and what to buy is not easy. History is important and a lot of the previously applied principles stay the same.

In the panic that followed the Battle of Waterloo, Baron Rothschild is credited as saying: "The time to buy is when there is blood on the streets."

Being as he was a contrarian investor (investing against the prevailing market), we know that this is only half the story. Baron Rothschild, a member of one of the world’s most famous banking families, was really supposed to have said: "Buy when there is blood in the streets, even if the blood is your own."

His strategy was simple: if he invested in assets when they were at a discount or in a heavily depressed market then the return to value would be manageable and governed merely by the passage of time. This would create good wealth. If the investment performed very well then the returns would be super returns creating real long-term wealth.

A vast number of venture capitalists in recent years have bought at market value with the hope that the investment would perform well. This would return a reasonable value but not the same super returns that can be seen from investing at the bottom. This was Baron Rothschild’s forte. He would buy on the way down, then at the bottom as stability was restored, and then gain on the way back up. The amount of blood Baron Rothschild actually spilt is unknown but it is suffice to say he gained much more than he lost!

So, with such a simple principle in hand, how do we determine when there is enough blood on the street and the market is, indeed, at the bottom? There is an argument to say that if the market shows a tiny improvement or continuous slow gain for a period of three months, then this indicates that the future will improve.

Clearly, in the current environment there are no indicators that the market is at the bottom and a lot of blood is still being spilt. 2009 is going to be as bleak, if not more so that 2008. So far we have seen the destruction and culling of the big banks and other "safe" markets. 2009 will drastically affect smaller companies – and with January just around the corner, the time to act is now.

This is definitely a time for consolidation to survive. Out of the current financial crisis and blood-letting there will be great businesses built. These businesses will be streamline and effective and take full advantage of the upturn in the markets when they come.

However this is not a market for the faint of heart or amateurs. To succeed not only do you have to understand how to do progress, but you must also have the right skill-set around you. For example, dealing with operational issues and/or creditors in an insolvent situation is critical to success. Distressed investment requires more than cash. A different skill-set is needed from buoyant market investing, and surrounding yourself with experience and expertise is vital.

Those of us who have the benefit of the lessons learnt in the last recession and who have continued to specialise in distressed investments (either as principle or adviser) know that the right turnaround team and right technology will make all the difference in carrying an investment through to success. The team is fundamental – perhaps even more important than having the available cash to invest.

Going back to Baron Rothschild, it’s not just about losing a little blood to gain a bit more. It’s about having some blood to invest as well as the sweat and tears of long-established and experienced turnaround experts on and at your side. Without them the struggle will be that much harder.

The effects of VAT and interest rate reduction

What are the real affects of the government’s gifts of lower interest rates and reduced VAT levels? Are they really a boost to the economy or a poison chalice causing confusion and extra administration for individuals and businesses alike?

The answer depends quite simply on where you stand in the cycle of the economy. For most of us, the affects of the VAT reduction are just not material – 1p on a Mars bar. It’s just too small to make a huge difference. It is more of an administrative task for the stripe suited grey accountants than a saving (or encouragement) to the average man on the street. It is true to say that those boutique shops embracing the VAT reduction are using it as a way of advertising, but I’m not sure that it has helped to get consumers through the door. Certainly, if it is making a difference, it is not enough of a difference to change our fortunes.

The interest reduction, on the other hand, equates to a 30% drop and this is big enough to have the potential to make a much bigger difference; the critical factor, of course, being that the banks must pass on those rate reductions.

For businesses and individuals who have interest only in borrowings, the recent one-point reduction has a huge impact on monthly repayments. Lower interest will improve the margin for error, and this has to be positive. This will certainly assist in the survival of those borrowing, but will it help the housing market?

The housing market is fundamental to the UK economy. With falling house prices, liquidity that existed 6 months ago has all but gone. Bank security is everything. Security is the gap between the loan value and the market value of the house. Lenders only ever lend when there is adequate security in place. This ensures full recovery of their debt if the borrower defaults. As house values fall, the amount of security available also reduces and the loan to value calculation means there is no money to lend. Indeed, for those who have taken mortgages in recent times at 95% loan to value will now find themselves in a negative equity situation. Some borrowers, who fixed their mortgage interest rate won’t even be able to take advantage of the lower interest rates.

For those with money – and the stomach to invest – it is a great time to buy or invest in cheap assets, but be warned that this is not a game for amateurs and it is very easy to get burnt. Those who succeed will be those with experienced professionals around them, such as turnaround practitioners who have learned these unique skill sets during the last recession and finessed in the buoyant times that followed.

For those with money – and the stomach to invest – it is a great time to buy or invest in cheap assets, but be warned that this is not a game for amateurs and it is very easy to get burnt. Those who succeed will be those with experienced professionals around them, such as turnaround practitioners who have learned these unique skill sets during the last recession and finessed in the buoyant times that followed.

For the others who have bank deposits but no confidence or skills required to profit from the downturn the reduced interest rates, their rate of saving has been reduced with immediate effect and that does nothing to boost confidence.

So, where do you stand in the economy? Are you looking to make gains from the downturn whilst there is blood on the streets or are you facing negative equity and reducing saving rates? The government has meant theses reductions as gifts but to some they are a poison chalice.

Company Voluntary Arrangements (CVA) are a misunderstood alley to companies in trouble.

Introduced in 1986, there has been a steady increase in their use as a way of rescheduling debt, avoiding insolvency and ensuring the survival of the business.

Rightly, CVAs came under some scrutiny and criticism in the mid 1990’s after being misused.  The effects of a misapplied CVA are simply to prolong the life of a terminal business and invariably to increase the overall debt that goes down with the company.

When used correctly, a company voluntary arrangement is an incredibly powerful tool.  The business can be totally in control. In its simplest form the effect of a CVA would be:

• Survival of the business,
• Employees keep their jobs,
• Suppliers profit from continued services,
• Creditors receive returns.

In its more complex form, a business proposing a CVA can

• cut costs,
• lose onerous contracts,
• compromise future and contingent debts ,and
• really streamline cash flow demands.

For such a strong, legally binding process, this business restructuring procedure is very simple.  A proposal is drafted and creditors vote to accept or reject the proposals at a meeting.  If accepted, the terms are binding on all creditors from the date of the meeting.

Although the law envisages the majority of CVA proposals are drafted by the directors of the company, in the main, an insolvency practitioner or turnaround specialist will assist in putting the proposals together.

The importance of using a CVA weathered and experienced insolvency practitioner (IP) is critical.  You wouldn’t go to a divorce lawyer for a patent application! Although all IPs duties are the same (and they are licensed to assist and preside over a CVA) not all have years of experience at the cutting edge of term drafting and negotiation within the CVA arena.

Some of the most fundamental points to consider include:

• Is the management right? Does it need boosting or enhancing? Have some of the problems arisen due to a management weakness?
• What is the turnaround plan?  Who is critical to the business survival? What tactical aspects need to be built into the proposals and how do we get creditor buy in to the deal?
• What are the funding requirements like?  Is new cash investment needed and if so how much turnaround finance is needed, and where from?

Only once these questions have been answered would we recommend the proposal is drafted and put before creditors.  After all, the market place is now a mature and experienced place in respect of debt re-scheduling.  If a woolly proposal is put before them they will shoot it down – and rightly so.

So, my concise conclusion would be:

• CVAs are a winning tool,
• Take action early to avoid a higher mountain,
• Be truthful and realistic in what will and won’t work in the proposal, and
• ONLY enlist the help of a REAL SPECIALIST in the CVA field

Creditors and business peers will love and support you if a realistic, well drafted CVA proposal is put together that works. They will hate you if you have got blue sky hope drafted into something that ends up costing them more money.

Libby Aird-Brown
Investment Partner
The MacDonald Partnership Plc
www.tmp.co.uk

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