Our Virtual Finance Director James was brought in by Accountants and Corporate Finance advisers, wanting to help the business owner to successfully exit his business. The business was involved in providing data services to a global client base and had a turnover of £2.2m and had an operating loss of c. £30k per month (largely due to product re-development costs).
Context & Dilemma
The business owner had experienced significant health problems and wished to exit. However the business was in no position to be sold. In order to prepare for that he decided that FD arrangements needed to be changed and a new approach introduced.
The previous part time FD was not providing clear direction to the Finance team. The monthly accounts pack gave confusing data, giving detailed analysis between two countries performance, however these showed a picture materially different to the filed Statutory Accounts. In addition, the incumbent Financial Controller was operating as a bookkeeper, only producing a trial balance before any accruals & prepayments.
Following the initial review, vfdnet worked as a part time Virtual Finance Director (VFD), bringing in a part time Virtual Financial Controller (VFC). Together the VFD and VFC re-designed the Management Accounts pack, providing a holistic Group position (aligning the Accounts information to how the business was run), and generating accurate, timely and meaningful management information. This quality information then restored trust in the Finance Function by the Directors.
Over the 2 years, our vfdnet leadership of the finance function delivered:
- Accurate, timely and meaningful Monthly Accounts pack
- Clear and transparent Budget process
- Reliable Cash flow forecasting
- Management Accounts result very close to filed Statutory Accounts
- Re-gained full confidence of the Bank
- Developed Financial Controller able to generate full monthly Accounts pack
- Cleaned up data ready for detailed Due Diligence process
Working with the Directors and management team on a part time basis, over 2 years the business grew marginally to £2.4m but crucially the business was transformed to a small Operating Profit.
With cleaned up Financial information, vfdnet then lead the preparation of files for the electronic data room, reviewing all info for any possible ‘smoking guns’. The Corporate Finance adviser did an excellent job by procuring 2 bids for the business, one which was significantly biased towards an earn-out, and a £2.4m offer for cash on completion. After 3 months of fielding BDO’s detailed Due Diligence questions, the deal was completed, and the business owner walked away within 1 week. The business owner did reward the employee team very generously out of his proceeds.
After the deal, the Financial Controller was congratulated by the Buyer’s lead Director and awarded a significant salary increase and continues in role on an ongoing basis; a great testament to our development of her over the 2 years.
I took on James to help change the management dynamic and prepare the business ready for exit, In addition to his own contribution we benefited from him introducing a qualified Virtual Financial Controller too. Together they really helped get the Finance function in good shape for the due diligence process.
The Corporate Finance advisers did a great job in soliciting the offers for the business. The chosen acquirer, a Plc company with a compatible business ethos, brought in BDO to do the Due Diligence. James managed the finance team well, populating the electronic data room and fielding all the BDO questions on a timely basis so enabling the deal to be completed in 3 months, which was a great result, both for the shareholders and the staff.
It was also very pleasing that vfdnet mentored and developed our Financial Controller from acting as a bookkeeper to an effective FC, achieving a good salary increase with the new owners.
Sebastian – CEO and former business owner