Private Equity Finance:
From Public to Private.
(August 2001)
Contents:
Industry Background 1
Eastern Track Renewals 2
The Management Employee Buy-Out (MEBO) 3
Setting up the deal with the Venture Capitalist 3
Valuation of Eastern Track Renewal 4
Negotiation 6
Purchase of Northern Track Renewals 7
Post Deal and Exit 7
The Employee Offer 8
The Human Element 9
Conclusions 9
Epilogue 10
Appendices:
The Management Team Appendix
A
Historic Financial Data Appendix
B
Forecast Financial Data Appendix
C
Deal Structure Appendix
D
This report covers the case of a Management and Employee Buy-Out
(MEBO) of Eastern Track Renewal Ltd (ETR), a railway track renewal company once
part of British Rail, the acquisition of Northern Track Renewal Ltd, (NTR) and
the subsequent trade sale of the created group to Jarvis Plc. ETR and NTR were
put up for auction by the British Government during the privatisation of
British Rail (BR). The information was gathered during a meeting in Leeds with
Mr. Dave Doggett, formerly MD of ETR and then Chairman and CEO of Fastline, Mr.
Dave Douglas operations and technical director of ETR and Fastline, a separate
meeting in Leeds with Mr. Kevin Frisby formerly with Ernst & Young
(E&Y) who were retained by ETR as advisers and accountants.
This report explores the motivating factors behind the deal, how
the parties arrived at their bid amount, the interrelationships between the
parties involved and how this was taken forward through the negotiation process
to a successful completion and exit via a trade sale.
Several conclusions were drawn from the case; money is not
always the motivator in a deal, the valuation of a business is an art and not a
science and in an auction process bidding tactics are particularly important.
Relationships between all parties can be the most important element. The
identification of the strategic asset of a regional track renewal monopoly and
the underlying uncertainty of earnings benefited the management team.
Further information, business plan, strategy and implementation plan, available from; paul@paulbrianblack.com