Case Study
The founder of this Client Company knew the Commercial Director of a North America generic mobile payment technology business, aimed at transportation verticals. During 2003/04 this Canadian company had developed pay by mobile phone technologies with sophisticated monitoring capabilities. Its first material deployment in was in paying for car parking, which proved to be a highly successful as a disruptive & scalable technology with better service for customers and better experience for end users
To the motorist this system meant no hunting for coins, text reminders, no need to return to vehicle to add more time, better security, easier expense management and it was quicker. To the parking operator it meant less machines, highly cost effective means of introducing credit card payment, increase in revenue, elimination of theft, lower cash collection costs and a better service to their customers.
In late 2004 we helped the principal of this Client set up and establish a UK company with an initial modest equity base that had the benefit of the Enterprise Investment Scheme (EIS). We then helped the client negotiate a license with the Canadian company for the exclusive use of its technology throughout Europe. Following the signing of the License Agreement, the consideration for which was a minority equity stake in the UK Company, we were instrumental in setting up the administrative systems for this new business and the anglicising of the billing and customer reporting output from the Canadian system. We then helped orchestrate the raising of significant additional EIS capital and negotiated an SFLG bank loan, which together were used to fund the launching of the system in the UK. Between 2005 and 2010 the UK Company scaled to 35 sizable clients, 1.6m registered users, with 900,000 transactions per month, and in 2009 we assisted with the opening and set up of an office in Paris to launch a similar operation in France. By then, worldwide, the UK and Canadian companies together had 58 staff across three countries with 2.5 million registered users, growing by 58,000 new users per month, processing 2 transactions per second throughout the day, with a 580% growth in revenue since 2007, all centrally operating from hosted infrastructure in Canada that supported multiple transaction channels.
Throughout this period we managed the UK’s, and subsequently the French, finance function, providing support and guidance to the employed accounts staff in each country and liaising with their respective, bankers, auditors, tax advisers and solicitors. The UK business achieved Cashflow breakeven by January 2008, and towards the end of 2009 we became heavily involved with the negotiation and contractual aspects of the Sale of the combined UK and Canadian entities to a UK quoted Group for a consideration of up to £33m that completed in March 2010. For the UK business the sale represented a 68 multiple of historic earnings, 4 times revenues and over an 8 times tax free return to its investors in just under 5 years.
The core management of the UK Company, of which we were considered a vital part, were totally focused throughout the process, and control and correct documentation, such as the Joint Venture Agreement, Technology & License/Hosting Agreement and the Shareholder Agreement were key to its success. The pre preparation of a detailed business plan, and the monthly monitoring of actual progress against this plan, both financial and operational was paramount, as was the value of quality professional advice from day one, its EIS status, sound organisation and the preparation to be capable of scaling, all of which stood up to scrutiny in the eventual sale. All stakeholders in the business, the shareholders, the bankers, the Canadian JV partner, and the staff, received regular progress reports and there was active involvement and support from the non-executive directors appointed to the Board. The Company stayed focused on the core opportunity, as defined by the Business Plan, the action points from the minutes of the previous meeting, which we prepared and circulated acting as Company Secretary for the Company, were always the first agenda item at the next monthly Board Meeting, and these minutes provided an accurate history of the Company – very valuable in the well prepared for sale due diligence process