Background

FRP’s Corporate Finance team won a competitive pitch to support HSBC and Frontier Development Capital in their decision to lend to Hammonds Furniture Group, to enable a management buy-out (MBO) by the two remaining members of the Hammonds family, and also provide growth capital. Founded in 1926 in Hinckley, Leicestershire, Hammonds has 89 showrooms across the UK.

The family-run business has 837 staff and an annual turnover of over £85 million. The lenders could see added value in our combined corporate finance and restructuring offering, as we were able to advise on all aspects of the deal (ability of the group to service debt, downside risks, quality of management, reporting function, strategy), and on the need to restructure the shareholding of the business to reflect the MBO.

Action

Having spent considerable time gaining a thorough understanding of the business, our team worked with management to ensure that financial information and modelling was robust, that debt structures were correctly overlaid onto the forecast models, and highlighted areas of sensitivity in the forecasts and covenants proposed. We wrote a report for the lenders that highlighted the key risk areas for the lend, along with any potential mitigations.

Outcome

We supported the lenders in their decision to lend, enabling the MBO to go ahead and giving the business an opportunity to grow under a revitalised ownership with new funding. The business will benefit from the insight and challenge provided to it from the lenders. The systems and KPI reporting at the business have been improved due to our work, and our team worked closely with the business to ensure the information it had would be able to be used by the lenders going forward.