Bringing you news of successful exits in the sector
Fund: Seneca Partners EIS Portfolio Service
DETAILS OF THE FUND
The opportunity was introduced by the administrator of food packaging company Foodpack. After careful consideration and a short period of due diligence, we recognised the potential of the company and quickly assembled a new senior management team and a package of equity and debt funding to buy the trade and assets of the company out of administration. Our EIS Portfolio Service funded £1.275 million of the equity investment.
The combination of the funding package and expertise of Seneca’s investment team and the senior management team we brought in, has meant a business that had failed was now back into profit and had safeguarded the jobs of c.150 employees previously at risk
We invested in October 2015, and exited on 30 November 2018, so an investment period of three years and two months.
What Does The Company Do?
Foodpack is a food packaging and manufacturing company with a state of the art facility and a blue chip customer base. The company is based in St Helens.
What Did The Company Invest The Money In?
The funding package from our EIS Portfolio Service has enabled the company to maintain its major customers and drive profitability through the deployment of funds into the following areas:
- To support working capital: in the wake of the previous company’s administration, the new company Foodpack Ltd initially struggled to obtain credit. Also, while a cost rationalisation exercise was put in place, any delay in implementation would need funding. Finally, the company was required to reach agreement with ‘ransom creditors’ in order to continue to trade with its major customers.
- Capital expenditure: there has been increased investment in plant and equipment to improve operations and win new customers.
- New leadership team: as a part of the support package we put together, we utilised our unique partner network to source two experienced senior food industry professionals, to help turn the business around. They both joined the board and took a shareholding in the company. We also placed one of our senior managers, Tim Murphy, on the board and in the first few weeks utilised the experience of our own management team to help provide the day to day financial management of the business, whilst the new permanent management team bedded in.
- Upgraded IT accountancy software package: given the size of the business the existing package wasn’t fit for purpose. During the first three months post investment, funds were used to install a fully integrated software package adequate to support the company’s forecast growth.
- Senior management team hires: funding has helped the business to recruit additional resource to its senior team and drive efficiencies from its operations, particularly in relation to its existing machinery.
- The jobs of c.150 employees previously at risk were safeguarded as the business has returned to profit.
HOW MUCH WAS RAISED?
£1,275,000 equity raised, all from Seneca.
How Was The Exit Achieved?
The business was sold to Integrated Packaging Services. Seneca found the acquirer and provided corporate finance services during the transaction, advising the company on the sale.
How Much Was Returned To Investors?
Investors benefited from a 2.3x return on investment, excluding tax, and a 3.3x return net of tax.
The return was above Seneca’s target return of 1.6x to 1.8x
What Other Benefits Has The Company Provided?
The original food packaging company was a major employer in the area. Our investment secured the jobs of 150 people and resulted in the local supply chain being maintained. There is an inevitable knockon effect for other support businesses in the area and of course, the existing factory continues to be used rather than standing derelict.
The company has since been able to employ another 20 full time staff along with a number of agency staff.
From a taxation point of view, our investment means that there are c.170 individuals paying tax through PAYE and in due course the company will be due to pay corporate tax. In addition, the employed staff will have no or a lower requirement for state benefits.
How Will You Continue To Support The Company?
We have now exited the business in full and will have no impact on the company going forward. GBI