ICON66 – Volume 5
Cleartone Telecoms sold to Management Buy In Team
Radio talk
Cleartone is a designer, manufacturer and supplier of mobile radio communications equipment, principally for the emergency services. The product range includes VHF/UHF handheld, mobile and fixed equipment operating in all frequency bands, as well as the new TETRA digital mobile radio products that are specifically aimed at the ‘blue light’ markets. While some bespoke manufacturing is done at Cleartone’s premises in South Wales, the majority of equipment manufacturing is now carried out in Japan. Cleartone has a good opportunity for growth in the next few years from UK police forces who are replacing their existing analogue radios with new TETRA digital mobile radios.
3i Group introduction
Cleartone
was controlled
by Aspen Group
Plc, who wanted
to sell their
holding as
part of a realisation
programme following
their privatisation
from The London
Stock Exchange
in 1999. Aspen
was partly
owned by 3i
Group Plc who
introduced
the opportunity
to ICON.
Not so clear
Although Cleartone was well placed to benefit from the rollout of the new TETRA networks in the UK, there were a number of other issues that clouded the picture, ranging from, the effects of foot and mouth (which was affecting orders and therefore cash flow was lumpy), to the state of the telecoms sector which was bombed out. Far from buying, many telcos were disposing of assets and two major competitors Marconi and Simoco in the UK had both been sold.
HBOS funded MBI team
Nevertheless, although the conditions were not great, the potential for growth in the digital radio market was significant. We highlighted this potential in our Information Memorandum and received interest from 18 companies ranging from large US companies to mid-tier UK listed companies and some “Buy-in” candidates. The timetable slipped when a potential buyer withdrew after its shares were suspended. Not to be deterred we received several indicative offers and exclusivity was given to a management buy-in team led by Richard Hill who was financed by Bank of Scotland Plc. The transaction was structured with a cash consideration that together with restricted warranties provided the clean exit the shareholders sought.
Leave something on the table
Brian Parker from ICON commented “Given the conditions at the time, we got a good deal for the vendors. Importantly, the purchaser knew the business well and saw significant growth potential from the radio communications market”. In an ideal world you would sell a business when the corporate and market cycles are near their peaks but that is rarely the case. Whenever you sell, you need to have a good growth story and leave something on the table for the purchaser.
Corporate
Finance advisers
ICON
Corporate Finance
Vendor’s
lawyers
Clark Holt,
Swindon
Vendor’s
tax advisers
Smith & Williamson,
London
