Project Morgan

Deal Summary

Catalyst advised the management team of a private equity backed manufacturing business on an equity restructuring in early 2010.

In common with many other leveraged businesses, Morgan was falling short of trading forecasts set at the height of the credit boom. This resulted in the need for a restructuring of the debt facilities and a reset of the incentive targets provided to the management team.

What difference did we make?

At the time of our appointment, it was clear that the original incentive package for management was no longer relevant and was very unlikely to realise any significant value for the team in the current environment. The shareholders had therefore made some initial proposals for resetting management’s incentive terms. These fell, however, some way short of making any material difference to the rewards the management were likely to be able to achieve.

We therefore worked with both the management team, incumbent banks and the institutional shareholders to identify solutions that would provide an incentive package that rewarded management for achievement of the revised forecasts whilst ensuring that the institutional shareholder position was protected going forward. Additionally, any structure that was to be implemented needed to be tax effective to ensure minimal tax leakage on a future exit.

As a result of our advice we were able to agree a deal that saw the management team take a combination of bonus and incremental capital gain on a future sale. This incentivised them on a reasonable outcome and minimised the tax costs of any transaction that might ensue.