Distribution of Beauty Products: Improving systems to achieve an MBO

Original Additions (“OA”) was privately owned by its founder and a sleeping partner, supplying beauty products to retail and professional markets from its purposes-built premises in Hayes, Middlesex. The founder was looking to retire and had appointed BDO Stoy Hayward to sell the company.

A number of hurdles needed to be cleared prior to the sale – there was no finance director, the company had reporting procedures suitable for a privately owned business, but product margins weren’t reconciled with accounts, there was uncertainty about stock – both historic and current – the financial IT system was old-fashioned and, as a result, information for due diligence was not readily available.

Following an introduction by Jeremy Newman, managing partner of BDO, our colleague Keith Lidgate was appointed as interim FD to see the company through the sale process, involving:

• re-presenting historic management accounts and reconciling them with statutory accounts
• constructing a forecast model to support the budget process and provision of regular short-term forecasts
• extensive review of stock obsolescence
• managing the year end, due diligence and completion accounts process

Keith worked with management at OA and the corporate finance team at BDO over a period of some nine months. Given the level of involvement, he was generally at the OA offices two to three days a week, and on the end of the phone for consultation at other times.

An MBO – with a new full-time FD - was the successful outcome.