Light Engineering Company

This was a management buy-out from an American company, financed jointly by 3i and the then Scottish Development Agency (later Scottish Enterprise). The company employed around 80 people and manufactured items for the electronics sector, its customers being principally in the field of telecommunications. The company itself actually had a fairly long history, having been a locally-grown business for a number of years prior to being taken over by the US corporation; after several years the American parent had decided that it no longer wished to manufacture in the UK and indicated its intention to close down. A couple of senior managers approached the institutions to enquire about the possibility of mounting a buy-out, and along the way a potential board of four people willing to invest their own money was put together and a business plan commissioned. A deal was agreed involving equity from these four and from the two outside institutions mentioned, plus a bank facility. The deal involved a ‘ratchet’ in that it gave the owner-managers initially 30 per cent of the ordinary equity but allowed them the opportunity to see this proportion raised to 70 per cent if certain profit targets were met in the early years of the new company’s life. Part of the institutional funding was, as is usual in buy-outs, in the form of redeemable preference shares with a five-year target period for redemption.