TDSi Case Study

Introduction

To truly understand the relevance of TDSi as an example of Inspire’s approach and mindset, one has to consider that in 2005 when, John Davies; the MD was introduced to Inspire he had been given just four weeks over a Christmas period to persuade Prudential’s investment arm not to sell or break-up the company, but rather to allow an MBO to be implemented. One also has to consider that not only did Inspire devise the rescue, funding and future strategic plan enabling the MBO to be executed, but Inspire are as “close” now as they were during these challenging times, implementing the final phase of the company’s return to a cash positive environment.  With Inspire’s ongoing help, TDSi is implementing an international, sales and marketing strategy, selling UK manufactured security systems to international markets, including China.

Background

TDSi designs and manufactures security access systems and was part of a group that traded under the brand name of Upperpoint Manufacturing Limited (UML). The group comprised of four companies in the global security market. While TDSi and Baxall manufactured access control systems and CCTV equipment, Upperpoint Distribution Limited and Norbain, managed the distribution aspects of the business and did so very profitably. The group had been acquired by as institutional investor, Prudential, PPR in 1998 for £55m.

Structural Problems

While the group’s structure provided superior financial strength, it had allowed poor management to go unnoticed. By 2005, it was clear that TDSi was haemorrhaging cash and PPR decided to appoint a new managing director. John Davies had a peerless reputation within international allied industries and set about investigating the company’s position. As a result of his in-depth report and with an overdraft of £1.3m that only promised to get worse, PPR decided to sell the company. It was then that John Davies suggested that the time required to find a suitable buyer would erode what was left of any asset value and would render the process a “fire-sale”; he asked PPR for time to investigate an MBO and was given four weeks to come up with a proposal. Through a local network, Inspire and others were met and the decision that John Davies made demonstrates Inspire’s USPs perfectly.

The Entrepreneurial Team Approach

John Davies recognised the entrepreneurial and teamwork approach immediately as Inspire isolated the opportunities and identified the hurdles standing in the way. This goal driven approach not only redressed the imbalance in TDSi’s immediate predicament, but provided a tangible three step process that would steer TDSi out of trouble and into cash positive and profitable waters. Although John Davies liked the idea of dealing directly with Warren Munson (the Founder and Managing Director of Inspire) in preference to a lower tier manager from one of the “bigger” accountants, he soon realised the manner in which Warren Munson engaged all of his team, transferring not just information, but rather a stakeholder mentality; everyone in Inspire wanted tosee TDSi survive and then prosper.

The Client Journey

  • Inspire’s approach was broken down into three initial steps:
  • Discussion and assessment – analysis of resources Implementation of financial and management rescue plan
  • Engagement and overseeing of a sustainable strategy.

Discussion and Assessment

Inspire’s first task was to assess the immediate difficulties and meet PPR’s deadline with a deliverable solution, both in terms of time and expectations. This was done with open and limitless discussions as the team shared the short, medium and long-term problems and objectives. Accessing the funds for the MBO was crucial, but so too was a realistic future strategy and evidence to satisfy the lender. With a vested interest in a fast and effective outcome, PPR was approached and a line of credit obtained via vendor loan notes from Norbain. This enabled the MBO to complete on schedule.

Implementation of financial and management rescue plan

The objectivity of Inspire’s assessment instigated agoal- driven process. Accordingly, with Inspire’s assistance TDSi first rid itself of the overbearing weight of property and then set about securing a facility that would allow it to play to its strengths and begin the process of becoming self- funding. Key programming, software and IPR resources were retained and enhanced in-house while casings (for the security systems) were outsourced to China. This avoided needless transportation costs (both to TDSi and the environment). It also reflected the global nature of the market with the UK market stagnant and overseas market booming. The distribution policy was also overhauled and improved by setting up a Chinese company so that immediate market penetration could be liberated. Inspire accompanied John Davies on these trips to Hong Kong and across the border into China thus ensuring the strategy remained on target.

Engagement and overseeing of strategy sustainability

Inspire’s innovative non-exec style facility “FD on Demand” came into its own once the troubled waters had been navigated and Davies became (and still is) very dependent on Inspire’s ongoing advice. This has been especially significant when dealing with the overseas tax and audit requirements in target markets. But beyond the financial fundamentals, Inspire has engrained itself into TDSi’s culture and engaged itself almost on a day-by-day basis. The relationship between client and adviser is empathetic and highly successful.

“If you are looking for a fresh approach to traditional services Inspire’s the place you should be looking as you get an awful lot more.”
John Davies

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