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News - 09 November 2020

ABN AMRO Commercial Finance UK completed a £47.5m asset based lending deal with leading specialist packaging and labelling business Reflex at the very height of the pandemic’s first UK lockdown. Jeremy Harrison and Katharine Weeden share lessons learnt on getting transactions over the line in troubled times.

How did ABN AMRO Commercial Finance manage to seal its biggest transaction of 2020 while the world was in the grips of a pandemic? The bank’s £47.5m bilateral deal with UK specialist packaging and labelling business Reflex covers receivables financing, a cash flow loan and term financing on plant, machinery and property.

The deal was not, in itself, a response to Covid-19. Reflex had outgrown its existing provider, and in February mandated EY to find a new partner that could provide more flexible and appropriate finance. The business had been funded through a mix of arrangements including asset-based lending (ABL), hire purchase (HP) and commercial mortgages – a complex blend from different providers that affected both clarity and cost.

We were able to satisfy the group’s finance needs largely under a single facility – whilst also structuring a cash-out for one director looking to retire. So what made it possible to get such an important deal done during this tough period?

The new deal might not have been prompted by Covid-19. But Reflex is a rare example of a successful company that has actually flourished through the pandemic. Its specialist food and pharmaceuticals packaging products have been in strong demand. 

The Reflex management team is impressive and impassioned, taking a proactive approach to both the practicalities of dealing with Covid-19, and its commercial implications. New production lines were quickly put in place to meet escalating demand, and staff operate within pods to minimise risk to health and disruption to the business. Some employees even said they felt safer at work than at home.

When we had a meeting with the management team at their premises back in March, to introduce their future relationship manager, a full two weeks before the country had been officially sent into it’s first lockdown, we were issued with the company’s Covid packs containing goggles, facemasks and sanitising equipment. It was clear from the start that the team understood exactly what was happening – and had a plan for action, too.


Lockdown due diligence

The initial management presentation in London in February left us in no doubt that this was a deal that we wanted to pursue. But we still had to win Reflex’s business in a competitive process. The full deal team attended the management presentation – and our team-based approach, which reassures clients about efficiency and continuity, as well as our genuine interest in the management and their business helped to win over the Reflex board. 

We think other factors were at work too. For example, ABN AMRO has a deep-rooted commitment to environmental, social and governance (ESG) credentials – which dovetails with Reflex’s own priorities. It’s a carbon-zero business that invests heavily in R&D focused on sustainability. Like them, we don’t just pay lip service to sustainability goals – they are a factor in our credit underwriting. That’s not just because we like ‘green’ businesses. Evidence of sustainability tells us a business has long-term planning and responsible investing at its core – and those are serious risk mitigators.

We completed all money laundering and ‘know your customer’ (KYC) requirements during the initial meeting, avoiding what would have been headaches further down the line. But the deal process was still challenging in many ways: travel was restricted and face-to-face meetings banned. Deals have strict deadlines, and when valuations that typically take two to three weeks are extended to five weeks, any bank faces a squeeze. Remote working did make the process more difficult. Usually ABN AMRO’s deal teams would work shoulder-to-shoulder, but the usual collaborations were replaced with daily internal deal team video calls. They helped to keep everyone focused and up to speed as we worked through the process.

As with any deal presented to a credit committee at the moment, we also had to present a Covid-19 analysis. In this instance, the process was relatively straightforward. Reflex provided us with a full report, including details of two of their depots that had posted their best-ever performance in March.

Then there were documents that needed to be signed with no in-person meetings, ranging from the NDA at the outset to a full range of legal documentation at the end. 

Our solution was to proactively manage the transaction with strict timelines, providing high-level indications of the necessary steps to get the deal done against a timetable. We held daily calls using the schedule to ensure nothing was missed in a deal that involved a full suite of assets and multiple components. And then, when we hit the final two weeks, the timeline was revised to include more granular detail in the run up to completion.


Management team tips

This deal was a ray of sunshine in a dark and gloomy period. Everyone pulled together to make sure it got done. That included not just the bank and the advisers, but, of course, the management team itself.

Reflex founder and CEO Ian Kendall said, “It’s been critical to the success of Reflex to have good, strong banking relationships with professionals who understood what we were trying to do. From the start it was clear to us that we could work that way with the ABN team. They shared our enthusiasm for the business and kept their eyes on the outcome not just the process. And I’m pleased to say our experience of ABN post-deal has exceeded our high expectations.”

And there are important lessons that businesses can take from this process, in terms of preparing themselves optimally for success. Two stand out:

  • Have a realistic timeline is of the utmost importance, because everything takes that little bit longer right now.
  • Most businesses running a beauty parade will use an approved valuer to look at their assets. This should be done as soon as possible, even before the process itself has been kickstarted. 

These are challenging times. But the reality is that mandates are now proliferating, and deals are getting done. Reflex is an outstanding company with a great management team that we look forward to working with in the years to come. But we are confident that there are other exciting opportunities out there for banks, and businesses, that can learn to navigate a new way of working.