Airmatic Ltd’s Management Buyout: TaxGem’s Expertise in Action
Airmatic Ltd, founded in 1998, has grown into a market leader in the design, manufacture, and installation of industrial ventilation and ductwork systems throughout the UK. With a commitment to innovation and research-driven solutions, the company has long been at the forefront of its industry. Recently, Airmatic completed a pivotal moment in its journey: a management buyout (MBO) that saw the transition of leadership from its founding shareholders to the next generation of managers, Claire Watson and Rob Taylor.
At TaxGem, we were privileged to play a key role in this significant transaction, providing the full breadth of our expertise in tax planning, business strategy, and accounting. This blog delves into both the technical and human aspects of the MBO, while highlighting TaxGem’s comprehensive service offerings that made the deal a success.
A Well-Structured and Tax-Efficient MBO
The MBO was facilitated through a holding company (HoldCo) structure, allowing the incoming shareholders to take over ownership of Airmatic Ltd with minimal tax impact. Claire and Rob, who had been gradually introduced into the leadership of the company, now officially acquired ownership.
At the heart of the transaction was a share-for-share arrangement, where the newly formed HoldCo acquired shares in Airmatic from both the outgoing and incoming shareholders. The exiting shareholders received a capital payment in exchange for their shares (thus enabling them to access their Business Asset Disposal Relief, resulting in a preferential CGT rate of just 10% on their gains). The incoming shareholders received an issue of new shares in Holdco, thus bringing their ownership in the Airmatic Group to 50% each. Steph Gemson, leading Chartered Tax advisor, supported by Ellie O’Farrell (ACCA) lead the team to advise on and implement this structure, ensuring that the ownership transfer was efficient and compliant with tax regulations. The transaction was fully cleared by HM Revenue & Customs (“HMRC”) in advance, thus mitigating the risk of any inadvertent CGT or income tax liabilities. The buyout was partially funded using Airmatic’s cash reserves, while the remainder was financed through an invoice financing arrangement with NatWest—a process in which we were deeply involved.
TaxGem’s Comprehensive Role in the MBO
At TaxGem, our involvement spanned multiple crucial areas of the transaction, ensuring that both the exiting and incoming shareholders benefitted from the most favourable outcomes. Here’s a breakdown of the key services we provided:
1. Step Plan Development: We developed a detailed step plan that mapped out every stage of the transaction. This plan served as a blueprint, ensuring the smooth progression of the deal while preventing any unwanted tax crystallisation for the shareholders.
2. Valuation of Airmatic Ltd: TaxGem produced the business valuation for Airmatic Ltd, a key step in the process to ensure that all parties (including HMRC) had a clear understanding of the company’s worth. This valuation was integral to negotiating the final terms of the MBO and ensuring that the deal reflected fair value.
3. Cash Flow Forecasting for Financing: One of the most complex aspects of the transaction was the cash flow forecasting. TaxGem created detailed cash flow forecasts, essential for securing the necessary financing from NatWest. These forecasts provided a clear picture of Airmatic’s financial health and its ability to service the debt incurred through the invoice financing arrangement, helping to raise confidence with the bank.
4. Raising Finance with NatWest: To ensure that the deal could proceed smoothly, TaxGem worked closely with NatWest to ensure the funds could be raised through invoice financing. This form of financing allowed Claire and Rob to complete the MBO without heavily impacting Airmatic’s working capital, giving them the flexibility to pursue future growth.
5. Tax Structuring and HMRC Clearance: Our tax team took the lead in structuring the deal to optimise tax outcomes for all parties involved. We obtained HMRC clearance for the transaction, ensuring that share for share exchange treatment applied, thus mitigating the risk of any unwanted CGT or income tax liabilities. The only taxation charge that arose for the Company was the stamp on the purchased shares, taxed at just 0.5% based on the valuation produced by TaxGem. Overall the transaction could not have been more tax efficient!
6. Tax Efficiency for the Company and the Incoming Shareholders: For Claire, Rob and Airmatic Ltd, TaxGem ensured the process was highly tax-efficient. Between these three parties, the only tax paid was just 0.5% Stamp Duty on the shares acquired by the new Holdco, a significant benefit of the structure we advised on. This minimised upfront costs and allowed Claire and Rob to focus on reinvesting in Airmatic’s growth.
7. Companies House filings: TaxGem ensured an end to end, seamless process for our client by going over and above to get all Companies House filings up to date to ensure the legal substance of the project was correctly reflected at Companies House.
Overcoming Challenges: Timing and Complexity
As with any significant business transaction, the Airmatic MBO presented its fair share of challenges. The most pressing was the tight timeline—the entire transaction had to be completed before the company’s March 2024 financial year-end, which meant we had just 8 weeks to finalise the deal. This added pressure to secure HMRC clearance, finalise cash flow forecasts, and raise financing in a short window.
However, by leveraging our experience and working closely with all stakeholders, we successfully navigated these hurdles. Our team ensured that the financial and tax implications were carefully managed at every stage, keeping the project on track to meet the deadline.
The Human Side: A New Era for Airmatic
While the technical complexities of the MBO were important, the human element was just as significant. For the exiting shareholders, the buyout marked the end of a rewarding journey. After years of building Airmatic into an industry leader, they were ready to retire, confident that Claire and Rob were the right successors to lead the company into its next phase. Thanks to the capital payments structured by TaxGem, the exiting shareholders now have the financial freedom to enjoy the rewards of their hard work.
For Claire and Rob, the MBO is an exciting new chapter. With full ownership of the business, they are focused on modernising operations and driving growth. One of their first steps was to hire a new finance manager, signalling a more data-driven approach to managing the business. Their vision is to continue Airmatic’s legacy of innovation while expanding into new markets with higher-margin contracts. In fact, the impact has already been felt—Airmatic has added seven figures to its revenue in the first two quarters of the year.
A Bright Future: Airmatic’s Next Chapter
Under the leadership of Claire and Rob, Airmatic is well-positioned for continued success. Their modern approach, supported by the financial structures and tax efficiencies implemented during the MBO, sets the company up for strong growth. They are actively pursuing new contracts with higher margins, and the company’s performance in the first two quarters of the year reflects the potential for even greater achievements.
At TaxGem, we are proud to have been a part of this pivotal transition as well as continuing to support Airmatic as a strategic partner for all of their accountancy and tax compliance and planning. The Airmatic MBO showcases the breadth of our expertise, from tax planning and financial structuring to business valuation and cash flow management. Our tailored approach to managing complex transactions ensures that both technical requirements and human considerations are seamlessly integrated, delivering successful outcomes for all stakeholders.