Macquarie Bank has a fund specialising in infrastructure investments and owned one half of the infrastructure that delivers the UK’s terrestrial Television-Arqiva. Macquarie had successfully grown earnings at Arqiva in its three years of ownership. The owners of the other half of the infrastructure, National Grid, decided to auction of its subsidiary, NGW, providing Macquarie with a unique opportunity to restructure the industry to the benefit of consumers, broadcasters and create value for itself. In parallel, as part of Digital Switch Over – reengineering terrestrial broadcasting to complete digitalisation of the service deliver value chain and release spectrum, Macquarie had entered into a contract with the BBC that had large, punitive failure penalties for both implementation and service levels. Macquarie’s challenge was (1) raise funds through refinancing Arqiva, with its improved profitability, (2) raise funds against earnings and synergies from NGW, and (3) demonstrate to lenders that failures on DSO were unlikely to impact profit and cash flow.
Commercial and financial due diligence on both Arqiva and NGW was needed during the auction process, reporting on issues to management and preparing reports for use in the debt capital raising process. David was responsible for assessing Arqiva’s ability to execute its DSO commitments and the likelihood that failure penalties (e.g. £2m per week of delay) would be triggered. During the sale process, David reviewed synergy plans prepared by Arqiva, providing advice and challenge to improve the plans, and help form the final PwC view in reports used by banks. David also assessed the capital expenditure plans of both NGW and Arqiva, both of which were dominated by the significant DSO investments required.
Our rigorous review enabled Macquarie to navigate banks’ credit processes and committees, and culminated in the £2.5b acquisition of NGW.