Our Services
Case Studies

Case Study One

The background: our client and their situation

The client is an industrial company producing household goods for all main UK retailers and a few US retailers. The Scheme deficit ranks as the second largest liability of the Employer group. There are two schemes in the Group. The total discounted liability of the Schemes is XXXX and we have XXX members.

The issue and our goals

The shareholders of the employer were in the final round of selling the business to another industrial group with a much stronger covenant. In preparation for this transaction AAA was appointed as sole trustee 12 months before the sale process started to prepare the two Schemes for this transaction.

On top of our ordinary Trustees duties, our mission was to reduce as much as possible the unknown liabilities, to sort out any historical hangover (Equalisation, GMP etc.) for the Scheme not to be an obstacle to the change of ownership which is very beneficial to our members.

As part of this project we are also merging the two Schemes to reduce the administrative burden and significantly reduce the cost of managing those. 

How we managed the issue

As sole trustee we were able to run this project efficiently as a full business project and to use the whole spectrum of the AAA in-house team.

  • We launched a full review of the deed and rules to assess any required clean-up and initiated the work on two major topics (equalisation and GMP). There is still a lot to be done to finish the clean-up but we are moving in the right direction and at least the unknowns are known!
  • We worked intimately with the current employer and their shareholder advisors on the sale transaction, reviewing the various options proposed and using the AAA team members who have done corporate transactions for a living for so many years – (actually, they bore us to death with their war stories!)
  • As part of the process we negotiated a conditional MoU with the existing employer, setting the provisional parameters of the post transaction deficit valuation in light of the new employer solid covenant. So the (short term) future of those negotiations rested on certainty rather than being open ended.
  • This, plus the clean-up, enabled the employer to negotiate a sales transaction which was fully protective of our members’ rights, while being acceptable to the new employer. 
  • Last, but not least, we are just finalising the merger of the two schemes into a new single scheme, which will simplify the administration and streamline costs. 

The result

The result of 18 months’ work is:

  • Our members have a much better employer covenant.
  • By preparing the Schemes in advance of a big M&A transaction, we avoided the Scheme being the infamous stumbling block in the transaction, which would have left our members much worse off.
  • Our involvement in the M&A preparation avoided the two schemes facing a materially detrimental transaction and instead created a win-win transaction.
  • The merger of the two schemes, while complex, will create a simplified and cost effective platform benefiting the Scheme and the new employer.