One of the major hindrances to the objectives of the Federal Government of Nigeria’s 2013 Automotive Industry Policy, was the dearth of skills and capacity building in the Nigerian automotive industry. A national automotive policy aimed at promoting in-country design and manufacturing of “Made in Nigeria” motor vehicles relied heavily on availability of automotive engineering knowledge and skills in-country, and support of sub-industries within auto-manufacturing value chain.
As an intervention to the above, in 2016, the National Automotive Design and Development Council (“NADDC”) resolved to develop the country’s first integrated automotive skills acquisition and capacity development centre – the National Automotive Centre of Excellence – using a Public-Private-Partnership (PPP) model. It published an invitation for Expression of Interests from prospective private sector interests for the concession, on a Design, Build, Finance, Operate and Transfer basis.
Our client, a company operating a local automotive vocational training enterprise recognized an opportunity and engaged Eczellon to advise on and execute the transaction. The mandate includes packaging a winning bid to the NADDC for the Concession of the facility and, subsequently, raising the project development financing.
There were many challenges to the ultimate objectives of our client on the transaction, including but not limited to:
- Low financial capacity versus need for extensive professional services:
Although part of – a subsidiary of – a large manufacturing company, the company itself was a small enterprise with low capitalization. It could therefore not fully engage the required technical professionals for the project.
- Parent Company Issues:
The company is a wholly owned subsidiary of a large auto manufacturing and assembly company, which had been acquired by the Asset Management Corporation of Nigeria (AMCON). The expected divestment of AMCON from this parent company was identified to have a likely negative impact on a capital raise exercise by our client for the project.
- Inflexible Project Features:
The NADDC maintained specific design requirements, which specified orientation of facility, key features etc. These were initially viewed as potential hindrances to the overall deployment of the building to commercial operations.
Solution - Our Approach
Eczellon approached the transaction with a view to balancing the objectives and requirements of key stakeholders in the project, while circumventing the larger issues.
To deal with the ownership issue, Eczellon recommended and executed a spin-off of the company from its parent, through an expertly executed Management Buy-Out. Subsequently, as opposed to engagement of third party professional services on fees bassis, Eczellon organized on behalf of the client, consortium for the bid, in which all required professional parties were admitted as consortium partners based on pre-agreed terms which included rewards, partnership tenor, and exit.
The consortium accepted the NADDC required features and was able to design an even more robust facility that preserved the key features, yet maximized the facilities for intended educational business set up.
The consortium won the bid and concession of the National Automotive Centre of Excellence facility. Based on the transaction structure and financial projections that factored real market dynamics and economic evolution, Eczellon successfully raised up to $25million for the project.
We executed a Management Buy-Out of our company, after winning a concession of a major government asset. Eczellon guided us all through, with excellent advisory inputs and helped us secure financing
in the news
June 7, 2018
June 7, 2018
As banks continuously reassess their lending policies, corporates are increasingly seeking alternative financing options, turning to bond issuance as a source of longer term finance. There are other potential advantages companies consider such as cheaper borrowing costs, but there are other attractions: Diversification of funding is one attraction. The banking sector’s approach to lending canSeptember 7, 2018