Link Engineering

Link Engineering (Pvt.) Ltd.  had been engaged in the Construction Industry of Sri Lanka for more than 25 years and was awarded C 1 Grade in Construction by ICTAD. In the early half of its lifespan it was the leading Construction Contractor of the country. During this early period the Company undertook and completed some of the landmark construction projects in Sri Lanka. Once achieving this lead position the company diversified and invested into areas totally outside the core business and all the diversified projects were unsuccessful and had to be sold at a loss. This situation caused a heavy drain on its finances which curtailed its capacity as a leading Construction Contractor and lost its lead position in the industry. For the last seven to eight years it executed a recovery plan and presently is in need of fresh infusion of capital to reestablish itself and regain its lost position in the industry.

The Company in the last five years had been generating a Turnover of  Rs.600 M per annum on the average which was  well below its capacity. The major constrains in increasing the revenue were:

a)    Lack of aggressive and effective marketing strategy and networking capabilities solely depending on getting projects from participating in public tenders of construction projects
b)    Lack of bank facilities for bidding purposes and straddling the company with inadequate working capital.

It was at this stage that IRC (Pvt.) Ltd was approached and we took over from there. The Company  was burdened with a liability of Rs.425 m and had no net assets as such.  Income Tax payment arrears, EPF arrears and other debts were a threat to the Board of Directors and the Company was going to be defunct.  In order to turn around the Company, an immediate reduction of the liability component and an urgent capital infusion to the tune of around Rs.200 m was  to  be planned out.

Therefore we advised the Board of Directors to accept only one alternative that was to dispose it to another sun-rise Construction Company  which had no C 1 Grading.  We were able to locate the right Company, that was Blue Ocean Group of Companies.  The only attraction that the Link Engineering Co. had was the C1 grading and the brand name for its exceptional performance about 10 years ago.  We were capitalizing on that situation and started negotiation with the Management of Blue Ocean Co.  We suggested to Blue Ocean to bid for mega construction projects on the strength of its financial capacity and the brand name of Link Engineering Co..   We were very successful in getting a couple of mega construction projects being awarded to Link Engineering Co. on the strength of the  Blue Ocean Co.  and the latter was  well positioned to acquire the Link Engineering Co..

After a lengthy negotiation, the IRC (Pvt.) Ltd successfully got the Blue Ocean Co. to agree on its proposal to acquire the Link Engineering Co. by absorbing the immediate liabilities leaving behind the Bank loans to be transferred to Blue Ocean Co .after releasing the personal guarantees given by the Directors of Link Engineering.  Whilst absorbing the liabilities, IRC (Pvt.) Ltd. persuaded the Management of Blue Ocean Co. to take into consideration the Brand Name and to compensate the Directors of Link Engineering Co. by paying a reasonable amount of money.  It was agreed and the transaction was complete very successfully.  The IRC (Pvt.) Ltd played a strategic role in the whole acquisition process utilizing its expertise and networking  capabilities. (April 2013)

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