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Begbies Traynor (BEG)

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Monday 18 January, 2021

Begbies Traynor

Acquisition

RNS Number : 9340L
Begbies Traynor Group PLC
18 January 2021
 

18 January 2021

Begbies Traynor Group plc

 

Acquisition

 

"A significant expansion of the group's scale and specialisms

in business recovery and financial advisory"

 

Begbies Traynor Group plc (the "group"), the business recovery, financial advisory and property services consultancy, today announces that it has completed the acquisition of CVR Global LLP ("CVR").

 

Highlights of the acquisition

 

·   Maximum potential consideration of £20.8m on a cash free and debt free basis, financed from the group's existing bank facilities

· Represents the largest insolvency acquisition the group has undertaken to date

· Delivers a significant expansion of the group's scale in London and the South of England

· Enhances the group's existing specialisms in business recovery and financial advisory

· Adds first overseas offices, enhancing the offering provided by BTG Global Advisory

· In line with strategy to target value-accretive acquisitions and is expected to be immediately earnings enhancing

 

About CVR

 

CVR is a leading independent firm of insolvency practitioners, forensic accountants and experts in other related complementary disciplines. The firm's specialisms include restructuring, financial distress, fraud and asset recovery, business disputes, and pension covenant reviews.

 

The business operates from seven UK offices in London, Birmingham, Bristol, Southampton, Hove, Medway and Colchester; together with offshore offices in Gibraltar, Jersey, Cyprus and the British Virgin Islands.

 

The team of 90 partners and employees will all join the group and enhance our existing strong network of offices and teams across London and the South of England. In common with our previous insolvency acquisitions, the CVR team will operate as Begbies Traynor and BTG Advisory moving forwards.

 

There is a significant overlap of operating locations, which will enable the group to combine local operating teams in single offices and derive operating synergies, which are expected to be worth at least £0.75m per annum when fully realised.

 

The CVR specialisms are expected to enhance the group's offering and include:

 

· Significant insolvency expertise with cases largely sourced from professional intermediaries.

·     A strong contentious insolvency practice which will complement the group's existing practice.

· Forensic accounting, expert witness and pensions advisory services which will develop our BTG Advisory service line.

· Established operations in offshore locations which will enhance the offering provided by BTG Global Advisory.

 

The business has a strong record of financial performance based on the development of the specialisms noted above and an increasing and profitable caseload. In the financial year ended 31 March 2020, CVR reported annual revenue of £9.5m (audited) and normalised pre-tax profits of £1.2m when reported on the same basis as the group (unaudited). In the first six months of its current financial year, trading continued in line with this performance. Net assets were £4.1m (including net debt of £2.5m) at 31 March 2020.

 

Reasons for and benefits of the acquisition

 

The group's strategy is to increase the scale and quality of its businesses both organically and through value-accretive acquisitions, enabling increased shareholder value through the delivery of strong, sustainable financial performance.

 

Our strategy in business recovery and financial advisory has been to increase market share and add complementary service offerings, whilst increasing the average case size and complexity of the caseload. The group has a long-standing track record of making successful acquisitions that have met these criteria.

 

This strategy has delivered a steady increase in the group's market share of new insolvency appointments, reaching a record high at the half year ended 31 October 2020 of 10.4%, up from 8% at the same point in 2018. The increase in our market share, together with an increase in average case size, has mitigated the weakness in the wider insolvency market during 2020. The development of the division, including the contribution from acquisitions, enabled growth in revenue and profits in the half year ended 31 October 2020.

 

The acquisition is in line with our strategy, as CVR adds both scale and specialisms to enhance the group's business recovery and financial advisory practice, both regionally and overseas. It is expected to be immediately earnings enhancing.

 

Principal terms of the acquisition

 

The acquisition is for a maximum potential consideration of £20.8m on a cash free and debt free basis.  The consideration is structured as follows:

 

· Initial cash consideration of £12.0m (subject to cash free/debt free adjustments), which will be financed through the group's existing facilities.

· Contingent cash consideration of up to £4.0m subject to profit-enhancing financial performance conditions in the first three years post acquisition; and

· Earn out of up to £4.8m subject to successful fee realisations on three long-running contentious insolvency appointments.

 

At 31 October 2020, the group reported net cash of £0.7m. Following this transaction, the group retains significant financial headroom in its committed bank facilities of £25m. On a pro-forma basis, following the acquisition, net debt is expected to be £11m.

 

Mark Fry, Head of business recovery and advisory of Begbies Traynor Group plc, commented:

 

"The acquisition of CVR significantly increases the scale and specialisms of our business recovery and financial advisory business across London and the South of England, whilst enhancing our overseas capabilities. The CVR team has a similar style and culture to our own and will be a highly complementary fit with our business.

 

"We welcome the team into the group and look forward to working with them."

 

Ric Traynor, Executive Chairman of Begbies Traynor Group plc, commented:

 

"The acquisition of CVR is our largest insolvency acquisition to date and is expected to be immediately earnings enhancing. The increase in scale and capabilities leaves the group
well-positioned to increase its market share and continue to grow its business recovery and financial advisory revenues.

 

"The group continues to consider further acquisition opportunities and organic investments in both of its divisions, in line with our stated strategy."

 

 

 

Enquiries please contact:

 

Begbies Traynor Group plc  0161 837 1700

Ric Traynor - Executive Chairman

Nick Taylor - Group Finance Director

 

Canaccord Genuity Limited    020 7523 8350

(Nominated Adviser and Joint Broker)

Emma Gabriel / Angelos Vlatakis

 

Shore Capital                                                                                         020 7408 4090

(Joint Broker)

Mark Percy / Anita Ghanekar

 

MHP Communications  020 3128 8168

Reg Hoare / Katie Hunt / Florence Mayo                                               [email protected] 

 

 

Information on Begbies Traynor Group can be accessed via the Group's website at
www.begbies-traynorgroup.com/investor-relations

 

 

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