TIDMBPM
RNS Number : 0138W
B.P. Marsh & Partners PLC
07 December 2023
7 December 2023
B.P. Marsh & Partners Plc
("B.P. Marsh", "the Company" or "the Group")
Realisation of investment
Sale of Paladin Holdings Limited, parent company of CBC UK
Limited
B.P. Marsh and Partners Plc (AIM:BPM), the specialist private
equity investor in early stage financial services businesses, is
pleased to announce the sale of its entire shareholding in Paladin
Holdings Limited ("Paladin"), the holding company of CBC UK Limited
("CBC"), subject to certain conditions including regulatory
approval being granted.
Highlights:
-- GBP41.8m (net of all transaction costs) initial cash
consideration expected to be received from the disposal of the
Group's 43.8% holding in Paladin on completion, subject to
regulatory approval
-- Internal rate of return to B.P. Marsh of 45% (inclusive of
all income and fees) based on initial consideration
-- Repayment to the Group of GBP5.9m outstanding loans to Paladin
-- GBP11.3m uplift from GBP30.53m valuation as at 31 July 2023
-- Potential for GBP17.8m further consideration if Paladin achieves defined hurdles
-- Initial equity investment of GBP3.5k
Sale of Shareholding in Paladin
B.P. Marsh has agreed to sell its shareholding in Paladin, the
parent company of CBC, the London-based Insurance Broker, to
Specialist Risk Group Limited ("SRG"), one of the fastest growing
groups of insurance intermediaries in the UK, subject to regulatory
approval. SRG is backed by HGGC, the Californian based mid-market
private equity firm.
Background to the Investment
B.P. Marsh originally invested in Paladin as part of a
Management Buy-Out in February 2017, with an initial equity
investment of GBP3.5k for a 35% shareholding. The Company has also
supported Paladin with loan funding during this time, and currently
has outstanding debt of GBP5.9m. Since B.P. Marsh's investment,
Paladin's EBITDA has grown from a loss of GBP(50)k in 2016 to a
forecast adjusted EBITDA of GBP10m in FY23. In the year ended 31
January 2023, Paladin contributed GBP0.9m to the Group's total
income from investments.
The Transaction
Upon completion, the Group expects to receive at least GBP41.8m
in cash (net of all transaction costs) plus repayment in full of
its GBP5.9m loans to Paladin, an aggregate cash receipt of
GBP47.7m. The equity proportion of the initial consideration alone
represents an GBP11.3m uplift (or 37%) on the Group's most recent
GBP30.53m valuation of the investment as at 31 July 2023,
underlining our valuation methodology.
As well as the initial consideration on completion, the Company
will also be entitled to receive its proportion of any net working
capital adjustment, expected to be finalised within three months of
completion.
The Company will then be entitled to receive deferred
consideration of up to GBP17.8m in cash based upon 20% EBITDA
growth targets above Paladin's current EBITDA in FY24 and FY25,
payable in 2025 and 2026. There is the possibility of further
consideration in FY25 should Paladin outperform these growth
targets.
Jon Newman, the Company's Finance Director and Nominee Director
on the Boards of Paladin and CBC, will resign from his roles at
Paladin and CBC on completion of the sale.
The investment, development and subsequent sale of the Group's
holding in Paladin demonstrates B.P. Marsh's established strategy
of partnering with entrepreneurial management teams to assist their
growth prior to reaching a management-led exit in a time frame that
suits all parties.
Jon Newman, the Group's Finance Director, commented:
"The sale of our stake in Paladin at an expected IRR of 45% at
completion with the potential for significant further consideration
over the next two years, is testament to our investment strategy
and ability to identify opportunities to back successful management
teams and to successfully realise value for our shareholders. We
believe that there are few, if any, UK investors that could have
made this investment, demonstrating the specialist position that
B.P. Marsh occupies in the marketplace and the opportunities that
this can provide our investors.
"It has been an absolute pleasure to work with Andrew Wallas,
Rob Cottingham and the whole team at CBC and be a part of the
transformational growth since the MBO almost seven years ago. This
deal offers an exciting future for both SRG and CBC, and the whole
of B.P. Marsh wishes everyone at CBC every success in the
future."
Andrew Wallas, Chairman of CBC, said:
"When Rob Cottingham called me in 2016 to explain the
opportunity for a Management Buyout of independent Lloyd's Broker
CBC, I contacted B.P. Marsh, who agreed to partner with us very
readily. This year is the 50th anniversary of me commencing my
career within the Lloyd's market as a junior administrator with
Nelson Hurst under the tutelage of Brian Marsh. B.P. Marsh has
provided follow on funding and supported us to expand the business
by attracting highly experienced, talented and dedicated
practitioners.
"The B.P. Marsh nominee director on our board, Jon Newman, has
provided us with insight, inspiration, wise council and a calming
influence which has been invaluable to us as we have developed the
business under the leadership of Rob Cottingham. The role and
expertise of B.P. Marsh and in particular Jon Newman in helping us
to navigate this transaction has been deeply appreciated by both
Rob Cottingham and myself."
Use of Proceeds
Subject to completion, this transaction would increase the
Group's current funds to approximately GBP93.7m after transaction
costs and tax. Following the receipt of the Sales proceeds, the
Directors will present their plans for the utilisation of this cash
to Shareholders.
Note
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK
domestic law by virtue of the European Union (Withdrawal) Act
2018.
For further information:
B.P. Marsh & Partners Plc www.bpmarsh.co.uk
Brian Marsh OBE +44 (0)20 7233 3112
Nominated Adviser & Broker
Panmure Gordon
Atholl Tweedie / Stephen Jones / Amrit
Mahbubani / Ailsa MacMaster +44 (0)20 7886 2500
Financial PR & Investor Relations
Tavistock bpmarsh@tavistock.co.uk
Simon Hudson / Tim Pearson / Katie Hopkins +44 (0)20 7920 3150
Notes to Editors:
B.P. Marsh's current portfolio contains fourteen companies. More
detailed descriptions of the portfolio can be found at
www.bpmarsh.co.uk .
Since formation over 30 years ago, the Company has assembled a
management team with considerable experience both in the financial
services sector and in managing private equity investments. Many of
the directors have worked with each other in previous roles, and
all have worked with each other for approaching ten years.
- Ends -
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END
DISGRBDDCBGDGXR
(END) Dow Jones Newswires
December 07, 2023 02:23 ET (07:23 GMT)
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