REG - B.P. Marsh &Partners - Realisation of Investment

B.P. Marsh & PartnersAnnouncement

07/12/2023 07:30

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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:

·    £41.8m (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 £5.9m outstanding loans to Paladin

·    £11.3m uplift from £30.53m valuation as at 31 July 2023

·    Potential for £17.8m further consideration if Paladin achieves
defined hurdles

·    Initial equity investment of £3.5k

 

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 £3.5k for a 35%
shareholding. The Company has also supported Paladin with loan funding during
this time, and currently has outstanding debt of £5.9m. Since B.P. Marsh's
investment, Paladin's EBITDA has grown from a loss of £(50)k in 2016 to a
forecast adjusted EBITDA of £10m in FY23. In the year ended 31 January 2023,
Paladin contributed £0.9m to the Group's total income from investments.

 

The Transaction

 

Upon completion, the Group expects to receive at least £41.8m in cash (net of
all transaction costs) plus repayment in full of its £5.9m loans to Paladin,
an aggregate cash receipt of £47.7m. The equity proportion of the initial
consideration alone represents an £11.3m uplift (or 37%) on the Group's most
recent £30.53m 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
£17.8m 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 £93.7m 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 (http://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
(http://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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