Upgrades after DRP acquisition
We have upgraded both our forecasts and valuation post the group’s latest acquisition. To recap, in its largest acquisition to date. BEG agreed to pay up to £25m (on a cash/debt free basis with normalised working capital) for insolvency practice David Rubin & Partners (DRP), a long-established operation with offices in London and Guernsey.The acquisition, in combination with the addition of CVR in January, further builds the market share of the group’s insolvency business (from 10.5% to 12% by volume of insolvency appointments) and is expected to enhance its profile amongst important sources of referrals and opportunities for synergies between different components of the group.
We have increased our fair value calculation to 165p/share, which reflects the transformational nature of the latest acquisition. That share price is equivalent to a 18.7x FY22e PER and a 1.9% prospective yield (covered a healthy 2.7x by adjusted earnings). The multiple is broadly in line with the general market rating for UK listed professional services companies.
Begbies Traynor Group is a business recovery, financial advisory and property services consultancy. Co. provides these services through two operating segments: business recovery and financial advisory services, which provides transactional support, valuations and advisory services through its subsidiary, BTG Financial Consulting LLP; and property services, which delivering advisory, such as commercial property valuations, property receiverships, property management and accounting, and as well as transactional services that include property auctioneers, machinery and business asset auctioneers to owners and occupiers of commercial property, investors and financial institution.
Gateley (Holdings) is engaged in the provision of commercial legal services together with complementary non-legal professional services including acting as independent trustees to pension schemes and providing specialist tax incentive advice and specialist property consultancy advice. Co. sells its services through 18 business lines, grouped into five operating segments: Banking and Financial Services; Corporate; Business Services; Employees, Pensions, and Benefits; and Property.
K3 Capital Group acts as business sales specialists. Co. has one reporting segment due to the nature of services provided across Co. being the same, being business sales derived solely from the U.K. The services supplied to clients of Co. include presenting the clients' sales opportunity to market, sourcing potential acquirers and project managing transactions to completion.
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