Exploring all options for equity partners to ensure alignment for a diverse stakeholder base is key for M&A in the accountancy sector, says Tom Rowe-Jones of LAVA Advisory Partners.
What’s the deal?
The investment by Blixt-backed accounting group Kinbrook into Beavis Morgan Group, an established London-based firm. Beavis Morgan covers accounting and tax advisory and Moorfields, which is its restructuring and recovery arm. The investment was the execution of Kinbrook Group’s strategy to obtain a London and South East hub, complementing the Duncan and Toplis business located in the Midlands and East of England that the group has invested in previously.
How were you introduced to the deal?
Through a private equity investor. We took part in a competitive selection process. They chose LAVA because of our extensive sector knowledge, strong relationships with lower mid-market private equity and hands-on technical approach.
What was the process?
Any potential deal scenario was fully explored to ensure it met the requirements of the diverse partner group. It was not a generic auction. It was instead a careful curation of parties we felt were aligned with those objectives. In the accounting sector, moving from an equity partnership to a private equity structure is a journey and it’s important that all stakeholders are on board. We explored all participants in the market and narrowed options down, ensuring management had a carefully selected shortlist, before driving discussions between a number of parties.
Who were the other advisers?
Russell Cooke was the sell-side legal advisers. Tax advice came from the in-house Beavis Morgan tax team. Buy-side legal advice came from Pinsent Masons with RSM providing financial and tax due diligence.
Why did Beavis Morgan choose Blixt?
Blixt and Kinbrook appreciated Beavis Morgan’s strategic vision and desire to not just preserve but strengthen the business as the London and South East hub. They wanted to add value and complement the group strategy, leveraging the capabilities of the rest of the Kinbrook group, with parallel service lines and shared resources. Beavis Morgan didn’t want the break-up of the group and Kinbrook valued what they had built. They rolled some of the consideration into the deal, as they wanted to be a key part of driving group strategy moving forwards and benefit from the future success of the combined business. There’s appetite for Kinbrook to do more acquisitions, and the Beavis team sees an opportunity for M&A in London and the South East. The infrastructure and the M&A execution expertise of the wider group was really attractive.
What were the challenges?
Clear communication with the equity partners about deal structure options was key – what it would mean for them personally and financially, and for others across the firm. It is a people-centric sector so incentivising key personnel, bringing talent on the journey and giving them opportunities was central to the success of the business and the deal.
What were the lessons learned?
It’s crucial to protect and maintain the culture that brought the business success, albeit under a different structure. We’re seeing the need to strike this balance in the accounting and the legal sectors. As well as the cultural change involved in moving from a partnership to private equity investment, there’s the legal reorganisation – like tax analysis – and it’s important to focus on that early, so it doesn’t hold things up at the back end of the process.
