LONDON: FRP Advisory Group announced the acquisition of Spectrum Corporate Finance Limited, a leading Corporate Finance and Debt Advisory boutique to UK mid-market clients and their funders.

The consideration comprises cash of £9.4 million plus a further payment contingent on the net assets at completion of up to circa £3 million.

The five key selling shareholders have also entered into a subscription agreement to reinvest £3.76 million of the proceeds into new ordinary shares which will be issued by FRP.

Spectrum was founded in 2010 by Simon Davies, Clive Hatchard and Ian Milne. They provide coverage of the UK from their offices in Reading and London, with particular focus on the central South, South East and London.

All 27 colleagues will join FRP including: seven Partners (Simon Davies, Clive Hatchard, Ian Milne, Mark Farlow, Simon Sherliker, Darren Miller and James Mines); 12 other fee earners; four research colleagues and four support colleagues.

In the last reported financial year ended September 2020, Spectrum recorded unaudited revenues of £4.0m and unaudited adjusted1 EBITDA of £0.5 million, with several large transactions falling into the current financial year as a result of the adverse impact of COVID-19.

In the previous two financial years to September 2018 and 2019 Spectrum averaged unaudited revenues of £6.4 million and unaudited adjusted1 EBITDA of £2.5m. On an annual basis going forward it is expected that Spectrum’s underlying incremental contribution to FRP will be revenue of £7.5 million and adjusted1 EBITDA of £2.1 million.

However, within specific financial years there will be timing volatility of when transactions complete as demonstrated by Spectrum having completed 12 transactions in calendar Q4 2020.

Geoff Rowley, FRP CEO said: “Spectrum is another excellent addition to FRP, in line with our strategy to complement our organic growth with high quality selective acquisitions.

It further bolsters our Corporate Finance and Debt Advisory offering, following the East Anglian JDC Group (Corporate Finance and Forensic Services) acquisition in September 2020, as well as strengthening our UK footprint. Nationally FRP’s Corporate Finance and Debt Advisory teams will now comprise 48 fee earners (including 18 Partners) across 9 locations.

This highly complementary combination will give us a key position in the UK mid-cap transactional advisory market; it will enable FRP to continue supporting clients post COVID-19, in addressing both their strategic ambitions and being available to help as challenges arise.

The Spectrum team have earned themselves a great reputation, particularly within the UK private equity community and we are excited about the contribution they will make to FRP.”

Simon Davies, co-founder of Spectrum said: “We are delighted to have found in FRP a partnership that shares our values of professionalism, quality, entrepreneurial spirit and achieving the best possible outcome for clients.

We are immensely proud of what we have achieved at Spectrum over the past ten years, and as a new chapter starts with FRP, we are excited at the opportunities this new partnership presents for our team and our clients. We are looking forward to continuing to grow our Corporate Finance and Debt Advisory businesses nationally, as a combined group.”

Pursuant to the terms of the subscription agreement, the five key selling shareholders of Spectrum have agreed to subscribe for £3.76 million of subscription shares, at a subscription price of 103.5p, being the closing mid-price on 23 February 2021.

Application has been made to AIM pursuant to the issue and admission to trading on AIM of 3,632,852 subscription shares. It is expected that these subscription shares will be admitted on 4 March 2021.

The cash proceeds will be funded by a partial drawdown under the existing Revolving Credit Facility (RCF) which has been recently increased from £5 million to £10 million.

An allocation of nil cost share option awards, from the existing FRP Employee Incentive Plan (EIP) will also be made to employees of Spectrum. This EIP was established and funded on IPO, 6 March 2020.

Following Admission, the Company’s issued share capital will consist of 243,191,489 Ordinary Shares with voting rights. This number may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules.

FRP Advisory is a business advisory firm based in the United Kingdom, providing restructuring, corporate finance, debt advisory, forensic accounting and pensions services and is one of the UK’s largest specialists in the area of corporate restructuring. www.frpadvisory.com