The shareholders of Challenge Group started discussion with PMP in later 2020 and approached our corporate finance team to support them with the acquisition at the beginning of 2021. The deal involved the provision of buy-side advice to the shareholders of Challenge TRG Group Holdings in relation to the acquisition of PMP Recruitment, a provider of multi-sector recruitment and facilities management services.
Our role involved supporting in financial modelling of the deal, working capital and completion mechanism negotiations alongside general project management of the transaction.
The acquisition was to be funded by the extension of the target’s existing ID facilities. It was therefore a key focus of our work to ensure the bank could get comfortable with the available headroom across the forecast period.
We built and advised on various iterations of a forecast financial model with the purpose of assessing the headroom over the forecast period, despite there being limited financial data available.
A month before the expected completion, a key customer announced they were pulling a proportion of revenue away from the target due to an internal strategy change, re-opening valuation and structuring discussions.
We supported in the renegotiation of the deal by adapting the financial model to incorporate an earn out mechanism to reflect the change in financial performance and working capital profile of the business.
With this updated modelling, both the buyer and the bank were able to get sufficient comfort on the reliability of key net working capital balances to drive the expected headroom across the forecast period. This gave the bank the comfort it needed that there was adequate debt capacity in the business for it to continue and extend its current facilities in support of the buyer.
