Shares in insolvency specialist Begbies Traynor (BEG:AIM) jumped 8% higher to 106.25p on Monday after the company made its largest acquisition to date, CVR Global LLP.
The transaction represents a maximum consideration of £20.8 million on a cash and debt free basis and will create a ‘significant expansion of the group’s scale’ on London and the South of England.
CVR is an insolvency practitioner with forensic accountants and experts in other complementary disciplines which enhances the group’s existing business recovery ad financial advisory capabilities.
The acquisition is expected to be ‘immediately earnings enhancing’ and is in line with Begbies’ strategy to increase market share, add complementary services whilst increasing the average case size and complexity.
Begbies reached a market share of 10.4% at 31 October 2020, an increase of 2.4% over the last two years.
PROFIT UPGRADES
Shore Capital analyst Rachel May commented, ‘We believe this represents an attractive buying opportunity given the significant upside potential to our earnings forecasts should the pandemic eventually drive higher corporate insolvency volumes.’
Analysts at Canaccord Genuity added, ‘We believe the CVR transaction should deliver market share gains and meaningful revenue and cost synergies.’
Following the transaction net debt is expected to be £11 million and the group retains ‘significant financial headroom’ with banking facilities of £25 million.
Executive chairman Ric Traynor said, ‘The group continues to consider further acquisition opportunities and organic investments in both of its divisions, in line with our stated strategy.’
