XPS Pensions Group buys Penfida and issues update

£11.6m deal significantly boosts the consultancy’s covenant capabilities

Jonathan Stapleton
clock • 3 min read
XPS Pensions Group’s Paul Cuff said Penfida’s expertise complemented the consultant’s existing covenant business
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XPS Pensions Group’s Paul Cuff said Penfida’s expertise complemented the consultant’s existing covenant business

XPS Pensions Group has bought Penfida, the corporate finance and covenant advisor to UK pension funds, for a total cash consideration of £11.6m.

Penfida was established in 2005 to provide corporate finance advice mainly to pension fund trustees, both in respect of complex corporate transactions as well as regular covenant advisory work in connection with pensions schemes' triennial valuations and monitoring.

It has since built up a substantial presence in the market as an independent specialist adviser, with clients representing in aggregate more than £300bn of assets.

Penfida's business will be combined with the existing XPS covenant team ­- significantly boosting capability and giving critical mass in this important area.

XPS said the deal will enable it to offer covenant advisory services to a wider range of its clients adding that Penfida clients and staff would benefit from access to the wider capabilities of XPS.

The business unit will be led by the current Penfida management team, including senior partner Paul Jameson, integrating within the wider XPS group over time.

XPS said the acquisition includes all staff and contracts within the business and constituted a class two transaction for the purposes of the Financial Conduct Authority's listing rules.

It said the cash consideration of £11.6m comprised of £7.9m on completion and contingent deferred consideration of up to £3.7m, subject to business performance and the continued employment of key employees.

Penfida senior partner Paul Jameson said: "We are delighted to be joining the XPS family, where the culture and values of the firm align with our own. As part of XPS we will be able to continue to provide independent advice to our clients and we will benefit from ongoing investment to enable the combined business to grow and thrive into the future."

Penfida generated profit before tax of £0.9m on an unadjusted basis in the year ended 31 March 2022. XPS said the acquisition is expected to contribute to the group approximately £5m of revenue per annum at a 25% adjusted EBITDA margin.

XPS trading update

XPS also published a trading update - noting it had generated "strong organic growth" in the first five months of its financial year, with revenue up 12% against the equivalent period in 2021.

The consultant said, while relatively early in the financial year, the continued resilience and predictability of its business model - including inflation-linked revenues - alongside the strong pipeline of activity for both longstanding and new clients was "very encouraging".

It said the board were "confident" of achieving full year results slightly ahead of their previous expectations of the year.

XPS Pensions Group co-chief executive Paul Cuff said: "Penfida is a business that we have known and admired for a long time. We have seen first hand the high-quality service they provide when we have worked on clients we have in common. We are excited to welcome their fantastic team. Their expertise complements our existing strong and growing covenant business and means we can offer a market leading service to current and future clients across the entire spectrum of services that they need.

"I am also very encouraged by the revenue growth we are experiencing at XPS across all our divisions, as we deliver for our clients who have needed our support against a backdrop of significant levels of regulatory change and market turmoil. I am excited for the prospects of the Group and look forward to updating shareholders as the year progresses."

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