Gary Partridge, managing director of Lexington Corporate Finance, had to keep his nerve when advising on the carve-out and MBO of Improve International.

What’s the deal?

The £12.75m RJD Partners-backed MBO of Improve International, completed in June 2020. Based in Swindon, Improve provides continuing professional development courses for vets. It has operations across continental Europe, as well as in Asia, and was a carve-out from AIM-listed Benchmark.

There was a £9.5m payment on completion and £3.25m deferred consideration, which was contingent on certain performance conditions being met. Management took a 30% stake. There was no debt brought into the deal on completion, which appealed to Benchmark from a deliverability point of view – it was a very competitive process.

How were you introduced to the deal?

Initially, we were introduced to the business by one of Improve’s non-executive directors. We were appointed following a beauty parade, after showing our interest in the deal and belief in the management team, as well as our experience of successful transactions in the training sector.

What were the timescales?

The sale process was launched in autumn 2019, with Q1 2020 the target for completion. First-round offers came in before Christmas. The shortlisted bidders had additional access to the team and information, and second-round offers were submitted at the end of January.

However, the pandemic struck while decisions were being made by Benchmark and management on which path to follow to successfully conclude the transaction. They had to assess the potential effects on the business, the continuing appetite of bidders and a bank funder, and, ultimately, whether to pause the transaction. RJD saw the deal through to completion in June 2020.

Who were the other advisers?

We provided financial advice to management, while Clark Holt gave legal advice. Benchmark appointed Cavendish Corporate Finance as financial lead advisers and Squire Patton Boggs as legal advisers. Eight Advisory, a fairly new UK firm, led largely by ex-EY partners, gave sell-side advice on the carve-out to Benchmark. Grant Thornton and Capital Law acted for RJD.

What were the challenges?

Close attention had to be paid to identifying stand-alone costs for support that Benchmark currently fulfilled, as well as understanding the completion balance sheet, minus intercompany balances and dividends. But the biggest challenge was COVID-19. There was significant debate regarding the maintainable EBITDA, and what the effects of the pandemic would be upon figures presented in the information memorandum. For example, there was much debate about whether there would be an acceptance of a switch to online tuition, but in face it has been very high. When Improve runs courses, more people are registered now than pre-COVID-19. However, in March 2020, there was some nervousness about the willingness of vets to make this switch.

In the final analysis, Improve was regarded as COVID-19-resilient, with good medium-term visibility of its course booking pipeline and confidence in its ability to pivot more of its courses online. It also has a well-diversified geographic customer base. RJD bought into all of that and had belief in the management team, which really knew its market.

Were there any lessons learned?

‘Keep calm and carry on’ – all the advisers kept their heads and got the deal done, despite lockdown. Management pivoted quickly to present numerous iterations of the business plan, showing downside cases, which demonstrated a deep understanding of its business and the sector. That reinforced the saying: ‘always know your numbers’.