XPS Pensions Group acquired the corporate finance and covenant adviser Penfida in a £12 million ($14 million) deal.
The transaction terms include a £7.9 million completion payment and a further roughly £4 million payment that is subject to business performance and the continued employment of key employees, a regulatory filing said. The deal includes all staff and contracts.
Penfida, established in 2005, was employee-owned, a Penfida spokesman said. It provides corporate finance advice to U.K. pension fund trustees, and its clients represent more than £300 billion in assets. The firm also specializes in employer covenants — the sponsoring employer's legal obligation and financial ability to support the pension fund.
XPS Pensions is a pension consulting and administration business.
The firm's business will be combined with XPS Pensions' covenant team, allowing XPS to offer covenant advice services to a wider range of clients. The business unit will be led by Penfida's management team, "integrating within the wider XPS Group over time," the filing said.
Penfida's management had been looking a while for a partner to invest capital in the business and continue the development of the firm, Paul Jameson, senior partner, said in an interview.
The firm has seen increased interest in its services given "a heightened focus on covenants coming through, both in terms of new legislation, regulation and developments that we see coming forward in the next year or so," Mr. Jameson said.
The current economic environment, "which is not without its problems," also is placing further importance on the sponsoring employer's promise and backing to a pension fund. "You either have a covenant you can rely on or you don't. If don't you're in pretty difficult territory," Mr. Jameson added.
Penfida executives see a growing market and space to develop, "but this business has grown to a point where it would benefit from external capital. At the same time, XPS were considering how to grow their covenant business." It's a "deal that works for both sides," Mr. Jameson added, since it brings "critical mass in corporate finance and covenant advice, as well as providing us with the platform for growth."
