For owners
Pennine acquires established businesses from the people who built them and owns them for the long term.
This page sets out the businesses Pennine looks for, how it conducts a transaction, the stages of a sale and the basis on which a price is determined, so that an owner can judge whether a conversation would be worthwhile.
What Pennine looks for
The trades
Pennine concentrates on service and distribution trades in which the customer buys under contract, under regulation or by routine. The earnings of such businesses are stable through the economic cycle, which allows them to support the cost of acquisition, and their customer relationships rest with the people who carry out the work, which allows them to change ownership without disruption.
- Commercial cleaning and facilities services
- Fire and security maintenance
- Heating, mechanical and electrical servicing
- Statutory testing and inspection
- Pest control
- Industrial repair
- Trade distribution
- Contract print
- Specialist logistics
- Block and commercial property management
Pennine does not generally acquire businesses in hospitality, retail or construction contracting, or businesses whose licences or customer relationships are held personally by the owner, because in those cases the earnings either follow the economic cycle or depend on the seller.
The businesses
What Pennine looks for in a business.
The figures below describe the businesses Pennine most often approaches. They are a guide rather than a set of conditions; a business outside them is considered where the trade, the management and the trading record are suitable.
Years under current ownership
10+
Typical of the businesses Pennine approaches; the record is in the filed accounts
Employees
5 to 50
Large enough to be run by a manager and small enough that few other buyers are active
Adjusted earnings a year
£150k to £400k
After adjustment for the owner's remuneration and non-recurring items; indicative rather than a limit
By road from Manchester, Warrington or Preston
90 min
The area in which Pennine operates
Trading history
Ten years or more under current ownership, with a record of profit in recent years.
A price based on earnings requires a record, and the record is the accounts.
Size
Ordinarily 5 to 50 employees and adjusted earnings of £150,000 to £400,000 a year.
Large enough to be run by a manager and to support the cost of acquisition; small enough that few other buyers are active.
Management
A manager, supervisor or foreman responsible for day-to-day operations.
The business continues to operate when the owner steps back.
Customers
A spread of customers, ordinarily with none accounting for more than about 15% of sales.
The loss of one contract should not put the business or its employees at risk.
Location
Within about 90 minutes by road of Manchester, Warrington or Preston.
The area in which Pennine operates and can attend in person.
The owner's position
Prepared to step back within one to two years, with an agreed handover period.
Where the owner holds the relationships, the licences or the technical knowledge, the price and the handover arrangements reflect it.
Conduct
What an owner can expect from Pennine.
Pennine sets out in writing, at the outset, how it intends to conduct the transaction, and adheres to that through to completion.
- The business retains its name, its premises and its employees, and continues under the manager who runs it today. In the trades Pennine acquires, customer relationships rest with supervisors and engineers rather than with the owner, and disturbing them would reduce the value of the business.
- Pennine acquires in order to own. It does not acquire a business with a sale in mind, and no price it offers depends on one.
- An offer is made only once the finance for it has been arranged, so that a seller is not taken through a process that cannot complete.
- In the first year after completion, Pennine's practice is to make no change that a customer or an employee would notice, and to agree any later change with the manager.
- Where Pennine decides not to proceed, it says so promptly and gives its reasons. A seller who decides not to continue is not contacted again unless they ask to be.
How a sale proceeds
The process
Six stages from the first conversation to completion.
Nothing is requested from a seller before the stage that requires it, and no adviser costs are incurred on either side until the terms have been put in writing.
STAGE 1
A conversation
Half an hour, in person or by telephone, without obligation on either side and in confidence.
STAGE 2
Confidentiality and financial information
If both parties wish to proceed, a short confidentiality agreement, followed by three years of accounts and recent management accounts.
STAGE 3
An indicative proposal
Pennine's view of the value of the business and of how the price would be paid, including deferred or staged payments where these suit the seller's position on tax and timing.
STAGE 4
Heads of terms
If terms are agreed in principle, a short written summary of them, with a period of exclusivity, before solicitors are instructed on either side.
STAGE 5
Due diligence
An accountant reviews the financial information and a solicitor the contracts. Pennine commissions this only after heads of terms have been agreed, so that a seller is not put through it by a buyer that does not intend to proceed.
STAGE 6
Completion and the first year
Employees are informed on the day of completion. The seller remains available for an agreed period, usually 6 to 12 months, to introduce customers and suppliers, and no changes are made in the first year beyond those agreed with the manager.
Price and payment
How a price is determined.
Pennine bases its price on the earnings the business has already achieved, as shown in its filed accounts, management accounts and VAT returns, adjusted for the owner's remuneration and for non-recurring items. Each adjustment is accepted where it is supported by a payslip, an invoice or a ledger entry. The multiple applied to those earnings reflects the trade, the extent to which the business depends on its owner, the spread of its customers and the condition of its balance sheet, and it is explained to the seller.
Where the seller's view of earnings and the evidence differ, Pennine's preference is to bridge the difference with a deferred or contingent payment rather than a higher headline price, so that the seller is paid in full if the earnings are achieved and the business is protected if they are not. Part of the price is commonly deferred, with interest, and paid over the following years. The split between the amount paid on completion and the amount that follows is agreed with each seller, taking account of their position on tax and timing, and is set out in writing before solicitors are instructed.
Basis
Earnings achieved
Adjusted earnings shown in the accounts and VAT returns, not a forecast; the business's own cash and borrowings are dealt with separately at completion
On completion
The larger part
Paid in cash on completion
Deferred
Owed with interest
Paid over the following years; it also maintains the seller's interest in an orderly handover
Contingent
Subject to earnings
Used where the seller's expectation of earnings exceeds the evidence
The proportions are agreed with each seller and vary from one transaction to another.
Questions owners ask
Questions owners ask.
Anything not covered here is answered in the first conversation.
Will the staff keep their jobs?
Pennine does not acquire a business in order to reduce its staff. In the trades it acquires, customer relationships rest with supervisors, engineers and technicians, and much of the value of the business lies with them. On completion nothing changes for employees; the people on whom the business depends are consulted about their terms before completion, and the manager's remuneration is increased from the first day.
Will the name change?
No. The business retains its name, its premises, its bank and its customers, and continues to be run by the people who run it today. It is not merged with any other business Pennine owns.
Who will know that I am talking to Pennine?
No one, unless the seller chooses otherwise. The first conversation is not disclosed to anyone, a confidentiality agreement is signed before any financial information is exchanged, and employees are informed on the day of completion.
How is the price worked out?
On the basis of the earnings the business has already achieved, as shown in its filed accounts, management accounts and VAT returns, adjusted for the owner's remuneration and for non-recurring items, with evidence for each adjustment. The multiple applied reflects the trade, the business's dependence on its owner, the spread of its customers and the condition of its balance sheet, and it is explained to the seller. Where the seller's view of earnings and the evidence differ, the difference is usually bridged by a deferred or contingent payment rather than by a higher headline price.
Do I have to leave straight away?
No. A handover period is agreed, usually 6 to 12 months, during which the seller introduces customers and suppliers under an agreed consultancy arrangement. An owner who wishes to remain for longer in a defined role can discuss it.
What if I am not ready to sell?
Nothing further happens. No deadline is set and no pressure is applied; Pennine expects to wait several years for some of the businesses it approaches. An owner who decides not to continue is not contacted again unless they ask to be.
How does Pennine pay for a business?
Each acquisition is financed on its own terms, from Pennine's own capital and that of a small number of private investors who participate in the transaction, together with a term loan secured on the business acquired and, usually, a part of the price deferred and owed to the seller with interest. The finance is arranged before an offer is made, and the debt is sized to what the business's existing cash flow can service with a margin. No part of the price depends on a later sale of the business.
Will Pennine sell the business later?
Pennine acquires in order to own, and holds the businesses it acquires for the long term. It is not a fund, so there is no date by which a business must be sold, and no price it offers depends on a later sale. Pennine does not undertake that a business will never change hands, since no owner can give that undertaking for the decades ahead; a sale is not planned and would be considered only where it was the right outcome for the business and its employees.
What does Pennine want from the first conversation?
To understand what the owner has built, what they are proud of, what concerns them and what they want for their employees. Price is discussed last.
Contact
The first step is a conversation of half an hour.
In person or by telephone, without obligation on either side and in confidence.
acquisitions@pennineholdco.com
Calls that are not answered are returned the same day. Investors and lenders: investors@pennineholdco.com