Sanne Group plc (LON:SNN), the global provider of alternative asset and corporate services, has announced the accretive acquisition of Private Equity Administrators Group.
In addition, the Group expects to deliver underlying EPS for the year ending 31 December 2020 in-line with expectations, despite the market backdrop remaining uncertain.
Acquisition and M&A Opportunity
Sanne has announced that it has entered into an agreement to acquire PEA, a leading Scandinavian and Guernsey private equity fund administrator, from its founders who will stay with the company. It adds over 55 employees and over €27bn of assets under administration to Sanne, with offices in Denmark, Sweden and Guernsey. Both Sanne and PEA have a close cultural alignment sharing a strong focus on delivering high quality client service.
PEA is a strategically important acquisition that will further expand Sanne’s geographical footprint introducing a new physical presence in the important Scandinavian markets of Denmark and Sweden, which have strong underlying growth characteristics. The acquisition will also provide an opportunity to increase the scale of the Group’s Guernsey operations and client base.
The acquisition has been agreed with an upfront consideration of €27m, of which 30 per cent will be payable in Sanne shares, and cash earn-out components based on performance up to the end of 2022, capped at €3.25m. PEA is expected to deliver revenues of c.€6.7m and EBITDA of c.€2.1m for the year to 31 December 2020. For the year to 31 December 2019 the business had profits before tax of €1.5m and gross assets of €2.7m. The acquisition should complete by the end of Q1 2021, subject to regulatory clearance. The transaction is expected to be immediately earnings enhancing.
This is the fourth acquisition that Sanne has announced this year with the Group continuing to work actively on a healthy pipeline of potential transactions. The Group remains disciplined in its approach to acquisitions, focusing on executing transactions that are accretive to the Group’s long-term strategic vision and to value.
Trading Update
Sanne has continued to trade resiliently through the second half of the year and expects to deliver underlying EPS in-line with expectations. The Group has also begun to see increased client activity converting into new business wins during Q4.
The market backdrop has continued to be impacted by the on-going COVID-19 pandemic, as well as additional uncertainty relating to the US elections and Brexit negotiations. Accordingly, the delays to fundraisings and closings as well as the reduced transaction levels, seen throughout Q2, continued in Q3. Although existing client activity has latterly begun to increase in Q4, full year revenues are consequently expected to be marginally below the Board’s previous expectations.
Despite the delay to fundraising and closings, we again expect to deliver a robust new business performance with new wins anticipated to be similar to the first half, which had benefited from a largely unaffected market through Q1. This result will provide good growth momentum for 2021 and beyond.
The medium and long-term structural growth drivers for the industry remain strong and we expect market conditions to improve over time now that several effective COVID-19 vaccines will be made available. While the timing of this improvement remains difficult to assess, the continued investment in our client proposition, technology-led services and operational platform will ensure that Sanne is well-positioned to capture the growth opportunities as the market recovers.
The Group continued to exercise rigorous cost control and operational discipline during the year and as a result expects underlying operating margins within its guided range. The business also continues to benefit from high levels of cash conversion.
Notice of 2020 Results
Sanne Group expects to announce its full year results for the year to 31 December 2020 on Friday 19 March 2021.
