Oval hints at IPO ambition in 2009

Oval's chief executive officer, Phillip Hodson, has admitted that the company could seek an initial public offering as early as next year, despite pulling out of a deal to buy Birmingham-based Perkins Slade.

The broker market has seen a barrage of corporate activity this year, with 3i QPE's involvement with Jelf, Towergate's failure to secure a substantial deal with private equity house Candover and Giles securing private equity backing from Charterhouse.

Oval, which is 30% owned by Caledonia Investments, had called in corporate advisers Hawpoint to review its options and, last month, PB speculated that consolidation could not go on forever with the acquirers would be starting to think about other ways to return money to shareholders (p.6, PB, June 2008).

Choices

Hodson told delegates at Oval's broker conference at The Belfry in Birmingham in June that it may consider a floatation in 2009 or 2010 as "one of several options". This news comes after the company revealed that it was putting its acquisition spree on hold until later this year due to the global financial crisis.

Hodson told sister title Post: "We would consider an IPO as one of our options, because as I keep pointing out time and time again, we are not looking to sell.

"However, this is not something we are going to do straightaway, due to the state of the market, rather (it is) something we may look at doing next year or beyond. However, there are other options open to us."

Oval has insisted previously that it would not seek an IPO until its revenue exceeded about £200m; according to the company it stands at just over £100m currently. Mr Hodson added: "Before we consider anything like this, we want to have an internal structure in place that is as good as a public company. If we do move towards this route in 2009 and 2010 then we will be well prepared."

Oval has revealed that it hopes to resurrect deals with up to eight companies once the state of the financial markets improves. The latest announcement follows one in which the consolidator admitted that it had put acquisitions on hold for the summer after it published its unaudited group financial results for the year ending 31 May 2008; these showed that turnover had increased by 41% from £60m to £85m, with group revenues in excess of £100m on an annualised basis. The group admitted also that it could seek an initial public offering as early as next year as "one of many options".

On hold

Phillip Hodson said: "Looking at the current financial conditions in the market and the fact that we made eleven acquisitions in the last financial year, the decision has been made to take a short summer pause in our acquisition process. We hope to pick up dialogue with up to eight companies when the market improves, Perkins Slade is one of them."

However, any attempt to revive a deal with Perkins Slade is likely to be met with resistance from chief executive David Slade, who told PB that he was "fed up with dealing with large organisations".

Slade added: "It's unlikely that we'll deal with Oval again now. We will now look to have a succession plan in place at our board meeting on 1 July and I will stay in my current role as long as necessary. We will not be having talks with any other consolidators. We have spent six months dealing with Oval and it has come to nothing." A source close to Towergate reacted to Oval's decision by saying that it expected "a reality check" in the prices of brokers, with "multiples returning to more appropriate levels".

For 2007, the Towergate Partnership announced gross written premiums of £1.2bn for 2007, revenues of £277.9m and earnings of £108.5m before interest, tax, depreciation and amortisation, with a return EBIDTA on revenues of 39%. Following the decision to postpone any floatation, Patrick Snowball left Towergate's board in order to pursue other corporate opportunities, though he said that he will remain as chairman of Towergate's financial services arm.