Employees of PA Consulting Group set for substantial payouts

05 November 2018 Consultancy.uk

A new refinancing manoeuver is expected to land over 1,000 employees at PA Consulting with a significant payout. The firm’s debt, which includes vendor loan notes put in place when Carlyle purchased the firm, is set to be refinanced, as the firm enjoys strong growth.

In 2015, PA Consulting Group signed a deal with private equity firm Carlyle which injected new funds into the ambitious firm. The US group valued the UK-headquartered business at $1 billion (then worth £700 million), in a deal which saw Carlyle take a 51% stake in PA. This left the firm’s then-2,500 employees retaining a minority stake of 49%, along with sharing in the spoils of a £116 million cash payment.

Now, hundreds of staff at the management consultancy are thought to be in line for another substantial payout, this time as part of a £350 million refinancing deal. According to reports first circulated by Sky News, Carlyle is close to appointing investment bankers to work on the plan, which insiders have claimed would deliver windfalls to more than 1,000 employee shareholders, as well as a big dividend to Carlyle.

The size of the potential payouts remains unclear at present, though one source reportedly told the UK media that they had been facilitated by substantial growth in revenue and profitability since the 2015 buyout. PA Consulting has enjoyed strong growth in the past years particularly, with its fee income rising 6% in 2017 to surpass the £400 million mark.

PA now employs about 2,600 specialists in sectors including consumer, defence and security, energy and utilities, financial services and healthcare. According to the reports, bankers have since been instructed to focus on improving PA Consulting's capital structure. In order to do this they will likely take steps to refinance existing debt including vendor loan notes put in place when Carlyle took control.

The news comes as PA continues to put the funds made available by Carlyle’s investment to use on mergers and acquisitions. Prior to the Carlyle deal, the firm had gone five years without purchasing a smaller firm, but has gone on to complete three deals in less than 12 months, after the recent purchase of Sparkler, a digital insight and strategy consultancy which works with clients including Diageo and eBay.

Other recent changes at PA have seen Marcus Agius, who was behind the major private equity investment in PA, leave his role as Chair, with John Alexander taking his place, after joining from leading global environmental and sustainability consultancy ERM. PA also announced an £850 million deal with Pension Insurance Corporation to offload its pension liabilities, clearing the way for the refinancing process now underway.