Oakley buys TICC assets Phenna, CTS; PE owners reap 5x-plus money

Gustav Hoejmark-Jensen
31 August 2022

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Oakley Capital has acquired Inflexion-backed Phenna Group and Palatine-owned Construction Testing Solutions (CTS), two UK-based testing, inspecting, certification, and compliance providers (TICC).

The buyer is investing via Oakley Capital Fund V, which is still in the fundraising process. Oakley has exceed its GBP 2.5bn target for the fund, as reported in June 2022.

Upon completion, the smaller CTS Group will become part of the larger Phenna Group.

The businesses were marketed off GBP 10m in EBITDA and GBP 60m in EBITDA during their respective auctions, as reported by Unquote's sister publication Mergermarket.

With all the pipeline and completed bolt-ons, the company is expected to generate a run-rate EBITDA of GBP 80-GBP 100m by the time of closing in 4Q22, Unquote's sister publication Debtwire reported.

Phenna's management has re-invested alongside Oakley Capital, according to the announcement.

With the pre-empted sale, Inflexion achieves a 5.5x return just 18 months after the acquisition of its minority stake in Phenna Group in February 2021, a source familiar with the situation said.

Phenna is the first exit for the Partnership Capital II vehicle. Between Partnership Capital I and II, Phenna is the third GBP 1bn exit.

Under the GP's ownership, Phenna Group made 23 acquisitions across six countries in a bid to expand the firm geographically while penetrating new sectors, according to the announcement.

For Palatine, the overall return stands at 5.8x, according to a press release by the sponsor. The GP had already made a partial exit from CTS in 2021, with the sale of its insurance claims management division to HomeServe plc for GBP 53m, as announced.

Since its initial investment in 2018, Palatine has more than doubled CTS', mainly through a buy and build strategy. With Palatine's backing, CTS has made nine acquisitions in the TICC industry.

Companies
Formed in 2018, Phenna is now a global TICC group with revenue growth of circa 100% CAGR over the last three years, according to an announcement. Before the buyout, the group comprised 31 independent businesses that provide specialist TICC services across infrastructure, built environment, niche industrial, pharmaceutical and certification, and compliance divisions. The business operates across 12 countries among four continents.

CTS Group is a provider of testing, inspection, and geoengineering consulting services in the UK, primarily focussed on long-term civil infrastructure projects. The business has more than doubled revenues over the last three years through organic growth and targeted acquisitions, according to an announcement.

Advisors
Oakley Capital – DC Advisory (M&A); Simpson, Thacher & Bartlett (legal); PWC (FDD); BCG (CDD).

Inflexion – Houlihan Lokey (M&A); KPMG (FDD); OC&C (CDD); Eversheds Sutherlands (legal); Avonhurst (legal).

Palatine – Clearwater International (M&A); Browne Jacobson (legal) and Deloitte (tax).

[Editor's note: Subsequent to publication, the article has been amended to clarify that Phenna is the first exit for the Partnership Capital II vehicle.]