Chartered accountants and business advisers Price Bailey have supported PSI Services Inc on their journey to the acquisition of Cubiks Group Limited, a talent assessment and development software and services supplier, headquartered in Guildford, UK, with offices in 13 countries across Europe and Asia Pacific.
PSI, a global leader in the provision of talent assessment technology and consulting solutions with over 70 years of experience, approached Price Bailey to review and comment on a vendor due diligence report commissioned by Cubiks Group Limited. PSI had made an indicative offer and was seeking to firm up a valuation figure in advance of issuing a letter of intent. Given the nature of the offer, time was a factor and this ‘phase 1’ work was to be completed to a challenging deadline with a more comprehensive financial due diligence process taking place once a deal had been agreed.
Throughout the project, Price Bailey’s UK based Strategic Corporate Finance team collaborated with PSI’s wider international team, coordinating with its members in head office in Glendale, California and Boston, Massachusetts, as well as Europe.
The initial phase involved the independent review of the vendor due diligence report commissioned by Cubiks. The Price Bailey team undertook high level due diligence on the entire report to interrogate the historic EBITDA (earnings before interest, tax, depreciation and amortisation) figures and normalisation adjustments proposed by both Cubiks and their due diligence supplier, as well as bringing any key findings to the client’s attention, and providing commentary on the original report. The deal valuation outlined in the report commissioned by Cubiks was based on a multiple of FY18 EBITDA, so any adjustments to this suggested or queried by the Price Bailey team directly impacted deal value for PSI and Cubiks.
The first phase was completed to deadline and the Price Bailey team reported back to PSI, who considered the team’s comments and findings in their finalisation of a letter of intent to Cubix Group Limited. This outlined the high level terms of their offer, including valuation. Once the above had been accepted, PSI engaged Price Bailey to complete the following phase of the financial due diligence process.
During this extended financial due diligence exercise, the work of the Price Bailey team extended into advisory work on the transaction itself. Particularly the significant complications arising from Cubiks employee ownership structure and related tax issues and the impact on the total deal valuation. This resulted in over £1M of savings for PSI in the negotiation of cash/debt-like adjustments.
Throughout the transaction, the Strategic Corporate Finance team took on more of an advisory role and contributed to a complex deal structuring process involving EBT (Employee benefit trust) share options, as well as realising over £1M of savings for PSI in the negotiation of cash/debt-like adjustments. This second phase spanned several weeks and resulted in successful completion in October 2019.
Simon Blake, Partner at Price Bailey, said: “This was a complex deal which required an adaptable project team at Price Bailey with a wide range of expertise. We are delighted to have assisted the PSI team in getting ready for the next stage of its journey.”
Janet Garcia, President at PSI thanked the Price Bailey team for the “over and above” work on this project, along with Ant Brice, Finance Director, highlighting his appreciation for additional work from the Price Bailey team to get PSI to their current stage.