Brunswick sells minority stake to merchant bank

Brunswick has agreed to sell a 10.7 per cent stake to US merchant bank BDT Capital Partners, valuing the business at around £500m.

Brunswick sells minority stake to merchant bank

According to the Financial Times, the deal will see a pay out of £140m to the global comms consultancy's 200 partners. Roughly half that total is expected to go to co-founder and chair Sir Alan Parker, who has insisted he will stay at Brunswick.

It's the first time the group has taken external investment since it was founded in 1987.

The business is to move from a limited liability partnership into a private company to allow the changes. BDT, which is headed by Warren Buffet's banker Bryron Trott, will take its stake through preference shares.

Parker and fellow co-founders Loise Charlton and Andrew Fenwick are to sell back four per cent of company shares to fund the restructure, leaving Parker on 48.3 per cent, around two percentage points lower than his current stake. The rest of the ownership will be held by the partners, co-founders and BDT.

An extra 15 per cent of the existing share capital is to be issued over time to partners, under what Brunswick called a "growth share scheme", meaning "virtually every partner in the firm will be a shareholder". There will also be a one-off £18m payment distributed to everyone who isn't a partner, largely calculated as a percentage of salary.

BDT is expected to remain a shareholder for at least 10 years and a representative will join the Brunswick board. The deal is expected to be completed in August. The £140m funding is from existing reserves and bank borrowing.

The new Brunswick Group partnership board will be chaired by Parker and include Charlton and Fenwick plus CEO Neal Wolin and COO Helen James as directors.

In a letter to staff, seen by PRWeek, Parker said the changes will "lift the firm to the next level and create greater opportunities for everyone in Brunswick over time".

"The firm has an exceptional opportunity ahead of us right now. The demand is there – we can all feel it. Everyone recognises that the world for our clients is increasingly complex. So they need more help, on more things, in more places than ever before. We have seen this as a long-term trend and we have deliberately built and broadened the firm to help our clients meet this new world."

Parker stressed his commitment to Brunswick, saying he feels "as energised as ever".

Opportunity

The newspaper reports that Brunswick had been considering plans for a capital restructuring before the pandemic hit. However, the agency has fared better than many during the turbulent COVID-19 era and would have been seen as an attractive prospect for investors.

As PRWeek has reported, a number of agencies than combined corporate, crisis, public affairs and other key services saw demand rise for their services rise amid the intense challenges for clients.

Revenue at Brunswick, which operates in 27 cities across the world, rose five per cent to $322m in 2020. Brunswick leapfrogged Edelman to top the PRWeek UK Top 150 Consultancies table this year, as it became the only top-10 UK agency to show growth in 2020 - UK revenue rose a modest one per cent to £66.7m.

Brunswick also climbed from sixth to second in the Mergermarket rankings of comms agencies by the number of M&A deals they handled in 2020.

Speaking to PRWeek in April about Brunswick's performance during the pandemic, senior partner Simon Sporborg said: “We had a strong start to 2020, an uncertain spring, but work picked up in June with the autumn and run-in to Christmas exceptionally busy, including more critical issues work alongside financial situations mandates across deals, restructurings, IPOs and capital raisings.

"We have strong, established relationships with our clients, and they really leant on the deep expertise that we have built up over the last decade in financial, political and social – this was seen not only in the UK but across the entire firm.”

Parker said in his letter: "Together, these plans allow us to invest more confidently, consistently and for the long-term. It gives us a new incorporated structure, an exceptional strategic partner and a powerful balance sheet. Most of our investments have always been in people and that will continue to be the case. We see investment opportunities in every office, every sector group and every practice group. We also need to continue to invest in those critical core services that keep us all on the road and are crucial to our future success."

Brunswick is among a number of major comms businesses to receive significant third party investment in recent years.

Teneo secured new backing from CVC Capital Partners in 2019, and shortly after LDC, the private equity arm of Lloyds Banking Group, became the new majority owner of Instictif.

Private equity firm CD&R snapped up Grayling and Citigate owner Huntsworth just over a year ago. Sard Verbinnen sold a 40 per cent stake to Golden Gate Capital in 2016.

Among smaller agencies, fast-growing UK consultancy Headland announced it had sold a minority stake to LDC last month.

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