LONDON—Financial Dynamics, which bought itself back from parent Cordiant three years ago with the assistance of global private equity firm Advent International, has been acquired by Baltimore-based management consulting firm FTI Consulting, which has expertise in restructuring and change management, mergers and acquisition, litigation and other critical business issues, for approximately $260 million.
Financial Dynamics, with headquarters in London, employs more than 450 people in 17 offices situated in major business and capital market locations in Europe, the U.S., Asia, the Middle East and South Africa. Historically best known for its work in the mergers and acquisitions arena, it has tripled in size since its MBO and expanded to offer expertise in areas such as business consulting, corporate branding and reputation and public affairs.
FTI, which is listed on the New York Stock Exchange with a market value of just under $1 billion, has 1,400 employees in 25 offices in major U.S. cities, and offices in Europe, Asia and Australia.
According to Jack Dunn, president and chief executive officer of FTI: “Our acquisition of FD is a unique opportunity to execute, in a single transaction, many of the strategic objectives for our international expansion and one that should enable us to achieve our 2009 plan a year earlier than expected.
“First, FD has senior level, deeply ingrained, trusted advisor relationships with businesses and governments in important financial centers throughout the world. These relationships will allow us to expand and grow our ‘gold standard’ practices into new markets under the auspices and through the contacts of FD, a widely recognized and trusted brand.
“Second, FD brings global market leadership to FTI and our clients in a new practice area - strategic business and financial communications - one of the most critical areas facing corporate boards and executives given the vital and increasing importance of reputational risk. These strategic communications services represent immediate opportunity and value to our clients in the U.S.
“Finally, the core values of the great professionals at FD are the same as our own: dedication to clients, highest standards of integrity and a commitment to bring the very best in intellectual capital to bear on the financial, regulatory and reputational issues that affect the futures of our clients. Teams of professionals from both companies are already at work on the integration and client service opportunities that will allow us to hit the ground running.”
FTI will pay approximately $260 million, consisting of $215 million in cash, $20 million in notes and deferred purchase obligations and $25 million of restricted FTI stock. To finance the acquisition of FD, FTI intends to offer $215 million of senior unsecured notes and Deutsche Bank Securities, which acted as financial advisor to FTI, is committed to provide the financing to fund the acquisition.
FD is currently owned by Advent International, a global private equity firm, and FD management. Advent has elected to receive cash for all of its holdings and will receive £47 million in cash in return for its £8 million investment. About 160 management shareholders are expected to elect the alternate offer comprised of cash, restricted stock and the opportunity to participate in future contingent consideration of up to $80 million based on exceeding financial objectives.
FTI will operate FD as a separate business segment run by the existing management team, including FD’s London based group chief executive Charles Watson and U.S. CEO Declan Kelly, both of whom will serve on FTI’s executive management board.
“FTI is a company we have greatly admired for some time and we believe this partnership is a perfect commercial, cultural and strategic fit for FD,” says Watson. “We live and operate in complementary markets and practices where we enjoy numerous relationships and interests in common. The potential for collaboration is compelling. Joining forces with a recognized leader in the consulting world that, like FD, focuses on critical issues that confront clients, also marks a landmark for the communications industry—creating the optimal environment for FD.”
Watson cited cultural compatibility as a particularly strong reason for the decision to sell to a management consulting firm rather than a communications holding company.
“A business like ours is populated with a very high ratio of senior staff,” he says. “We are a high intellectual capital business, and a key challenge for us is creating the right environment to attract the best people. Partnering with a consulting business was always ideal for us, because ultimately they attract the same kind of people and have the same kind of culture. They understand how to create opportunities for and manage people of that nature.”
But the synergies in terms of client work were also compelling, Watson says, particularly in the area of restructuring and change management, which has been a major part of FD’s business over the past three years. “Probably our biggest projects have been the Swiss Air insolvency, the restructuring of British Energy, the restructuring of debt at Eurotunnel and Enron’s post-Chapter 11 recovery. Restructuring and change is a big area for us, as it is for FTI, which is possibly the number one corporate restructuring firm in the U.S.” In 2002, FTI acquired the business recovery services division of PricewaterhouseCoopers .
Other areas of synergy, Watson says, include mergers and acquisitions and litigation support.
Finally, he said, the fact that FD will account for about a quarter of FTI’s total headcount means that it will be an important part of the firm’s overall business strategy, and he and Kelly will have an opportunity to participate in management decision-making at the group level, something that might not have been possible at a much larger company.