Disclaimer: Unless noted otherwise, views and analysis expressed here are the author's own and based on public sources. The article is intended for informational and entertainment purposes only. This is not financial advice. Please consult a professional for investment decisions.

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Welcome back, TICC aficionados! 

After covering Phenna’s beginnings - including a detailed account of how David Harrison and Paul Barry turned £10M into a nearly £800M PE exit, we’re back on the case.

Today, we will show you how Phenna wins sellers’ hearts and wallets, based on a real offer letter. Next, we will also take you through the mechanics of Phenna’s trademark put/call option schemes - a souped-up form of seller financing. Finally, you will learn why such schemes are not risk-free, and why their proliferation signals a slow demise of Phenna’s decentralised ethos - in favour of a more integrated arrangement.     

But first, some context.  

Phenna built a £200M+ ($270M+) run-rate EBITDA business by painstakingly acquiring lots of small, niche, and highly profitable TICC businesses. But not only buying. Filings by Oakley Capital, Phenna’s majority shareholder, pin organic growth at double the 5-6% rate mustered by larger peers like SGS and Bureau Veritas (Phenna’s organic growth was a respectable 9% in 2025). Throw in the barely discernible capex levels (3% of revenue in 2025), and you can see why lenders are comfortable with 7x+ leverage, according to S&P. 

Still, you don't end up with a pile of debt this high by acquiring at 7x EBITDA. The culprit is Oakley's buy-in at 18x EBITDA 3.5 years ago. Let’s run some quick math to see what’s achievable.

Oakley is said to be lining up an exit at a £3-4B valuation. At £200-250M EBITDA this implies a 15-20x multiple. On our estimates, this by no means pessimistic scenario yields a 2-3x MOIC. We’ve assumed c.£1B ($1.3B) in preferred equity (excluding accrued interest) and £1.4B ($1.9B) in debt (including both interest-bearing debt and rollovers).

Now, more than doubling a billion pounds of investor money is no mean feat… But what will Private Equity buyers want in return? 

We believe, 3 things:  

To tackle the first two points. In 2025, Phenna closed 26 acquisitions, adding £100M+ and £20M+ in revenue and EBITDA, respectively. Ironically, for an aggregator whose first acquisition was a Boston-based NDT business (Hansen Aerospace), Phenna has struggled to make meaningful inroads in the US. Britain remains by far the largest market with 60% of 2025 revenue vs. 10% for North America. We have heard that the target is at least one-third apparently. So the answer is to buy, and to borrow lots more. 

But how? Phenna’s senior debt is rated single-B: junk territory. To increase leverage capacity without upsetting lenders, Phenna borrowed from Röko’s rollover playbook. According to Phenna’s lender marketing material, between 2021 and 2024 the weighting of deferred/contingent payments in total purchase consideration more than doubled (from 15% to 32%).

Read on to learn about: 

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While researching for the article, we stumbled upon the Letter of Intent (LOI) for Atlantic Testing Labs (ATL), a laboratory testing service for the construction, energy, and infrastructure sectors based in Upstate New York. Phenna acquired Atlantic in April 2025. 

How come the Atlantic LOI ended up in the public domain? Because the company holds radioactive materials licenses regulated by the U.S. Nuclear Regulatory Commission (NRC), disclosure regarding corporate acquisition and ownership transfers must be submitted to the NRC for regulatory approval and is placed in the public record. 

This was one of Phenna’s larger transactions. Public filings suggest that Phenna paid £30M (c.$40M) for a 75% stake. Based on disclosed revenue and EBITDA of £34M and £8.5M EBITDA, and grossing up for liabilities, multiples paid work out to 1.2x and 6x, respectively. Inexpensive even by Phenna’s exacting standards. 

Three things jump out from the letter:

One, the text extols Phenna’s decentralised model (the word “autonomy” appears three times) while mercilessly dunking on competition. Private Equity is “driven by short-term financial returns at the expense of sustainable growth”. Whereas “strategic investment often dilutes customer focus, damages brand value and focuses on integration/cost savings, rather than customer service and revenue growth”. Not unfair!   

Two, the speed of execution. Phenna aims to sign binding legal documentation within 60 days of agreeing the LOI. In ATL’s case, this actually happened! The LOI was signed on 5 February 2025; the transaction closed on 30 April 2025.   

Three, Phenna offered to acquire 75%, with the remaining 25% subject to a put/call scheme. The wording is so good we will share it verbatim:

On the surface, the scheme is similar to Röko’s, but for the absence of dividend leakage: an essential feature for an acquirer levered to the tilt! In 2025, Phenna’s finance costs came to 84% of operating cash flows, most of it in the form of cash interest on senior debt (source: public filings). 

Needless to say, Phenna LOVES rollovers. Its M&A-related payables jumped from practically nothing in 2021 to £139M in 2025 (c.1x adjusted EBITDA). We’d expect a far higher figure given the frenetic pace of dealmaking - in 2025, it spent £224M on acquisitions, up 3x YoY - however, Phenna does not disclose the assumption used to calculate the payables. 

Put/call option schemes must represent the lion’s share. How do these schemes actually work?