Powerful partnerships: One year on with Phenna

It’s been a year since Phenna Group took on minority funding to accelerate its already impressive acquisitive growth. CEO Paul Barry talks about how the first year of partnership has been with Inflexion.

Having worked for many years within large corporates, Paul Barry knew how frustrating the politics, bureaucracy and red tape could be. So he set up his own business to escape all that, and in April 2019 Phenna Group was born to consolidate the fragmented TICC market, one that Paul had worked in for over 20 years. The group was named after the initials of his children’s names, bookended with his and his wife’s.

With M&A progressing well, Paul wanted to accelerate the growth of Phenna with funding and expertise to support and develop Phenna’s offering and geographical reach. Feeling he was at last master of his own destiny, he was keen to retain autonomy. “It was crucial that any private equity firm allowed me to stay in control. I didn’t want someone to look in minute detail and require me to provide spreadsheets every week whilst adding no real value. It wasn’t going to work for me or the team.”

Paul had known of Inflexion for years through a variety of business connections, including some operating within the portfolio itself. “That gave me a great sounding board for referencing to call upon,” Paul recalls.

So when it came time to look for a new funding partner, it was natural he turned to Inflexion, and an agreement was signed at the end of 2020, enabling Paul to retain control of the business he’d set up but benefit from the backer’s experience in his sector and growth plans.

Paul says, continuing: “Inflexion has expertise in our areas of activity through its investment experience with, for example, Cawood Scientific, British Engineering Services and Alcumus. Inflexion Partner Mark Williams sits on our board and was also involved with Alcumus for many years, so he brings a very healthy perspective to our discussions. His input helps our decisions to be better thought through as he draws on his experience to support us.”

Marathon, not a sprint

Phenna’s journey has been remarkable by anyone’s standards. From a standing start just under three years ago, the firm has grown from two founders to over 2,000 employees by the end of February 2022, and that momentum is expected to continue.

The story is one of rapid growth, both organic and via M&A with 16 acquisitions undertaken since the Inflexion deal and another three pending at the time of writing. These have deepened Phenna’s presence in existing core markets, such as the UK and Ireland, and allowed the firm to cast an eye to new overseas territories with recent acquisitions in Dubai and Singapore taking Phenna into the Middle East and Asia. All the acquisitions have been part of a clear strategy of building out the core operating areas whilst augmenting the platform.

While Phenna has expanded geographically, recent deals have also taken the firm into new end-market sectors such as fire, cyber security, HSE and ecology.

The firm currently has nine acquisitions in diligence. “By the end of Q1 with a fair wind, we will have completed over 30 acquisitions. These are all targeted high-quality deals designed to complement our strategy, deepen our presence in key sectors and strengthening the platform,” Paul enthuses.

Underpinning Phenna’s extraordinary growth is a committed acquisition facility and strong relationship with the Group’s lender. “Inflexion helped us to get favourable terms on a competitive ringfenced debt instrument, which is very valuable, and Inflexion’s brand brings credibility to our discussions.” Indeed Paul admits none of the deals he’s taken to them have been declined. “They’re incredibly supportive.”

Phenna’s M&A model is focused on being a strategic enabler for the businesses it acquires, encouraging vendors to remain involved, operating within a semi-autonomous operating model and this helps Phenna to continue to pursue M&A at the velocity it does. “We don’t seek to change brands, people, processes, or systems. We support strategically and with financial backing, but actually leave them to manage the day-to-day operations,” Paul says, admitting it’s what he admires about Inflexion’s own style of minority capital for their partnership.

Phenna’s growing scale (fast approaching £200m of annual revenue) combined with Inflexion’s backing has now put the business in a position to undertake a variety of synergistic acquisitions, thereby significantly enhancing what can be offered. Phenna has supported its divisional businesses to make bolt-on acquisitions for some time, but the more recent acquisitions, of a division from a listed company and a private equity-backed business, illustrate the breadth of options Phenna now has at its disposal.

Additionally, Phenna has been making some Group-level strategic investments to support its businesses and their processes, such as the appointments of a Group HR Director, new General Counsel, three Divisional MD’s and a new Group Financial Controller. Phenna is also currently implementing an overarching finance system to streamline management reporting and help drive efficiency, with Inflexion helping in this area. Inflexion have also been involved in appointing Phenna’s Chair. “He brings value in that he understands the private equity dynamic and has experience in buy-and-build,” Paul explains.

And, crucial in Paul’s mind to building a successful business, there is chemistry. With the businesses he brings into Phenna as well as with Inflexion. “I need to be comfortable sitting down with someone for a few hours over dinner if I’m going to bring them into the Group. It was the same for my private equity backer and Inflexion absolutely ticked that box.”

Inflexion’s dedicated minority investment fund, Partnership Capital II, announced a minority investment in Phenna in February 2021. Inflexion is utilising its experience to support the company’s growth through M&A to expand Phenna’s existing service offering and geographical reach.