Begbies Traynor, the insolvency consultancy group, is selling its Red Flag Alert credit risk business to its Chairman, Ric Traynor.
Traynor, Begbies Traynor's Executive Chairman, has acquired the controlling interest in the Red Flag Alert LLP, with Begbies retaining a minority interest in the partnership. This follows a disposal process, during which feedback from third parties was that the business was not yet sufficiently established for consideration as a standalone acquisition opportunity.
Traynor has pledged to pump in up to £1m of new capital into the LLP to fund ongoing losses and its future development. The agreement allows for a return of up to £1.5m of the investment made by Begbies in the business to date, together with a future share of any trading profits of the LLP, with a de-minimis obligation for future investment.
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Traynor will act as Chairman of the Red Flag business, which will be managed by the current management team who transfer with the business.
Begbies has agreed to continue to provide shared accommodation, information technology, personnel, marketing, administrative and accounting services to Red Flag on a similar basis to current intra-group arrangements. Begbies has negotiated an agreement to retain full access to the database and joint marketing rights for the publication of Red Flag Alert quarterly statistics.
For the year ended April 30th 2011, the Red Flag business generated revenue of £0.2m (2010: nil) and an operating loss of £0.7m (2010: loss of £0.6m), reflecting the on-going investment requirements of the division. Net liabilities at the end of April 2011 were £0.03m. The division was reported as a discontinued operation in the group's half year results announcement issued in December 2011.
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