INSOLVENCY firm Begbies Traynor has sold its tax business to Smith & Williamson Holdings.
The deal will see Smith & Williamson pay £2.9m upfront, plus 50% of any income greater than £5.8m which the tax business achieves in the 12 months to April 30, 2012.
A further payment will be made “based on certain client engagements” in the year to April 2013.
The business offers a tax and tax investigations consultancy. It has 56 partners and employees working from offices in Birmingham, Manchester and London.
In the year to April 2011, it had a fee income of £7m, but earnings before interest, tax, amortisation and exceptionals were just £100,000.
It had a carrying value in the firm’s accounts of £7m and any write-downs associated with the sale will be declared when it announces its half-year figures next month.
Smith & Williamson is headquartered in London and has 10 offices including in Birmingham and Worcester.
Begbies Traynor said proceeds of the tax division would be used to pay down its net debt levels.
It also said it was progressing with the sale of its Red Flag credit information arm and would provide an update “when appropriate”.
Executive chairman Ric Traynor said: “We are pleased to have secured the sale of this non-core business in line with our strategy.
“We believe it will be better taken forward under Smith & Williamson’s ownership, given their strength within the tax market.
“Today’s sale will enable the group to focus on its two core businesses – insolvency and global risk partners – to enhance their market positions and take advantage of growth opportunities in their respective markets.”
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