Status
Analysis
Grafton.
PROJECT BARBARA · DEAL DOSSIER
Cover current as at 8 Jun 2026
Ref J300
Cover current as at 8 Jun 2026
Ref J300
Deal Memo · Acquisition Target
Glenn Flegg & Co
Langley, Slough SL3 · sourced via Adam J Walker (Julie Drake) · asset & goodwill purchase (partnership) · est. 1991
Verdict
🟢 Pursue
Priority
1
Lettings-led, recurring-heavy, retiring-owner book in our backyard — but the durable post-RRA earnings are the question; the deal rests on the book-value floor.
Guide£1.10m (£1.01m ex-pipeline)·
StructureAsset & goodwill, cash-free/debt-free·
MotiveRetirement·
SoftwareVeco (Eurolink)·
OfficeOne (Langley sold — serviced from 1 Jul)
Owners & key people · updated 8 Jun (broker)
- Glenn FleggFounder · 60+ · the retiring seller
- SimoneGlenn's daughter · 20+ yrs · current role unclear — to verify (§9)
- NickNow performs the key operational roles (broker) — but also said to be selling his share; runs Carr Williams → non-compete
KPIs at a glance
| Sales | Lettings | Total | |
| Revenue LTM to Mar-25 | £89,907 | £560,636 | £650,543 |
| Recurring fee | — | £440,759 | £440,759 |
| Recurring % | — | 79% | 68% |
| Normalised | Reported | ||
| Lettings profit FY23 basis | £142,620 | £171,684 | |
| × Recurring fee | × Normalised EBITDA | × Post-AI EBITDA | |
| Asking price £1.01m ex-pipeline | 2.3× | 7.1× | 3.8× |
| Managed | Rent-collect | Let-only | |
| Properties 373 let · 349 landlords · re-confirming (§9) | 289 | 66 | 18 |
| Avg rent (pcm) | Mgmt fee | RPE (norm.) | |
| Book economics | £1,318 | 10% | £77,630 |
Three-case underwriting (run-rate EBITDA — see §3 for the durable-earnings caveat)
Downside · Professionalise
£142,620
Sold at 2.4× recurring fee → ~£1.06m ≥ £1.01m price. The floor — capital protected if the book is intact.
Base · Enhance
£210,169
+ off-the-shelf tech, right-sizing, fee optimisation. Entry 4.8×.we underwrite to this
Upside · Transform
£265,436
+ the AI-native run-rate & roll-up leverage. Entry 3.8× — free optionality.
Model headline: ~25% 5-yr IRR · ~2.9× money · ~5.5-yr payback (O4; 65/35 upfront/deferred; Year-5 terminal at 5× EBITDA). The durable-earnings stress test (§3) is the live caveat.
Chapter 2
Analysis — the financial model
Builds on Chapter 1 · model v3 · + the RRA/owner-exit stress test (§3) and the 8-Jun broker update (§9).
What this adds. Chapter 1 said the shape is right; this prices it. A partnership strikes profit before paying the partners for their time, so the reported £171,684 flatters; normalised, the lettings business earns £142,620 — the honest anchor. §3 then asks the harder question: how much of that is durable once RRA-banned and owner-dependent income is stripped.
1The normalisation bridge (FY2023 — our full-detail year)
| Reported partnership profit FY23 (pre partners' tax & drawings) | £171,684 |
| Less non-operating income (interest etc.) | (£5,569) |
| = Operating profit | £166,115 |
| Add back owner-discretionary, non-cash & financing | £46,505 |
| = Adjusted EBITDA (before owner labour) | £212,620 |
| Less partner labour at market (Glenn £12k · operator £55k · Nick £3k) | (£70,000) |
| = Normalised EBITDA — today | £142,620 |
The gap (£172k → £143k) is mostly the partners' own time, partly offset by ~£47k of owner-discretionary / non-cash costs a buyer strips. Conservative — struck on FY23 (turnover £501k) while the book has since grown to £560.6k. Note: the £55k operator replacement was assumed to be Simone; the broker now attributes the key operational roles to Nick (§9) — the quantum is unchanged, but who we retain is not yet clear.
2The recurring annuity (LTM lettings £560,636)
- Fully-managed recurring fee £374,126 · rent-collection recurring £66,633 → recurring fee income £440,759 (79% of lettings) — the core asset.
- Renewals £15,230 · set-up/admin £77,251 · let-only £14,410 · other/ancillary £12,561 (the transactional ~21%). Recurring fee per managed property ≈ £1,525/yr.
- Sales desk (£89,907) sits outside the lettings accounts.
3RRA + owner-exit stress test — the durable earnings base
The decisive question (added 8 Jun): the headline £142,620 is carried partly by income the Renters' Rights Act bans or erodes, and the sales desk is owner-dependent. Strip those and test whether the defensible earnings support the price.
| Fully-managed recurring fee | £374,126 |
| Rent-collection recurring fee | £66,633 |
| = Recurring fee income — DURABLE (survives RRA + owner exit) | £440,759 |
| Renewal commissions — BANNED by the RRA (fixed terms abolished → no renewals) | £15,230 |
| Set-up / admin (let) fees — erode (open-ended tenancies → fewer re-lets) | £77,251 |
| Let-only fees — erode (same) | £14,410 |
| Other / ancillary — mixed | £12,561 |
| Sales desk (separate) — owner-dependent + RRA one-off | £89,907 |
The read. Renewals (£15.2k) come out for good. The ~£92k of set-up + let-only fees is re-let-frequency income — the pack shows 65 re-lets vs only 12 genuinely new instructions a year, so most of it depends on tenant turnover, which the RRA's open-ended tenancies structurally reduce. The sales contribution (~£20–33k, sitting outside the £142,620) is owner-dependent.
- Durable, post-RRA, owner-independent lettings earnings are materially below the £142,620 headline — removing renewals and haircutting re-let fees brings the defensible normalised EBITDA toward ~£90–110k (to firm up from the Xero line-by-line, §10). On that base the entry multiple is ~9–11× — the earnings do not justify the £1.01m price.
- So the deal rests on the capital-protection floor — resale of the recurring book (£440,759 × ~2.4 ≈ £1.06m), not the earnings — and that floor holds only if the managed book hasn't shrunk (the pre-RRA off-loading point, §9).
- The Base/Upside cases (§7) are then built from the durable core + the AI uplift, not the fragile transactional/sales layer.
Underwriting consequence: underwrite on the durable recurring book; treat renewals as gone, re-let fees as declining, sales as un-underwritten. The £1.01m guide is 2.3× recurring fee against our ~1.7–2.0× rule — negotiate toward the floor, or walk.
4The recurring book over time & churn
£487.5k (FY-Jul-22) → £501.1k (FY-Jul-23) → ~£514.8k annualised (8m to Mar-24) → £560.6k (LTM Mar-25); the seller's own FY-Mar-26 projection dips ~3% (probe). 65 re-lets + 12 new instructions/yr against 289 managed implies a roughly steady-state book. We don't yet have gross churn (managed lost) — needs the Veco export. AMBERDeriving true churn + net book growth is a priority DD item.
5Sales business unit (proxy — sits outside the lettings accounts)
~£90k revenue / ~18 sales → ~£20–33k contribution — small, lumpy, people-led. Not the asset we're buying. The 8-Jun update confirms last year's sales were substantially landlords off-loading ahead of the RRA (one-off) plus non-landlord valuations off a 35-year reputation (owner-dependent). Treat as a commission-only earn-out / outsource / decline.
6Valuation vs thesis
At £1.01m ex-pipeline: 2.3× recurring fee (above our 1.7–2.0× discipline), 7.1× normalised EBITDA (vs a flattering ~5.9× reported), 3.8× post-AI EBITDA. RPE normalises to £77,630 (vs ~£50k traditional; £200k+ the IB target). §3 is the caveat: on durable earnings the multiple is materially worse.
7Three-case underwriting (floor-protected)
| Downside | Base | Upside | |
|---|---|---|---|
| Run-rate EBITDA | £142,620 | £210,169 | £265,436 |
| Entry × | 7.1× | 4.8× | 3.8× |
| Exit basis | 2.4× rec. fee | 5× EBITDA | 5× EBITDA |
| Gross money multiple | 1.47× | 1.69× | 2.14× |
The floor holds — professionalise & sell at 2.4× recurring fee returns ~£1.06m ≥ the £1.01m price (capital protected) — provided the book is intact (§9). We underwrite to the Base; the Upside is free optionality. Fuller cash-flow (O4): ~25% IRR / ~2.9× money; Year-1 landlord retention is the swing factor.
8Exit & cash generation
5-year hold; Base/Upside exit at 5× run-rate EBITDA, Downside by selling the clean book at 2.4× recurring fee. Entry 65% upfront (£656.6k) / 35% deferred (£353.5k, retention-contingent) + ~£35k deal/transition. Early years cash-absorptive (deferred paid Yrs 1–2); ~£200k/yr from Year 3; cumulative equity cash positive in Year 5.
9The 8 June broker update (material — key person, office, book)
- Key person — now Nick, not Simone. "The key operational roles are now performed by Nick" — yet also that he is "not involved in the day-to-day" and "looking to sell his share"; Simone is not mentioned. This inverts the Chapter-1 read. If the de-facto operator is the one leaving (and he runs a competing agency), the operator-continuity gap — Barbara's #1 issue — is worse here. Nick would sign a non-compete. Resolve at the exploratory meeting: who runs it day-to-day, and who stays.
- Office. One-office business (website corrected; they chose SEO/portals over a 2nd branch). The Langley premises has been bought by the neighbour; they move to short-term serviced offices from 1 July. Good — no lease/premises liability to inherit, and it quietly validates the dark-office direction; but a continuity wobble mid-sale.
- Book may have shrunk. Last year's sales were substantially landlords off-loading ahead of the RRA — managed units leaving the book — so the ~289 managed count may be lower now. Drives both recurring fee income and the Downside floor.
10What the model still needs / the information we need (open DD)
- REDXero line-by-line commissions, both departments, end-Mar-25 to date (their accountant offered) — sizes durable recurring vs banned renewals vs re-let fees vs sales; firms up §3.
- REDCurrent managed-property count + recurring run-rate — confirm the book hasn't shrunk; it underpins the floor.
- REDMar-25 statutory accounts — confirm normalised earnings on the latest full year; reconcile the ~£26k gap.
- REDStandard terms of business (Julie chasing) — contract novation / assignment to NewCo.
- REDWho runs it / who stays (§9) — the operator-continuity crux.
- AMBERSales split (offload vs durable); serviced-office terms from 1 July; renewal-fee quantum & true churn from Veco; the normalisation add-backs (premises, internet £9.7k, consultancy £18.2k, mgmt fees £5.7k).