BL-2022-002117 - [2025] EWHC 2794 (Ch)

On 14 December 2016, Trilantic sent to the SFA a business plan for 3AAA. There has been a degree of controversy as to whether it was Trilantic’s business plan or the Company’s business plan and whether Sir Peter had failed to realise that the plan would be implemented whether there was a change of control or not. Whoever was responsible for drafting it, (i) it was a document provided to Sir Peter in response to his request for a document setting out Trilantic’s plan; and (ii) it is headed “Trilantic Capital Partners – Follow-up – Business Plan Details”, has a cover page featuring Trilantic’s logo, features Trilantic’s logo on the footer of every page, and contained a page of disclaimers stressing that it was confidential to Trilantic and was based on “current expectations, estimates, projections, opinions and beliefs of Trilantic”. Sir Peter was entitled to treat it as Trilantic’s plan for the business if the acquisition went ahead. Nor is there any evidence that 3AAA expected to be able to implement the plan if the Trilantic Acquisition did not go ahead and there was no injection of substantial further capital. Indeed the evidence from the period when the Trilantic Acquisition stalled, was that severe cost cutting was expected if the Trilantic Acquisition fell through because costs had been increased in expectation of it going ahead.

The plan was a short document with little detail. It did however make clear that the growth projections in the plan were premised on an assumption of continued growth in the non-levy market and more specifically that the Company’s non-levy contract would have grown to approximately £39 million by 2019-20 from £31 million in 2016-17.

On 16 December 2016, Ms Forton reported to Sir Peter that (a) 3AAA’s projections were ‘challenging but not unreasonable and acknowledge the changing market place and the business changes that need to be made to positively respond’; (b) 3AAA would focus on building up its levy business; (c) its EBITDA predictions were ‘pragmatic’; but (d) she could not assess what Trilantic expected from its investment and when.

Peter Marples had a conversation with Ms Forton on 19 December 2016 and she assured him that the recommendation for approval on the same terms as the Inflexion deal was with Sir Peter for his approval. Mr Marples made a contemporaneous note in which he referred to a “letter” being on Sir Peter’s desk for him to “sign” but there was no such draft approval letter; none has been disclosed and no one remembers one. It is likely that this was a misunderstanding, and what was “sitting on Sir Peter’s desk”, or more likely on his computer, was Ms Forton’s recommendations in the shape of her briefing note and email advice.

Pausing there, at this stage everyone at the SFA involved in the change of control process, apart from Sir Peter, had concluded that there was no reason for the SFA not to agree the change of control. The recommendation after internal consultation and research was that the SFA’s standard change of control letter should be written.

Sir Peter arranged a call with Ms Forton and Keith Smith at 10am on 22 December 2016. Neither Sir Peter nor Mr Smith recalled the discussion on that call, but it is likely that Sir Peter’s decision was discussed or reached on this call. Sir Peter was clear in his evidence that he was the sole decision maker and I accept that evidence. At, or before this meeting, Keith Smith gave Sir Peter his assessment of the business plan and that it underestimated the disruption that was coming to the small business market. Later the same day, Ms Forton prepared a draft decision letter for the SFA declining to give the assurance sought. The letter said: “at this point, based on the information provided, the SFA is not able to agree to this change in ownership in the context of current and future contracts”. It asked a number of questions about the business plan and specifically the growth projections for non-levy business and expressed concern that these were not achievable.

Mr Smith and Sir Peter both made some amendments to the letter, which was sent on 23 December 2016. The amendments made by Sir Peter enlarged on the concerns about the projections of non-levy income emphasising the uncertainty of future funding for this area and describing the assumptions made in the business plan as optimistic.

Pausing there, it does appear that the business plan, which may have been the business plan prepared before the announcement of the Non-Levy Cap, was aspirational and optimistic in relation to non-levy business. Trilantic had recalibrated their offer on the basis that the non-levy case had been too ambitious, and their investment thesis could no longer be predicated on continued high growth in the non-levy market. Mr Smith reviewed the business plan and advised Sir Peter that it did not fully address the changes that were coming. Mr Davidson expert evidence is that the growth prospects presented in the business plan were unrealistic.

In his covering email, Sir Peter said ‘Then we stand back and wait for the fireworks […] my private expectation is that Trilantic will ditch 3aaa at this point because they will feel they have been misled by them’. The expectation that Trilantic would walk away was one he was to express internally to Ms Forton and Mr Smith several times in the next month. He added a drafting note to Ms Forton to include reference to the relevant part of the Funding Agreement.

The Decision Letter was sent on 23 December 2016. It referred to Clauses 5.9 and 5.10 (without setting them out). It said:

The concerns expressed were in relation to the optimistic assumptions underpinning the business plan in relation to the projected growth of 3AAA’s business in the non-levy market. They reiterated the points made at the 13 December meeting about the disruption that would be caused to the SME market from the introduction of the levy and the uncertainty of future funding of apprenticeships in the non-levy market. It emphasised the £5 million Non-Levy Cap and made no reference to the fact that the SFA had been reassuring the sector that it was looking to maintain existing volumes on non-levy new starts notwithstanding the cap in 2017-18. After outlining those concerns it ended:

“We would be prepared to reconsider our decision in the New Year if you can provide further detail which would provide assurance that a change of ownership would not prejudice your ability to deliver our contract.”

Initially the Decision Letter was not thought to be fatal. Mr Khan’s analysis was that “Joe is confident that we can ultimately get approval for CofC but only by providing assurance that we have planned for the worst in terms of non-levy funding” […] if we want CofC approval, we need to show PL in particular that we can guarantee contract delivery even in the doomsday-ish scenario that he is tenaciously presenting as being a real possibility and that the envisaged investment from TCP enhances this security of contract performance”.

However, Mr Cohen was not prepared to present a case along those lines, as it was not in line with Trilantic’s investment thesis, and if Sir Peter’s scenario came to pass it was possible that the Company would not be able to survive.

In the event, the Company (through Peter Marples) provided a response on 2 January 2017. In it, Peter Marples sought to address the SFA concerns but acknowledged that in the worst case scenario there would be losses which would need to be funded somehow, or the business restructured. Sir Peter, Mr Smith and Ms Forton considered that response internally and all expressed the view that the response did not address the concerns expressed in the Decision Letter.

The SFA accordingly wrote again on 7 January 2017 explaining that it had considered the further information but remained of the same view. In the SFA’s reply, Ms Forton added new allegations (later shown to be incorrect) that 3AAA had not met SFA minimum standards and that this would be relevant to the change of control decision. Sir Peter amended the letter to make it ‘tougher’ and said ‘My bet is that the MPL [minimum standards] position will be news to Trilantic and they will now drop out’. He accepted in evidence that, notwithstanding what was said in the letter, the minimum standards position was not relevant to the change of control decision but he wanted to pass on the information, presumably for Trilantic’s benefit, as it was ‘highly relevant to the competence and the capacity of 3aaa as an organisation’.

Again this response was not thought to be fatal. A record of a call between Di McEvoy-Robinson and Kirsty Evans on 12 January 2017 says: “In a nutshell – it is as simple as PL wanting to see that we had planned for a £5m only allocation for new starts and that we had contingency plans in place for this possibility and that TCP were aware of what a £5M only allocation might mean and still wanted to invest and not walk away and leave a potential issue with apprentices on programme and their completion, which other investors had done with other companies in the past.”

At this point Trilantic could have continued with the acquisition regardless - there was no requirement for SFA consent to the acquisition. Alternatively, it could have sought to provide the SFA with a business plan catering for the pessimistic scenario painted by Sir Peter and assuring him that Trilantic would not walk away leaving a disorderly cessation of business. Trilantic chose not to do either.

Trilantic decided to withdraw from the process, and communicated this to the SFA by way of an email of 11 January 2017. Mr Joe Cohen did not give evidence and there is therefore no direct evidence of why Trilantic withdrew. In a carefully worded email, Mr Cohen explained that the reason for termination was that the SFA viewed Trilantic’s basic funding assumption of continued funding of non-levy apprenticeships at the same level as “excessively optimistic”. It suggested that if the SFA wanted to encourage private capital into the sector to invest in needed infrastructure it needed to provide greater SME funding certainty, at which point Trilantic’s business plan assumptions would hopefully appear reasonable. The email suggests that Trilantic did not believe the doomsday scenario painted by Sir Peter was likely, but was not willing to take the risk. It also hints that it is Mr Cohen’s view that Sir Peter was trying to discourage Trilantic and other private equity players from entering the sector.

Peter Marples’ evidence in cross-examination was to similar effect that “Mr Lauener had clearly spooked Mr Cohen” by “informing him that in essence non−levy funding would come to an abrupt end”, and that “They believed that there was risk to the business based upon what Mr Lauener had told them. Quite clearly, Mr Lauener spooked them, and that's ultimately why we're here today”

Ms Forton forwarded notification of Trilantic’s withdrawal to Sir Peter and Mr Smith stating, in light of Sir Peter’s earlier prediction that this would happen, that ‘[t]his won’t come as a surprise to you both’.