Acquisition of JE Consulting

K3 CAPITAL GROUP PLC

("K3", the "Company" and including its subsidiaries, the "Group")

Acquisition of JE Consulting

and Total Voting Rights 

K3 Capital Group plc, a multi-disciplinary professional services firm providing advisory services to SMEs, announced today the acquisition of professional services marketing agency, Professional Insight Marketing Ltd which trades as JE Consulting ("JE Consulting") (the "Acquisition"), for an initial consideration, excluding cash and surplus assets, of £2.32 million through a combination of cash and ordinary shares of 1 penny each in the Company ("Ordinary Shares"), in addition to maximum combined earn outs of £2.25 million and an additional 120,000 growth shares ("Growth Shares").

Background to and reasons for the Acquisition

JE Consulting is a full service marketing agency specialising in digital and creative services to SMEs operating in the accountancy, legal and healthcare markets. Established in 1998 and based in Sutton Coldfield in the West Midlands, the business provides services to over 140 clients across the UK. Founder, Jo Edwards, is a thought leader on the subject of digital marketing and social media for professional service firms as well as being a respected key-note speaker at major conferences throughout the UK.

The Acquisition complements K3's growth strategy by expanding and deepening the services of the K3 Hub, a centre for accountants in practice to access specialist advice, services and CPD training, available to K3 Hub members while also bringing 140 new members into the K3 Hub.

For the twelve months to November 2021, JE Consulting generated revenue of £1.5 million (unaudited), of which the majority is monthly recurring revenue, and adjusted EBITDA of £0.40 million (unaudited and normalised for Director's salaries). JE Consulting had net assets of £0.5 million as at 30 November 2021, of which £0.59 million was cash.

The Acquisition is expected to be earnings enhancing in the first full financial year of ownership and EBITDA is expected to grow as JE Consulting increases revenues and benefits from recent investments in service overheads.

Terms of the Acquisition

The initial consideration of £2.32 million will be satisfied through £1.77 million in cash from the Company's existing cash resources and a draw down from the Company's existing banking facilities, and the issue of 177,430 Ordinary Shares (being £0.55 million at an issue price of 313 pence, calculated using the 30 day volume weighted average price to 21 February 2022) satisfied through the Company's existing authorities ("Consideration Shares").

The Consideration Shares are subject to a 2 year lock-in, followed by a 12 month orderly market agreement. The Board notes that the lock-in agreements are each capable of being modified, waived or cancelled in the event each of the parties are in agreement.

In addition, 120,000 Growth Shares will be made available and issued to the owners and key personnel of JE Consulting on completion.

The earn out is payable over 4 years with mechanisms to increase or decrease subject to certain performance criteria. The earn out is payable as to 60% cash and 40% shares across the next 4 financial years ending 31 May 2026 (the "Earn Out").

The date for payment and/or issue of Ordinary Shares, as applicable, in respect of the Earn Out is set at 31 August in each relevant financial year. The cumulative Earn Out is capped at £2.25 million.

The Growth Shares are being issued in line with our adopted incentive scheme, detailed in the Company's announcement on 3 August 2020.

Admission and Total Voting Rights

Application has been made for the 177,430 Consideration Shares to be admitted to trading on AIM ("Admission") and dealings are expected to commence on 4 March 2022.

The Consideration Shares will rank pari passu with the existing issued Ordinary Shares and will have the right to receive all dividends and other distributions declared, made or paid in respect of the Ordinary Shares following Admission.

The total number of Ordinary Shares in issue following Admission will be 73,497,110. Accordingly, the figure of 73,497,110 may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in the Company under the FCA's Disclosure Guidance and Transparency Rules.

John Rigby, K3's CEO, commented,

"I am delighted to announce the acquisition of this highly trusted and established business that will accelerate our strategy of enhancing our solutions for accountancy firms and their clients.

The team at JE Consulting are highly complementary to our service portfolio and to the continued development of the K3 Hub, which, since its launch in February 2021, has recruited over 1,000 member firms in the UK.

This acquisition strengthens our presence when the professional services sector is expanding, especially in the accountancy space and increases our recurring revenue. I look forward to welcoming our new colleagues and continuing the successful execution of our strategy to generate long-term sustainable growth and attractive returns for our shareholders".

 Jo Edwards, Managing Director at JE Consulting, commented,

"We are delighted to be part of the K3 Capital journey going forwards. The opportunities this acquisition provides to the business to continue to grow and invest in new services and marketing is now unrivalled in the professional services sector and we look forward to building relationships with the K3 Hub members".

This Announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

For further information please contact:

Information on K3 Capital Group plc can be accessed via the Group's website at: www.k3capitalgroupplc.com

About K3 Capital

K3 Capital Group plc is a multi-disciplinary and complementary professional services group advising UK SMEs, with operations throughout the UK and overseas.

Services provided by the Group fall into three key operating divisions:

• M&A Division:

o Company sales and business brokerage

o Corporate finance services

o Transaction services

o Off-market acquisitions

o Debt advisory

• Tax Division:

o Research and development tax credit advisory

o Tax investigations

o Tax planning

o Tax advisory

• Restructuring Division:

o Restructuring advisory

o Financial advisory

o Creditor services

o Forensic accounting and expert witness

o Pensions advisory

o Accelerated M&A