Recommended Cash Acquisition

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

15 December 2022

RECOMMENDED CASH ACQUISITION

of

K3 CAPITAL GROUP PLC ("K3")

by

SHIN BIDCO LIMITED ("BIDCO")

which is a company controlled by

affiliates of Sun European Partners, LLP (collectively, "Sun")

to be effected by means of a Scheme of Arrangement

under Part 26 of the Companies Act 2006

Summary and highlights

· Further to the announcement by K3 on 8 December 2022, the boards of Bidco and K3 are pleased to announce that they have reached agreement on the terms of a recommended cash acquisition pursuant to which Bidco, a wholly-owned subsidiary of Sun, will acquire the entire issued and to be issued share capital of K3 (the "Acquisition"). The Acquisition is to be effected by means of a scheme of arrangement under Part 26 of the Companies Act.

· The Acquisition is conditional, amongst other things, on the approval of Independent K3 Shareholders.

· Under the terms of the Acquisition, each Independent K3 Shareholder will be entitled to receive:

For each K3 Share held 350 pence in cash

· The Acquisition values the entire issued and to be issued share capital of K3 at approximately £271.7 million, and represents:

o  a premium of approximately 16.7 per cent. to the Closing Price per K3 Share of 300 pence on 7 December 2022 (being the last Business Day prior to the commencement of the Offer Period);

o  a premium of approximately 31.3 per cent. to the three-month volume weighted average price of 266.6 pence per K3 Share to 7 December 2022 (being the last Business Day prior to the commencement of the Offer Period);

o  a premium of approximately 36.4 per cent. to the six-month volume weighted average price of 256.6 pence per K3 Share to 7 December 2022 (being the last Business Day prior to the commencement of the Offer Period);

o  a premium of 52.2 per cent. to the Closing Price of 230 pence per K3 Share on 13 September 2022, being the last Business Day before Sun and K3 commenced discussions about a possible offer by Sun for K3; and

o  an implied enterprise value of 13.1 times FY22 adjusted EBITDA.

· Certain directors and employees of the K3 Group have agreed to roll a portion of their K3 Shares into securities in Topco, an indirect parent of Bidco, subject to the terms and conditions of the Rollover Arrangements (as detailed below, and in paragraphs 9 and 15 of this Announcement and in Appendix IV to this Announcement).

Recommendation of the Independent Directors

· The Independent Directors, who have been so advised by Numis as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing advice to the Independent Directors, Numis has taken into account the commercial assessments of the Independent Directors. Numis is providing independent financial advice to the Independent Directors for the purpose of Rule 3 of the Code.

· Accordingly, the Independent Directors unanimously intend to recommend that Independent K3 Shareholders vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (or, in the event that the Acquisition is implemented by way of a Takeover Offer, to accept or procure acceptance of the Takeover Offer), as the Independent Directors have irrevocably undertaken to do in respect of their own beneficial holdings of 572,255 K3 Shares as set out below).

Irrevocable undertakings and letters of intent

· The Independent Directors have irrevocably undertaken to Bidco to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (including the Rule 16 Resolution) in respect of their own beneficial holdings amounting in aggregate to 572,255 K3 Shares and representing approximately 0.8 per cent. of the issued share capital of K3 (being approximately 1.1 per cent. of the K3 Shares eligible to vote at the Court Meeting and approximately 1.2 per cent. of the K3 Shares eligible to vote on the Rule 16 Resolution) as at 14 December 2022 (being the latest practicable date prior to publication of this Announcement). In addition, certain members of the Independent Directors' immediate families and related trusts have irrevocably undertaken to Bidco to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (including the Rule 16 Resolution) in respect of their own beneficial holdings amounting in aggregate to 230,306 K3 Shares and representing approximately 0.3 per cent. of the issued share capital of K3 (being approximately 0.5 per cent. of the K3 Shares eligible to vote at the Court Meeting and approximately 0.5 per cent. of the K3 Shares eligible to vote on the Rule 16 Resolution) as at 14 December 2022 (being the latest practicable date prior to publication of this Announcement). Further information on these undertakings is set out in Appendix III to this Announcement.

· Bidco has received an irrevocable undertaking from AXA Investment Mangers (a discretionary asset manager whose clients hold, in aggregate, 2,839,259 K3 Shares and on whose behalf AXA Investment Managers may exercise the voting rights attaching to the Shares, which represent approximately 3.9 per cent. of the issued share capital of K3 (being approximately 5.5 per cent. of the K3 Shares eligible to vote at the Court Meeting and approximately 5.7 per cent. of the K3 Shares eligible to vote on the Rule 16 Resolution)), to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (including the Rule 16 Resolution). Further information on this undertaking is set out in Appendix III to this Announcement.

· Bidco has received irrevocable undertakings from certain additional Independent K3 Shareholders holding, in aggregate, 2,268,147 K3 Shares representing approximately 3.1 per cent. of the issued share capital of K3 (being approximately 4.4 per cent. of the K3 Shares eligible to vote at the Court Meeting and approximately 4.6 per cent. of the K3 Shares eligible to vote on the Rule 16 Resolution), to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (including the Rule 16 Resolution). Further information on these undertakings is set out in Appendix III to this Announcement.

· Bidco has received further irrevocable undertakings from certain Independent K3 Shareholders connected with Management Holders holding, in aggregate, 1,425,000 K3 Shares representing approximately 1.9 per cent. of the issued share capital of K3 (being approximately 2.8 per cent. of the K3 Shares eligible to vote at the Court Meeting), to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting. Those Independent K3 Shareholders are not entitled to vote on the Rule 16 Resolution. Further information on these undertakings is set out in Appendix III to this Announcement.

· Bidco has also received a non-binding letter of intent from Canaccord Genuity (an Independent K3 Shareholder holding, in aggregate, 2,680,915 K3 Shares representing approximately 3.6 per cent. of the issued share capital of K3 (being approximately 5.2 per cent. of the K3 Shares eligible to vote at the Court Meeting and approximately 5.4 per cent. of the K3 Shares eligible to vote on the Rule 16 Resolution)), stating its intention to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (including the Rule 16 Resolution). Further information on this undertaking is set out in Appendix III to this Announcement.

Management Rollover

· The Management Holders (being certain directors and employees of the K3 Group (and certain of their spouses) who hold K3 Shares (or who will acquire such shares as a result of the exercise of LTIP Options or upon the exchange of Growth Shares) have entered into a Rollover Deed under which Bidco will acquire substantially all of the K3 Shares they hold or will acquire in exchange for cash and Bidco Rollover Notes. The K3 Shares which are subject to the Rollover Deed are excluded from the Scheme. Further information about the Rollover Arrangements are set out in paragraphs 9 and 15 of this Announcement and in Appendix IV of this Announcement. In aggregate, the Management Holders have agreed to sell to Bidco 22,336,422 existing K3 Shares representing approximately 30.4 per cent. of the issued share capital of K3 as at 14 December 2022.

· Under the terms of the Rollover Deed, each Management Holder will receive cash at the Offer Price in respect of the balance of their holdings of K3 Shares not exchanged for Bidco Rollover Notes.

· The Management Holders have also undertaken to Bidco to vote in favour of any resolution to be proposed at the General Meeting and not to accept any offer or other transaction made in competition with or which might otherwise frustrate the Acquisition. The Management Holders are not eligible to vote at the Court Meeting to approve the Scheme or to vote on the Rule 16 Resolution to be proposed at the General Meeting; however, they have, under the terms of the Rollover Deed, undertaken to Bidco to be bound by the Scheme.

Structure, Conditions and timetable

· It is intended that the Acquisition will be implemented by way of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act.

· The Scheme Document, containing further information about the Acquisition and notices of the Court Meeting and the General Meeting, together with an indicative timetable for implementation of the Scheme, will be published as soon as reasonably practicable and, in any event (save with the consent of the Panel), within 28 days of this Announcement.

· Completion of the Acquisition will be conditional, amongst other things, on the following matters:

o  the approval of the Scheme by a majority in number of the Independent K3 Shareholders who are present and vote at the Court Meeting, either in person or by proxy, representing at least 75 per cent. in value of the Independent K3 Shares voted;

o  the approval by those Independent K3 Shareholders eligible to vote (representing a simple majority of votes cast) of the Rule 16 Resolution (being a resolution to approve the Rollover Arrangements at the General Meeting in accordance with Rule 16.2 of the Code);

o  the approval by K3 Shareholders (representing at least 75 per cent. of votes cast) of the resolutions to be proposed at the General Meeting required to implement the Scheme;

o  the sanction of the Scheme by the Court;

o  the Scheme becoming effective by no later than the Long Stop Date;

o  the receipt from the FCA of confirmation of the cancellation of the FCA authorisation and related FSMA permissions of the K3 Group Regulated Entity, or approval by the FCA of the change of control of the K3 Group Regulated Entity which would take place as a result of the Acquisition or its implementation; and

o  satisfaction of the other Conditions listed in Part A of Appendix I to this Announcement.

· It is expected that the Court Meeting and the General Meeting will be held in late January 2023 or early February 2023 and, subject to the satisfaction or waiver of all relevant Conditions and the further terms set out in Appendix I to this Announcement and to be set out in the Scheme Document, that the Scheme will become effective in the first half of 2023.

· K3 Shares held by Management Holders are not subject to the Scheme. The Management Holders are not eligible to vote at the Court Meeting to approve the Scheme or to vote on the Rule 16 Resolution to be proposed at the General Meeting; however, they have, under the terms of the Rollover Deed, undertaken to Bidco to be bound by the Scheme.

Commenting on the Acquisition, Ian Mattioli, Non-Executive Chairman of K3, said:

"Since IPO in 2017, management has continued to execute its strategy of building a multi-disciplinary and complementary group, providing specialist advisory services to SMEs across three core divisions, business sales, tax and restructuring. K3 is now a diversified group with a resilient, high margin and cash generative business model and a data-driven marketing platform at its core, driving strong levels of organic growth.

Sun is an experienced investor with a proven track record in supporting strong management teams in achieving their growth ambitions. K3 will be able to benefit from their operational expertise whilst having a supportive partner with the capital required to fund K3's M&A strategy.

Whilst being confident on the outlook for K3, we are mindful of the weakening macroeconomic environment in the UK and the pressures that this is likely to put on UK SMEs over the medium term and, therefore, it is the Independent Directors view that this offer represents an opportunity for shareholders to realise their entire investment, in cash, at an attractive valuation."

Commenting on the Acquisition, Alexander Wyndham, a Principal at Sun, said:

"K3 has consistently won market share across its various verticals and cemented itself as a leader within the SME advisory sector. As a long-term investor with significant buy and build experience, we are excited to partner with management to capitalise on market opportunities. We look forward to supporting management scale the business through the expansion of operations and service offerings."

This summary should be read in conjunction with, and is subject to, the full text of this Announcement. The Acquisition will be subject to the Conditions and further terms set out in Appendix I to this Announcement and to the full terms and conditions which will be set out in the Scheme Document. Appendix II to this Announcement contains the sources and bases of certain information and calculations contained in this Announcement. Appendix III to this Announcement contains details of the irrevocable undertakings and letters of intent given to Bidco by Independent K3 Shareholders in relation to the Acquisition. Appendix IV to this Announcement contains further details on the Rollover Arrangements. Appendix V to this Announcement contains definitions of certain expressions used in this summary and in this Announcement.

Enquiries:

Weil, Gotshal & Manges (London) LLP is providing legal advice to Bidco and Sun. Addleshaw Goddard LLP is providing legal advice to K3.

Important notices

Houlihan Lokey UK Limited ("Houlihan Lokey"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as financial adviser exclusively for Sun and Bidco and for no one else in connection with the matters described in this Announcement and will not be responsible to anyone other than Sun and Bidco for providing the protections afforded to its clients or for providing advice in relation to such matters. Neither Houlihan Lokey nor any of its affiliates (nor any of their respective directors, officers, employees or agents), owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Houlihan Lokey in connection with this Announcement, any statement contained herein or otherwise.

Numis Securities Limited ("Numis"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as financial adviser, nominated adviser and corporate broker exclusively for K3 and no one else in connection with the matters set out in this Announcement and will not be responsible to anyone other than K3 for providing the protections afforded to clients of Numis, nor for providing advice in relation to any matter referred to herein. Neither Numis nor any of its affiliates (nor any of their respective directors, officers, employees or agents), owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Numis in connection with this Announcement, any statement contained herein or otherwise.

Further information

This Announcement is for information purposes only and is not intended to and does not constitute, or form part of, an offer to sell or an invitation to purchase any securities or the solicitation of an offer to buy, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, pursuant to the Acquisition or otherwise, nor shall there be any purchase, sale, issuance or exchange of securities or such solicitation in any jurisdiction in which such offer, solicitation, sale, issuance or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction. The Acquisition will be made solely by means of the Scheme Document or any document by which the Acquisition is made which will contain the full terms and Conditions of the Acquisition, including details of how to vote in respect of the Acquisition.

This Announcement has been prepared for the purpose of complying with English law and the Code and the information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.

K3 will prepare the Scheme Document to be distributed to K3 Shareholders at no cost to them. K3 and Bidco urge K3 Shareholders to read the Scheme Document when it becomes available because it will contain important information relating to the Acquisition. Any decision to vote in respect of the resolutions to be proposed at the Court Meeting and the General Meeting should be based on the information contained in the Scheme Document.

Each K3 Shareholder is advised to consult its independent professional adviser regarding the tax consequences to it (or to its beneficial owners) of the Acquisition.

Overseas Shareholders

The release, publication or distribution of this Announcement in certain jurisdictions may be restricted by law. Persons who are not resident in the United Kingdom or who are subject to the laws of other jurisdictions should inform themselves of, and observe, any applicable requirements. Further details in relation to Overseas Shareholders will be contained in the Scheme Document. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person.

The Acquisition relates to shares of a UK company and is proposed to be effected by means of a scheme of arrangement under the laws of England and Wales. Neither the US proxy solicitation rules nor the tender offer rules under the US Exchange Act apply to the Acquisition. Accordingly, the Acquisition is subject to the disclosure requirements, rules and practices applicable in the United Kingdom to schemes of arrangement, which differ from the requirements of US proxy solicitation or tender offer rules. However, if Bidco were to elect to implement the Acquisition by means of a Takeover Offer, such Takeover Offer would be made in compliance with all applicable laws and regulations, including Section 14(e) of the US Exchange Act and Regulation 14E thereunder. Such a takeover would be made in the United States by Bidco and no one else. In addition to any such Takeover Offer, Sun, certain affiliated companies and the nominees or brokers (acting as agents) may make certain purchases of, or arrangements to purchase, shares in K3 outside such Takeover Offer during the period in which such Takeover Offer would remain open for acceptance. If such purchases or arrangements to purchase were to be made, they would be made outside the United States and would comply with applicable law, including the US Exchange Act.

None of the securities referred to in this Announcement have been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any other US regulatory authority, nor have such authorities passed upon or determined the adequacy or accuracy of the information contained in this Announcement. Any representation to the contrary is a criminal offence in the United States.

K3's financial statements, and all financial information that is included in this Announcement, or that may be included in the Scheme Document, have been prepared in accordance with international financial reporting standards and may not be comparable to financial statements of companies in the United States or other companies whose financial statements are prepared in accordance with US generally accepted accounting principles.

Unless otherwise determined by Bidco or required by the Code and permitted by applicable law and regulation, the Acquisition will not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the offer by any such use, means, instrumentality or form within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly, copies of this Announcement and all documents relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this Announcement and all documents relating to the Acquisition (including custodians, nominees and trustees) must observe these restrictions and must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would violate the laws in that jurisdiction.

The availability of the Acquisition to K3 Shareholders who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements.

The Acquisition will be subject to the applicable requirements of the Code, the Panel, the London Stock Exchange and the FCA.

Forward looking statements

This Announcement contains statements about Bidco and the K3 Group that are or may be forward looking statements. These statements are based on the current expectations of the management of Bidco and K3 and are naturally subject to uncertainty and changes in circumstances. All statements, including the expected timing and scope of the Acquisition, other than statements of historical facts included in this Announcement, may be forward looking statements. Without limitation, any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "should", "would", "could", "anticipates", "estimates", "projects", "strategy" or words or terms of similar substance or the negative thereof are forward looking statements. Forward looking statements may include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of the K3 Group's operations; and (iii) the effects of government regulation on the K3 Group's business.

Such forward looking statements are not guarantees of future performance. By their nature, because they relate to events and depend on circumstances that will occur in the future, such forward looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results and developments to differ materially from those projected or implied in any forward looking statements. These factors include, but are not limited to, the satisfaction of the conditions to the Acquisition, as well as additional factors, such as changes in political and economic conditions, changes in the level of capital investment, retention of key employees, changes in customer habits, success of business and operating initiatives and restructuring objectives, impact of any acquisitions or similar transactions, changes in customers' strategies and stability, competitive product and pricing measures, changes in the regulatory environment, fluctuations or interest and exchange rates and the outcome of any litigation. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements, (which speak only as of the date hereof) and neither Bidco nor any member of the K3 Group (nor any of their respective directors, officers, employees or advisers) provides any representation, assurance or guarantee that the occurrence of the events expressed or implied by the forward looking statements will actually occur. Further, Bidco and each member of the K3 Group disclaims any obligation to update publicly or revise any forward looking or other statements contained herein, whether as a result of new information, future events or otherwise, except as required by applicable law.

All subsequent oral or written forward looking statements attributable to any member of the Wider Bidco Group or Wider K3 Group, or any of their respective directors, officers, employees or advisers, are expressly qualified in their entirety by the cautionary statement above.

No profit forecasts or profit estimates

No statement in this Announcement is intended as a profit forecast or profit estimate for any period and no statement in this Announcement should be interpreted to mean that earnings or earnings per share for K3 for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for K3.

Dealing and Opening Position Disclosure Requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the Offer Period and, if later, following the announcement in which any securities exchange offeror is first identified.

An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th Business Day following the commencement of the Offer Period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offerors, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the Business Day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3 of the Code.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4 of the Code).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the Offer Period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

In accordance with the Code, normal United Kingdom market practice and Rule 14e-5(b) of the US Exchange Act, Numis and its affiliates will continue to act as exempt principal trader in K3 securities on the London Stock Exchange. These purchases and activities by exempt principal traders which are required to be made public in the United Kingdom pursuant to the Code will be reported to a Regulatory Information Service and will be available on the London Stock Exchange website at www.londonstockexchange.com. This information will also be publicly disclosed in the United States to the extent that such information is made public in the United Kingdom.

Information relating to K3 Shareholders

Please be aware that addresses, electronic addresses and certain other information provided by K3 Shareholders, persons with information rights and other relevant persons for the receipt of communications from K3 may be provided to Bidco during the Offer Period as required under Section 4 of Appendix 4 to the Code to comply with Rule 2.11(c) of the Code.

Publication on website and hard copies

This Announcement and the documents required to be published pursuant to Rule 26.1 of the Code will be available free of charge, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on K3's website at www.k3capitalgroupplc.com/investors/ by no later than 12.00 p.m. on the Business Day following this Announcement.

Neither the content of any website referred to in this Announcement nor the content of any website accessible from hyperlinks is incorporated into, or forms part of, this Announcement.

K3 Shareholders may request a hard copy of this Announcement by contacting the Registrar during business hours on +44 (0)370 707 1226. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m. to 5.30 p.m. (London time), Monday to Friday, excluding public holidays in England and Wales. Please note that the Registrar cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. K3 Shareholders may also request that all future documents, announcements and information to be sent to them in relation to the Acquisition should be in hard copy form. If a K3 Shareholder has received this Announcement in electronic form, hard copies of this Announcement and any document or information incorporated by reference into this Announcement will not be provided unless such a request is made.

Rounding

Certain figures included in this Announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

15 December 2022

RECOMMENDED CASH ACQUISITION

of

K3 CAPITAL GROUP PLC ("K3")

by

SHIN BIDCO LIMITED ("BIDCO")

which is a company controlled by

affiliates of Sun European Partners, LLP (collectively, "Sun")

to be effected by means of a Scheme of Arrangement

under Part 26 of the Companies Act 2006

1 Introduction

Further to the announcement by K3 on 8 December 2022, the boards of Bidco and K3 are pleased to announce that they have reached agreement on the terms of a recommended cash acquisition pursuant to which Bidco, a wholly-owned subsidiary of Sun, will acquire the entire issued and to be issued share capital of K3. The Acquisition is intended to be effected by means of a scheme of arrangement under Part 26 of the Companies Act.

2 The Acquisition

Under the terms of the Acquisition, which will be subject to the Conditions and further terms set out in Appendix I to this Announcement and to be set out in the Scheme Document, Independent K3 Shareholders will be entitled to receive:

For each K3 Share held 350 pence in cash

The Acquisition values the entire issued and to be issued share capital of K3 at approximately £271.7 million on a fully diluted basis, and represents:

· a premium of approximately 16.7 per cent. to the Closing Price per K3 Share of 300 pence on 7 December 2022 (being the last Business Day prior to the commencement of the Offer Period);

· a premium of approximately 31.3 per cent. to the three-month volume weighted average price of 266.6 pence per K3 Share to 7 December 2022 (being the last Business Day prior to the commencement of the Offer Period);

· a premium of approximately 36.4 per cent. to the six-month volume weighted average price of 256.6 pence per K3 Share to 7 December 2022 (being the last Business Day prior to the commencement of the Offer Period);

· a premium of 52.2 per cent. to the Closing Price of 230 pence per K3 Share on 13 September 2022, being the last Business Day before Sun and K3 commenced discussions about a possible offer by Sun for K3; and

· an implied enterprise value of 13.1 times FY22 adjusted EBITDA.

It is currently expected that the Scheme Document will be published in early January 2023, that the Court Meeting and the General Meeting will be held in late January 2023 or early February 2023 and, subject to the satisfaction or, if permitted, waiver of all relevant Conditions and the further terms set out in Appendix I to this Announcement and to be set out in the Scheme Document, that the Scheme will become effective in the first half of 2023.

Certain directors and employees (and certain of their spouses) of the K3 Group who hold K3 Shares (or who will acquire such shares as a result of the exercise of LTIP Options or upon the exchange of Growth Shares) have entered into a Rollover Deed under which Bidco will acquire substantially all of the K3 Shares they hold or will acquire in exchange for cash and Bidco Rollover Notes (which are ultimately expected to be exchanged for securities in Topco, an indirect parent of Bidco), subject to the terms and conditions of the Rollover Arrangements (as detailed in paragraphs 9 and 15 of this Announcement and in Appendix IV to this Announcement).

3 Background to and reasons for the Acquisition

Sun believes that the acquisition of K3 represents an attractive opportunity due to K3's position as a market leader in specialist advisory services to SMEs across Business Sales, Restructuring and Tax advisory in the UK. Sun recognises the progress achieved by K3 in its implementation and current execution of its growth and diversification strategy and believes that K3 is well positioned to capitalise on future growth opportunities.

As a long-term investor with significant experience in buy and build strategies, Sun believes it is strongly positioned to support management in the next phase of development of K3.

4 Recommendation

The Independent Directors, who have been so advised by Numis as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing advice to the Independent Directors, Numis has taken into account the commercial assessments of the Independent Directors. Numis is providing independent financial advice to the Independent Directors for the purpose of Rule 3 of the Code.

Accordingly, the Independent Directors unanimously intend to recommend that the Independent K3 Shareholders vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting.

5 Irrevocable undertakings and letters of intent

The Independent Directors have irrevocably undertaken to Bidco to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (including the Rule 16 Resolution) in respect of their own beneficial holdings amounting in aggregate to 572,255 K3 Shares and representing approximately 0.8 per cent. of the issued share capital of K3 (being approximately 1.1 per cent. of the K3 Shares eligible to vote at the Court Meeting and approximately 1.2 per cent. of the K3 Shares eligible to vote on the Rule 16 Resolution) as at 14 December 2022 (being the latest practicable date prior to publication of this Announcement). In addition, certain members of the Independent Directors' immediate families and related trusts have irrevocably undertaken to Bidco to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (including the Rule 16 Resolution) in respect of their own beneficial holdings amounting in aggregate to 230,306 K3 Shares and representing approximately 0.3 per cent. of the issued share capital of K3 (being approximately 0.5 per cent. of the K3 Shares eligible to vote at the Court Meeting and approximately 0.5 per cent. of the K3 Shares eligible to vote on the Rule 16 Resolution) as at 14 December 2022 (being the latest practicable date prior to publication of this Announcement).

Bidco has received an irrevocable undertaking from AXA Investment Mangers (a discretionary asset manager whose clients hold, in aggregate, 2,839,259 K3 Shares and on whose behalf AXA Investment Managers may exercise the voting rights attaching to the Shares, which represent approximately 3.9 per cent. of the issued share capital of K3 (being approximately 5.5 per cent. of the K3 Shares eligible to vote at the Court Meeting and approximately 5.7 per cent. of the K3 Shares eligible to vote on the Rule 16 Resolution)), to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (including the Rule 16 Resolution).

Bidco has received irrevocable undertakings from certain additional Independent K3 Shareholders holding, in aggregate, 2,268,147 K3 Shares representing approximately 3.1 per cent. of the issued share capital of K3 (being approximately 4.4 per cent. of the K3 Shares eligible to vote at the Court Meeting and approximately 4.6 per cent. of the K3 Shares eligible to vote on the Rule 16 Resolution), to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (including the Rule 16 Resolution).

Bidco has received further irrevocable undertakings from certain Independent K3 Shareholders connected with Management Holders holding, in aggregate, 1,425,000 K3 Shares representing approximately 1.9 per cent. of the issued share capital of K3 (being approximately 2.8 per cent. of the K3 Shares eligible to vote at the Court Meeting), to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting. Those Independent K3 Shareholders are not entitled to vote on the Rule 16 Resolution.

Bidco has also received a non-binding letter of intent from Canaccord Genuity (an Independent K3 Shareholder holding, in aggregate, 2,680,915 K3 Shares representing approximately 3.6 per cent. of the issued share capital of K3 (being approximately 5.2 per cent. of the K3 Shares eligible to vote at the Court Meeting and approximately 5.4 per cent. of the K3 Shares eligible to vote on the Rule 16 Resolution)), stating its intention to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (including the Rule 16 Resolution).

Further details of these irrevocable undertakings and letters of intent are set out in Appendix III to this Announcement.

The Management Holders have also undertaken to Bidco to vote in favour of any resolution to be proposed at the General Meeting and not to accept any offer or other transaction made in competition with or which might otherwise frustrate the Acquisition. The Management Holders are not eligible to vote at the Court Meeting to approve the Scheme or to vote on the Rule 16 Resolution to be proposed at the General Meeting; however, they have, under the terms of the Rollover Deed, undertaken to Bidco to be bound by the Scheme.

6 Background to and reasons for the Recommendation

Since the initial public offering in 2017, K3 has transformed itself from a single division business sales company into a multi-disciplinary and complementary group, providing specialist advisory services to SMEs across three core divisions, business sales, tax and restructuring. This transformation has been achieved through the successful integration of six acquisitions since June 2020, alongside the internal development of new complementary business lines. K3 is now a diversified group, with a resilient, high margin and cash generative business model and a data-driven marketing platform at its core, driving strong levels of organic growth.

K3's reported revenues have grown from £10.8 million in FY17 to £70.7 million in FY22 and adjusted EBITDA increased from £4.7 million to £20.4 million over the same period. This strong financial performance has resulted in a significant increase in K3's market capitalisation from £40.1 million at the time of the initial public offering to £221 million as at 7 December 2022 (being the latest Business Day prior to commencement of the Offer Period). Over the same period, K3 delivered a total shareholder return of 294.1 per cent., including the reinvestment of dividends paid.

Over the last two years, K3 has demonstrated the success of its diversified business model, consistently delivering against or exceeding market expectations. However, the Independent Directors believe that this strong financial and operational performance has not been reflected in the share price, with a significant de-rating in K3's valuation experienced over the last year against a backdrop of record results in FY22 and consistent delivery of K3's strategy. As a people business, employee equity ownership was a core driver for K3's initial public offering and, historically, has been used as an effective tool to incentivise and retain employees. However, the significant volatility in the share price and recent underperformance significantly reduces the value of equity incentivisation as a means to appropriately incentivise and retain key employees.

Acquisitions have been a core part of K3's strategy and the Independent Directors believe that there is an attractive runway for further acquisitions, leveraging K3's extensive database and direct marketing expertise. K3 has a highly cash generative model and has historically paid a very attractive dividend, which, for FY22, equalled £8.9m, representing 93.1 per cent. of profit after tax. The size of the dividend relative to K3's earnings materially reduces the cash available to fund accretive acquisitions. Historically, K3 has raised additional capital through equity placings to fund acquisitions, but, at the share prices prevalent through most of the last year, the Independent Directors do not believe it would be in the best interest of shareholders to raise additional capital through equity issuance. The revolving credit facility and remaining cash resources are, therefore, only sufficient for smaller bolt-on acquisitions, restricting K3's ability to embark on a more ambitious M&A strategy which could be achieved under private ownership with a supportive partner who has the required financial resources such as Sun. It has also become apparent that there are a number of public market investors that are reluctant to see any dilution in the profit margins of the Group, which again limits the Group's ability to target additional acquisitions.

The Independent Directors remain confident in K3's ability to continue to grow on AIM, but are mindful of the weakening macro-economic outlook in the UK, which is likely to put significant pressure on UK SMEs over the medium term. Whilst this is likely to benefit the performance of the restructuring division in due course, the impact on both the business sales and tax divisions is uncertain. In addition, the Chancellor's Autumn Statement announced unwelcome changes to the R&D tax credit scheme albeit the Independent Directors are hopeful that the negative impacts of the changes can be potentially offset by K3's continued organic growth. It has also highlighted that regulatory change is likely to be an ongoing feature in the sectors K3 operates in, and the Independent Directors believe that, under private ownership, the Group would have greater freedom to react quickly to such changes. While the Independent Directors believe that K3's present strategy and opportunities are capable of delivering long-term growth and profitability, they also believe that the terms of the Acquisition provide K3 Shareholders with an immediate, certain and attractive cash value. The Independent Directors have taken into account the current trading of the business announced separately on 12 December 2022 in considering their recommendation and believe the Acquisition appropriately recognises the medium-term prospects and growth potential of K3 as a standalone business.

The Independent Directors also recognise that the very limited liquidity of K3 Shares makes it challenging for K3 Shareholders to monetise their holdings should they so wish. The Acquisition provides the opportunity for K3 Shareholders to realise their entire investment at an attractive valuation in cash.

The Board received expressions of interests from multiple parties before agreeing to move forward through due diligence with Sun, having negotiated terms at an Offer Price of 350 pence per share. The other parties who previously expressed an interest have confirmed that they are no longer considering a possible offer for the Group.

Based on the Offer Price of 350 pence per K3 Share, the Acquisition represents:

·  a premium of approximately 16.7 per cent. to the Closing Price per K3 Share of 300 pence on 7 December 2022, being the last Business Day prior to the commencement of the Offer Period;

·  a premium of approximately 31.3 per cent. to the three-month volume weighted average price of 266.6 pence per K3 Share to 7 December 2022, being the last Business Day prior to the commencement of the Offer Period;

·  a premium of approximately 36.4 per cent. to the six-month volume weighted average price of 256.6 pence per K3 Share to 7 December 2022, being the last Business Day prior to the commencement of the Offer Period;

·  a premium of 52.2 per cent. to the Closing Price of 230 pence per K3 Share on 13 September 2022, being the last Business Day before Sun and K3 commenced discussions about a possible offer by Sun for K3; and

·  an implied enterprise value of 13.1 times FY22 adjusted EBITDA.

In addition to the financial terms of the Acquisition, in its evaluation of Sun as a suitable owner of K3 from the perspective of all stakeholders, the Independent Directors have also taken into account Sun's intentions for the business, management and employees and other stakeholders of K3. The Independent Directors believe that Sun is strongly positioned to support K3 on its next phase of growth, providing the capital required to fund K3's M&A strategy alongside operational expertise to capitalise on the cross-selling opportunities in K3's existing portfolio of brands.

Accordingly, the Independent Directors intend to recommend unanimously that K3 Shareholders vote in favour of the Scheme and the resolutions to be proposed at the General Meeting.

7 Information on Sun and Bidco

Sun is a pioneer in private equity investing, uniquely combining the financial skills and resources of a traditional private equity firm with the insight, scale and expertise of a world class operating team.

Sun focuses on turning good companies into great ones and has a strong track record in buy and build. Performance improvement is driven by partnering with strong management teams and utilising its substantial in-house resources and expertise in analysing, building, and growing strong and differentiated businesses across a wide range of industries.

Bidco is a newly-established company formed by Sun for the purposes of the Acquisition.

8 Information on K3

K3 is a multi-disciplinary and complementary group providing specialist advisory services to SMEs, incorporating business and company sales, restructuring and insolvency and tax advisory services.

Services provided by the Group's three key operating divisions are as follows:

·  Business Sales: company sales and business brokerage, corporate finance services, transaction services, debt advisory;

·  Tax: research and development tax credit advisory, tax investigations, tax planning, tax advisory; and

·  Restructuring: restructuring advisory, financial advisory, creditor services, forensic accounting and expert witness, pension advisory and accelerated M&A.

K3's divisions operate through multiple brands including Knightsbridge, KBS Corporate, KBS Corporate Finance, Knight Corporate Finance and Knight Transaction Services (Business Sales), Quantuma and Quantuma International (Restructuring), Randd, Knight R&D and K3 Tax Advisory (Tax).

K3 has executed six acquisitions since June 2020, successfully growing the business into new service lines and creating a platform for business critical and advisory services across the SME lifecycle. This acquisition strategy has transformed K3 from a single division business sales company at the time of its initial public offering into a multi-disciplinary and complementary group across its three core divisions.

K3 is a data-led business and has developed proprietary distribution platforms (K3 Globe, K3 Hub and K3 X-Sell), creating a differentiated marketing model across the wider business and enabling K3 to drive organic growth by proactively engaging with prospective clients.

For FY22, K3 generated revenue of £70.7m and adjusted EBITDA of £20.4m. As at 31 May 2022, K3 had net cash of £7.8m on an IFRS 16 basis.

The Group is headquartered in the UK and the K3 Shares were admitted to trading on AIM in April 2017.

9 Rollover Arrangements

The Management Holders (being certain directors and employees of the K3 Group (and certain of their spouses) who hold K3 Shares (or who will acquire such shares as a result of the exercise of LTIP Options or upon the exchange of Growth Shares), have entered into a Rollover Deed under which Bidco will acquire substantially all of the K3 Shares they hold or will acquire. The K3 Shares which are subject to the Rollover Deed are excluded from the Scheme. In consideration for the transfer to Bidco of their K3 Shares, Bidco will pay cash and issue Bidco Rollover Notes to the Management Holders.

Pursuant to the Rollover Deed, the Management Holders will enter into a Put and Call Option Agreement with Bidco, Holdco and Topco, which will provide for the exchange of their Bidco Rollover Notes for Holdco Rollover Notes, followed by the exchange of their Holdco Rollover Notes for securities in Topco.

The Management Holders and Bidco have agreed the principal terms on which the Management Holders will hold securities in Topco, and these terms are set out in the Rollover Deed (the key terms of which are summarised in Appendix IV to this Announcement).

Under the terms of the Rollover Deed, there are three classes of Management Holders, each of whom has agreed to exchange differing proportions of their K3 Shares for Bidco Rollover Notes:

· Group 1 Management Holders. These are certain directors and employees of the K3 Group (and certain of their spouses) who hold existing K3 Shares. Each Group 1 Management Holder will exchange 50 per cent. of their Group 1 K3 Shares for Bidco Rollover Notes (save for certain immaterial holdings of K3 Shares which Bidco has agreed to exclude from the Rollover Arrangements).

The Group 1 K3 Shares are held as follows:

In aggregate, these Group 1 K3 Shares represent approximately 23.2 per cent. of the issued share capital of K3 as at 14 December 2022

· Group 2 Management Holders. These are certain directors and employees of the K3 Group who hold LTIP Options which will be exercised for new K3 Shares, or Growth Shares which will be exchanged for new K3 Shares. Each Group 2 Management Holder who exercises an LTIP Option or who exchanges Growth Shares will exchange a number of their Group 2 K3 Shares representing (at the Offer Price) 50 per cent. of the net value of their Group 2 K3 Shares. That net value will be calculated as the aggregate value of those Group 2 K3 Shares at the Offer Price, less any exercise price or similar cost payable in connection with their respective awards under the LTIP or the Growth Share Scheme, less a notional amount representing an estimate of the tax liability (varying between 10 per cent. and 47 per cent. depending on the nature of the incentive award) that will be incurred by the Group 2 Management Holder in connection with the Rollover Arrangements. The extent to which unvested LTIP Options will be exercisable as a result of the Transaction will depend on when the Acquisition completes. Therefore, in respect of Group 2 Management Holders holding unvested LTIP Options, for the purposes of estimating the number of Group 2 K3 Shares subject to the Rollover Arrangements the number of Group 2 K3 Shares that they will acquire pursuant to the exercise of those unvested LTIP Options has been calculated on the assumption that the Acquisition will complete at the end of February 2023. 

The number of Group 2 K3 Shares that will be subject to the Rollover Arrangements is estimated to be as follows:

· Group 3 Management Holders. These are Anthony Ford and Stuart Lees, both K3 Directors and employees of K3, who hold existing K3 Shares. Each Group 3 Management Holder will exchange approximately 25 per cent. of their holdings of Group 3 K3 Shares for Bidco Rollover Notes. (This excludes 250,000 K3 Shares held by Anthony Ford which he will transfer to the Ford Family Foundation, a charitable organisation).

In aggregate, these Group 1 K3 Shares represent approximately 7.1 per cent. of the issued share capital of K3 as at 14 December 2022.

Under the terms of the Rollover Deed, each Management Holder will receive cash at the Offer Price in respect of the balance of their holdings of K3 Shares not exchanged for Bidco Rollover Notes.

The Independent K3 Shareholders will be asked at the General Meeting to approve the Rollover Arrangements described in this paragraph 9 by voting on the Rule 16 Resolution. Pursuant to Rule 16 of the Code, neither the Management Holders nor their connected persons nor any person holding K3 Shares on behalf of Management Holders and/or any of their connected persons will be entitled to vote on such resolution, and voting on this resolution will be by way of a poll.

The Independent Directors also intend unanimously to recommend that the Independent K3 Shareholders vote in favour of the Rule 16 Resolution to approve the Rollover Arrangements at the General Meeting described in this paragraph 9. As required by, and solely for the purposes of, Rule 16.2 of the Code, Numis (in its capacity as independent advisers to K3 for the purposes of Rule 3 of the Code) has reviewed the terms of the Rollover Arrangements and considers that the terms of the Rollover Arrangements are fair and reasonable, so far as the Independent K3 Shareholders are concerned. In forming this view, Numis has taken into account the commercial assessments of the Independent Directors.

The Acquisition will be conditional, amongst other things, on the Independent K3 Shareholders approving the Rollover Arrangements at the General Meeting as described above.

Other than the Rollover Arrangements, currently there are no arrangements or understandings between Sun or Bidco and/or any person acting in concert with Sun and/or Bidco and the management of K3 or the K3 Directors having any connection with or dependence upon the Acquisition.

Further details of the terms of the Rollover Arrangements will be set out in the Scheme Document.

10 Directors, management, employees, pensions and locations

Strategic plans for the K3 Group

Sun believes that in order to maximise its future potential, K3 will be better suited to a private company environment. This will allow K3 management to fully focus on executing their long-term strategic vision, with appropriate support, capital and assistance from Sun - which has significant operational experience, expertise and resources - whilst maintaining the existing culture and values of the business which have played an integral role in K3's success to date.

Sun believes that it is well-positioned to help accelerate K3's growth and performance, enhance profitability and create greater employment opportunities over the long term.

Sun also believes that there will be excellent opportunities to make value enhancing acquisitions to expand the overall K3 service offering and intends to support K3's management in identifying, assessing and financing the acquisitions of complementary companies.

Intentions for employees and management

Sun recognises the quality of K3's wider management and employee teams and attaches great importance to their skills, knowledge and expertise in the ongoing delivery of high-quality services to clients and in the future growth of the K3 Group.

Sun therefore believes that supporting the employee base will be essential to the continued success of the Group. In addition to investment in the development of K3's technology and operational infrastructure, Sun intends to support K3 management's growth plans and the expansion of K3's operations and service offerings through continued investment in the K3 employee base and in the acquisition of fresh talent.

Management incentivisation and retention have been and remain essential to the success of the K3 Group. This has historically been achieved, in part, through offering K3 Shares, awards under the LTIP and/or Sharesave Plan and/or Growth Shares which are exchangeable for K3 Shares to key individuals in management roles. To maintain this alignment, certain directors and employees of the K3 Group have agreed to roll a portion of their K3 Shares into securities in Topco, an indirect parent of Bidco, subject to the terms and conditions of the Rollover Arrangements (as detailed in paragraphs 9 and 15 of this Announcement and Appendix IV to this Announcement).

In addition to the above, following completion of the Acquisition Bidco intends to put in place supplementary incentivisation arrangements for managers and employees of K3. However, Bidco has not entered into, and has not had discussions on proposals to enter into, these supplementary incentivisation arrangement with any member of K3's management or with any K3 employee, nor will it enter into any such discussions prior to the completion of the Acquisition.

Bidco does not intend to implement any material headcount reduction as a result of the Acquisition and confirms that, following completion of the Acquisition, the existing contractual and statutory rights and terms and conditions of employment, including pension obligations, of the management and employees of the K3 Group will be safeguarded in accordance with applicable law.

Bidco has no intention to make any material change to the conditions of employment of K3 employees or in the balance of the skills and functions of the employees and management of K3.

Intentions for headquarters, locations, fixed assets and research & development

Bidco does not envisage a redeployment of K3's fixed asset base. Following the completion of the Acquisition, Bidco may identity areas of the K3 Group where investment can be increased or specific business units that can be prioritised. However, based on diligence performed to date, Bidco does not expect the Acquisition to have a material impact on the operations, places of business, or headquarters of K3, nor its research and development functions.

As a result of the K3 Shares ceasing to be admitted to trading on AIM and of K3 becoming a private company, certain corporate and support functions may no longer be required or may be reduced in size and could potentially require reduced headcount. Bidco has not yet determined whether any such headcount reductions will be required or developed proposals as to how they could be implemented, but does not expect any headcount reductions to be material. Any individuals affected will be treated in a manner consistent with the high standards, culture and practices of K3.

Bidco expects that the Independent Directors will resign from the board of K3 upon completion of the Acquisition.

Pension schemes

No member of the Wider K3 Group participates in any defined benefit pension schemes.

Trading facilities

K3 Shares are currently admitted to trading on AIM. As set out in paragraph 17 below, requests will be made to the London Stock Exchange to cancel the admission to trading of K3 Shares on AIM shortly after the Effective Date and to re-register K3 as a private company.

Strategic plans for Bidco

Except to the extent described above, the Acquisition will not impact the existing business of Sun.

Bidco may raise debt financing in connection with the Acquisition following the date of this Announcement. The introduction of such financing, if put in place, will not cause any changes to the operational structure of the business or any of the other matters outlined above.

Post-offer undertakings

No statements in this paragraph 10 are "post-offer undertakings" for the purposes of Rule 19.5 of the Code.

11 K3 Share Plans

Participants in the K3 Share Plans will be contacted regarding the effect of the Acquisition on their rights under the K3 Share Plans and appropriate proposals will be made to such participants which reflects their rights under the K3 Share Plans in due course.

Those K3 Share Plan participants who are also Group 2 Management Holders should note that their rights under the K3 Share Plans will also be subject to the arrangements applicable to Group 2 Management Holders as described in this Announcement, and as will be set out in more detail in the Scheme Document.

The K3 Share Plan participants who are party to the Rollover Arrangements will not receive a proposal under Rule 15 of the Code.

12 Financing

The cash consideration payable by Bidco pursuant to the Acquisition will be funded from equity financing drawn down from Sun VIII. In connection with the financing of Bidco, Sun VIII has entered into the Equity Commitment Letter. Bidco may raise debt financing in connection with the Acquisition following the date of this Announcement.

Further information regarding these arrangements will be included in the Scheme Document.

Houlihan Lokey, financial adviser to Bidco, is satisfied that the resources available to Bidco are sufficient to enable Bidco to satisfy in full the cash consideration payable to K3 Shareholders under the terms of the Acquisition.

13 Offer-related Arrangements

Confidentiality Agreement

Pursuant to the Confidentiality Agreement, Sun Group VIII undertook to keep, and to procure that certain of their representatives keep, confidential information relating to K3 and/or to the Acquisition, to use such information solely for the agreed purposes in relation to the Acquisition and not to disclose it to third parties (with certain exceptions). These confidentiality obligations will remain in force until 14 September 2025. The Confidentiality Agreement contains standstill provisions which restricted Sun Group VIII and any Concert Party from acquiring or offering to acquire interests in certain securities of K3 which ceased to apply on release of this Announcement.

Under the Confidentiality Agreement, neither Sun Group VIII nor certain of its affiliates will, during the period of 12 months from the date of the Confidentiality Agreement, employ or offer to employ, or solicit for employment or endeavour to entice away, any individual who is at any time during that 12-month period a director, officer or senior employee of K3 or one of its group undertakings, with whom Sun Group VIII or any of its representatives came into contact, or in respect of whom Sun Group VIII or any of its representatives were provided information in connection with the Acquisition, subject to customary exclusions such as in respect of responses to general adverts not specifically targeted at the officers, senior executives or employees of K3.

Co-operation Agreement

Pursuant to the Co-operation Agreement, Bidco and K3 have agreed to co-operate and provide each other with reasonable information and assistance in relation to any filings, submissions and notifications in relation to the satisfaction of Condition 3(a) as set out in Appendix I to this Announcement. Bidco has also agreed to provide K3 with such information, assistance and access as may reasonably be required for the preparation of the Scheme Document.

The Co-operation Agreement will terminate in certain circumstances, including (but not limited to):

· upon service of written notice by Sun to K3 if the Independent Directors make a change to their recommendation;

· if prior to the Long Stop Date, either: (i) a Condition has been invoked by Bidco (with the consent of the Panel, if required); or (ii) a Competing Offer is announced which is recommended by the Board or the Independent Directors;

· if the Scheme is not approved by Scheme Shareholders at the Court Meeting, or if the K3 Shareholders do not approve all resolutions proposed at the General Meeting, or the Court refuses to sanction the Scheme and Bidco has not elected to implement the Acquisition by means of a Takeover Offer;

· if the Acquisition (whether implemented by way of the Scheme or a Takeover Offer) is, with the permission of the Panel, terminated, withdrawn or lapses in accordance with its terms prior to the Long Stop Date (other than where such lapse or withdrawal is as a result of the exercise of Sun's right to effect a switch in accordance with the terms of this Co-operation Agreement); or

· unless otherwise agreed by Bidco and K3, the Effective Date has not occurred before the Long Stop Date.

The Co-operation Agreement also contains provisions that will apply in respect of the K3 Share Plans.

14 Deeds of Variation

K3 has acquired a number of companies on terms that part of the consideration payable by K3 to sellers, who are also K3 Shareholders, is deferred by way of an earn-out which is contingent on the financial performance of the relevant company.

In the case of some acquisitions, the earn-out payable to the sellers under the relevant share purchase agreement is, in the event of a change of control of K3, accelerated to a point in time before it would otherwise be payable.

Furthermore, the relevant share purchase agreements provide that any earn-out payment payable to the sellers is to be satisfied partly in cash and partly by the issue of K3 Shares, although K3 retained the discretion to pay any earn-out payment wholly in cash.

K3 has entered into deeds of variation with the relevant counterparties which have amended the terms of the relevant share purchase agreements as follows:

· by deleting the acceleration clause in its entirety so that the change of control of K3, which would take place as a result of the Acquisition or its implementation, will not bring forward payment of the earn-out;

· by removing reference to the part satisfaction of the earn out payment by the issue of K3 Shares and to confirm that any earn-out payment payable to the sellers will be wholly in cash; and

· in the case of two companies only, by agreeing that the earn-out payment will be no less than a certain amount in the three consecutive financial years (FY23 - FY25).

Each of the deeds of variation is conditional upon the change of control of K3 occurring on or before 28 April 2023.

15 Structure of the Acquisition

It is intended that the Acquisition will be effected by means of a Court-approved scheme of arrangement between K3 and Scheme Shareholders under Part 26 of the Companies Act. Bidco reserves the right to elect to implement the Acquisition by way of a Takeover Offer (with the consent of the Panel and subject to the terms of the Co-operation Agreement).

The purpose of the Scheme is (taken together with the Rollover Deed) to provide for Bidco to become the holder of the entire issued and to be issued share capital of K3.

The Scheme is an arrangement between K3 and the Scheme Shareholders pursuant to which the Scheme Shares will be transferred to Bidco in consideration for which the Scheme Shareholders will receive cash consideration on the basis set out in paragraph 2 above.

In order for the Scheme to become effective, it must be approved by the Scheme Shareholders as described below.

In addition, the Scheme will be conditional upon the passing of all the resolutions to be proposed at the General Meeting.

Voting arrangements at the Meetings

In order to become effective, the Scheme must be approved by a majority in number of the Scheme Shareholders voting (and entitled to vote) at the Court Meeting, either in person or by proxy, representing not less than 75 per cent. in value of the K3 Shares voted.

In addition, the Scheme will be conditional upon the passing of resolutions to be proposed at the General Meeting to implement the Scheme, including:

· a special resolution to approve the adoption of the Amended K3 Articles which must be passed by K3 Shareholders representing at least 75 per cent. of the votes validly cast on that resolution; and

· the Rule 16 Resolution, which must be passed by Independent K3 Shareholders eligible to vote representing a simple majority of the votes validly cast on that resolution.

The General Meeting will be held immediately after the Court Meeting.

The Management Holders are not eligible to vote at the Court Meeting to approve the Scheme or to vote on the Rule 16 Resolution to be proposed at the General Meeting; however, they have, under the terms of the Rollover Deed, undertaken to Bidco to be bound by the Scheme.

Effectiveness of the Scheme

Following the Meetings, the Scheme must be sanctioned by the Court. The Scheme will only become effective once a copy of the Court Order is delivered to the Registrar of Companies. Upon the Scheme becoming effective, it will be binding on all Scheme Shareholders, whether or not they attended or voted at the Meetings (and if they attended and voted, whether or not they voted in favour).

Subject to the satisfaction of the Conditions, the Scheme is expected to become effective in the first half of 2023.

Any K3 Shares issued before the Scheme Record Time (other than those issued to Management Holders) will be subject to the terms of the Scheme. Any K3 Shares issued at or after the Scheme Record Time (other than those issued to Management Holders) will be subject to the Amended K3 Articles and be automatically transferred to Bidco.

The Acquisition will lapse if the Scheme does not become effective by the Long Stop Date.

Further details of the Scheme, including an indicative timetable for its implementation and the necessary action to be taken by K3 Shareholders, will be set out in the Scheme Document, which is expected to be dispatched to K3 Shareholders as soon as reasonably practicable and, in any event, within 28 days of the date of this Announcement (or such later date as may be agreed with the Panel).

16 Conditions

In addition to the requirements described in paragraph 15 above, the Acquisition will be subject to the Conditions and further terms set out below and in Appendix I to this Announcement and to be set out in the Scheme Document and will only become effective upon, among other things, the receipt from the FCA of confirmation of the cancellation of the FCA authorisation and related FSMA permissions of the K3 Group Regulated Entity, or approval by the FCA of the change of control of the K3 Group Regulated Entity which would take place as a result of the Acquisition or its implementation.

The Scheme will lapse if:

· the Court Meeting and the General Meeting are not held on or before the 22nd day after the expected date of such Court Meeting and General Meeting to be set out in the Scheme Document in due course (or such later date (if any) as may be agreed by Bidco and K3 and, if required, the Court may allow);

· the Scheme Court Hearing is not held on or before the 22nd day after the expected date of the Scheme Court Hearing to be set out in the Scheme Document in due course (or such later date (if any) as may be agreed by Bidco and K3 and, if required, the Court may allow);

· the Scheme does not become effective by the Long Stop Date; or

· the Rule 16 Resolution is not duly passed by the requisite majority of eligible Independent K3 Shareholders at the General Meeting in accordance with Rule 16.2 of the Code.

The deadlines for the timing of the Court Meeting, the General Meeting and the Scheme Court Hearing as set out above may be waived by Bidco, and the deadline for the Scheme to become effective may be extended by agreement between K3 and Bidco.

17 De-listing and re-registration

Prior to the Scheme becoming effective, K3 will make an application to the London Stock Exchange for the cancellation of the admission to trading of K3 Shares on AIM, to take effect shortly after the Effective Date. The last day of dealings in K3 Shares on AIM is expected to be the Business Day immediately following the Scheme Court Hearing and no transfers will be registered after 6.00 p.m. on that date.

On the Effective Date, share certificates in respect of K3 Shares will cease to be valid and should be destroyed. In addition, entitlements to K3 Shares held within the CREST system will be cancelled.

It is also proposed that, following the Effective Date and after the K3 Shares are delisted, K3 will be re-registered as a private limited company.

18 Disclosure of interests in K3 Shares

As at the close of business on 14 December 2022 (being the latest practicable date prior to the date of this Announcement) neither Bidco, its directors, nor, so far as Bidco is aware, any person acting in concert (within the meaning of the Code) with it (i) has any interest in or right to subscribe for any relevant securities of K3, or (ii) has any short positions in respect of relevant securities of K3 (whether conditional or absolute and whether in the money or otherwise), including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery, or (iii) has borrowed or lent any relevant securities of K3 (including, for these purposes, any financial collateral arrangements of the kind referred to in Note 4 on Rule 4.6 of the Code) save for any borrowed shares which have been either on-lent or resold, or (iv) is a party to any dealing arrangement of the kind referred to in Note 11 on the definition of acting in concert in the Code.

It has not been practicable for Bidco to make enquiries of all of its concert parties in advance of the release of this Announcement. Therefore, if Bidco becomes aware, following the making of such enquiries, that any of its concert parties have any such interests in relevant securities of K3, all relevant details in respect of Bidco's concert parties will be included in Bidco's Opening Position Disclosure in accordance with Rule 8.1(a) and Note 2(a)(i) on Rule 8 of the Code which must, unless there are no such interests of which Bidco is aware, be made on or before 12 noon on 22 December 2022.

19 Dividends

If any dividend is paid or becomes payable in respect of K3 Shares on or after the date of this Announcement and prior to the Effective Date, Bidco has the right to reduce the consideration payable by it pursuant to the Acquisition by an amount up to the aggregate amount of such dividend or distribution (excluding any associated tax credit).

20 Overseas Shareholders

The availability of the Acquisition and the distribution of this Announcement to persons not resident in the United Kingdom may be affected by the laws and regulations of the relevant jurisdiction. Such persons should inform themselves about, and observe, any applicable legal or regulatory requirements. K3 Shareholders who are in any doubt regarding such matters should consult an appropriate independent professional adviser in the relevant jurisdiction without delay.

This Announcement does not constitute an offer for sale of any securities or an offer or an invitation to purchase any securities. K3 Shareholders are advised to read carefully the Scheme Document and the forms of proxy once these have been dispatched.

21 General

Bidco reserves the right, subject to the prior consent of the Panel and subject to the terms of the Co-operation Agreement, to elect to implement the Acquisition by way of a Takeover Offer for the entire issued and to be issued share capital of K3 not already held by Bidco, as an alternative to the Scheme. In such an event, such offer will be implemented on the same terms (subject to appropriate amendments as described in Part B of Appendix I to this Announcement), so far as applicable, as those which would apply to the Scheme.

If the Acquisition is effected by way of a Takeover Offer and such offer becomes or is declared unconditional in all respects and sufficient acceptances are received, Bidco intends to exercise its rights to apply the provisions of Chapter 3 of Part 28 of the Companies Act to acquire compulsorily the remaining K3 Shares in respect of which the Takeover Offer has not been accepted.

Investors should be aware that Bidco may purchase K3 Shares otherwise than under any Takeover Offer or scheme of arrangement relating to the Acquisition, such as in open market or privately negotiated purchases.

Numis and Houlihan Lokey have given and not withdrawn their consent to the publication of this Announcement with the inclusion herein of the references to their respective names, in each case, in the form and context in which they appear.

22 Documents available on website

Copies of the following documents will be made available on K3's website at www.k3capitalgroupplc.com/investors/ until the end of the Offer Period:

· the Confidentiality Agreement;

· the Co-operation Agreement;

· the irrevocable undertakings and letters of intent referred to in paragraph 5 above;

· the Rollover Deed;

· the Equity Commitment Letter;

· a copy of this Announcement; and

· the consents of Numis and Houlihan Lokey referred to in paragraph 21.

The bases and sources of certain financial information contained in this Announcement are set out in Appendix II to this Announcement. Certain terms used in this Announcement are defined in Appendix V to this Announcement.

Enquiries:

Weil, Gotshal & Manges (London) LLP is providing legal advice to Bidco and Sun. Addleshaw Goddard LLP is providing legal advice to K3.

Important notices

Houlihan Lokey, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as financial adviser exclusively for Sun and Bidco and for no one else in connection with the matters described in this Announcement and will not be responsible to anyone other than Sun and Bidco for providing the protections afforded to its clients or for providing advice in relation to such matters. Neither Houlihan Lokey nor any of its affiliates (nor any of their respective directors, officers, employees or agents), owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Houlihan Lokey in connection with this Announcement, any statement contained herein or otherwise.

Numis, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as financial adviser, nominated adviser and corporate broker exclusively for K3 and no one else in connection with the matters set out in this Announcement and will not be responsible to anyone other than K3 for providing the protections afforded to clients of Numis, nor for providing advice in relation to any matter referred to herein. Neither Numis nor any of its affiliates (nor any of their respective directors, officers, employees or agents), owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Numis in connection with this Announcement, any statement contained herein or otherwise.

Further information

This Announcement is for information purposes only and is not intended to and does not constitute, or form part of, an offer to sell or an invitation to purchase any securities or the solicitation of an offer to buy, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, pursuant to the Acquisition or otherwise, nor shall there be any purchase, sale, issuance or exchange of securities or such solicitation in any jurisdiction in which such offer, solicitation, sale, issuance or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction. The Acquisition will be made solely by means of the Scheme Document or any document by which the Acquisition is made which will contain the full terms and Conditions of the Acquisition, including details of how to vote in respect of the Acquisition.

This Announcement has been prepared for the purpose of complying with English law and the Code and the information disclosed may not be the same as that which would have been disclosed if this Announcement had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.

K3 will prepare the Scheme Document to be distributed to K3 Shareholders at no cost to them. K3 and Bidco urge K3 Shareholders to read the Scheme Document when it becomes available because it will contain important information relating to the Acquisition. Any decision to vote in respect of the resolutions to be proposed at the Court Meeting and the General Meeting should be based on the information contained in the Scheme Document.

Each K3 Shareholder is advised to consult its independent professional adviser regarding the tax consequences to it (or to its beneficial owners) of the Acquisition.

Overseas Shareholders

The release, publication or distribution of this Announcement in certain jurisdictions may be restricted by law. Persons who are not resident in the United Kingdom or who are subject to the laws of other jurisdictions should inform themselves of, and observe, any applicable requirements. Further details in relation to Overseas Shareholders will be contained in the Scheme Document. Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person.

The Acquisition relates to shares of a UK company and is proposed to be effected by means of a scheme of arrangement under the laws of England and Wales. Neither the US proxy solicitation rules nor the tender offer rules under the US Exchange Act apply to the Acquisition. Accordingly, the Acquisition is subject to the disclosure requirements, rules and practices applicable in the United Kingdom to schemes of arrangement, which differ from the requirements of US proxy solicitation or tender offer rules. However, if Bidco were to elect to implement the Acquisition by means of a Takeover Offer, such Takeover Offer would be made in compliance with all applicable laws and regulations, including Section 14(e) of the US Exchange Act and Regulation 14E thereunder. Such a takeover would be made in the United States by Bidco and no one else. In addition to any such Takeover Offer, Sun, certain affiliated companies and the nominees or brokers (acting as agents) may make certain purchases of, or arrangements to purchase, shares in K3 outside such Takeover Offer during the period in which such Takeover Offer would remain open for acceptance. If such purchases or arrangements to purchase were to be made, they would be made outside the United States and would comply with applicable law, including the US Exchange Act.

None of the securities referred to in this Announcement have been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any other US regulatory authority, nor have such authorities passed upon or determined the adequacy or accuracy of the information contained in this Announcement. Any representation to the contrary is a criminal offence in the United States.

K3's financial statements, and all financial information that is included in this Announcement, or that may be included in the Scheme Document, have been prepared in accordance with international financial reporting standards and may not be comparable to financial statements of companies in the United States or other companies whose financial statements are prepared in accordance with US generally accepted accounting principles.

Unless otherwise determined by Bidco or required by the Code and permitted by applicable law and regulation, the Acquisition will not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the offer by any such use, means, instrumentality or form within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly, copies of this Announcement and all documents relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this Announcement and all documents relating to the Acquisition (including custodians, nominees and trustees) must observe these restrictions and must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would violate the laws in that jurisdiction.

The availability of the Acquisition to K3 Shareholders who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not resident in the United Kingdom should inform themselves of, and observe, any applicable requirements.

The Acquisition will be subject to the applicable requirements of the Code, the Panel, the London Stock Exchange and the FCA.

Forward looking statements

This Announcement contains statements about Bidco and the K3 Group that are or may be forward looking statements. These statements are based on the current expectations of the management of Bidco and K3 and are naturally subject to uncertainty and changes in circumstances. All statements, including the expected timing and scope of the Acquisition, other than statements of historical facts included in this Announcement, may be forward looking statements. Without limitation, any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "should", "would", "could", "anticipates", "estimates", "projects", "strategy" or words or terms of similar substance or the negative thereof are forward looking statements. Forward looking statements may include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of the K3 Group's operations; and (iii) the effects of government regulation on the K3 Group's business.

Such forward looking statements are not guarantees of future performance. By their nature, because they relate to events and depend on circumstances that will occur in the future, such forward looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results and developments to differ materially from those projected or implied in any forward looking statements. These factors include, but are not limited to, the satisfaction of the conditions to the Acquisition, as well as additional factors, such as changes in political and economic conditions, changes in the level of capital investment, retention of key employees, changes in customer habits, success of business and operating initiatives and restructuring objectives, impact of any acquisitions or similar transactions, changes in customers' strategies and stability, competitive product and pricing measures, changes in the regulatory environment, fluctuations or interest and exchange rates and the outcome of any litigation. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements, (which speak only as of the date hereof) and neither Bidco nor any member of the K3 Group (nor any of their respective directors, officers, employees or advisers) provides any representation, assurance or guarantee that the occurrence of the events expressed or implied by the forward looking statements will actually occur. Further, Bidco and each member of the K3 Group disclaims any obligation to update publicly or revise any forward looking or other statements contained herein, whether as a result of new information, future events or otherwise, except as required by applicable law.

All subsequent oral or written forward looking statements attributable to any member of the Wider Bidco Group or Wider K3 Group, or any of their respective directors, officers, employees or advisers, are expressly qualified in their entirety by the cautionary statement above.

No profit forecasts or profit estimates

No statement in this Announcement is intended as a profit forecast or profit estimate for any period and no statement in this Announcement should be interpreted to mean that earnings or earnings per share for K3 for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for K3.

Dealing and Opening Position Disclosure Requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the Offer Period and, if later, following the announcement in which any securities exchange offeror is first identified.

An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th Business Day following the commencement of the Offer Period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offerors, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the Business Day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3 of the Code.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4 of the Code).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the Offer Period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

In accordance with the Code, normal United Kingdom market practice and Rule 14e-5(b) of the US Exchange Act, Numis and its affiliates will continue to act as exempt principal trader in K3 securities on the London Stock Exchange. These purchases and activities by exempt principal traders which are required to be made public in the United Kingdom pursuant to the Code will be reported to a Regulatory Information Service and will be available on the London Stock Exchange website at www.londonstockexchange.com. This information will also be publicly disclosed in the United States to the extent that such information is made public in the United Kingdom.

Information relating to K3 Shareholders

Please be aware that addresses, electronic addresses and certain other information provided by K3 Shareholders, persons with information rights and other relevant persons for the receipt of communications from K3 may be provided to Bidco during the Offer Period as required under Section 4 of Appendix 4 to the Code to comply with Rule 2.11(c) of the Code.

Publication on website and hard copies

This Announcement and the documents required to be published pursuant to Rule 26.1 of the Code will be available free of charge, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on K3's website at www.k3capitalgroupplc.com/investors/ by no later than 12.00 p.m. on the Business Day following this Announcement.

Neither the content of any website referred to in this Announcement nor the content of any website accessible from hyperlinks is incorporated into, or forms part of, this Announcement.

K3 Shareholders may request a hard copy of this Announcement by contacting the Registrar during business hours on +44 (0)370 707 1226. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 a.m. to 5.30 p.m. (London time), Monday to Friday, excluding public holidays in England and Wales. Please note that the Registrar cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes. K3 Shareholders may also request that all future documents, announcements and information to be sent to them in relation to the Acquisition should be in hard copy form. If a K3 Shareholder has received this Announcement in electronic form, hard copies of this Announcement and any document or information incorporated by reference into this Announcement will not be provided unless such a request is made.

Rounding

Certain figures included in this Announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

APPENDIX I

CONDITIONS AND FURTHER TERMS OF THE OFFER

Part A: Conditions to the Scheme and the Acquisition

1 The Acquisition will be conditional upon the Scheme becoming unconditional and effective, subject to the Code, by not later than the Long Stop Date.

Scheme Conditions

2 The Scheme will be subject to the following Conditions:

(a) (i) its approval by a majority in number representing not less than 75 per cent. in value of Independent K3 Shareholders who are on the register of members of K3 (or the relevant class or classes thereof) at the Voting Record Time, present and voting, whether in person or by proxy, at the Court Meeting (or any adjournment thereof); and (ii) such Court Meeting being held on or before the 22nd day after the expected date of the Court Meeting to be set out in the Scheme Document in due course (or such later date as may be agreed between Bidco and K3 (and that the Court may approve));

(b) (i) the passing of the Resolutions at the General Meeting by the requisite majorities of the K3 Shareholders; and (ii) such General Meeting being held on or before the 22nd day after the expected date of the Court Meeting to be set out in the Scheme Document in due course (or such later date as may be agreed between Bidco and K3 (and that the Court may approve)); and

(c) (i) the sanction of the Scheme by the Court (with or without modification (but subject to such modification being acceptable to Bidco and K3)) and the delivery of a copy of the Court Order to the Registrar of Companies; and (ii) the Scheme Court Hearing being held on or before the 22nd day after the expected date of the Scheme Court Hearing to be set out in the Scheme Document (or such later date as may be agreed between Bidco and K3 (and that the Court may approve)).

General Conditions

3 In addition, subject as stated in Part B below and to the requirements of the Panel, the Acquisition will be conditional upon the following Conditions and, accordingly, the necessary actions to make the Scheme effective will not be taken unless such Conditions (as amended, if appropriate) have been satisfied or, where relevant, waived.

FCA condition

(a) the FCA: (a) giving written notice to Sun or Bidco pursuant to section 55H of FSMA that it approves cancellation of the K3 Group Regulated Entity's FCA authorisation and related FSMA permissions; or (b) giving written notice to Sun or Bidco pursuant to section 189(4)(a) of FSMA (or issuing a decision notice under 189(7) of FSMA, in terms which do not impose any material conditions, obligations or restrictions on the Wider Bidco Group or the Wider K3 Group, other than those which are satisfactory to Bidco (acting reasonably)) that it approves any acquisition of control (within the meaning of section 181 of FSMA) over the K3 Group Regulated Entity by any member of the Wider Bidco Group which, in either case, would take place as a result of the Acquisition or its implementation, or being treated as having given such approval pursuant to section 189(6) of FSMA;

Other Third Party clearances and Authorisations

(b) the waiver (or non-exercise within any applicable time limits) by any relevant Third Party of any termination right, right of pre-emption, first refusal or similar right (which is material in the context of the Wider K3 Group taken as a whole) arising as a result of or in connection with the Acquisition including, without limitation, its implementation and financing or the proposed direct or indirect acquisition of any shares or other securities in, or control or management of, K3 by Bidco or any member of the Wider Bidco Group;

(c) all notifications, filings or applications which are necessary by Bidco having been made in connection with the Acquisition and all necessary waiting periods (including any extensions thereof) under any applicable legislation or regulation of any jurisdiction having expired, lapsed or been terminated (as appropriate) and all statutory and regulatory obligations in any jurisdiction having been complied with in each case in respect of the Acquisition or the acquisition by any member of the Wider Bidco Group of any shares or other securities in, or control of, K3 and all Authorisations which are reasonably necessary in any jurisdiction for or in respect of the Acquisition (including, without limitation, its implementation and financing) and, except pursuant to Chapter 3 of Part 28 of the Companies Act, the acquisition or the proposed acquisition of any shares or other securities in, or control or management of, K3 or any other member of the Wider K3 Group by any member of the Wider Bidco Group having been obtained in terms and in a form reasonably satisfactory to Bidco from all appropriate Third Parties or (without prejudice to the generality of the foregoing) from any person or bodies with whom any member of the Wider K3 Group or the Wider Bidco Group has entered into contractual arrangements and all such Authorisations necessary, appropriate or desirable to carry on the business of any member of the Wider K3 Group in any jurisdiction which are material in the context of the Bidco Group or the K3 Group taken as a whole having been obtained and all such Authorisations remaining in full force and effect and all filings necessary for such purpose having been made and there being no notice or intimation of an intention to revoke, suspend, restrict, modify or not to renew such Authorisations at the time at which the Acquisition becomes otherwise unconditional;

(d) no Third Party having given notice of a decision to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference (and in each case, not having withdrawn the same), or having required any action to be taken or otherwise having done anything, or having enacted, made or proposed any statute, regulation, decision, order or change to published practice or having taken any other steps (and in each case, not having withdrawn the same) and there not continuing to be outstanding any statute, regulation, decision or order which would or might reasonably be expected to:

(i) require, prevent or delay the divestiture or alter the terms envisaged for such divestiture by any member of the Wider Bidco Group or by any member of the Wider K3 Group of all or any portion of its businesses, assets or property or impose any limitation on the ability of any of them to conduct their businesses (or any part thereof) or to own, control or manage any of their assets or properties (or any part thereof) which, in any such case, is material in the context of the Wider Bidco Group or the Wider K3 Group taken as a whole;

(ii) except pursuant to Chapter 3 of Part 28 of the Companies Act, require any member of the Wider Bidco Group or the Wider K3 Group to acquire or offer to acquire any shares, other securities (or the equivalent) or interest in any member of the Wider K3 Group or any asset owned by any Third Party (other than in the implementation of the Acquisition);

(iii) impose any material limitation on, or result in a material delay in, the ability of any member of the Wider Bidco Group directly or indirectly to acquire, hold or to exercise effectively all or any rights of ownership in respect of shares or other securities in K3 or on the ability of any member of the Wider K3 Group or any member of the Wider Bidco Group directly or indirectly to hold or exercise effectively all or any rights of ownership in respect of shares or other securities (or the equivalent) in, or to exercise voting or management control over, any member of the Wider K3 Group;

(iv) otherwise adversely affect any or all of the business, assets, profits or prospects of any member of the Wider K3 Group or any member of the Wider Bidco Group to an extent which is material in the context of the Wider Bidco Group or the Wider K3 Group in either case taken as a whole;

(v) result in any member of the Wider K3 Group or any member of the Wider Bidco Group ceasing to be able to carry on business under any name under which it presently carries on business to an extent which is or would be material in the context of the Wider K3 Group taken as a whole;

(vi) make the Acquisition, its implementation or the acquisition or proposed acquisition of any shares or other securities in, or control or management of, K3 by any member of the Wider Bidco Group void, unenforceable and/or illegal under the laws of any relevant jurisdiction, or otherwise, directly or indirectly materially prevent or prohibit, restrict, restrain, or delay to a material extent or otherwise materially interfere with the implementation of, or impose material additional conditions or obligations with respect to, or otherwise materially challenge, impede, interfere or require material amendment of the Acquisition or the acquisition or proposed acquisition of any shares or other securities in, or control or management of, K3 by any member of the Wider Bidco Group;

(vii) require, prevent or materially delay a divestiture by any member of the Wider Bidco Group of any shares or other securities (or the equivalent) in any member of the Wider K3 Group or any member of the Wider Bidco Group; or

(viii) impose any limitation on the ability of any member of the Wider Bidco Group or any member of the Wider K3 Group to conduct, integrate or co-ordinate all or any part of its business with all or any part of the business of any other member of the Wider Bidco Group and/or the Wider K3 Group which is adverse to and material in the context of the Wider Bidco Group or the Wider K3 Group in either case taken as a whole,

and all applicable waiting and other time periods (including any extensions thereof) during which any such Third Party could decide to take, institute, implement or threaten any such action, proceeding, suit, investigation, enquiry or reference or take any other step under the laws of any jurisdiction in respect of the Acquisition or the acquisition or proposed acquisition of any K3 Shares or otherwise intervene having expired, lapsed or been terminated;

Certain matters arising as a result of any arrangement, agreement, etc.

(e) except as Disclosed, there being no provision of any arrangement, agreement, lease, licence, franchise, permit or other instrument to which any member of the Wider K3 Group is a party or by or to which any such member or any of its assets is or may be bound, entitled or be subject or any event or circumstance which, as a consequence of the Acquisition or the acquisition or the proposed acquisition by any member of the Wider Bidco Group of any shares or other securities (or the equivalent) in K3 or because of a change in the control or management of any member of the Wider K3 Group or otherwise, could or might reasonably be expect to result in any of the following to an extent which is material and adverse in the context of the Wider K3 Group, or the Wider Bidco Group, in either case taken as a whole, or in the context of the Acquisition:

(i) any monies borrowed by, or any other indebtedness, actual or contingent, of, or any grant available to, any member of the Wider K3 Group being or becoming repayable, or capable of being declared repayable, immediately or prior to its or their stated maturity date or repayment date, or the ability of any such member to borrow monies or incur any indebtedness being withdrawn or inhibited or being capable of becoming or being withdrawn or inhibited;

(ii) the creation, save in the ordinary and usual course of business, or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any member of the Wider K3 Group or any such mortgage, charge or other security interest (whenever created, arising or having arisen) becoming enforceable;

(iii) any such arrangement, agreement, lease, licence, franchise, permit or other instrument being terminated or the rights, liabilities, obligations or interests of any member of the Wider K3 Group being terminated or adversely modified or affected or any obligation or liability arising or any action being taken or arising thereunder;

(iv) any asset or interest of any member of the Wider K3 Group being or failing to be disposed of or charged or ceasing to be available to any such member or any right arising under which any such asset or interest could be required to be disposed of or charged or could cease to be available to any such member otherwise than in the ordinary course of business;

(v) any liability of any member of the Wider K3 Group to make any severance, termination, bonus or other payment to any of its directors or other officers;

(vi) the rights, liabilities, obligations, interests or business of any member of the Wider K3 Group or any member of the Wider Bidco Group under any such arrangement, agreement, licence, permit, lease or instrument or the interests or business of any member of the Wider K3 Group or any member of the Wider Bidco Group in or with any other person or body or firm or company (or any agreement or arrangement relating to any such interests or business) being or becoming capable of being terminated or adversely modified or affected, or any onerous obligation or liability arising or any adverse action being taken thereunder;

(vii) any member of the Wider K3 Group ceasing to be able to carry on business under any name under which it presently carries on business;

(viii) the value of, or the financial or trading position or prospects of, any member of the Wider K3 Group being adversely affected; or

(ix) the creation or acceleration of any liability (actual or contingent) by any member of the Wider K3 Group (including any tax liability or any obligation to obtain or acquire any Authorisation, notice, waiver, concession, agreement or exemption from any Third Party or any person) other than trade creditors or other liabilities incurred in the ordinary course of business,

and no event having occurred which, under any provision of any arrangement, agreement, licence, permit, franchise, lease or other instrument to which any member of the Wider K3 Group is a party or by or to which any such member or any of its assets are bound, entitled or subject, would or might reasonably be expected to result in any of the events or circumstances as are referred to in Conditions (e)(i) to (ix);

Certain events occurring since 31 May 2022

(f) except as Disclosed, no member of the Wider K3 Group having since 31 May 2022:

(i) except for shares issued pursuant to existing awards under the K3 Share Plans and save as between K3 and wholly-owned subsidiaries of K3, issued or agreed to issue or authorised or proposed or announced its intention to authorise or propose the issue, of additional shares of any class, or securities or securities convertible into, or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares, securities or convertible securities or transferred or sold or agreed to transfer or sell or authorised or proposed the transfer or sale of K3 Shares out of treasury;

(ii) recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution (whether payable in cash or otherwise) other than dividends (or other distributions whether payable in cash or otherwise) lawfully paid or made by any wholly-owned subsidiary of K3 to K3 or any of its wholly-owned subsidiaries;

(iii) other than pursuant to the Acquisition (and except for transactions between K3 and its wholly-owned subsidiaries or between the wholly-owned subsidiaries of K3 and transactions in the ordinary course of business) implemented, effected, authorised or proposed or announced its intention to implement, effect, authorise or propose any material merger, demerger, reconstruction, amalgamation, scheme, commitment or acquisition or disposal of assets or shares or loan capital (or the equivalent thereof) in any undertaking or undertakings otherwise than in the ordinary course of business;

(iv) (except for transactions between K3 and its wholly-owned subsidiaries or between the wholly-owned subsidiaries of K3 and except for transactions in the ordinary course of business) disposed of, or transferred, mortgaged or created any security interest over any material asset or any right, title or interest in any material asset or authorised, proposed or announced any intention to do so, in each case other than in the ordinary course of business and to an extent which is or would be material in the context of the Wider K3 Group taken as a whole;

(v) (except for transactions between K3 and its wholly-owned subsidiaries or between the wholly-owned subsidiaries of K3) issued, authorised or proposed or announced an intention to authorise or propose, the issue of or made any change in or to the terms of any debentures or become subject to any contingent liability or incurred or increased any indebtedness, in each case other than in the ordinary course of business and to an extent which is or would be material in the context of the Wider K3 Group taken as a whole;

(vi) entered into or varied or authorised, proposed or announced its intention to enter into or vary any contract, arrangement, agreement, transaction or commitment (whether in respect of capital expenditure or otherwise) except in the ordinary course of business which is of a long term, unusual or onerous nature or magnitude or which is or which involves or could involve an obligation of a nature or magnitude, in each case to an extent which is material in the context of the Wider K3 Group taken as a whole;

(vii) entered into any contract, transaction or arrangement which would be restrictive on the business of any member of the Wider K3 Group or the Wider Bidco Group other than of a nature and extent which is normal in the context of the business concerned;

(viii) entered into or varied in a material way the terms of, or made any offer (which remains open for acceptance) to enter into or vary to a material extent the terms of, any contract, service agreement, commitment or arrangement with any director or senior executive of any member of the Wider K3 Group;

(ix) save as agreed with Bidco, proposed, agreed to provide or modified the terms of any of the K3 Share Plans;

(x) proposed, agreed to provide or modified the terms of any other share option scheme, incentive scheme or other benefit constituting a material change relating to the employment or termination of employment of a material category of persons employed by the Wider K3 Group or which constitutes a material change to the terms or conditions of employment of any senior employee of the Wider K3 Group, save as agreed by the Panel (if required) and by Bidco, or entered into or changed the terms of any contract with any director or senior executive;

(xi) purchased, redeemed or repaid or announced any proposal to purchase, redeem or repay any of its own shares or other securities or reduced or, except in respect of the matters mentioned in sub-paragraph (i) above, made any other change to any part of its share capital;

(xii) (except in the ordinary course of business) waived, compromised or settled any claim which is material in the context of the Wider K3 Group taken as a whole;

(xiii) terminated or varied the terms of any agreement or arrangement between any member of the Wider K3 Group and any other person in a manner which would or might reasonably be expected to have a material adverse effect on the financial position of the Wider K3 Group taken as a whole;

(xiv)  (save for the amendments contained in the Amended K3 Articles and except as disclosed on publicly available registers) made any alteration to its memorandum or articles of association or other incorporation documents;

(xv) made or agreed or consented to any material change to:

(A) the terms of the trust deeds and rules constituting the pension scheme(s) established by any member of the Wider K3 Group for its directors, employees or their dependants;

(B) the contributions payable to any such scheme(s) or to the benefits which accrue, or to the pensions which are payable, thereunder;

(C) the basis on which qualification for, or accrual or entitlement to, such benefits or pensions are calculated or determined; or

(D) the basis upon which the liabilities (including pensions) of such pension schemes are funded, valued, made, agreed or consented to;

(xvi)  been unable, or admitted in writing that it is unable, to pay its debts or commenced negotiations with one or more of its creditors with a view to rescheduling or restructuring any of its indebtedness, or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business;

(xvii) (other than in respect of a member of the Wider K3 Group which is dormant and was solvent at the relevant time) taken or proposed any steps or corporate action or had any legal proceedings instituted or threatened against it in relation to the suspension of payments, a moratorium of any indebtedness, its winding-up (voluntary or otherwise), dissolution, reorganisation or for the appointment of a receiver, administrator, manager, administrative receiver, trustee or similar officer of all or any of its assets or revenues or any analogous or equivalent steps or proceedings in any jurisdiction or appointed any analogous person in any jurisdiction or had any such person appointed;

(xviii) entered into, implemented or authorised the entry into, any joint venture, asset or profit sharing arrangement, partnership or merger of business or corporate entities;

(xix)  taken (or agreed or proposed to take) any action which requires, or would require, the consent of the Panel or the approval of K3 Shareholders in general meeting in accordance with, or as contemplated by, Rule 21.2 of the Code; or

(xx) entered into any agreement, arrangement, commitment or contract or passed any resolution or made any offer (which remains open for acceptance) with respect to or announced an intention to, or to propose to, effect any of the transactions, matters or events referred to in this Condition (f);

No adverse change, litigation, regulatory enquiry or similar

(g) except as Disclosed, since 31 May 2022:

(i) there having been no adverse change, and no circumstance having arisen which would or might be expected to result in any adverse change, in the business, assets, financial or trading position or profits or prospects or operational performance of any member of the Wider K3 Group which is material in the context of the Wider K3 Group taken as a whole and no circumstances have arisen which would or might reasonably be expected to result in such adverse change or deterioration;

(ii) no litigation, arbitration proceedings, prosecution or other legal proceedings having been threatened, announced or instituted by or against or remaining outstanding against or in respect of, any member of the Wider K3 Group or to which any member of the Wider K3 Group is or may become a party (whether as claimant, defendant or otherwise), in each case which has had or might reasonably be expected to have a material adverse effect on the Wider K3 Group taken as a whole or which is material in the context of the Acquisition;

(iii) no enquiry, review or investigation by, or complaint or reference to, any Third Party against or in respect of any member of the Wider K3 Group having been threatened, announced or instituted or remaining outstanding by, against or in respect of any member of the Wider K3 Group, in each case which has had or might reasonably be expected to have a material adverse effect on the Wider K3 Group taken as a whole or in the context of the Acquisition;

(iv) no contingent or other liability having arisen or become apparent to Bidco or increased which has had or might reasonably be expected to have an adverse effect on the Wider K3 Group taken as a whole or in the context of the Acquisition;

(v) no member of the Wider K3 Group having conducted its business in breach of any applicable laws and regulations and which is material in the context of the Wider K3 Group as a whole or material in the context of the Acquisition; and

(vi) no steps having been taken and no omissions having been made which are reasonably likely to result in the withdrawal, cancellation, termination or modification of any licence held by any member of the Wider K3 Group which is necessary for the proper carrying on of its business and the withdrawal, cancellation, termination or modification of which has had, or might reasonably be expected to have, a material adverse effect on the Wider K3 Group taken as a whole or in the context of the Acquisition;

No discovery of certain matters

(h) except as Disclosed, Bidco not having discovered:

(i) that any financial, business or other information concerning the Wider K3 Group publicly announced prior to the Announcement Date or disclosed at any time to any member of the Wider Bidco Group by or on behalf of any member of the Wider K3 Group prior to the Announcement Date is misleading, contains a material misrepresentation of any fact, or omits to state a fact necessary to make that information not misleading, in any such case to an extent which is material in the context of the Wider K3 Group taken as a whole or in the context of the Acquisition;

(ii) that any member of the Wider K3 Group or any partnership, company or other entity in which any member of the Wider K3 Group has a significant economic interest and which is not a subsidiary undertaking of K3 is, otherwise than in the ordinary course of business, subject to any liability, contingent or otherwise, which is material in the context of the Wider K3 Group taken as a whole;

(iii) any information which affects the import of any information disclosed at any time by or on behalf of any member of the Wider K3 Group and which is material in the context of the Wider K3 Group taken as a whole;

(iv) that any past or present member of the Wider K3 Group has failed to comply with any and/or all applicable legislation or regulation, of any jurisdiction with regard to the use, treatment, handling, storage, carriage, disposal, spillage, release, discharge, leak or emission of any waste or hazardous substance or any substance likely to impair the environment or harm human health or animal health or otherwise relating to environmental matters or the health and safety of humans, or that there has otherwise been any such use, treatment, handling, storage, carriage, disposal, spillage, release, discharge, leak or emission (whether or not the same constituted a non-compliance by any person with any such legislation or regulations, and wherever the same may have taken place) any of which storage, carriage, disposal, spillage, release, discharge, leak or emission would be likely to give rise to any liability (actual or contingent) or cost on the part of any member of the Wider K3 Group and which is material in the context of the Wider K3 Group taken as a whole;

(v) that there is, or is likely to be, for any reason whatsoever, any liability (actual or contingent) of any past or present member of the Wider K3 Group to make good, remediate, repair, reinstate or clean up any property or any controlled waters now or previously owned, occupied, operated or made use of or controlled by any such past or present member of the Wider K3 Group (or on its behalf) or by any person for which a member of the Wider K3 Group is or has been responsible, or in which any such member may have or previously have had or be deemed to have had an interest, under any environmental legislation, common law, regulation, notice, circular, Authorisation or order of any Third Party and which is material in the context of the Wider K3 Group taken as a whole or in the context of the Acquisition; or

(vi) that circumstances exist (whether as a result of announcing or completing the Acquisition or otherwise) which would be reasonably likely to lead to any Third Party instituting, or whereby any member of the Wider Bidco Group or any present or past member of the Wider K3 Group would be likely to be required to institute, an environmental audit or take any other steps which would in any such case be reasonably likely to result in any liability (whether actual or contingent) to improve, modify existing or install new plant, machinery or equipment or carry out changes in the processes currently carried out or make good, remediate, repair, re-instate or clean up any land or other asset currently or previously owned, occupied or made use of by any past or present member of the Wider K3 Group (or on its behalf) or by any person for which a member of the Wider K3 Group is or has been responsible, or in which any such member may have or previously have had or be deemed to have had an interest which is material in the context of the Wider K3 Group taken as a whole or in the context of the Acquisition; or

(vii) circumstances exist whereby a person or class of persons would be likely to have any claim or claims in respect of any product or process of manufacture or materials used therein currently or previously manufactured, sold or carried out by any past or present member of the Wider K3 Group which claim or claims would be likely to affect adversely any member of the Wider K3 Group and which is material in the context of the Wider K3 Group taken as a whole or in the context of the Acquisition; and

Anti-corruption, sanctions and criminal property

(i) except as Disclosed, Bidco not having discovered that:

(i) any past or present member, director, officer or employee of the Wider K3 Group is or has at any time engaged in any activity, practice or conduct which would constitute an offence under the Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977 or any other applicable anti-corruption or anti-bribery law, rule or regulation or any other applicable law, rule, or regulation concerning improper payments or kickbacks or (B) any person that performs or has performed services for or on behalf of the Wider K3 Group is or has at any time engaged in any activity, practice or conduct in connection with the performance of such services which would constitute an offence under the Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977 or any other applicable anti-corruption or anti-bribery law, rule or regulation or any other applicable law, rule, or regulation concerning improper payments or kickbacks; or

(ii) any asset of any member of the Wider K3 Group constitutes criminal property as defined by section 340(3) of the Proceeds of Crime Act 2002 (but disregarding paragraph (b) of that definition) or proceeds of crime under any other applicable law, rule or regulation concerning money laundering or proceeds of crime or any member of the Wider K3 Group is found to have engaged in activities constituting money laundering under any applicable law, rule or regulation concerning money laundering; or

(iii) any past or present member, director, officer or employee of the Wider K3 Group, or any other person for whom any such person may be liable or responsible, is or has engaged in any conduct which would violate applicable economic sanctions or dealt with, made any investments in, made any funds or assets available to or received any funds or assets from:

(A) any government, entity or individual in respect of which US, UK or European Union persons, or persons operating in those territories, are prohibited from engaging in activities or doing business, or from receiving or making available funds or economic resources, by US, UK or European Union laws or regulations, including the economic sanctions administered by the United States Office of Foreign Assets Control or HM Treasury; or

(B) any government, entity or individual targeted by any of the economic sanctions of the United Nations, the United States, the United Kingdom, the European Union or any of its member states, save that this shall not apply if and to the extent that it is or would be unenforceable by reason of breach of any applicable blocking law; or

(iv) any past or present member, director, officer or employee of the Wider K3 Group, or any other person for whom any such person may be liable or responsible:

(A) has engaged in conduct which would violate any relevant anti-terrorism laws, rules or regulations;

(B) has engaged in conduct which would violate any relevant anti-boycott law, rule, or regulation or any applicable export controls, including but not limited to the Export Administration Regulations administered and enforced by the U.S. Department of Commerce or the International Traffic in Arms Regulations administered and enforced by the U.S. Department of State;

(C) has engaged in conduct which would violate any relevant laws, rules, or regulations concerning human rights, including but not limited to any law, rule, or regulation concerning false imprisonment, torture or other cruel and unusual punishment, or child labour; or

(D) is debarred or otherwise rendered ineligible to bid for or to perform contracts for or with any government, governmental instrumentality, or international organisation or found to have violated any applicable law, rule or regulation concerning government contracting or public procurement; or

(v) any member of the Wider K3 Group is or has been engaged in any transaction which would cause Bidco to be in breach of any law or regulation upon its acquisition of K3, including but not limited to the economic sanctions of the United States Office of Foreign Assets Control, HM Treasury or any other relevant government authority.

Part B: Certain further terms of the Acquisition

1 Bidco reserves the right in its sole discretion to waive:

(a) the deadlines set out in Condition 2 for the timing of the Court Meeting, General Meeting and/or the Scheme Court Hearing. If any such deadline is not met, Bidco will make an announcement by 8.00 a.m. on the Business Day following such deadline confirming whether it has invoked or waived the relevant Condition or agreed with K3 to extend the deadline in relation to the relevant Condition; and

(b) in whole or in part, all or any of the Conditions set out in paragraph 3 of Part A of this Appendix I.

2 Except as set out in paragraph 1(a) above the Conditions in paragraphs 1 and 2 of Part A of this Appendix I may not be waived.

3 Bidco will be under no obligation to waive (if capable of waiver), to determine to be or remain satisfied or to treat as fulfilled any of the Conditions set out in paragraph 3 of Part A of this Appendix I (inclusive) by a date earlier than the latest date for the fulfilment or waiver of that Condition specified above, notwithstanding that the other Conditions may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such Conditions may not be capable of fulfilment.

4 Under Rule 13.5(a) of the Code, Bidco may not invoke a Condition so as to cause the Acquisition not to proceed, to lapse or to be withdrawn unless the circumstances which give rise to the right to invoke the Condition are of material significance to Bidco in the context of the Acquisition. Bidco may only invoke a Condition that is subject to Rule 13.5(a) with the consent of the Panel and any Condition that is subject to Rule 13.5(a) may be waived by Bidco. Conditions 1 and 2 of Part A of this Appendix I are not subject to this provision of the Code.

5 Each of the Conditions is to be regarded as a separate Condition and shall not be limited by reference to any other Condition.

6 The K3 Shares acquired under the Acquisition will be acquired fully paid and free from all liens, equities, charges, encumbrances, options, rights of pre-emption and any other third party rights and interests of any nature and together with all rights now or hereafter attaching or accruing to them, including, without limitation, voting rights and the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid, or any other return of value (whether by reduction of share capital or share premium account or otherwise) made on or after the Announcement Date and before the Effective Date.

7 If, on or after the Announcement Date and prior to or on the Effective Date, any dividend, distribution or other return of value is declared, paid or made or becomes payable by K3 with a record date prior to or on the Effective Date, Bidco reserves the right (without prejudice to any right of Bidco, with the consent of the Panel, to invoke the Condition set out in paragraph 3(f)(ii) of Part A of this Appendix I)) to reduce the consideration payable under the Acquisition to reflect the aggregate amount of such dividend, distribution or other return of value. In such circumstances, K3 Shareholders would be entitled to receive and retain any such dividend, distribution or other return of value declared, made or paid.

If and to the extent that any such dividend, distribution or other return of value is paid or made on or prior to the Effective Date and Bidco exercises its rights under this paragraph 7 to reduce the consideration payable under the Acquisition, any reference in this Announcement to the consideration payable under the terms of the Acquisition will be deemed to be a reference to the consideration as so reduced.

If and to the extent that any such dividend, distribution or other return of value has been declared or announced but not paid or made or is not payable by reference to a record date on or prior to the Effective Date or will be (i) transferred pursuant to the Acquisition on a basis which entitles Bidco to receive the dividend, distribution or other return of value and to retain it; or (ii) cancelled, the consideration payable under the terms of the Acquisition will not be subject to change in accordance with this paragraph 7.

Any exercise by Bidco of its rights referred to in this paragraph 7 will be the subject of an announcement and, for the avoidance of doubt, shall not be regarded as constituting any revision or variation of the Acquisition.

8 Bidco reserves the right to elect (with the consent of the Panel, and subject to the terms of the Co-operation Agreement) to implement the Acquisition by way of a Takeover Offer for the K3 Shares as an alternative to the Scheme. In such event, the Takeover Offer will be implemented on the same terms and conditions, so far as applicable, and subject to the terms of the Co-operation Agreement, as those which would apply to the Scheme, subject to appropriate amendments, including an acceptance condition set at 90 per cent. (or such lesser number as Bidco may decide and the Panel may permit) of the K3 Shares to which such Takeover Offer relates.

9 If Bidco is required by the Panel to make an offer for K3 Shares under the provisions of Rule 9 of the Code, Bidco may make such alterations to any of the Conditions and terms of the Acquisition as are necessary to comply with the provisions of that Rule.

10 The availability of the Acquisition to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Persons who are not resident in the United Kingdom should inform themselves about and observe any applicable requirements.

11 The Acquisition is not being made, directly or indirectly, in, into or from, or by use of the mails of, or by any means of instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of, any jurisdiction where to do so would violate the laws of that jurisdiction.

12 The Acquisition is governed by the laws of England and Wales and is subject to the jurisdiction of the English courts and to the Conditions and further terms set out in this Appendix I. The Acquisition is subject to the applicable requirements of the Code, the Panel and the London Stock Exchange.

APPENDIX II

SOURCES OF INFORMATION AND BASES OF CALCULATION

1 The existing issued share capital of K3 is 73,503,464 K3 Shares.

2 The value of the Acquisition on a fully diluted basis has been calculated on the basis of 73,503,464 K3 Shares in issue on 14 December 2022 (being the last Business Day prior to the date of this Announcement) and an additional 4,123,356 K3 Shares that may be issued pursuant to the K3 Share Plans. This additional number of K3 Shares has been calculated on the basis of the maximum number of K3 Shares that may be issued under the K3 Share Plans assuming that the Effective Date occurs prior to the end of February 2023.

3 The Closing Prices referred to in this Announcement are taken from the AIM Appendix to the Daily Official List of the London Stock Exchange.

4 Volume-weighted average prices have been derived from Bloomberg and have been rounded to the nearest single decimal place.

5 The total shareholder return since K3's initial public offering of 294.1% includes the reinvestment of all dividends and is taken from Bloomberg on 7 December 2022 (the last Business Day prior to the commencement of the Offer Period).

6 The implied enterprise value of 13.1 times FY22 adjusted EBITDA referred to in this Announcement is calculated based on:

(i) an enterprise value of £267.2 million, comprising:

(A) a fully diluted equity value of £271.7 million based on the issued and to be issued share capital of K3; minus

(B) £7.8 million net cash as at FY22 on a post IFRS 16 basis; plus

(C) £3.3 million initial cash consideration paid for the acquisition of Chamberlain & Co.; and

(ii) £20.4 million FY22 adjusted EBITDA.

7 The £8.9 million FY22 dividend comprises of:

(i) £2.9 million FY22 Interim Dividend payment; plus

(ii) £6.0 million FY22 Final Dividend payment.

8 Unless otherwise stated, the financial information relating to K3 is extracted or derived (without material adjustment) from the audited consolidated financial statements of K3 for the financial year ended 31 May 2022.

APPENDIX III

DETAILS OF IRREVOCABLE UNDERTAKINGS AND LETTERS OF INTENT FROM INDEPENDENT K3 SHAREHOLDERS

Irrevocable Undertakings given by Independent Directors, certain members of their immediate families and related trusts

The Independent Directors, certain members of their immediate families and related trusts as described above, have given irrevocable undertakings to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting or, in the event the Acquisition is effected by way of a Takeover Offer, to accept or procure the acceptance of the Takeover Offer in accordance with the procedure set out in the relevant offer document containing such Takeover Offer.

These irrevocable undertakings cease to be binding: (i) where the Acquisition is to be implemented by way of the Scheme, if the Scheme does not become effective on or before the Long Stop Date, provided that the reason is not because Bidco has elected to proceed by way of a Takeover Offer, rather than the Scheme; (ii) where the Acquisition is to be implemented by way of a Takeover Offer, if the relevant offer document is not despatched to K3 Shareholders on or before the date falling 28 days after the date of the firm announcement of such Takeover Offer or such later time as may be agreed by the Panel; (iii) if the Acquisition, whether to be implemented as a Scheme or a Takeover Offer, lapses or is withdrawn and Bidco announces that it does not intend to proceed with the Acquisition; (iv) if the Acquisition, whether to be implemented as a Scheme or a Takeover Offer, lapses or is withdrawn (which for the avoidance of doubt does not include any suspension of the timetable applicable to any Scheme) and no new, revised or replacement Scheme or Takeover Offer has been announced by Bidco, in accordance with the Code, within 10 Business Days of such lapsing or withdrawal; or (v) if (x) any other scheme of arrangement under Part 26 or Part 26A of the Companies Act in respect of K3 becomes effective in accordance with its terms; or (y) any other offer made for the entire ordinary share capital of K3 becomes or is declared unconditional.

Subject to the above, the terms of the irrevocable undertakings from each of the Independent Directors, certain members of their immediate families and related trusts as described above, will continue to be binding in the event a higher competing offer is made for K3.

Irrevocable Undertakings given by other Independent K3 Shareholders

*Connected with a Management Holder

These Independent K3 Shareholders have each given an irrevocable undertaking to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting, or, in the event the Acquisition is effected by way of a Takeover Offer, to accept or procure the acceptance of the Takeover Offer in accordance with the procedure set out in the relevant offer document containing such Takeover Offer. The Independent K3 Shareholders identified above as connected with Management Holders are not eligible to vote on the Rule 16 Resolution.

The terms of the irrevocable undertaking given by AXA Investment Managers on behalf of its clients permits it to accept or vote in favour of a higher competing offer made prior to the Scheme becoming effective or, if the Acquisition is to be implemented as a Takeover Offer, prior to such Takeover Offer becoming unconditional, if any person other than Bidco or a person acting in concert with Bidco announces a firm intention to make an offer to acquire K3 which is not subject to pre-conditions(a "Competing Offer"), provided that (i) such Competing Offer is at a price of at least 385 pence for each K3 Share; and (ii) Bidco has not announced a firm intention to make a revised offer which is not subject to any pre-conditions, the value of which is at least equivalent to that available under such Competing Offer by 5 p.m. on the tenth Business Day after the date of the announcement of the Competing Offer.

The irrevocable undertaking given by AXA Investment Managers on behalf of its clients will cease to be binding in the event that it accepts or votes in favour of a Competing Offer in the permitted circumstances described above. The undertaking given by AXA Investment Managers on behalf of its clients is subject to any amendment or termination of its authority, or to instruction to the contrary by its underlying clients or customers pursuant to the relevant investment management agreements (or equivalent) entered into by AXA Investment Managers (or any of its affiliates) with them.

Save as noted above in relation to the irrevocable undertaking given by AXA Investment Managers on behalf of its clients, the Independent K3 Shareholders' irrevocable undertakings cease to be binding in the same circumstances as the irrevocable undertakings given by the Independent Directors.

Non-binding letters of intent

Under the letter of intent issued to Bidco by Canaccord Genuity (an Independent K3 Shareholder holding, in aggregate, 2,680,915 K3 Shares), Canaccord Genuity states its non-binding intention to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting (including the Rule 16 Resolution).

APPENDIX IV

FURTHER DETAILS ON THE ROLLOVER ARRANGEMENTS

The Rollover Deed

The Rollover Deed sets out the terms on which the Management Holders have agreed to sell to Bidco substantially all of the K3 Shares they hold (or which they will acquire as a result of the exercise of LTIP Options or upon the exchange of Growth Shares) in exchange for cash and Bidco Rollover Notes.

The Management Holders have agreed (amongst other things):

· to vote in favour of the resolutions to be proposed at the General Meeting (other than the Rule 16 Resolution); and

· not to accept or vote in favour of any offer or other transaction made in competition with or which might otherwise frustrate the Acquisition,

in respect of their beneficial holdings of K3 Shares amounting, in aggregate, to 22,336,422 K3 Shares and representing approximately 30.4 per cent. of the issued share capital of K3.

The Rollover Deed will terminate if the Scheme or any Takeover Offer lapses or is withdrawn and (if permitted by the Code or the Panel) Bidco does not announce within ten Business Days thereafter that it intends to switch to a Takeover Offer (or a Scheme, as applicable).

Put and Call Option Agreement

The Management Holders will enter into a Put and Call Option Agreement with Bidco, Holdco and Topco, which will provide for the exchange of their Bidco Rollover Notes for Holdco Rollover Notes, followed by the exchange of their Holdco Rollover Notes in consideration for the issue of securities in Topco.

The Topco Securities to be issued to the Management Holders under the Put and Call Option Agreement will be held subject to the terms set out in the Rollover Deed.

Topco Securities

The Rollover Deed sets out the principal terms on which the Management Holders and NIH VIII Shin Holdings S.à r.l., an affiliate of Sun VIII, (such affiliate being, the "Sun Shareholder") will hold Topco Securities following completion of the arrangements provided for in the Put and Call Option Agreement. The detailed terms relating to the holding of Topco Securities are yet to be agreed.

The Sun Shareholder will hold A ordinary shares in Topco, whilst the Management Holders will hold B ordinary shares in Topco. The Topco A ordinary shares and B ordinary shares will rank pari passu based on relative total sums invested (or deemed invested) in Topco, although the B ordinary shares will not carry voting rights. The Management Holders will hold Topco B ordinary shares and loan notes in the same proportions as the Sun Shareholder holds Topco A ordinary shares and loan notes.

The Management Holders will have the right to subscribe pro rata to their relative total invested amounts on the same terms as the Sun Shareholder on any new issues of Topco Securities for cash (other than under the terms of any management incentive plan that is put in place after the Effective Date).

On a sale of Topco Securities by the Sun Shareholder, the Management Holders will benefit from tag-along rights, enabling them to sell the same pro rata proportion of their Topco Securities as are sold by Sun Shareholder.

The Topco Securities held by the Management Holders will be subject to a drag-along right, whereby the Sun Shareholder can require each Management Holder to sell all of their Topco Securities where the Sun Shareholder proposes to sell all or substantially all of its Topco Securities on arm's length terms to a bona fide unconnected offeror.

The Topco Securities issued pursuant to the Rollover Deed are not subject to any leaver provisions.

APPENDIX V

DEFINITIONS

The following definitions apply throughout this Announcement unless the context requires otherwise:

For the purposes of this Announcement, "subsidiary", "subsidiary undertaking" and "undertaking" have the respective meanings given thereto by the Companies Act and "associated undertaking" has the meaning given by paragraph 19 of Schedule 6 to the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, other than paragraph 19(1)(b) of Schedule 6 to those regulations which shall be excluded for this purpose.

All references to "pounds", "pounds Sterling", "Sterling", "GBP", "£", "pence", "penny" and "p" are to the lawful currency of the United Kingdom.

All the times referred to in this Announcement are London times unless otherwise stated. References to the singular include the plural and vice versa.