TIDMRBGP
RNS Number : 3639M
Rosenblatt Group PLC
16 September 2019
16 September 2019
Rosenblatt Group plc
("Rosenblatt", the "Company" or the "Group")
Acquisition of Convex Capital Limited
Highlights:
-- Convex Capital Limited ("Convex") is a specialist sell-side
corporate finance boutique, based in Manchester, UK
-- The acquisition is in line with the Group's strategy to diversify
the Company beyond legal services and to create opportunities
for cross-referral of business
-- The total consideration for the acquisition, assuming all
earn-out and deferred consideration payments are made, is
GBP22 million
-- The Board expects the transaction to be immediately, and materially,
earnings and value-enhancing for the Group
-- In line with the Board's approach to acquisitions, the majority
of the consideration is to be paid in shares, with a maximum
of 40% to be paid in cash from existing resources. A significant
proportion of the consideration is deferred on the completion
of an earn-out
-- All shares to be issued at a premium to the closing price
on 13 September 2019
-- Key management and employees of Convex have agreed to a long-term
lock-in for shares and lengthy non-compete clauses
-- The acquisition of Convex is expected to help generate a regular
flow of fee-based work for Rosenblatt's Corporate division,
which is focused on commercial transactions
-- To reflect the evolving nature of the Group, to a broader
supplier of professional services, the name of the Company
will be changed to RBG Holdings plc
Rosenblatt Group plc, the professional services group, has today
announced the acquisition of Convex Capital Limited, a specialist
sell-side M&A corporate finance boutique, based in Manchester,
UK. The acquisition is in line with the Group's M&A strategy.
This strategy aims to diversify the Company beyond legal services,
focusing on high-margin professional services companies like
Convex, which will also create opportunities for the cross-referral
of business.
About Convex
Convex is entirely focussed on helping companies, particularly
owner-managed and entrepreneurial businesses, realise their value
through sales to large corporates. Convex identifies and
proactively targets firms that it believes represent attractive
acquisition opportunities.
The Board expects the transaction to be immediately, and
materially, earnings and value-enhancing for the Group. For the
financial year ended[1] 30 June 2019, Convex generated revenues of
GBP8.7 million and profit before tax of GBP4.3 million. As of 30
June 2019, Convex had net assets of GBP3.7 million and no net debt.
Convex was owned by its directors. All directors and employees of
Convex are remaining with the business.
Like Rosenblatt, Convex is an entrepreneurial, high-margin and
cash generative business in the professional services sector, with
a strong network of clients and partners across the UK and Europe.
Convex was established in 2011 by Chairman, Mike Driver. It has
completed in excess of GBP1 billion in transactions over the last
four years and completed 13 deals in the last year alone with
EBITDA margins of more than 50 per cent.
The strategic impact of the acquisition
The acquisition of Convex is expected to help generate a regular
flow of fee-based work for Rosenblatt's corporate division, which
is focused on commercial transactions. The Group believes that by
working closely together, there will be an opportunity to
cross-sell services to the client bases of both companies.
Rosenblatt also intends to use Convex's Manchester base to
create a new regional business hub. The Group will market its
expanded professional services offering from the hub, which will
also create the opportunity for further cost savings on back-office
functions.
Financial terms of the transaction
The acquisition has been structured in accordance with the
Board's M&A strategy. This strategy means that the majority of
the consideration is to be paid in shares, with a maximum of 40% to
be paid in cash. A significant proportion of the consideration is
deferred, to lock in the new business and the talent being
acquired. This approach is designed to ensure the value of the
acquisition is protected and so that the management of Convex are
appropriately incentivised to deliver returns for Rosenblatt
shareholders as well as themselves.
The total consideration for the acquisition, assuming all
earn-out and deferred consideration payments are made, is GBP22
million. The consideration is structured as follows:
-- An initial consideration, payable on completion of GBP13.6
million. Of this GBP13.6 million, GBP7 million will be paid
in cash from the Company's existing resources and GBP6.6 million
will be satisfied by the issue of 5.5 million new Rosenblatt
shares (the "Initial Consideration Shares") based on an issue
price of 120 pence per share (a premium of 35.6% to the closing
price on 13 September 2019).
-- A deferred consideration, payable after one year, of GBP8.4
million. Of this GBP8.4 million, GBP1.8m million will be paid
in cash, and GBP6.6 million will be satisfied by the issue
of 4.7 million new Rosenblatt shares (the "Deferred Consideration
Shares"), at a minimum price of 140 pence per share (a premium
of 58.2% to the closing price on 13 September 2019) or, if
higher, the market value of the shares at the time. The Deferred
Consideration Shares will only be issued if Convex exceeds
a threshold EBITDA of GBP6 million for the period from 16
September 2019 to 16 September 2020.
Key management and employees of Convex have agreed to a
long-term lock-in for Rosenblatt shares and agreed to non-compete
clauses. The Initial Consideration Shares and the Deferred
Consideration Shares will be subject to a lock-in of three years
from their respective issuance dates. Application will be made for
the Initial Consideration Shares to be admitted to trading on AIM.
Admission of the Initial Consideration Shares is expected to be on
20 September 2019.
Management and employees of Convex will also join the Rosenblatt
performance bonus scheme to ensure close alignment with the
interests of shareholders.
Name Change
To reflect the evolving nature of the Group, from primarily a
provider of legal services to a broader supplier of professional
services, the Board has changed the name of the Company to RBG
Holdings plc. This change is expected to become effective on the
London Stock Exchange from 8 a.m. on 17 September 2019. There is no
change to the stock market ticker (AIM: RBGP), the Group's ISIN
(GB00BFM6WL52) or SEDOL (BFM6WL5).
Following the acquisition, the Group will comprise a number of
subsidiaries including the law firm, Rosenblatt Limited, Convex
Capital Limited, and the Group's litigation finance arm.
Current Trading
The Group will be announcing its interim results for the six
months ended 30 June 2019 on Wednesday 25 September 2019. The Board
can confirm trading remains in line with the update published on 1
August 2019.
Nicola Foulston, CEO, Rosenblatt, said: "Convex is an exciting
and successful business, which shares with Rosenblatt a focus on
high-margins and cash generation. Like Rosenblatt, it is an
entrepreneurial company with a proven ability to create markets
where none have existed. We also share a similar client base, often
working with entrepreneurs. We have had the pleasure of working
with Mike and the Convex team over several years and know there is
a strong cultural fit between the two organisations. There is a
considerable market opportunity in terms of cross-referrals of
business between Rosenblatt and Convex, as well as the opportunity
to expand our regional presence."
Mike Driver, Chairman, Convex, said: "The combination of Convex
and Rosenblatt is a fantastic opportunity to drive the development
of both companies. Like ourselves, Rosenblatt builds strong
relationships with entrepreneurs and business founders. Working
closely with Nicky and her team will expand our network to help
identify future transaction opportunities. We can also increase the
support that we can offer clients to ensure a successful deal. We
are very excited about the future opportunities that this agreement
will bring."
Enquiries:
Rosenblatt Group plc Via Newgate Communications
Nicola Foulston, CEO
Stifel (Nominated Adviser and Broker) Tel: +44 (0)20 7710
7600
Gareth Hunt
Stewart Wallace (QE)
Tom Marsh
Newgate Communications (for media enquiries) Tel: +44 (0)20 3757
Robin Tozer/Fiona Norman 6880; rosenblatt@newgatecomms.com
About Rosenblatt Group plc
Rosenblatt Group plc is a professional services group, which
includes one of the UK's leading dispute resolution practices. It
provides a range of legal services to its diversified client base,
which includes companies, banks, entrepreneurs and individuals.
Complementing this is the Group's increasingly international
footprint, advising on complex cross-jurisdictional matters in
China, Israel, America and India. Rosenblatt's practice areas
include dispute resolution, corporate, banking and finance,
insolvency and financial restructuring, construction and projects,
employment, financial services, IP/technology/media, real estate,
regulatory and tax resolution.
[1] Represents the eleven months from when Convex converted from
a partnership to a limited company - 1 August 2018 to 30 June
2019
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END
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