REG - DSW Capital PLC - Acquisition, Issue of Equity, RCF, and TVR

DSW CapitalAnnouncement

04/11/2024 07:00

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RNS Number : 7148K  DSW Capital PLC  04 November 2024

 

4 November 2024

DSW CAPITAL PLC

("DSW Capital", "DSW" or the "Company")

 

Acquisition of DR Solicitors Limited,

Issue of Equity,

Revolving Credit Facility,

and

Total Voting Rights

 

DSW Capital, a profitable, mid-market, challenger professional services
licence network and owner of the Dow Schofield Watts brand, is pleased to
announce that it has completed the significantly earnings-enhancing and
transformational acquisition of DR Solicitors Limited ("DR Solicitors" or
"DR") for a total consideration of £6.1 million (the "Acquisition").

 

Background to DR Solicitors

 

DR Solicitors is an award winning, nationally recognised law firm, which
provides services to GPs, consultants and other primary care providers in the
UK.  Established by ex-Magic Circle lawyer Daphne Robertson and Nils
Christiansen, DR operates on a platform model, employing eight staff at its
head office in Guildford and distributing work across a growing network of
consultant solicitors, which currently totals 18.

 

The healthcare sector is highly regulated, and DR Solicitors has a
well-established and strong brand reputation in its key markets, resulting in
high levels of repeat business and a loyal customer base.

 

In the financial year ended 31 March 2024, the business achieved organic
revenue growth of 11% to generate revenue of £3.1 million and profit before
tax of £1.2 million and, as at 31 March 2024, DR Solicitors had net assets of
£1.6 million.

 

Co-founders Daphne Robertson and Nils Christiansen (the "Vendors") will
continue to lead DR Solicitors post-Acquisition, collaborating with, and
supported by, DSW Capital's experienced senior management team.

 

Acquisition rationale

 

The Acquisition brings a highly scalable, cash generative, and profitable
Legal Platform to the Group.

 

Importantly, and in line with the Board's stated diversification strategy, the
Acquisition materially reduces the Group's reliance on the cyclical SME
M&A market from 68% of revenue to c.30%.

 

The cultural synergies between the two businesses are excellent, with DR
Solicitors' strong, proven and committed management team sharing DSW Capital's
vision and ambition.

 

DR Solicitors operates in the medical and dental markets, broadening the
Group's offering whilst enabling DSW Capital to continue to enjoy its strong
referral network in the other markets in which it operates.

 

The Acquisition is expected to be immediately and significantly
earnings-enhancing and it is the board's intention to maintain the Group's
progressive dividend policy.

 

Terms of the Acquisition

 

Under the terms of the Acquisition agreement, DSW Capital has paid a total
consideration of £6.1 million, satisfied by £4.3 million in cash and £1.8
million of new ordinary shares of £0.0025 each in DSW Capital ("Consideration
Shares"). The parent company of DR Solicitors is DR Services Holdings Limited
("DRSH" or the "Vendor"), a company registered in England & Wales, owned
and controlled by Daphne Robertson and Nils Christiansen. DRSH has entered
into a lock-in agreement with DSW, pursuant to which it will not dispose of
any of the Consideration Shares for a period of two years to 1 November 2026.

 

The cash consideration is being funded from the Group's cash reserves and a
new £3 million revolving credit facility (the "RCF"), further details of
which are set out below.

 

Summary of the RCF

 

DSW Capital entered into the RCF with OakNorth Bank plc on 31 October 2024.
The RCF is for an initial 3-year term until 31 October 2027. The facility is
for £3 million, and the Company has drawn down the full amount to help fund
the Acquisition. The RCF carries an interest rate of 4.5% above the Bank of
England base rate and is subject to standard leverage and interest cover
covenants.

 

Issue of the Consideration Shares and Total Voting Rights

 

Application will be made to the London Stock Exchange for the 3,204,748
Consideration Shares to be admitted to trading on AIM ("Admission"). It is
expected that Admission will take place at 8.00am on 5 November 2024.

 

The Consideration Shares will rank pari passu in all respects with the
existing ordinary shares of £0.0025 each in DSW Capital ("Ordinary Shares"),
including the right to receive all dividends declared, made or paid after
completion.

 

Following Admission, DSW Capital's total issued share capital will comprise
25,131,108 Ordinary Shares. This number may be used by shareholders in DSW
Capital as the denominator for the calculations by which they will determine
if they are required to notify their interest in, or a change to their
interest in, the share capital of DSW Capital under the FCA's Disclosure
Guidance and Transparency Rules.

 

Following Admission, DRSH will hold an interest in 3,204,748 Ordinary Shares
each, equal to approximately 12.75% of the enlarged issued share capital of
DSW.

 

James Dow, Chief Executive Officer of DSW Capital, said:

 

"This is a game changing acquisition, and we are delighted to announce it to
our stakeholders. Not only is it immediately and significantly
earnings-enhancing, but it also diversifies our revenues, building resilience,
and provides an opportunity to expand into new professional markets. Working
with DR's inspirational management team, we believe we can accelerate the
growth of the business using the strength of the Dow Schofield Watts brand,
and resources and, over time, build a substantial platform of diversified,
niche legal services.

 

"This is truly a meeting of minds. We are committed to supporting Daphne,
Nils, and the DR team in the holistic growth and development of the business
and welcome everyone warmly to Dow Schofield Watts."

 

Daphne Robertson, Founder and Senior Partner of DR Solicitors, added:

 

"We were one of the first legal firms to own a niche, one of the first to
develop a consultant based operating model, one of the first to embrace
alternative business structures, and now we are one of the first to integrate
into a truly multi-disciplinary professional services group.

 

"The entrepreneurial culture of DSW Capital is a strong fit with our own, and
this transaction will provide DR Solicitors with the scale and resources to
continue building on our successful operating model for the benefit of all our
clients. We are looking forward to this exciting next step, as we accelerate
the growth of both our firm and the wider DSW group."

 

Enquiries:

 

 DSW Capital                                                     Tel: +44 (0) 1928 378 100

 James Dow, CEO

 Shru Morris, Deputy CEO

 Pete Fendall, COO & Interim CFO

 Shore Capital (Nominated Adviser & Broker)                      Tel: +44 (0)20 7408 4090

 James Thomas/Mark Percy/Rachel Goldstein (Corporate Advisory)

 Guy Wiehahn / Isobel Jones (Corporate Broking)

 Rawlings Financial PR Limited                                   dswcapital@rfpr.co.uk

 Cat Valentine                                                   Tel: +44 (0) 7715 769 078

 

Notes to Editors 

 

About DSW Capital

 

DSW Capital, owner of the Dow Schofield Watts brand, is a profitable,
mid-market, challenger professional services network with a cash generative
business model and scalable platform for growth. Originally established in
2002, by three KPMG alumni, Dow Schofield Watts is one of the first platform
models disrupting the traditional model of accounting professional services
firms. DSW Capital operates licensing arrangements with its businesses and has
over 100 fee earners across 12 offices in the UK. These trade primarily under
the Dow Schofield Watts brand.

 

DSW Capital's vision is for Dow Schofield Watts to become the most
sought-after destination for ambitious, entrepreneurial professionals to start
and develop their own businesses. Through a licensing model, DSW Capital gives
professionals the autonomy and flexibility to fulfil their potential. Being
part of Dow Schofield Watts brings support benefits in recruitment, funding
and infrastructure. DSW Capital's challenger model attracts experienced,
senior professionals, predominantly with a "Big 4" accounting firm background,
who want to launch their own businesses and recognise the value of the Dow
Schofield Watts brand and the synergies which come from being part of the
network.

 

DSW Capital aims to scale its agile model through organic growth, geographical
expansion, additional service lines and investing in "Break Outs" (existing
teams in larger firms). The Directors are targeting high margin,
complementary, niche service lines with a strong synergistic fit with the
existing network.

 

DSW Capital investor website
(https://url.avanan.click/v2/___https:/dswcapital.com/investors/___.YXAxZTpzaG9yZWNhcDphOm86OTUxOGI3MDRhM2Y1YjQyNGIwMzAyM2QxZTcyYzA1NzI6NjpiZDk4OmZhZDVhNDUwMzE1NWQzZDhkNGFlMDRhYmM5M2FkMjkwYmRjNTE5MzM5N2Y0N2JiZmY5NmIzMjY5NjVkNzc2NmE6cDpUOk4)

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