REG - Gateley (Holdings) - Acquisition of Smithers Purslow

Gateley (Holdings)Announcement

20/04/2022 07:00

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RNS Number : 6688I  Gateley (Holdings) PLC  20 April 2022

20 April 2022

 

This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014, which forms part of United Kingdom domestic law by
virtue of the European (withdrawal) act 2018. Upon the publication of this
announcement, this inside information is now considered to be in the public
domain.

 

GATELEY (HOLDINGS) PLC

("Gateley", the "Company" or the "Group")

(AIM:GTLY)

 

ACQUISITION OF SMITHERS PURSLOW

Further execution of the Group's Platform Strategy

 

Gateley, the legal and professional services group, is pleased to announce the
acquisition of SP 2018 Limited and its subsidiaries (together "Smithers
Purslow" or "the Acquisition") for a total maximum consideration of £20.0
million, with an initial consideration of £12.15 million payable on
completion c. 56% in shares and c. 44% in cash.

 

Smithers Purslow is a rapidly growing multi-disciplinary chartered surveying
practice, comprising building and quantity surveyors and civil and structural
engineers. Specialising in services to the property insurance claims market,
it resolves high value claims for insurers, policy holders and their advisers.

 

Acquisition highlights

 

 ●    Further execution of Platform Strategy - expanding Gateley's strong Property
      Platform
 ●    Highly regarded in its market, Smithers Purslow provides a well-established
      presence in the sizeable and fast-growing, high-value property insurance
      claims market
 ●    Expected to be earnings enhancing in the first year post acquisition, the year
      ending 30 April 2023 ("FY23")
 ●    Incentivised senior management team will continue to lead the business,
      renamed Gateley Smithers Purslow
 ●    Compound organic growth of at least 20% per annum in revenue and EBITDA over
      the last five years
 ●    Revenue of £11.7 million and adjusted profit before tax( 1 ) of £2.5 million
      in the year ended 30 September 2021
 ●    With a total maximum consideration of £20.0 million, this is Gateley's
      largest acquisition to date

( )

(1) Adjusted profit before tax is after adjusting for the difference between
pre and post deal salaries of key directors of Smithers Purslow.

 

Overview of Smithers Purslow

 

Established in 1978, Smithers Purslow is a multi-disciplinary chartered
surveying practice, comprising building and quantity surveyors and civil and
structural engineers. Its core market is high value property insurance claims
in the UK. The practice is well established and highly regarded in its market,
generating recurring business from a large proportion of its insurance company
clients.

 

Smithers Purslow operates from ten regional offices across the UK and employs
130 staff. Its aim is to be recognised as the best provider of building and
construction professional services to the UK insurance market. Its blue-chip
client base includes insurance companies, utility companies and property
managers and high net worth individuals.

 

Financials

 

Smithers Purslow is an established, profitable and cash generative business,
which has delivered compound annual growth in revenue and EBITDA of more than
20 per cent over the last five years. In the year ended 30 September 2021,
organic revenue increased by 22.3 per cent to £11.7 million, generating
adjusted profit before tax(1.) of £2.5 million.

 

Net assets of Smithers Purslow at completion will be not less than £4.5
million, including net cash of approximately £0.2 million.

 

Acquisition rationale

 

Smithers Purslow gives Gateley significantly deeper reach into the UK's
sizeable and growing high-value property insurance claims market.

 

The Acquisition is a significant step forward in delivery of the Group's
Platform Strategy, to acquire and grow complementary professional services
businesses, and is a further demonstration of Gateley's commitment to invest
in growth.

 

Property is one of Gateley's four Platforms, the others being Business
Services, Corporate and People. These Platforms are market-facing structures
on which the Group clusters complementary legal and consultancy services,
directed at Gateley's chosen markets.

 

Smithers Purslow complements the existing expertise at Gateley Vinden,
acquired by the Group in 2020 and supplemented by the addition of Tozer
Gallagher in 2021, further enhancing the Group's already strong and growing
Property Platform.

 

The Board expects the Acquisition to be earnings enhancing from the first year
post acquisition, being FY23.

 

Terms of the Acquisition

 

Under the terms of the Acquisition, Gateley has acquired the entire issued
share capital of SP 2018 Limited from the existing management team and their
related parties (the "Sellers") for total maximum consideration of £20.0
million, on a debt free, cash free, normalised working capital basis. The
initial consideration of £12.15 million will be satisfied on completion in
part by the issuance of 3,312,322 ordinary shares of 10 pence each in the
capital of Gateley ("Ordinary Shares") at a price of £2.05 per Ordinary
Share. The initial cash consideration of c. £5.4 million will be funded from
Gateley's new revolving credit facility announced on 19 April 2022.

 

Up to a further £7.85 million could be payable with any payment subject to
Smithers Purslow achieving at least £4.5 million of EBITDA over the 24 months
to 30 September 2023. Such payment to be split in shares and cash as agreed
between the Sellers and the Company, providing no Seller is entitled to
receive more than 50% of their total consideration in cash.

 

Smithers Purslow will trade under the name Gateley Smithers Purslow with
immediate effect. Managing Director, Stephen Fraser and Senior Director,
Andrew Bussey will continue to lead the Gateley Smithers Purslow management
board. Both Stephen and Andrew have been with Smithers Purslow for over 25
years.

 

Issue of new Ordinary Shares and total voting rights

 

As part of the consideration payable on completion, 3,312,322 Ordinary Shares
are to be issued, as noted above. Application will be made to the London Stock
Exchange for the 3,312,322 new Ordinary Shares to be admitted to trading on
AIM ("Admission"). It is expected that Admission will take place at 8.00am on
25 April 2022.

 

The new Ordinary Shares will rank pari passu with the existing Ordinary Shares
in issue. Following Admission, Gateley's total issued share capital will
comprise 123,072,222 Ordinary Shares. This number may be used by shareholders
in Gateley 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 Gateley under the FCA's Disclosure
Guidance and Transparency Rules.

 

Rod Waldie, Gateley Chief Executive Officer, said:

 

"We are delighted to welcome the Smithers Purslow team to the Group. This is
another dynamic business that further expands the breadth of capability in our
already strong Property Platform.  Smithers Purslow's growth over the last
decade has been impressive and it is a highly regarded market leader in the
property insurance claims sector, in which we see significant opportunity to
develop broader and deeper relationships with insurers and insurance
intermediaries.

 

"The existing synergies between Smithers Purslow and Gateley Vinden, across a
number of their multi-disciplinary service lines, extend the depth of our
expertise and provide additional capacity to maximise on the opportunities
presented in this sizeable and growing market and the wider built-environment
consultancy space.

 

"This is our largest acquisition to date and is a clear demonstration of our
commitment to invest and grow our market-facing Platforms, as well as to
continue to strengthen our resilience through diversification."

 

Enquiries:

 Gateley (Holdings) Plc
 Neil Smith, Finance Director                                      Tel: +44 (0) 121 234 0196
 Nick Smith, Acquisitions Director and Head of Investor Relations  Tel: +44 (0) 20 7653 1665
 Cara Zachariou, Head of Corporate Communications                  Tel: +44 (0) 121 234 0074 Mob: +44 (0) 7703 684 946

 Liberum - Nominated Adviser and Broker

 Richard Lindley/Ben Cryer/Cara Murphy                             Tel: +44 (0) 20 3100 2000

 Belvedere Communications Limited - Financial PR
 Cat Valentine                                                     Mob: +44 (0) 7715 769 078
 Keeley Clarke                                                     Mob: +44 (0) 7967 816 525
 Llew Angus                                                        Mob: +44 (0) 7407 023 147
                                                                   gateleypr@belvederepr.com (mailto:gateleypr@belvederepr.com)

 

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