(Sharecast News) - Events agency Aeorema Communications announced the acquisition of boutique events and incentive travel company Eventful on Tuesday, for a total consideration of up to ?0.48m to be satisfied in cash and ordinary shares .
The AIM-traded firm said ?0.1m of the cash consideration would be in the form of a performance related earn-out.
It said its decision to acquire Eventful was made "in full confidence", even amid the challenging global situation unfolding due to the Covid-19 coronavirus pandemic.
Aeorema said Eventful had a strong cash flow position with "significant" revenue already confirmed or under discussion, and necessary risk mitigation in place in terms of contract cancellation fees of up to 90% in some instances.
Eventful's services would diversify and enhance the group's offering, the board said, with valuable "black book" introductions and opportunities for cross-selling well underway.
Aeorema explained that Eventful, run by its founder Caroline Lumgair, operates from London and assists clients with venue sourcing, event planning, event design and event management.
It said it had established a "loyal portfolio" across multiple industries including manufacturing, oil and gas, professional services, luxury retail, entertainment and finance.
The firm typically worked with clients on boutique incentive events, which was a differentiated client market to that of Aeorema's first live events business, Cheerful Twentyfirst.
Aeorema's board said the acquisition would strengthen its offering and add to its existing blue-chip client base.
It said Lumgair and her small team would move into Cheerful Twentyfirst's offices "almost immediately" to reduce overheads, and would be available to provide specialist knowledge on the organisation of high-end internal meetings, boutique conferences and training events of ranging scale.
The total consideration payable to Lumgair for Eventful of up to ?0.48m would be satisfied by ?0.35m in cash and 187,500 ordinary shares at a price of 14p each on completion.
Another ?50,000 in cash would be paid following the company's year ending 30 June 2021, on the basis that Eventful achieved target revenue of ?0.2m in the period, with another ?50,000 in cash payable in the year ending 30 June 2022 on the basis it achieved target revenue then as well.
"We are delighted to have acquired Eventful," said chairman Mike Hale.
"Caroline, her team and her clients will be an excellent addition to the group.
"The acquisition, which is immediately earnings enhancing and is expected to grow fee based revenues, will enable the group to enter into the venue sourcing and incentive travel events market, something we believe is very much linked to the live events market in which Cheerful Twentyfirst is already very successful."
Hale said the incentive travel sector - a multi-billion pound global market - needed specialist skills and knowledge, which Eventful would bring.
"We will concentrate on delivering logistics and value, in addition to creative and inventive solutions for our clients.
"We believe the acquisition is good value for money.
"Taking into account the positive cash balances in Eventful, net profits of some ?96,000 for the 2019 financial year, and on the assumption that both earn-out payments of ?50,000 each are paid, we believe we are making an acquisition that is on a much lower valuation multiple than other acquisitions we have seen in our sector.
"The acquisition will also allow us to grow our presence in the boutique events category."
Eventful had a number of clients for which they ran smaller events, Hale explained, adding that being able to offer that service more widely would create "significant" growth potential.
He said the acquisition would also provide Cheerful Twentyfirst and Eventful with the opportunity to join forces when tendering for new clients, and working with existing clients where the combination of the two companies' skills would be complementary.
"Notwithstanding the unchartered territory in which we find ourselves with the current Covid-19 virus outbreak, we believe Aeorema is well placed to weather this storm, particularly with our strong cash balance.
"Strengthening and adding to the company's offerings to current and new clients at this time supports our business model and long term strategy of enhancing the services we provide to grow the group."
At 0800 GMT, shares in Aeorema Communications were up 28.57% at 18p.
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