Gateley Holdings Regulatory News (GTLY)

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

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 tax1. 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."

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