Knights Group . Regulatory News (KGH)

Tuesday 9th October

Knights Group Holdings plc

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

Acquisition of Spearing Waite

Knights increases presence in the East Midlands

Knights, one of the UK's fastest growing regional legal and professional services businesses, today announces that it has acquired the equity membership interests of Spearing Waite LLP ("Spearing Waite"), Leicester's largest independent law firm, from Thomas Bower, Martin Stockdale Smith, Karen Herbert and Jonathan Wheeler (the "Sellers").

Acquisition rationale

Alongside Knights' organic growth strategy, the Group has a successful track record of acquiring regional law firms in attractive locations across the UK. As outlined at the time of the Group's IPO, the Company has a proven method to identify, execute and integrate earnings-accretive acquisitions, demonstrating an ability to unlock value from more traditional partnership structures.

Spearing Waite's profile as Leicester's largest independent law firm, its highly diversified revenue base and low client, sector and fee earner concentration complement Knights own business model, as does the firm's entrepreneurial culture and mix of both SME and blue-chip clients.

The acquisition is in line with the Company's stated strategy for acquisitions as set out in the June 2018 admission document and will see Knights move to eight regional offices and 450 fee earners, increasing its presence in the East Midlands alongside its existing Derby office.

Background to Spearing Waite

Spearing Waite was founded in 1993 and has built a strong reputation in the corporate, real estate and retail sectors with 59 fee earners working across a number of industry sectors.

For the year ending 31 March 2018 Spearing Waite delivered revenue of £7.1m and profits distributable to members of £3.2m. Restating this to reflect the fact that the current members of Spearing Waite will become employees of Knights at completion (and therefore deducting their employment costs), this equates to an illustrative adjusted EBITDA of £1.1m, a margin of 15% of revenue. Following full integration and delivery of anticipated synergy savings, the Board expects Spearing Waite to deliver an EBITDA margin of circa 20%. Spearing Waite will keep its branding for a short transitional period before being formally rebranded as Knights, effective from 1 January 2019.

Terms of the acquisition

Under the terms of the acquisition, Knights has acquired the equity membership interests of Spearing Waite for consideration comprising £5.25m in cash and 97,208 new shares in Knights, plus deferred consideration of £800,000 in cash (£300,000 payable on 1 October 2019, £250,000 payable on 1 October 2020 and £250,000 payable on 1 October 2021 subject to the Sellers remaining in employment with a member of the Knights group). Knights will also discharge a maximum of £2m of debt in Spearing Waite on completion, and grant restricted stock awards equivalent to a maximum value of £265,000, resulting in the maximum amount payable not exceeding £8.515m.

The cash consideration will be satisfied from Knights' existing facilities which due to better operating cash performance will result in net debt of approximately 1 times enlarged group EBITDA. The acquisition is expected to be materially earnings enhancing in the first full year.

Application has been made to the London Stock Exchange for the admission of 97,208 new ordinary shares to trading on AIM. Admission of the new shares is expected to take place at 8.00am on 10 October 2018. The Company's total issued share capital following admission will consist of 72,134,251 ordinary shares of one pence each with one voting right per share. This figure may be used by shareholders 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 the Company under the FCA's Disclosure and Transparency Rules.

Commenting on the acquisition, David Beech, CEO at Knights, said: "We are delighted to be acquiring Spearing Waite, a firm which is culturally aligned with Knights and one we have known for some time. They have created a strong reputation in Leicester, as evidenced by their fantastic client portfolio, and I have no doubt that they will be a great addition to our business."

Tom Bower Senior Partner, Spearing Waite added: "We have grown Spearing Waite to be the best firm in Leicester through brilliant people acting for quality clients. To continue our growth strategy we have decided to join Knights plc, a larger business and perfect cultural fit. Knights has the ambition and the financial clout to enable the combined force to continue to thrive in Leicester. We can't wait to get cracking with our ambitious growth plans."

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Notes to Editors

Knights is a fast-growing, regional legal and professional services business, ranked within the UK top 100 largest law firms by revenue. Knights was one of the first law firms in the UK to move from the traditional partnership model to a corporate structure in 2012 and has since grown rapidly. Knights has specialists in all of the key areas of corporate and commercial law so that it can offer end-to-end support to businesses of all sizes and in all sectors. The Company's main focus is on the UK's secondary regional markets, offering 'big city' quality expertise from a regional cost base. Currently, Knights operates from seven offices located in Cheltenham, Chester, Derby, Newcastle-Under-Lyme, Manchester, Wilmslow, Oxford, with an eighth office in Leicester added on completion of the acquisition of Spearing Waite LLP.