PHD.L Regulatory News (PHD)

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, THE REPUBLIC OR IRELAND OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. THIS ANNOUNCEMENT HAS NOT BEEN APPROVED BY THE LONDON STOCK EXCHANGE, NOR IS IT INTENDED THAT IT WILL BE SO APPROVED.

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

PROACTIS Holdings Plc

Proposed acquisition of Perfect Commerce, LLC

Placing to raise £70.0 million

New Debt Facilities

Issue of Convertible Acquisition Loan Notes

Admission of the Placing Shares to trading on AIM

Re-admission of the Enlarged Share Capital to trading on AIM

Board Changes

and

Notice of General Meeting

PROACTIS Holdings Plc ("PROACTIS", the "Group" or the "Company"), the specialist spend management solution provider, today announces that it has conditionally agreed to acquire all of the outstanding membership interest in Perfect Commerce, LLC ("Perfect Commerce"), a global provider of spend management solutions with operations in the US, UK and Europe (the "Acquisition"), for an aggregate consideration of up to $132.5 million (approximately £102.4 million), together with an oversubscribed conditional placing to raise £70.0 million at 165 pence per Placing Share, through finnCap, acting as sole bookrunner to the Company for the Placing.

The Acquisition is consistent with PROACTIS' growth strategy, which is designed to deliver a business that is capable of addressing a growing global market demand for spend management solutions. Perfect Commerce develops and sells cloud-based, technology-led, spend management solutions for the public and private sector markets. It has complementary territorial reach with extensive international capabilities serving approximately 150 customers (largely Tier 1), with over 1.3 million users across more than 80 countries, 20 languages and 100 currencies. Further, Perfect Commerce operates its own proprietary supplier network that it calls 'The Business Network' and which has approximately 970,000 suppliers connected to it. Those suppliers are able to use The Business Network to collaborate with and transact efficiently and electronically with their customers.

The Acquisition constitutes a reverse takeover under Rule 14 of the AIM Rules, and accordingly will require Shareholder approval at the General Meeting of the Company, to be held on 31 July 2017.

Key transaction highlights include:

· Transformational acquisition, significantly accelerating PROACTIS' strategy

· Strong strategic, commercial and financial rationale, increasing PROACTIS' scale, geographic footprint, customer opportunity, operational efficiencies and solution set

· Increased supplier commerce opportunity through The Business Network

· Multiple commercial and operational synergies:

o expected net annualised cost savings of approximately £5.0 million

o significant cross-sell / up-sell opportunities

· Expected to be earnings enhancing in first full financial year of ownership

· Placing of new Shares to raise £70.0 million, with significant over-subscription and tight discount

· New HSBC debt facilities totalling £45.0 million, consisting of a £30.0 million RCF facility and a £15.0 million term loan

· Issue of $5.0 million of Convertible Acquisition Loan Notes to the Proposed Director and another senior Perfect Commerce employee

· Appointment of new Chief Executive Officer, Hampton Wall (President and Chief Executive Officer of Perfect Commerce), with effect from Completion, with Tim Sykes resuming CFO role

Details of the Placing

PROACTIS has conditionally raised £70.0 million (before commissions, fees and transaction costs) by way of a conditional placing on a non pre-emptive basis of 42,424,243 Placing Shares at the Placing Price of 165 pence per Placing Share. The Placing Price represents a 5.7 per cent. discount to the closing middle market quotation price of a Share on 6 July 2017 of 175.0 pence per Share, being the last practicable date prior to this announcement. The Placing Shares represent approximately 45.8 per cent. of the Enlarged Share Capital. 

Details of the Acquisition

The Company proposes to finance the Acquisition through the Company's existing cash reserves, the net proceeds of the Placing, the Convertible Acquisition Loan Notes and the New Debt Facilities. At Completion, the Company expects to pay a total consideration of approximately $127.5 million, payable in cash and by the issue of the Convertible Acquisition Loan Notes. In addition, the Company will pay up to a further $5.0 million in additional cash consideration upon the occurrence of specified events during the period to 31 July 2018.

The Placing and Acquisition are conditional, inter alia, on approval by the Shareholders at the General Meeting to be held at 11.00 a.m. on 31 July 2017 at the office of finnCap Ltd at 60 New Broad Street, London, EC2M 1JJ, and Admission taking place by no later than 15 August 2017. Admission is expected to occur at 8.00 a.m. on 1 August 2017, and the Acquisition is expected to complete on or about 4 August 2017. Re-admission is expected to occur by 8.00 a.m. on 7 August 2017 and no later than 15 August 2017.

An Admission Document, including details of the General Meeting and the Resolutions, is expected to be posted to Shareholders today. In addition, a copy of the Admission Document will be available from the Company's registered offices from the date of the Admission Document until the date falling one month from Admission, and on the Company's website at www.proactis.com.

The Admission Document will contain detailed information about the Transaction and explain why the Directors consider the Transaction to be in the best interests of the Company and the Shareholders as a whole, and accordingly unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, notice of which will be set out at the end of the Admission Document. The Directors who hold interests in Shares have irrevocably undertaken to vote in favour of the Resolutions to be proposed at the General Meeting in respect of a total of 10,606,986 Shares representing approximately 21.1 per cent. of the Shares.

Board changes

The Board is pleased to announce the appointment of George Hampton Wall Jr, currently President and Chief Executive Officer of Perfect Commerce, as Chief Executive Officer of the Company, with effect from Completion. Mr Wall will replace Rod Jones as Chief Executive Officer, who retired from the Board yesterday with immediate effect. Tim Sykes, the current Chief Executive Officer Designate and Chief Financial Officer will, with effect from Completion, resume his role at Chief Financial Officer.

Further information regarding Mr Wall's appointment is set out in paragraph 16 below.

Tim Sykes, Chief Financial Officer of PROACTIS, commented:

"This is a highly complementary and transformational acquisition which we expect to be earnings enhancing in the financial year ending 31 July 2018. The Acquisition will accelerate PROACTIS' growth and bring substantial global scale to the Group, positioning us to exploit the high growth areas of the spend management market and enabling us to provide our customers with an even broader product offering.

"In addition, it will build our scale in the US, UK and mainland Europe, with the Enlarged Group having a uniquely balanced and scaled commercial and operational capability across all of those territories. The combined solution set will enable us to target both larger and more complex customer contract opportunities, wherever that customer might be located.

"As well as complementing the core business, we expect PROACTIS' own early-adopter product offering in supplier commerce to be transformed by the addition of The Business Network.

"The Board has identified significant efficiencies that it expects to realise through the combination of commercial and operational processes and expects these to be delivered within the first twelve months following Completion. We also believe that we are acquiring Perfect Commerce at a profitability inflexion point, with its momentum underpinned by a series of new name wins in recent months.

"We are delighted that Hamp is joining the Board at this exciting time. Hamp brings with him considerable experience in the industry, as well as a specific skillset in acquisition integration, and he will be of great value to the Company as we continue to grow. On behalf of everyone at PROACTIS, I would like to thank Rod Jones for his contribution to the growth and success of PROACTIS to this point and wish him a happy retirement.

"The support shown by investors for this Placing and Acquisition has been outstanding and has resulted in the Placing being significantly oversubscribed, by both existing and certain new investors, who we welcome on to the Company's share register. This is again a clear vote of confidence in the Board's growth strategy and we look forward to continuing to deliver on this."

Hamp Wall, President and Chief Executive Officer of Perfect Commerce, commented:

"We are excited to be joining PROACTIS at a time of such rapid innovation in the industry. We have a highly complementary product set, customer base and geographic reach and we look forward to offering our customers an enhanced product offering.

"I was extremely encouraged by the appetite of investors and HSBC for this transaction and I look forward to delivering value for them in return."

Enquiries:

Notes to Editors:

PROACTIS creates, sells and maintains specialist software which enables organisations to streamline, control and monitor all internal and external expenditure, other than payroll. PROACTIS is used in approximately 800 organisations around the world from the commercial, public and not-for-profit sectors.

PROACTIS is headquartered in Wetherby, West Yorkshire. It develops its own software using an in-house team of developers and sells through both direct and indirect channels via a number of Accredited Channel Partners.

PROACTIS floated on the AIM market of the London Stock Exchange in June 2006.

IMPORTANT NOTICE

This announcement does not constitute an offer to sell or issue or a solicitation of an offer to buy or subscribe for Placing Shares in any jurisdiction including, without limitation, the United States, Canada, the Republic of South Africa, Australia, Japan, the Republic of Ireland or any other jurisdiction in which such offer or solicitation is or may be unlawful (a "Restricted Jurisdiction"). This announcement and the information contained herein are not for publication or distribution, directly or indirectly, to persons in a Restricted Jurisdiction unless permitted pursuant to an exemption under the relevant local law or regulation in any such jurisdiction. No action has been taken by the Company, finnCap or any of their respective affiliates that would permit an offer of the Placing Shares or possession or distribution of this announcement or any other publicity material relating to such Placing Shares in any jurisdiction where action for that purpose is required. Persons receiving this announcement are required to inform themselves about and to observe any such restrictions.

The securities referred to herein have not been, and will not be, registered under the US Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act. There will be no public offer of securities in the United States.

Certain statements contained in this announcement are forward-looking statements and are based on current expectations, estimates and projections about the potential returns of the Company, Perfect Commerce and the Enlarged Group and the industry and markets in which the Enlarged Group will operate. Words such as 'expects', 'should', 'intends', 'plans', 'believes', 'estimates', 'projects', 'may', 'targets', 'would', 'could' and variations of such words and similar expressions are intended to identify such forward-looking statements and expectations. These statements are not guarantees of future performance or the ability to identify and consummate investments and involve certain risks, uncertainties, outcomes of negotiations and due diligence and assumptions that are difficult to predict, qualify or quantify. Therefore, actual outcomes and results may differ materially from what is expressed in such forward-looking statements or expectations. Among the factors that could cause actual results to differ materially are: the general economic climate, competition, foreign exchange fluctuations, changes of strategic direction, minority shareholder action, failure of internal controls, availability of purchasers in due course, price and margin pressure, technology developments, systems or network failures, changes in customer requirements, failure of suppliers to deliver against contract, availability of suitable acquisition targets, interest rate levels, loss of key personnel, the result of legal, financial and commercial due diligence, the availability of equity financing and/or debt financing on acceptable terms and changes in the legal or regulatory environment. These forward-looking statements speak only as at the date of this announcement. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in the Company's expectations with regard to them or any change in events, conditions or circumstances on which any such statements are based, unless required to do so by applicable law or the AIM Rules.

Any indication in this announcement of the price at which the Shares have been bought or sold in the past cannot be relied upon as a guide to future performance. Persons needing advice should consult an independent financial adviser. No statement in this announcement is intended to be a profit forecast and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

finnCap, which is authorised and regulated in the United Kingdom by the FCA, is acting for PROACTIS and for no one else in connection with the Placing and will not be responsible to anyone other than PROACTIS for providing the protections afforded to clients of finnCap or for affording advice in relation to the Placing, or any other matters referred to herein.

Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

Defined terms used in this announcement shall have the same meaning (unless the context otherwise requires) as ascribed to it in the "Definitions" section at the bottom of this announcement.

Exchange rates

Where amounts in US Dollars have been translated into pounds Sterling (or vice versa) they have been done so at an exchange rate of £1:$0.7731 (save as where otherwise indicated), being the exchange rate prevailing on 6 July 2015, being the latest practicable date prior to the publication of this announcement (Source: Bloomberg).

The following text has been extracted from the Admission Document which is expected to be published today.

ADMISSION AND RE-ADMISSION STATISTICS

(1) Assuming no Shares (other than all the Placing Shares) are issued by the Company between the date of this announcement and Re-admission.

(2) At the Placing Price.

EXPECTED TIMETABLE OF PRINCIPLE EVENTS

Notes:

(1) References to time are to London, England time unless otherwise stated.

(2) Each of the times and dates in the above timetable is subject to change without further notice. Any such change may be notified by an announcement on a Regulatory Information Service.

1. INTRODUCTION

PROACTIS has today announced that it has entered into the Acquisition Agreement to acquire all of the outstanding membership interest in Perfect Commerce for an aggregate consideration of up to $132.5 million (approximately £102.4 million) subject to certain adjustments at Completion, to be satisfied through the Company's existing cash reserves, the net proceeds from the Placing, the Convertible Acquisition Loan Notes and the New Debt Facilities.

Perfect Commerce develops and sells cloud-based, technology-led, spend management solutions for the public and private sector markets. It has global reach and extensive international capabilities serving approximately 150 customers, many of which are Tier 1 customers, with over 1.3 million users (excluding ERP and e Catalogue customers) across 83 countries, 21 languages and 102 currencies. Further, Perfect Commerce operates its proprietary supplier network that it calls 'The Business Network' and which has approximately 970,000 suppliers connected to it. Those suppliers use The Business Network to transact efficiently and electronically with their customers. The Business Network has been in operation since approximately 1999.

The Board and the Proposed Director believe that the Acquisition has a strong strategic, commercial and financial rationale and that the Acquisition accelerates PROACTIS' growth strategy, increases its scale and expands its geographic footprint. The Directors and Proposed Director believe that Perfect Commerce is well positioned for growth and is at a profitability inflexion point, after a period of restructuring. The Enlarged Group is expected to be one of the top ten 'pure' spend management companies globally and will have a customer base extending across the United States, the United Kingdom and mainland Europe served by an enhanced end-to-end solution set.

The Board and the Proposed Director believe that the Enlarged Group will have a highly complementary customer base with minimal overlap and that there are significant cross-selling and up-selling opportunities. In addition, the Board and the Proposed Director have identified a net £5.0 million of annualised cost savings in the Enlarged Group which they expect to realise by the end of the financial year ending 31 July 2018. Consequently, the Board and the Proposed Director believe that the Acquisition will be earnings enhancing in the financial year ending 31 July 2018.

The Board proposes to appoint Hampton Wall, the current President and Chief Executive Officer of Perfect Commerce, with effect from Completion. The Board also proposes to adopt the LTIP, the Bonus Plan and the Executive Share Option Scheme 2017, further details of which will be set out in paragraph 6 of Part VII of the Admission Document.

The Acquisition constitutes a reverse takeover under the AIM Rules, and therefore requires Shareholder approval at a General Meeting of the Company.

The Placing and Acquisition are conditional, inter alia, on approval by the Shareholders at a General Meeting to be held at 11.00 a.m. on 31 July 2017, and Admission taking place by no later than 15 August 2017. Admission is expected to occur at 8.00 a.m. on 1 August 2017, and the Acquisition is expected to complete on or about 4 August 2017. Re-admission is expected to occur by 8.00 a.m. on 7 August 2017 and no later than 15 August 2017.

The Admission Document will contain detailed information about the Transaction and explains why the Board considers that the Transaction is in the best interests of the Company and its Shareholders as a whole. The Board recommends that you vote in favour of the Resolutions to be proposed at the General Meeting, notice of which will be set out at the end of the Admission Document.

The Board who hold interests in Shares have irrevocably undertaken to vote in favour of the Resolutions to be proposed at the General Meeting in respect of a total of 10,606,986 Shares representing approximately 21.1 per cent. of the Shares.

2. BACKGROUND TO AND REASONS FOR THE ACQUISITION

The Acquisition is consistent with PROACTIS' growth strategy, which is designed to deliver a larger business that is capable of addressing a growing global market demand for spend management solutions. The Board and the Proposed Director believe that the Enlarged Group will be a growing business with scale that is both profitable and cash generative.

PROACTIS has adopted a strategy including organic growth through the delivery of best-in-class, cloudbased, technology led spend management solutions for its customers and the suppliers to its customers. The Group's investment in its solution set has supported this strategy and has enabled the Group to increase the size of its customer base through winning new customers as well as retaining and selling more to existing customers.

PROACTIS has supplemented its organic growth with a series of five acquisitions since February 2014.

These acquisitions have all delivered increased sales and profits to the Group. When evaluating potential M&A opportunities, PROACTIS focuses on certain key characteristics, including complementary customer bases, solutions and technologies as well as certain financial criteria.

The Board and the Proposed Director consider that Perfect Commerce satisfies these characteristics and criteria.

Perfect Commerce and PROACTIS both operate in the spend management solutions market, specialising in the development and sale of cloud-based, technology led spend management solutions to help customers procure 'indirect' goods and services more efficiently and effectively with the combined objectives of reducing costs and improving control and compliance. The Board and the Proposed Director believe that the Enlarged Group can become a leading provider of spend management solutions globally, with PMSI reporting that the Enlarged Group would rank in the global top 10 of the ePurchasing market by historical revenue. Perfect Commerce and PROACTIS are both, individually, growing and profitable companies and, together, the Board and the Proposed Director believe that the Enlarged Group has a greater potential to grow revenues and profitability more quickly than each company could do independently. This remains a key feature of the Company today, with annualised contracted revenue as at 31 January 2017 estimated at approximately 84 per cent. of total forward revenue.

The Board and the Proposed Director consider that Perfect Commerce has been through a significant restructuring programme since the acquisition of Hubwoo in September 2015 (which Perfect Commerce acquired as Hubwoo revenues were reducing following customer losses). The principle part of this restructuring programme included a cost reduction exercise which was designed to result in a cost base that was better aligned to the anticipated reduced revenue base. The Board and the Proposed Director believe that this restructuring programme is largely complete and that Perfect Commerce is now well positioned for growth as part of the Enlarged Group.

The PROACTIS and Perfect Commerce businesses have complementary solutions and technology which are provided to customers in territories and sectors with minimal overlap. The Board and the Proposed Director believe that Perfect Commerce's Business Network, which connects buyers and suppliers and enables those two customer groups to trade electronically, is of particular value and relevance to the Enlarged Group. The Board and the Proposed Director believe that the combination of the two businesses will result in an Enlarged Group with significantly increased scale, as well as improved territorial and customer reach to deliver an enhanced solution set to new and existing customers in its chosen markets. The Board and the Proposed Director also believe that the operational scale in its chosen territories should provide the Enlarged Group with a better opportunity to widen its acquisition strategy going forward, as further described in paragraph 8.1 below. Following Completion, it is intended that the Enlarged Group will be headquartered in London with operations in the UK, the US, France, Germany, Belgium, the Netherlands, the Philippines and New Zealand.

The Board and the Proposed Director believe that the combination of the PROACTIS and Perfect Commerce business will together deliver a significantly enhanced solution set and will also be able to accelerate development of new innovative solutions and products as a result of the combined scale of the two businesses' development capacities.

The Board and the Proposed Director expect the Enlarged Group to achieve annualised net cost savings of approximately £5.0 million, these are expected to be realised before the end of the financial year ending 31 July 2018. In addition, the Board and the Proposed Director have identified a number of commercial opportunities which they believe will provide additional revenues to the Enlarged Group.

The Enlarged Group's board of directors and management team will be strengthened and, on Completion, Hampton Wall will be appointed as Chief Executive Officer of the Enlarged Group. Mr Wall, the President and Chief Executive Officer of Perfect Commerce, has experience in cross border M&A, having completed four acquisitions with Perfect Commerce since 2012. The Board believes that Mr Wall's experience and understanding of the sector will further strengthen PROACTIS' management team. As part of the Acquisition, the Proposed Director will hold a Convertible Acquisition Loan Note in the principal amount of $3.75 million, under which he may be allotted Shares. In addition, the Enlarged Group intends to put in place an executive leadership team, led by Mr Wall, which will include commercial and operational executives from each key territory and also a team of executives that will be responsible for the provision of a corporate and technical infrastructure to support the commercial and operational executives. It is anticipated that the executive leadership team will comprise eight individuals in total and, together with the Board and the Proposed Director, it will also be responsible for delivering the integration plan for the two businesses, as referred to in paragraph 8.2 below.

3. SUMMARY INFORMATION ON PROACTIS

PROACTIS is a global spend management solution provider which creates, sells and maintains spend management software that enables organisations to streamline, control and monitor all expenditure, other than payroll, and delivers bottom-line value, monetary savings and efficiencies through improved spend management. PROACTIS' solutions are used by approximately 850 buyer organisations, with over 2 million users, in over 90 countries across the commercial, public and not-for-profit sectors. In addition, the Board believes that PROACTIS' customers have over 1 million supplier relationships. During 2010, PROACTIS' business model transitioned from a perpetual licence only model to a blended model, offering subscription based SaaS licences as well as perpetual licences. This transition was designed to fulfil a perceived commercial market need at the time, and which the Board believes is still present, as well as help the Company to deliver solid revenue with higher levels of recurring income.

Following a change in major Shareholders in 2013, the Company started to augment its organic growth with selective acquisitions, acquiring customers and cross-selling opportunities along with acquiring complementary solutions to the Group's businesses. The Company has made five acquisitions, excluding Perfect Commerce, since 2014 and the Board and the Proposed Director believe the Company has a strong track record of business integration.

During 2014, PROACTIS announced its intention to provide software that could create efficiencies within the buy/sell transaction process for both buyers and suppliers and that this could, potentially, provide a new form of revenue from suppliers. PROACTIS commenced designing software to support this and is presently in an early adopter programme with a small number of buyers and suppliers. The Group developed the software with the objective that it would increase transparency within the payment cycle for suppliers in order to create the opportunity for supplier financing. This opportunity had been progressed and PROACTIS is in the process of negotiating an APF with HSBC.

Detailed information on the Existing Group will be set out in Part II of the Admission Document.

4. SUMMARY INFORMATION ON PERFECT COMMERCE

Perfect Commerce provides cloud-based procurement, sourcing, and supplier network software and services to the enterprise and public market sectors through a blended buyer and supplier revenue model, with leading edge supplier network functionality. Perfect Commerce was founded in 2000 and is now used across approximately 80 countries by, largely, Tier 1 customers. Perfect Commerce was acquired by a procurement services and business process outsourcing company, led by the Proposed Director in 2007. Since that time, Perfect Commerce has pursued a growth strategy concentrating on acquisition led growth with the objective of creating a technology-led spend management solutions group.

In September 2015, Perfect Commerce acquired a majority stake (approximately 79 per cent.) in Hubwoo, a supply management and business network solution provider, headquartered in Paris, France and listed on the Eurolist of NYSE Euronext. This acquisition accelerated Perfect Commerce's global growth strategy, extending its suite of procurement and sourcing solution capabilities in both vertical and geographical markets. Under Perfect Commerce's ownership Hubwoo has been through a significant restructuring exercise and its customer base has stabilised, its cost base has been realigned to the reduced revenue base and the Board and the Proposed Director believe it is now well positioned for future growth.

Perfect Commerce has recently expanded its customer base by securing 14 major deals in 2016, nine of which were based in the US with the remaining five being based in mainland Europe.

Perfect Commerce and Hubwoo have consolidated their separate management teams and operations in France. The technologies used by Hubwoo were compatible with those of Perfect Commerce and this has enabled the integration process to be completed quickly and efficiently. This acquisition also brought with it The Business Network, which connects buyers and suppliers, enabling those two customer groups to trade electronically. The Board and the Proposed Director believe this is of particular value and relevance to the Enlarged Group.

The Business Network is a technology platform that integrates with the ERP Systems, procurement and accounts payable applications, on-premise and in the cloud, making it a versatile solution for Perfect Commerce that will also enable PROACTIS to utilise that technology for its own supplier networking opportunities.

In addition to The Business Network, Perfect Commerce offers a comprehensive solution set for buyers, including; management of contracts, sourcing, purchasing, catalogue management, invoice management and services procurement.

Perfect Commerce Business

Perfect Commerce provides solutions designed to enable customers to improve and make their spend management processes more efficient and effective. Perfect Commerce offers SaaS procurement solutions in which it is a leading player in its chosen markets as it continues to deliver a stable and reliable end-to-end system.

The broad suite of SaaS solutions are used by its customers for global government deployments in a variety of industries including chemicals, retail, energy, financial services, state and local government, food products, medical, hospitality, manufacturing, technology and transportation. Perfect Commerce's solutions seek to cover every aspect of spend management, from spend analytics and sourcing to contract management, procurement and e-invoicing. Perfect Commerce's services assist its customers to effectively manage the end-to-end procure to pay, strategic sourcing and supply chain management processes. Perfect Commerce also provides consulting services in supply chain and business process outsourcing.

Customers

With its comprehensive procurement software solution set, Perfect Commerce has been able to produce a system in which it can directly deliver efficiencies to all sizes and types of customers. Perfect Commerce's solutions are used by over 1.3 million users in over 80 countries, 21 languages, and 102 currencies. This figure does not include ERP and eCatalogue customers. Perfect Commerce's customer base consists of approximately 150 customers, the majority of which are Tier 1 customers and it owns and operate The Business Network, whose customers include: IBM, Idaho, BASF, State Street, ING, Microsoft, BNP Paribas, UCLA and Schlumberger.

Detailed information on Perfect Commerce will be set out in Part III of the Admission Document.

5. COMPARISON OF PROACTIS AND PERFECT COMMERCE

The Board and the Proposed Director believe that the following represents a high level comparison of Perfect Commerce and PROACTIS:

· Customers - though the sales processes of Perfect Commerce and PROACTIS share similarities, Perfect Commerce's customer base is smaller in number (approximately 150) but is larger in nature (predominantly Tier 1, Fortune 500 organisations) compared to PROACTIS, whose buyer customer base is greater in number (approximately 850) but smaller in nature (predominantly Tier 2 organisations). The Tier 2 space is more developed in the UK market, but currently nascent in the US and mainland Europe. In addition, Perfect Commerce generates significant revenue from suppliers as well as buyers, whereas PROACTIS' comparatively embryonic supplier network dictates that PROACTIS generates its revenue substantially from buyers with minimal supplier network revenue.

· Sector - Perfect Commerce and PROACTIS both have customers in many different commercial and public sector markets. PROACTIS is a leader in respect of number of the customers in the UK public sector, whereas Perfect Commerce's customer base is pan-sector. Perfect Commerce's customers are more concentrated in the US and mainland Europe whilst PROACTIS' are more concentrated in the UK. The Board and the Proposed Director believe that the Enlarged Group will have the opportunity to penetrate further the US commercial and public sector markets and the public sector market in mainland Europe.

· Business model - Perfect Commerce operates a SaaS based business model only. PROACTIS also has a SaaS based business model, with some instances of perpetual licences being sold. The Board and Proposed Director believe that the SaaS based business model, where revenues are contracted within the subscription agreements, generate high proportions of contracted revenue. The Board and the Proposed Director use an annualised contracted revenue calculation to measure this and expect that the Enlarged Group's annualised contracted revenue will be in excess of 85 per cent. as at Completion.

· Geographic presence - Perfect Commerce has a significant presence in the US and in mainland Europe. PROACTIS is primarily focused on the UK market, with a relatively small presence in the US and mainland Europe. The Board and the Proposed Director believe that the Enlarged Group will be better positioned to serve customers operating globally and, potentially, to target geographies.

· Products - the Board and the Proposed Director believe that PROACTIS and Perfect Commerce have complementary spend management solution sets, with PROACTIS adding AP automation, spend analytics and supply chain finance, that is in PROACTIS' early adopter programme, and with Perfect Commerce adding The Business Network, EU eInvoicing compliance in 37 countries and an emerging offering in Services Procurement. The Board and the Proposed Director believe that there will be significant opportunity to up-sell and cross-sell within the existing customer base using the combined solution sets of both organisations.

· Routes to market - Perfect Commerce and PROACTIS have both operated a sales strategy including direct and indirect routes to market. This is expected to continue within the Enlarged Group.

· Solution development - Perfect Commerce and PROACTIS both, individually, invest substantially in their respective existing and also new solutions, with approximately 10 per cent. of revenue being spent in this area. The Board and the Proposed Director believe there is an opportunity to focus this spending more efficiently in the Enlarged Group to accelerate the development of new innovative solutions.

· Technology - Perfect Commerce and PROACTIS have compatible technologies which the Board and the Proposed Director believe will enable the Enlarged Group to deploy new innovative solutions alongside both Perfect Commerce's and PROACTIS' existing solutions.

6. THE ENLARGED GROUP MARKET AND MARKET OPPORTUNITY

The Board and the Proposed Director believe that the ePurchasing market can be described as the provision of solutions for businesses and organisations that are designed to make their procurement and purchasing processes more efficient and effective. Whilst the Board and the Proposed Director believe that all businesses and organisations have an inherent need for these solutions, they believe that many are using inefficient manual systems and processes or sub-optimal software or service based solutions. These solutions have, historically, been delivered through on-premise licenced software supplemented by solution providers' service offerings. In more recent years, cloud-based technologies have influenced solution providers' delivery of these solutions to enable businesses and organisations to access the solutions more flexibly, for example, through SaaS based business models.

The Board and the Proposed Director believe that the ePurchasing market is fragmented, with no single or group of dominant player(s), and has many specialist solution providers, such as Coupa and Basware, competing with much larger ERP-led organisations such as SAPAriba and Oracle. PROACTIS and Perfect Commerce were two of only 12 competitors to be listed in the Gartner Magic Quadrant in 2016, a leading industry commentator. The Board and the Proposed Director believe that the fragmented nature of the market may be because there are limited specialist solution providers that offer a solution set across the full spectrum of spend management. Consequently, these factors can result in businesses and organisations using a mix of solutions from different solution providers.

Solution providers may, therefore, have an objective to provide end-to-end solution sets and there are two principal ways to achieve this objective; (i) for a solution provider to develop its own end-to-end solution set, or, (ii) for a solution provider to acquire or partner with a different solution provider with a view to providing the end-to-end solution set between the two solution providers. Further, the Board and the Proposed Director believe that it is important to be able to provide solutions on a global basis and the Board and the Proposed Director believe that these two factors have led to rapid industry consolidation; a recent increase in M&A within the market as solution providers aim to increase the breadth of their solution sets and expand to new geographies to facilitate cross-selling.

PMSI estimates that the size of the ePurchasing market is approximately $5.0 billion per annum but recognises that other market reports estimate that the market size is larger at approximately $7.0 billion. PMSI estimates that the market's current growth rate is approximately 10 per cent. per annum and that the market is expected to continue to grow at these levels going forward.

Data from PMSI, analysing the market geographically across the Americas, Europe, the Middle East and Africa ("EMEA") and APAC suggests that the Americas and EMEA represent the majority of the market. The Board and the Proposed Director believe that in the Americas the market has traditionally focused around Tier 1 and larger Fortune 500 organisations with, currently, little penetration of ePurchasing solutions into Tier 2 organisations. In the UK and Europe the ePurchasing market is more developed in Tier 2 organisations and this is a trend that the Board and the Proposed Director believe will be replicated in the US and which the Enlarged Group will be well positioned to capitalise on. When reviewing the market by solution segment, PMSI considers that these segments can be classified as S2P, business network and ancillary services. PMSI data suggests that S2P represents the main segment by value (further split into integrated S2P suites, P2P and S2C modules), with approximately 60 per cent. of the total market revenue. PMSI believe that, going forward, the fastest growth rates within the market segments will be in business networks and integrated S2P suites.

PMSI analysis suggests that a key growth driver of the Enlarged Group will be the growing market awareness of spend management solutions that facilitate process automation and integration. Another key growth driver will be cloud-based technologies and digitisation with developments such as artificial intelligence and machine learning. These technologies and developments can potentially enhance the solutions offered by ePurchasing solution providers, largely through the disruption and automation of traditional finance and procurement functions. The Board and the Proposed Director believe that this has been demonstrated over recent years, where there has been an increasing shift from on-premise to off-premise solutions ("SaaS"), owing to the number of advantages of SaaS solutions, such as lower up-front costs, easier integration and ease of upgrade. PMSI reports that SaaS revenue in the industry has more than doubled over the last 10 years and considers that it will evolve through incremental innovations and continue to be the predominant distribution model in the market. The Board and the Proposed Director also believe that regulatory change such as potential EU regulation mandating eInvoicing compliance will drive public sector initiatives, including commercial enterprises that conduct business with the public sector buyers, and further increases the Enlarged Group's target market and opportunity.

The Board and the Proposed Director believe that the Enlarged Group will be in a position to provide a substantially complete solution set across the whole spend management domain and that this could position the Enlarged Group well within the global market and the competitive landscape.

7. COMPETITION

The Board and the Proposed Director believe that the factors described above are resulting in growth in the ePurchasing market with businesses and organisations seeking to identify solutions that can assist them in making cost-savings and increasing control. This has led to a fragmented and competitive landscape with no one outright market leader. SAPAriba and Oracle are the two largest players, but neither competes directly in Perfect Commerce's or PROACTIS' market segment.

The competitive environment for spend management solutions is relatively broad and PMSI splits the market between the ERP vendors, the leading global pure-players and the mid-market and niche vendors.

PMSI estimates that ERP vendors represent approximately 35 per cent. market share, with SAPAriba being the market leader in this group with an estimated 22 per cent. share of the total ePurchasing market. Leading global pure players represent a combined 16 per cent. market share, which is where the Board and the Proposed Director believe that the Enlarged Group would be positioned. This group of solution providers includes Basware, Coupa, Tradeshift/IBX and Sciquest/Jaggaer. Medium sized and niche players represent a group of 150+ vendors and are estimated to account for approximately 31 per cent. share of the total market. Members of this group typically have less than $30 million revenues and 1 per cent. market share. Non-specialist players are estimated to represent a 12 per cent. share of the market.

ERP vendors offer similar solutions to those that are expected to be offered by the Enlarged Group, often as modules within their broader ERP systems but these modules are not specialised for spend management solutions and are often delivered through an on premise solution rather than as an off premise, SaaS solution. These ERP systems can take a long time to deploy and may require organisational restructuring which can be disruptive to the organisation, whereas the Board and the Proposed Director believe that solutions such as those to be provided by the Enlarged Group can be deployed with a reduced level of disruption to the underlying business. Consequently ERP vendors are increasingly moving away from on-premise solutions towards SaaS solutions. In the industry as a whole, PMSI estimate that the share of SaaS solutions has more than doubled over the last 10 years, exceeding 50 per cent. of the overall market in 2016 (compared to 25 per cent. in 2006), while revenue from licence and related maintenance fees has declined.

PMSI reports that in respect of profitability and growth trends, there is typically a divide between the ERP vendors, mature pure-players (often reporting low single-digit growth rates) and a few fast-growing businesses (such as Perfect Commerce and PROACTIS), which all report in excess of 10 per cent. EBITDA margins, and the majority of other competitors that are loss making (for example Coupa, Tradeshift, Tungsten), typically due to ambitious R&D programmes, high marketing costs and/or low-price positioning to attempt to win market share. PMSI position the Enlarged Group as being 'one of the most profitable and fast-growing ePurchasing pure players, globally' and 'the only ePurchasing pure-player growing at in excess of a 15 per cent. annual growth rate while reporting an EBITDA margin of in excess of 20 per cent. Additionally, within the market, there remains a divergence in the business network offering and who pays for it. Some competitors offer a business network to customers; however revenue models vary between 'free-for supplier' models and 'freemium' plan providers. Typically the 'free-for supplier' model offers minimal value for the supplier as it is often simply an electronic transfer of purchase order and invoices through an email server. While the providers charging supplier fees, like Perfect Commerce, are providing the supplier with software solutions that provide workload automation, customer management collaboration, price negotiation and price files for validation as well as a host of other value add services. The Board and the Proposed Director believe that The Business Network offering across the market will continue to evolve and a clearer adoption route will emerge over the coming years.

In light of the expected ePurchasing market growth rates, the fragmentation of the market and the combined strength of the Enlarged Group's offering, the Board and the Proposed Director believe that the Enlarged Group will be in a position to provide an end-to-end and best-of-breed solution set across the full spectrum of spend management as well as have a significantly strengthened platform from which to continue to pursue the M&A strategy that both PROACTIS and Perfect Commerce have adopted in the past.

8. THE ENLARGED GROUP STRATEGY AND BUSINESS

8.1 Strategy

The Board and the Proposed Director believe that the Enlarged Group will continue PROACTIS' growth strategy that is as follows:

· deliver organic growth through the sale of best-in-class spend management solutions for new customers. The Enlarged Group's continued commitment to investment in its solutions will support this;

· retain existing customers through high levels of support and service offerings with a focus on the cross-selling of the Enlarged Group's solution set to take advantage of the opportunity to create broader and deeper customer relationships;

· undertake selected M&A based activity with a focus on complementary territories, customer bases, solutions and technology. Whilst the focus for the Enlarged Group will primarily be the integration of Perfect Commerce and PROACTIS in the short-term, the Board and the Proposed Director believe there remains a healthy pipeline of further M&A opportunities that would accelerate and enhance the growth of the Enlarged Group; and

· capitalise on The Business Network to unlock a new opportunity, which PROACTIS has described as the 'supplier commerce opportunity', by accessing and offering value added benefits and services to a new customer grouping, the suppliers of PROACTIS' customers. The Enlarged Group also intends to explore other commercial opportunities, including those that arise from US Tier 2 companies, the US public sector, APF, AP automation, analytics and BPO procurement.

8.2 Integration plan

The Company has developed a plan designed to integrate Perfect Commerce and PROACTIS. This plan would create over time a single operation, going to market with a common strategy, vision and culture. The broad principles of the plan are as follows:

· to combine the commercial and operational market and customer facing teams in each of the principal geographies (the US, the UK and mainland Europe) and to appoint an executive in each of those territories that will carry the responsibility for the commercial and operational activities in each of those territories. The performance of these executives will be measured against growth, profitability and other commercial, financial and operational metrics;

· each of the territories will have access to the entire solution set which is available to be deployed in new and existing business opportunities;

· the design, development and support of the solution set will be co-ordinated centrally and delivered globally and will be based on market, customer and internal influences; and

· a global infrastructure team, comprising corporate marketing, product management, development, QA and L1&2 support, business information, accounting and legal counsel, to support the commercial and operational teams.

The Board and the Proposed Director have identified the need to deliver a high level of service and communication to customers, suppliers and staff throughout the duration of the integration period and the integration plan includes a detailed plan for communications throughout the period.

8.3 Integration synergies

The Board and the Proposed Director intend that the Enlarged Group be headquartered in London, UK with other main offices in Newport News, Virginia; Houston, Texas; Phoenix, Arizona; Paris, France; Bonn, Germany; Alabang, The Philippines; Auckland, New Zealand; Leeds, UK; Newcastle, UK; Telford, UK; and Aberdeen, UK.

The Board and the Proposed Director expect the Enlarged Group to achieve net annualised cost savings of approximately £5.0 million, primarily through a reduction in operating expenditure resulting from the economies of scale that the Enlarged Group would offer. These net cost savings are expected to arise in the areas of:

· Senior management rationalisation: approximately £0.6 million;

· Relocation customer support (off-shore): approximately £0.3 million;

· Rationalisation of IT operations: approximately £1.7 million;

· Finance and administration: approximately £0.7 million;

· Sales and account management: approximately £0.9 million; and

· Other general operational efficiencies: approximately £0.8 million.

The Board and the Proposed Director believe that these expected net annualised savings can be delivered by 31 July 2018 and that they should accrue approximately evenly from the date of Completion. The Board and the Proposed Director have estimated that the cost of delivering these cost savings will be approximately £2.5 million.

In addition to the above cost savings, the Board and the Proposed Director also believe that the Enlarged Group will benefit from an enhanced media profile and greater efficiencies in marketing and communication campaigns for new business, specifically within the US and French public sectors and the US Tier 2 commercial market. The Board and the Proposed Director also believe that the enhanced solution set should provide new revenue opportunities from existing customers (through cross-selling and up-selling) in the medium to long term.

9. SUMMARY OF FINANCIAL INFORMATION

Section B of Part V of the Admission Document will contain audited historical financial information on Perfect Commerce for the three years ended 31 December 2016. Audited historical financial information on PROACTIS for the three years ended 31 July 2016 and unaudited interim statements for the six month periods ended 31 January 2016 and 31 January 2017 will be incorporated by reference into Section C of Part V of the Admission Document.

The following summary financial information on Perfect Commerce and on PROACTIS has been extracted, without material adjustment (unless otherwise stated), from the financial information to be contained in Section B of Part V of the Admission Document (in the case of Perfect Commerce) and from the financial information to be incorporated by reference into Section C of Part V of the Admission Document (in the case of PROACTIS). The following summary financial information should be read in conjunction with the full text of the Admission Document (when published) and with the financial information to be presented in Sections B and C of Part V of the Admission Document. Investors should not rely solely on this summarised financial information.

Summary historical financial information on PROACTIS

* Stated before the impact of non-recurring administrative expenses (related to the Group's acquisition during FY16 and the post-acquisition integration and re-organisation programmes), amortisation of customer related intangible assets and share based payment charges.

Summary historical financial information on Perfect Commerce

10. CURRENT TRADING AND PROSPECTS

PROACTIS

The Existing Group announced its unaudited interim results for the six months ended 31 January 2017 on 26 April 2017, reporting the following financial highlights:

· Headline revenues increased 35.6 per cent. to £11.8 million (H1 2016: £8.7 million), benefitting from the contribution of Due North Limited (acquired on 2 February 2016) and Millstream Associates Limited (acquired on 16 November 2016);

· Underlying revenue growth (excluding the benefit of these acquisitions) was 13.4 per cent. (H1 2016: 3.6 per cent.);

· Adjusted EBITDA increased 25.0 per cent. to £3.0 million (H1 2016: £2.4 million);

· Strong balance sheet with net debt at £2.7 million (H1 2016: £0.5 million);

· Buoyant deal activity: 27 new name deals (H1 2016: 23);

· Favourable revenue shift toward multi-year SaaS deals: 22 new names (H1 2016: 14);

· Increased volumes from existing customers: 59 deals to 31 January 2017 (H1 2016: 45); and

· Early adopter programme for 'supplier Commerce' has progressed well during the period and overall supplier opportunity extended.

The Existing Group has seen strong growth, both organically and by acquisition, for the six months ended 31 January 2017. The Board considers that the level of organic growth has been strong and that this has been bolstered by the contributions from recent acquisitions. The Board believes that PROACTIS has executed its M&A strategy effectively over the six months ended 31 January 2017 and is committed to further M&A activity. Alongside the significant levels of new names signed during the period in the core business, PROACTIS' customer retention and increased deal flow from existing customers demonstrates the strength of PROACTIS' proposition and its ability to address successfully the growing spend management market.

Trading since 1 February 2017 has been in line with the Board's expectations.

This information relates to past performance. Past performance is not a reliable indication of future results.

Perfect Commerce

Perfect Commerce Group's focus over the past 12 months has been on cost restructuring, increasing efficiency and profit margin improvement, despite a reduced customer base and a consequent reduction in Hubwoo's service revenue. Whilst profit declined over Perfect Commerce Group's two financial years ended 31 December 2015, FY16 saw a return to EBITDA profitability.

Highlights regarding trading for the first five months to 31 May 2017 include:

· Revenue from eight new customers expected to be generated in this financial period;

· Three new customer "label" wins in 2017, being Bosch, North Carolina (US) and Chesterfield Virginia (US); and

· Normalised customer losses, with greater than 99 per cent. revenue retention rate.

Between 1 January 2017 and 31 May 2017, the Perfect Commerce Group traded broadly in line with its management's expectations. These expectations reflected a decline in Hubwoo revenues compared to prior years as previously terminated contracts expired, as will be described in paragraph 3 of Part III of the Admission Document. A number of new contracts that were services revenue based have been delayed but are expected to be delivered post Completion. Overall, the Board and the Proposed Director are pleased with the strong pipeline of opportunities that the Perfect Commerce Group has and are confident in the Perfect Commerce Group's ability to trade in line with expectations for the year ending 31 December 2017.

Some of this information relates to past performance. Past performance is not a reliable indication of future results.

11. PRINCIPAL TERMS AND CONDITIONS OF THE ACQUISITION

Acquisition of Perfect Commerce

On 7 July 2017, the Company, PROACTIS US and the Seller (amongst others) entered into the Acquisition Agreement, under which PROACTIS US has conditionally agreed to acquire all of the outstanding membership interest of Perfect Commerce. Immediately prior to Completion, the Seller will transfer all of its material subsidiaries to Perfect Commerce and convey to Perfect Commerce all material assets of the Seller and of any retained subsidiary relating to the operation of Perfect Commerce's business. At Completion, the Company expects to pay a total consideration of approximately $127.5 million, payable in cash and by the issue of the Convertible Acquisition Loan Notes. In addition, the Company will pay up to a further $5.0 million in additional cash consideration upon the occurrence of specified events during the period to 31 July 2018. The cash portion of the purchase price payable at Completion will be reduced by any outstanding indebtedness, unpaid transaction expenses, certain unpaid income taxes, if any, and by $637,500 to be deposited into an escrow account to fund the Seller's indemnity obligations.

Conditions to Acquisition

The Acquisition Agreement is conditional upon, amongst other things, the approval of the Acquisition by Shareholders at the General Meeting (notice of which will be set out at the end of the Admission Document) and the Company being in receipt of adequate funding.

Completion of the Acquisition is intended to occur within three Business Days following Admission, with Re-admission occurring shortly thereafter. At Admission, a number of conditions to the Acquisition and the New Facilities Agreement will remain to be satisfied (or waived). In the unlikely event that the Acquisition does not complete in circumstances where Admission has already taken place, the Board's current intention is that the net proceeds of the Placing will be invested and/or applied to manage the Company's debt and cash position on a short term basis while the Directors evaluate other acquisition opportunities and, if no acquisitions can be found on acceptable terms within a suitable timeframe, the Board will consider how best to return surplus capital to Shareholders. Such a return could carry financial and tax costs for certain Shareholders, will incur costs on the part of the Company and would be subject to applicable securities laws such that the total amount of any return of capital may be less than the amount subscribed in the Placing. 

Warranties and Indemnities 

The Acquisition Agreement includes representations, warranties and covenants from the Seller in favour of the Company. The Seller and certain members of the Seller owning a majority of the outstanding membership interest of the Seller (the "Key Holders") agree to indemnify the Company for damages arising out of any breaches of the Seller's representations, warranties and covenants. However, except for indemnities relating to specified fundamental representations, certain taxes and certain other specific items, Seller's and the Key Holders' indemnity obligations are limited to $637,500 in the aggregate, which amount will be deposited at Completion into an indemnity escrow account. In addition, the Key Holder's indemnity obligation, which are several, not joint are based pro rata on each Key Holder's relative ownership interest in the Seller. As further protection, the Company has procured a representation and warranty insurance policy with a policy limit of $25.5 million. Claims under this policy are subject to customary and certain specific conditions and exclusions.

Further details of the Acquisition Agreement will be set out in paragraph 18.1 of Part VII of the Admission Document.

12. HUBWOO AND POSSIBLE TENDER OFFER

Pursuant to a tender offer in September 2015, Perfect Commerce currently owns approximately 79 per cent. of the issued share capital in Hubwoo, which is listed on the Euronext market in France. At Completion the Company will become the indirect holder of more than 30 per cent. of the share capital and voting rights of Hubwoo and therefore under the rules of the AMF, Completion will trigger an obligation on the Company to launch a tender offer for those Hubwoo shares that Perfect Commerce does not already own, unless the AMF was to grant, in its sole discretion, a waiver. It is the current intention of the Company to seek such a waiver from the AMF. If a waiver is not granted the AMF has the discretion to determine the timetable for a tender offer.

The Board understands that within four businesses days from Completion, the Company is required to file a notification with the AMF disclosing its indirect holding in Hubwoo. The Board understands this notification will also require a comprehensive declaration of intent from PROACTIS regarding its intentions. It is the Board's intention to work with the AMF between the announcement of the Transaction and Completion to understand what obligations, if any, the AMF will impose on the Company.

In the event that a tender offer is required and no exemption or waiver is available or taken advantage of, the Board currently anticipates that it will work towards making a tender offer for the remaining Hubwoo shares after Completion and, in any event, subject to a timetable to be agreed with the AMF. In the absence of the Company acquiring any Hubwoo shares in the last 12 months, determination and fixing of the price to be offered per Hubwoo share as well as the form that the consideration will take (i.e. cash, Shares, convertible bonds or a combination of them) will need to involve the AMF and can be challenged by the AMF.

In the event that the Company becomes interested in 95 per cent. or more of the voting rights in Hubwoo, it would, at that time, be able to invoke a 'squeeze out' of the remaining minority shareholders under French law. The price to be paid under the squeeze out procedure is set by the AMF and it could be higher (or lower) than the price offered under any tender offer. There can be no guarantee that the 95 per cent. threshold will be reached (or the timescales within which it might be reached) and, as such, Hubwoo may not become a wholly owned subsidiary of PROACTIS and may retain its listing on the Euronext market.

13. FINANCING OF THE ACQUISITION & FINANCIAL IMPACT OF THE ACQUISITION

PROACTIS is financing the cash consideration due in respect of the Acquisition and associated expenses through a Placing expected to raise gross proceeds of £70.0 million and new debt to be drawn under the New Debt Facilities of £28.0 million on Completion. Further information on each of these is set out in paragraphs 11, 14 and 15 below. The Acquisition is expected to be earnings enhancing in the financial year ending 31 July 2018. This statement does not constitute a profit forecast.

14. INFORMATION ON THE PLACING

On Admission (following the issue of the Placing Shares but assuming no further Shares are issued between the date of this announcement and Admission) the Company will have 92,662,789 Shares in issue and an expected market capitalisation of approximately £152.9 million (based on the Placing Price). The Placing comprises the issue of 42,424,243 Placing Shares by the Company to raise approximately £70.0 million (before expenses). The Placing Price of 165 pence represents a discount of approximately 5.7 per cent. to the middle market closing price of 175 pence per Share on 6 July 2017, being the latest Dealing Day prior to the publication of this announcement.

finnCap has agreed, pursuant to the Placing Agreement, to use its reasonable endeavours to place the Placing Shares, with institutional and other investors. The Placing, which is not being underwritten, is conditional, amongst other things, upon the Placing Agreement becoming unconditional and not having been terminated in accordance with its terms prior to Admission; and Admission becoming effective on 1 August 2017, or such later date as finnCap and the Company may agree, being not later than 15 August 2017. The Placing Shares will rank pari passu in all respects with the Existing Shares including the right to receive all dividends and other distributions declared, paid or made after Admission. None of the Placing Shares have been marketed to or will be made available in whole or in part to the public in conjunction with the application for Admission.

On completion of the Placing the then existing issued share capital of the Company will be increased by 42,424,243 Shares, resulting in an immediate dilution of holders of Existing Shares who do not participate in the Placing of 45.8 per cent., in aggregate, assuming that no other Shares are issued between the date of this announcement and the date of Admission.

Further details of the Placing Agreement will be set out in paragraph 16 of Part VII of the Admission Document.

15. INFORMATION ON THE NEW DEBT FACILITIES

On 7 July 2017, the Company, PROACTIS US and other companies within the Existing Group entered into the New Debt Facilities with HSBC. The New Debt Facilities total £45.0 million and will be made available through a £30.0 million (multicurrency) revolving credit facility, comprised of £11.0 million of existing commitments and £19.0 million of new commitments (the "RCF") and a £15.0 million (multicurrency) term loan, comprised of £4.2 million of existing commitments and £10.8 million of new commitments (the "Term Loan"). The New Debt Facilities mature five years from the signing date. The Term Loan has a coupon rate of 1.95 per cent. over LIBOR and the RCF has a ratcheted coupon rate no lower than 1.75 per cent. over LIBOR and no higher than 2.5 per cent. over LIBOR.

The New Debt Facilities will be used by the Company to part fund the Acquisition and refinance existing indebtedness owing to HSBC, with the remainder being made available to fund the general corporate and working capital purposes of the Enlarged Group, including any permitted future acquisitions. The New Debt Facilities also provide that the Company may request an increase to the RCF under an additional, uncommitted, £10.0 million accordion facility that would be used for general corporate and working capital purposes of the Enlarged Group.

Further details of the New Debt Facilities will be set out in paragraph 17 of Part VII of the Admission Document.

16. DIRECTORS AND PROPOSED DIRECTOR

Following Completion, the Board will be enhanced by the addition of the Proposed Director, such that the Board, at that time, will comprise three executive directors and two non-executive directors. In conjunction with the Transaction, Rodney Jones (whose resignation as Chief Executive Officer was announced on 19 December 2016), stepped down from the board on 6 July 2017. Therefore, Tim Sykes will fulfil the role of Chief Executive Officer until Completion.

The biographical details of each member of the Board and the Proposed Director are set below:

Directors

Alan John Aubrey - (56 years), Non-Executive Chairman. Alan is the Chief Executive Officer of IP Group plc, a FTSE 250 company that specialises in commercialising intellectual property. He is also a non-executive chairman of Ceres Power Holdings plc, a manufacturer of advanced solid oxide fuel cells, a non-executive director of Avacta Group plc, an AIM quoted company that develops new detection and diagnostic devises for the bio-pharmaceutical markets and a non-executive director of the Department for Business, Energy and Industrial Strategy. Mr Aubrey is a fellow of the Institute of Chartered Accountants of England and Wales. Mr Aubrey is a member of the Remuneration Committee and the Chair of the Audit Committee.

Timothy (Tim) James Sykes - (47 years), Chief Financial Officer and Chief Executive Officer. Tim is a fellow of the Institute of Chartered Accountants of England and Wales. Over the last ten years, he has built up an expertise within the small cap AIM quoted market with over 25 financial years' experience across 5-10 companies as consulting Chief Financial Officer, before joining PROACTIS on a full-time basis from January 2016. Prior to that, he held senior positions within corporate finance at KPMG and as Commercial Director at Mountain Warehouse.

Sean Anthony McDonough - (56 years), Chief Operating Officer. Sean joined the Group as Director of Professional Services during 2005 from Azolve Limited, which he co-founded. Previous roles include Director of Professional Services for CODA Group plc, UK Technical Director for BaaN, Head of Professional Services - Europe Silknet Limited and VP of Professional Services EMEA at Kana Communications.

Rodney Potts - (72 years), Non-Executive Director. Rodney was one of the founders and former Chief Executive of CODA Group plc, the global provider of accounting systems. He is a director of a number of technology ventures. Mr Potts is the Chair of the Remuneration Committee and a member of the Audit Committee.

Proposed Director

George Hampton ("Hampton") Wall Jr. - (56 years), Proposed Chief Executive Officer. Hampton, aged 56, has more than 30 years of corporate management, business development and international M&A experience. He has been President and Chief Executive Officer of Perfect Commerce for 10 years and was previously President of CorMine LLC, a leading procurement services BPO company that acquired Perfect Commerce in 2007. Prior to CorMine LLC, he held various positions at Ferguson Enterprises and Wolseley PLC over 17 years, latterly as the President of the Corporate Sales Division. Hampton is a graduate of Wake Forest University.

Current directorships held by Mr Wall and directorships held by him in the last five years are as follows:

Mr Wall currently holds no Shares in the Company. On Completion, Mr Wall will be the holder of a Convertible Acquisition Loan Note in the principal amount of $3.75 million. The Convertible Acquisition Loan Notes are being issued in partial payment of the purchase price due under the Acquisition Agreement. The Convertible Acquisition Loan Notes will bear interest at 2.0 per cent. per annum, and mature, if not previously converted, on the first day following the fifth anniversary of Completion. Principal and, if converted prior to the date that is 15 months after Completion, accrued and unpaid interest, may be converted at the option of the holder at any time after the first anniversary of Completion into Shares at a conversion price equal to the Placing Price (the "Conversion Price"), subject to customary adjustments. The Convertible Acquisition Loan Notes are not pre-payable by the Company. The Company has the right to pay the outstanding principal amount of the Convertible Acquisition Loan Notes upon maturity in cash or by delivering Shares valued at the Conversion Price and also has the right to pay any accrued and unpaid interest, if not converted into Shares prior to the date that is 15 months after Completion, in cash or by delivering Shares valued at the greater of the Conversion Price or the average mid-market closing price of the Shares for the preceding 12 months. On Completion, the Company Mr Wall will enter into an orderly marketing agreement to govern the circumstances in which any Shares issued to him under the Convertible Acquisition Loan Notes can be disposed of in the 12 month period following such issue.

There are no other disclosures that are required to be announced under Schedule 2(g) of the AIM Rules for Companies.

Following Completion, the Board intends to review the composition of its non-executive board, in order to assist with the next stage of the Enlarged Group's growth.

17. IRREVOCABLE UNDERTAKINGS

The Company has received the following irrevocable undertakings from the Directors to vote in favour of the Resolutions in respect of the following number of Shares:

In addition to the Directors, certain other Shareholders have irrevocably undertaken to vote in favour of the Resolutions in respect of Shares in which they are interested, amounting to, in aggregate, 15,613,403 Shares, representing approximately 31.1 per cent. of the Existing Shares.

18. DIVIDEND POLICY

Declaration and payment of dividends by the Company will be dependent upon the financial position, cash requirements, future prospects and profits available for distribution of the Enlarged Group and other factors regarded by the Board as relevant at the time. It is expected that the Enlarged Group will generate sufficient distributable reserves and free cash flow to allow the Board to consider paying dividends for the financial year to 31 July 2017 and beyond, and it is the Board's intention to put in place a progressive dividend policy. There can be no assurance as to whether dividend distributions will occur as expected, the amount of dividend payments or the timing of any such payment.

The Directors will consider the following general principles when recommending dividends for approval by Shareholders or when declaring any interim dividends:

(a) the Group's level of cash, marketable financial assets and level of indebtedness;

(b) the Group's required and expected cashflows, interest expenses, profit, return on equity and retained earnings;

(c) the Group's expected results from operations and the anticipated future level of operations; and

(d) the Group's projected levels of capital expenditure and other investment plans including future acquisitions.

The Company paid a full year dividend of 1.3 pence per Share in respect of FY16 (FY15: 1.2 pence per Share).

19. CORPORATE GOVERNANCE, BOARD PRACTICES AND SHARE DEALING CODE

The Company has a policy, so far as is practicable and appropriate for a company of its size and nature, to comply with the provisions of the Corporate Governance Code for Small and Mid-Sized Companies issued by the Quoted Companies Alliance and will continue to apply those principles following Re-admission. The Company currently has two non-executive Directors with relevant sector experience to complement and bring an independent view to the Board, and to provide a balance to the executive Directors.

The Board is responsible for formulating, reviewing and approving the Group's (and, post Re-admission, the Enlarged Group's) strategy, budgets and corporate actions. The Directors will continue to hold meetings of the Board approximately nine times a year and at other times as and when required. Following Re-admission, the Board intends to review the composition of its non-executive board.

19.1 Board committees

The Company has established Audit and Remuneration Committees with formally delegated duties and responsibilities.

a) Audit Committee

The Audit Committee is chaired by Alan Aubrey and has the primary responsibility of monitoring the quality of internal controls and ensuring that the financial performance of the Group is properly measured and reported on. It receives and reviews reports from the Group's management and external auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Group. The Audit Committee meets not less than twice in each financial year and has unrestricted access to the Group's external auditors. The Audit Committee comprises Alan Aubrey and Rodney Potts.

b) Remuneration Committee

The Remuneration Committee is chaired by Rodney Potts and reviews the performance of the executive directors and makes recommendations to the Board on matters relating to their remuneration and terms of service. The Remuneration Committee also makes recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any employee share option scheme, equity incentive plan or bonus scheme in operation from time to time. The Remuneration Committee meets as and when necessary. In exercising this role, the members of the committee have regard to the recommendations put forward in the QCA Guidelines and, where appropriate, the UK Corporate Governance Code. The Remuneration Committee comprises Rodney Potts and Alan Aubrey.

19.2 Share dealing code

The Company has adopted a share dealing code for Directors and applicable employees for the purpose of ensuring compliance by such persons with the provisions of the AIM Rules relating to dealings in the Company's securities (including, in particular, Rule 21 of the AIM Rules) and the Market Abuse Regulation. The Directors consider that this share dealing code is appropriate for a company whose shares are admitted to trading on AIM.

The Company will take proper steps to ensure compliance by the Directors and applicable employees with the terms of the share dealing code and the relevant provisions of the AIM Rules (including Rule 21) and the Market Abuse Regulation.

20. SHARE OPTION / INCENTIVE SCHEMES

As at 6 July 2017 (being the latest practicable date prior to the publication of this announcement PROACTIS had outstanding options over a total of 3,506,430 Shares representing approximately 7.0 per cent. of the Existing Share Capital. A summary of the Share Schemes will be set out in paragraph 6 of Part VII of the Admission Document.

Following Admission, the Company intends to maintain its existing policy of making occasional grants of new options/awards under the Share Schemes to incentivise and reward the Directors, senior management and other employees of the Enlarged Group (including the Proposed Director and employees of the Perfect Commerce Group). The Directors believe that the issue of new options/awards will assist with key senior executive retention and the alignment of their interests with those of the Shareholders. To ensure that the Share Schemes are effective, they will continue to be administered and kept under review by the Remuneration Committee. The Remuneration Committee, where required, will consult with the Nominated Adviser and/or substantial Shareholders on the issue of new options/awards, to the executive Directors.

To facilitate this policy, the Company is proposing that, prior to Admission, it will adopt the LTIP and the Bonus Plan, details of which will be set out in paragraph 6.4 and 6.5, respectively, of Part VII of the Admission Document. In conjunction with the introduction of those schemes, the Remuneration Committee is undertaking a review of executive remuneration. As part of that review, the Remuneration Committee is considering the grant of new LTIP Awards and Bonus Awards to the proposed new Chief Executive Officer, Chief Financial Officer and the Chief Operating Officer. Any grant of these Awards will take place post Admission. Further details of these proposals will be set out in paragraph 6.6 of Part VII of the Admission Document.

The Company also proposes to adopt the Executive Share Option Scheme 2017 (a summary of which will be set out in paragraph 6.3 of Part VII of the Admission Document) pursuant to which the Directors are considering, subject to any legislative or regulatory restrictions, granting a new Unapproved Option between the date of this announcement and Admission. Further details of this proposed Unapproved Option will be set out in paragraph 6.3 of Part VII of the Admission Document.

21. TAXATION

The attention of investors is drawn to the information regarding taxation which will be set out at paragraph 12 of Part VII of the Admission Document. These details are, however, only intended as a guide to the current taxation law position in the UK.

Investors who are in any doubt as to their tax position or who are subject to tax in jurisdictions other than the UK are strongly advised to consult their own independent financial adviser immediately.

22. APPLICABILITY OF THE TAKEOVER CODE

The Takeover Code will govern takeover offers for the Enlarged Group and other matters to which the Takeover Code applies. Further details will be set out in paragraph 22 of Part VII of the Admission Document.

23. GENERAL MEETING

A notice convening the General Meeting, for 11.00 a.m. on 31 July 2017 to be held at the offices of finnCap at 60 New Broad Street, London EC2M 1JJ at 11.00 a.m. on 31 July 2017 at which the following Resolutions will be proposed:

Resolution 1: as an ordinary resolution, subject to and conditional on the Placing Agreement becoming unconditional as regards Admission and Admission having occurred, to approve the Acquisition;

Resolution 2: as an ordinary resolution, to grant authority to the Directors to allot Shares or to grant rights to subscribe for or convert any security into Shares pursuant to section 551 of the Act, up to an aggregate nominal amount of £5,000,000. This authority is in respect of the allotment of the Placing Shares and the Convertible Acquisition Loan Notes and is in addition to the authorities granted to the directors at the annual general meeting of the Company held on 19 December 2016, and will expire (along with such authorities) at the conclusion of the next annual general meeting of the Company, expected to be held in December 2017; and

Resolution 3: conditional on the passing of Resolution 2 and as a special resolution, to disapply the statutory pre-emption rights contained in section 561(1) of the Act in respect of the allotments for cash up to an aggregate nominal amount of £5,000,000. This disapplication is in respect of the allotment of the Placing Shares and the Convertible Acquisition Loan Notes. This power is in addition to the powers granted to the directors at the annual general meeting of the Company held on 19 December 2016 and will expire (along with such powers) at the conclusion of the next annual general meeting of the Company, expected to be held in December 2017.

24. ADMISSION, RE-ADMISSION, SETTLEMENT AND CREST

Application will be made by the Company for the Placing Shares to be admitted to trading on AIM. Subject to the passing of the Resolutions, it is expected that Admission will occur and dealings will commence on 1 August 2017.

As the Acquisition constitutes a reverse takeover of the Company under Rule 14 of the AIM Rules, Shareholder consent to the Acquisition is required at the General Meeting. Accordingly, following Completion, it is expected that the admission of the Existing Shares and the Placing Shares to trading on AIM will be cancelled (immediately prior to Re-admission) and the Enlarged Share Capital will be re-admitted to trading on AIM. Application will be made by the Company for the Enlarged Share Capital to be re-admitted to trading on AIM and it is expected that Re-admission will commence and dealings wukk commence by 8.00 a.m. on 7 August 2017.

Re-admission in conditional, amongst other things, on (i) Admission, (ii) Completion and (iii) no fact, matter or circumstances arising following Admission that results in finnCap (acting in good faith) being unable to deliver its declaration pursuant to Schedule Two of the Nomad Rules in connection with Re-admission.

Settlement of transactions in the Shares may take place in CREST if the relevant Shareholder so wishes. CREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by a share certificate and transferred otherwise than by written instrument. The Articles permit the holding and transfer of Shares under the CREST system. CREST is a voluntary system and Shareholders who wish to receive and retain share certificates will be able to do so. Persons acquiring Shares as a part of the Placing may elect to receive Shares in uncertificated form if, but only if, that person is a 'system-member' (as defined in the CREST Regulations) in relation to CREST.

It is expected that, subject to the satisfaction of the conditions of the Placing, the Placing Shares will be registered in the names of the Placees subscribing for them and issued either: in certificated form, where the Placee so elects, with the relevant share certificate expected to be dispatched by post, at the Placee's risk; or, by/or in CREST, where the Placee so elects and only if the Placee is a 'system member' (as defined in the CREST Regulations) in relation to CREST, with delivery (to the designated CREST account) of the Shares subscribed for expected to take place on 1 August 2017. Notwithstanding the election by Placees as to the form of delivery of the Placing Shares, no temporary documents of title will be issued. All documents or remittances sent by or to a Placee, or as they may direct, will be sent through the post at their risk. Pending the dispatch of definitive share certificates (as applicable), instruments of transfer will be certified against the Company's register of members.

25. RECOMMENDATION

The Directors consider the Transaction to be in the best interests of the Company and the Shareholders as a whole and accordingly unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting as they have irrevocably undertaken to do in respect of their own beneficial holdings amounting, in aggregate, to 10,606,986 Shares representing approximately 21.1 per cent. of the Existing Shares.

26. FURTHER INFORMATION

Your attention is also drawn to the Admission Document, which will contain further information on the Company, Perfect Commerce and the Transaction.

DEFINITIONS

In this announcement, where the context permits, the expressions set out below shall bear the following meaning:

GLOSSARY