Harvey Nash Group PLC Acquisition of Crimson Limited (4322Q)

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RNS Number : 4322Q

Harvey Nash Group PLC

12 September 2017

12 September 2017

Harvey Nash Group PLC

("Harvey Nash" or the "Company")

Acquisition of Crimson Limited (the "Acquisition")

Harvey Nash, the global technology recruitment and outsourcing group, is pleased to announce the acquisition of Crimson Limited ("Crimson"), cementing the Group's position as the market leading technology talent provider in the UK's IT and digital sectors.

Crimson, founded in 2000, is a UK IT solutions and recruitment company that specialises in digital and technology transformation solutions as well as offering a full range of IT recruitment services, both permanent and contract. For the year ended 31 March 2017, Crimson reported a profit before tax of GBP1.7 million on turnover of GBP23.5 million, with gross assets of GBP5.4 million at 31 March 2017. During this period approximately 50% of Crimson's gross profit was derived from IT Solutions and 50% from recruitment, of which the majority was contracting or annuity revenues.

Under the terms of the Acquisition, Harvey Nash Group plc will acquire 100% of the shares in Crimson for an initial cash consideration of GBP6 million ("Initial Consideration"), plus an adjustment for working capital on completion (expected to result in a payment of no more than GBP100,000). Deferred cash consideration of up to GBP4 million ("Deferred Consideration") will be paid in two equal tranches on the first and second anniversary of completion with 50% guaranteed and the remainder subject to achieving a minimum level of EBITDA in each year of GBP1.5 million (or an aggregate over 2 years of GBP3 million or more).

In addition to the Initial Consideration and the Deferred Consideration, an earn-out of up to GBP5 million will be payable in cash over the period of three years following completion, in two tranches:

-- up to GBP2 million will be paid based on the increase in adjusted EBITDA delivered by Crimson during months 13-24 following completion; the amount payable will be 5 times the difference between such adjusted EBITDA and the adjusted EBITDA of GBP2.5 million for the year ended 31 March 2017; and

-- up to GBP3 million will be paid based on the increase in adjusted EBITDA delivered by Crimson during months 25-36 following completion; the amount payable will be 5 times the difference between such adjusted EBITDA and GBP2.5 million (the "Earn-Out Consideration").

The Initial Consideration, the Deferred Consideration and, if applicable, the Earn-Out Consideration, will be satisfied from the Group's existing cash flows resources and facilities. The total maximum consideration payable for the acquisition of Crimson is up to GBP15 million in cash, on a cash-free and debt-free basis, but assuming a normal level of working capital (cGBP1.2 million during the year ended 31 March 2017).

Of the three shareholder directors, Robert Mallaband and Simon Chave will continue as CEO and CIO of Crimson respectively, remaining with the business along with the current management team, post-acquisition.

Albert Ellis, CEO of Harvey Nash Group, said:

"I am delighted to welcome the team from Crimson into the Group. This is a transformative acquisition firmly establishing the Group's business as the leading full service technology talent provider in the UK's IT and digital sectors.

The breadth and depth of technology expertise and talent resources offered by the combined businesses is unrivalled in the market and we expect to achieve cross selling synergies over the coming months. In particular, our world class Vietnam offshore IT project and software development service will complement Crimson's already established and well respected onshore consulting teams.

The announcement demonstrates our commitment to executing our stated strategy of delivering growth, both organically and through acquisitions."

Rob Mallaband, CEO of Crimson, said:

"Harvey Nash is well established with a unique portfolio of services and strong brand, and was the obvious choice when we were seeking a strategic partner to support us as we accelerate our own growth.

I am delighted that Crimson is now part of the Harvey Nash Group and am confident that substantial success and opportunity lies ahead now that we have the backing and support of a much larger group with a global footprint."

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) no 596/2014.

For further information, please contact:

Harvey Nash Group plc

Albert Ellis, CEO

Mark Garratt, CFO

Tel: [phone]

Panmure Gordon (Nominated Adviser & Broker)

Ben Thorne

Erik Anderson

Andrew Potts

Tel: [phone]

Hudson Sandler

Michael Sandler

Hattie O'Reilly

Fern Duncan

Tel: [phone]

About Harvey Nash:

Harvey Nash is a global recruitment business focusing on technology and digital talent recruitment. Our unique portfolio of services, from executive search, professional recruitment to offshore solutions, enables us to engage with clients at every stage of the business cycle. Our relationship-based model underpins the delivery of resilient financial returns and supports sustainable returns to shareholders.

With 8,000 professionals in 47 offices across the USA, Europe, Asia and Australia, Harvey Nash has the reach and resources of a global organisation, while fostering a culture of innovation and autonomy that empowers its employees and associates to deliver client-centric solutions.

About Crimson:

Crimson is a fast-moving technology and recruitment company which specialises in the full range of IT support, consultancy and search and selection services. Specialising in digital and transformational change services, Crimson is an accredited Microsoft Gold Partner and the business operates the world's leading and trusted technologies seeking to maximise its client's return on technology investment to improve efficiency, compliance, profitability, communications and processes. The business is driven by people and its reputation is built on providing products and services which reflects its values.

Crimson was majority owned by its directors and their wives (Simon Chave, Helen Chave, Michael Ames, Barbara Ames, Robert Mallaband, Julie Mallaband) and Tom Cadman, with the remainder of the shares owned by senior employees and private individuals.

This information is provided by RNS

The company news service from the London Stock Exchange

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(END) Dow Jones Newswires

September 12, 2017 02:00 ET (06:00 GMT)