LONDON: Rosenblatt Group plc, the professional services group, has announced the acquisition of Convex Capital Limited, a specialist sell-side M&A corporate finance boutique, based in Manchester, UK.
The total consideration for the acquisition, assuming all earn-out and deferred consideration payments are made, is £22 million.
The acquisition is in line with the Group’s M&A strategy. This strategy aims to diversify the Company beyond legal services, focusing on high-margin professional services companies like Convex, which will also create opportunities for the cross-referral of business.
Convex is entirely focussed on helping companies, particularly owner-managed and entrepreneurial businesses, realise their value through sales to large corporates. Convex identifies and proactively targets firms that it believes represent attractive acquisition opportunities.
The Board expects the transaction to be immediately, and materially, earnings and value-enhancing for the Group. For the financial year ended 30 June 2019, Convex generated revenues of £8.7 million and profit before tax of £4.3 million.
The acquisition of Convex is expected to help generate a regular flow of fee-based work for Rosenblatt’s corporate division, which is focused on commercial transactions. The Group believes that by working closely together, there will be an opportunity to cross-sell services to the client bases of both companies.
Rosenblatt also intends to use Convex’s Manchester base to create a new regional business hub. The Group will market its expanded professional services offering from the hub, which will also create the opportunity for further cost savings on back-office functions.
The acquisition has been structured in accordance with the Board’s M&A strategy. This strategy means that the majority of the consideration is to be paid in shares, with a maximum of 40% to be paid in cash. A significant proportion of the consideration is deferred, to lock in the new business and the talent being acquired.
This approach is designed to ensure the value of the acquisition is protected and so that the management of Convex are appropriately incentivised to deliver returns for Rosenblatt shareholders as well as themselves.
Key management and employees of Convex have agreed to a long-term lock-in for Rosenblatt shares and agreed to non-compete clauses. The Initial Consideration Shares and the Deferred Consideration Shares will be subject to a lock-in of three years from their respective issuance dates. Application will be made for the Initial Consideration Shares to be admitted to trading on AIM. Admission of the Initial Consideration Shares is expected to be on 20 September 2019.
Management and employees of Convex will also join the Rosenblatt performance bonus scheme to ensure close alignment with the interests of shareholders.
To reflect the evolving nature of the Group, from primarily a provider of legal services to a broader supplier of professional services, the Board has changed the name of the Company to RBG Holdings plc. This change is expected to become effective on the London Stock Exchange from 8 a.m. on 17 September 2019.
Following the acquisition, the Group will comprise a number of subsidiaries including the law firm, Rosenblatt Limited, Convex Capital Limited, and the Group’s litigation finance arm.
The Group will be announcing its interim results for the six months ended 30 June 2019 on Wednesday 25 September 2019. The Board can confirm trading remains in line with the update published on 1 August 2019.
Nicola Foulston, CEO, Rosenblatt, said: “Convex is an exciting and successful business, which shares with Rosenblatt a focus on high-margins and cash generation. Like Rosenblatt, it is an entrepreneurial company with a proven ability to create markets where none have existed. We also share a similar client base, often working with entrepreneurs. We have had the pleasure of working with Mike and the Convex team over several years and know there is a strong cultural fit between the two organisations. There is a considerable market opportunity in terms of cross-referrals of business between Rosenblatt and Convex, as well as the opportunity to expand our regional presence.”
Mike Driver, Chairman, Convex, said: “The combination of Convex and Rosenblatt is a fantastic opportunity to drive the development of both companies. Like ourselves, Rosenblatt builds strong relationships with entrepreneurs and business founders. Working closely with Nicky and her team will expand our network to help identify future transaction opportunities. We can also increase the support that we can offer clients to ensure a successful deal. We are very excited about the future opportunities that this agreement will bring.”
Edited by Nayyar Iqbal