GRC International Group PLC – Acquisition of DQM Group Holdings Ltd & Placing

GRC International Group PLC – Acquisition of DQM Group Holdings Ltd & Placing

GRC International Group plc (AIM:GRC), a leading supplier of IT governance, risk management and compliance products and services, is pleased to announce that it has conditionally agreed to acquire the entire issued share capital of DQM Group Holdings Limited, a provider of data consulting and technology solutions, and its subsidiaries. The Acquisition is expected by the Board to be significantly earnings enhancing in FY 2020 and beyond and marks the completion of the majority of the Group’s investment programme intended to position the Group to become cash generative.

In addition, and in connection with the Acquisition, the Company proposes to raise £5 million by way of a conditional placing of 5,000,000 new Ordinary Shares at 100 pence per Ordinary Share (the “Placing”). The Company intends to use the net proceeds of the Placing to finance primarily the initial cash element of the consideration for the Acquisition and to provide additional working capital for the enlarged business.

Acquisition highlights

  • Conditional agreement to acquire DQM, a provider of data consulting and technology solutions.  Key aspects of DQM include:
    – Four main revenue streams: Managed Services, GDPR Consulting, Third Party Auditing and GDPR Technology Solutions
    – Established earnings, with significant revenue for the year ended 28 February 2018 derived from clients using more than one product or service
    – Revenues for the financial year to 28 February 2018 of approximately £2.9m, with an EBITDA of approximately £720k
    – Organic revenue compound annual growth rate (“CAGR”) of 26 per cent. over the two years to 28 February 2018
  •  Initial Consideration for the Acquisition totaling £5,886,839 comprising a cash payment of £3,532,104 and the issue of 2,021,232 Ordinary Shares, worth £2,354,736 based on an issue price per Ordinary Share of 116.5 pence
  • Deferred Consideration calculated by reference to eight times DQM’s adjusted EBITDA for the financial year ended 28 February 2019, less the Initial Consideration and certain other adjustments. The Deferred Consideration will be satisfied through a cash payment (as to 60 per cent.) and the issue of Ordinary Shares (as to 40 per cent.) and is currently anticipated to be in the range of approximately £2.5 million to £3.5 million, not exceeding £5 million
  • The Acquisition, the Board believes, will provide a number of earnings enhancing benefits to GRC International:
    – Extend the Group’s existing offering to include high margin, data governance services
    – Add market share to the Group, by introducing additional household name clients with on-going contracts
    – Provide cross-selling and upselling opportunities through the companies’ complementary offerings
    – Broaden and strengthen the Group’s second tier management team, through the retention of existing DQM management
    – Add customer account management capability
    – Provide strategic opportunities, such as enabling the Group to gain Data Privacy Seal accreditation
    – Provide sector crossover, such as an increased financial sector exposure
  • The Acquisition is expected to be significantly earnings enhancing in FY 2020 and beyond.

 Placing highlights

  • GRC International is proposing to raise £5 million (before expenses) through a placing of 5,000,000 Placing Shares at 100 pence per Ordinary Share (the “Placing Price”)
  • The Placing Price represents a discount of approximately 9 per cent. to the closing bid price of 109 pence of the Ordinary Shares on 8 February 2019

Commenting on the proposed acquisition, Alan Calder, Chief Executive Officer of GRC International, said: “This strategic acquisition is another step forward in the growth strategy of GRC International, enabling us to capitalise further on the significant opportunities within the IT governance, risk and compliance market and to extend GRC’s existing capabilities and the range of products and services we offer to our customers. DQM boasts market-leading expertise in data consultancy, an impressive customer base and unique solutions, providing us clear opportunities for cross-selling and up-selling of our products and services. We look forward to welcoming DQM into the GRC International Group.”

Peter Galdies, Founder and Director of DQM, also commented: “We are looking forward to becoming part of the GRC International Group and working with Alan Calder and the team. Our existing offerings will complement GRC’s products and services well and the opportunities for synergy creation and cross-selling, we believe, will significantly strengthen the future prospects for the Group.”

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