The Mission Marketing Group plc Acquisition of Krow Communications Limited

Posted: 10th April 2018 08:57

The Mission Marketing Group plc, the technology-embraced marketing communications and advertising group, is pleased to announce that it has acquired Krow Communications Ltd, an award-winning creative Agency based in London, for an initialconsideration of £2.75 million, to be satisfied in cash. The Board expects the Acquisition to be earnings enhancing with immediate effect.

Highlights of the Acquisition

  • The Acquisition delivers a major London presence for themission;
  • Provides significant opportunities for cross-selling the Group's capabilities;
  • Initial consideration will be funded from the Group's existing financial resources; and
  • The Acquisition is expected to be earnings enhancing with immediate effect.

Information on Krow

Listed in Campaign as the UK's 17th largest advertising agency, Clerkenwell-based Krow was founded in 2005 and today employs 65 staff with a diverse Client list including Fiat, DFS, Ferrero, Sky Vegas, Wilko, RNLI, Digital Realty and Team GB.

Krow is still managed by the four founders who launched the business. This stability has helped foster a loyal Client roster, with many relationships of five years or more. According to Campaign's Adwatch, Krow's Aardman animated campaign for DFS was 2017's top overall performer, retaining its number one position for the second year in a row, its Olympics campaign for the same brand won Retail Week's campaign of the year.

In the financial year ended 31 December 2017, Krow reported revenues* of £7.2 million, underlying pre-tax profits** of £1.0 million and as at 31 December 2017 had net assets of £0.3 million.

As part of the Acquisition, all Krow founders and employees will remain employed by Krow.

Rationale for the Acquisition

themission provides a full range of integrated and specialist marketing communications services to local, national and international Clients from a network of offices across the UK, Asia and the US. The acquisition of Krow provides the Group with an important and high-profile presence in London. Predominantly a strategic and creative agency, we expect our shared knowledge, depth of resource and specialist services to strengthen and complement Krow's offering.

Terms of the Acquisition

Krow has been acquired for an initial consideration of £2.75 million for the business ("Initial Consideration"). The Initial Consideration is to be satisfied by a cash payment funded through the Group's existing cash resources. The Initial Consideration will be adjusted based on Krow's 2018 financial performance, with a further payment  to be made in 2019, of which up to £0.5 million will be payable in new ordinary shares.  Combined, the Initial Consideration payments will represent a 3x multiple of Krow's 2018 adjusted EBIT.

Contingent Consideration

Under the terms of the Acquisition Agreement, deferred consideration is payable, contingent on Krow's financial performance in 2019 and 2020 ("Contingent Consideration").  The Contingent Consideration is to be satisfied by the issue of new ordinary shares (being not less than 5%) with the balance payable in cash. The cash element is expected to be mostly funded from future cash-flows generated by the enlarged Group.

To achieve the maximum total consideration (Initial Consideration plus Contingent Consideration) of £14.5 million, Krow's compound EBIT growth is required to be 25% and it would need to achieve cumulative EBIT of £4.9 million in the three years ending 31 December 2020.

David Morgan, Executive Chairman of themission, commented: "We have admired Krow and its approach for quite some time and we are really looking forward to working with them as part of the missiontm. Krow's team members share our values and their position in the market, strategic expertise, creativity and strong senior team will complement our portfolio of Agencies and give us an important foothold in London."

Barry Cook, one of Krow's founders, commented: "Over the last 11 years, we have built a brilliant, multi-talented and loyal team that has helped us establish Krow very firmly in the top 20. We think the time is right for us to build on that position, adding depth and breadth to our capabilities to meet future client demand. We are convinced that in the mission we have found the perfect partner to achieve that. We are looking forward to establishing the Krow brand as a London-based flagship for the Group; it is going to be a really exciting partnership enabling us to be interconnected while preserving the integrity of our brand." 

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