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Harvey Nash acquires Crimson Limited

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 £1.7 million on turnover of £23.5 million, with gross assets of £5.4 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 £6 million ("Initial Consideration"), plus an adjustment for working capital on completion (expected to result in a payment of no more than £100,000). Deferred cash consideration of up to £4 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 £1.5 million (or an aggregate over 2 years of £3 million or more).

 

In addition to the Initial Consideration and the Deferred Consideration, an earn-out of up to £5 million will be payable in cash over the period of three years following completion, in two tranches:

 

•  up to £2 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 £2.5 million for the year ended 31 March 2017; and

•  up to £3 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 £2.5 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 £15 million in cash, on a cash-free and debt-free basis, but assuming a normal level of working capital (c£1.2 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.”

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