Sun European Partners completes acquisition of K3 Capital at over 21x profits

Sun European Partners has completed its acquisition of Bolton-headquartered professional services firm K3 Capital in a deal worth £271.7 million. The consideration represents close to a 21.4x multiple of K3’s £12.7 million pre-tax profits for the year ending May 31 2022, generated on group revenue of £70.6 million.

In its most recent results, K3 Capital, which provides specialist advisory services to SMEs in the business sales, tax and restructuring markets, saw revenue increase from £47.1 million in 2021, while pre-tax profits grew from £7.6 million.

The deal for Sun European Partners to acquire the firm on behalf of Sun Capital Partners Group, first announced in December 2022, has seen all of K3’s independent directors resign. Shares in the company were suspended from AIM on the morning of February 14 and will be cancelled at 7am on February 15.

Speaking when the deal was first announced, K3 non-executive chairman Ian Mattioli said: "Since IPO in 2017, management has continued to execute its strategy of building a multi-disciplinary and complementary group, providing specialist advisory services to SMEs across three core divisions, business sales, tax and restructuring.”

"K3 is now a diversified group with a resilient, high margin and cash generative business model and a data-driven marketing platform at its core, driving strong levels of organic growth. Sun is an experienced investor with a proven track record in supporting strong management teams in achieving their growth ambitions.”

Mattioli continued: "K3 will be able to benefit from their operational expertise whilst having a supportive partner with the capital required to fund K3's M&A strategy.”

"Whilst being confident on the outlook for K3, we are mindful of the weakening macroeconomic environment in the UK and the pressures that this is likely to put on UK SMEs over the medium term and, therefore, it is the independent directors view that this offer represents an opportunity for shareholders to realise their entire investment, in cash, at an attractive valuation."

The deal represents a continuation of a surge in dealmaking in the UK’s professional services sector, in which K3 Capital has also been active as a buyer for several years. In March 2022, the group acquired marketing agency JE Consulting, before acquiring insolvency practitioner Chamberlain & Co for up to £4.4 million in October.


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