Be Heard Group Plc Acquires Kameleon Worldwide Limited

Be Heard Group Plc, the digital marketing services group, announces the acquisition of Kameleon Worldwide Limited, the award-winning content marketing agency.

Founded in 2008 by Mark Webster and Richard Armstrong, Kameleon is one of a new breed of agencies using content, analytics and technology to change the way that brands connect with consumers. The agency provides cutting-edge content marketing services to leading brands including Danone, Quorn, RockCorps, Celebrity Cruises, Lee Cooper, National Citizens Service, City Index and Sony and was named Content Marketing Agency of the Year by the Drum Network in 2015.

This Acquisition is the latest step towards Be Heard's goal of building a digital marketing services group designed to deliver better, more cost efficient and more creative solutions to clients.

For the financial year ended 31 December 2015 Kameleon achieved adjusted EBITDA of £0.530 million on gross revenues of £2.43 million. In 2016, it is expected to generate gross revenues of £3.89 million, representing 60% annual growth, with adjusted EBITDA of £0.785 million.

Terms of the acquisition

Be Heard will acquire 100% of Kameleon's equity for an initial consideration of £4.05 million, representing 5.2x adjusted EBITDA for 2016. A deferred consideration of £3 million is payable in equal instalments over the three years to 2019 subject to gross revenue reaching 110% of the previous year's level. An additional 'stretch' payment will be payable in 2019 if Kameleon achieves sales and EBITDA of at least £8.1 million and £1.62 million respectively. The total deal is capped at £10 million. Kameleon is being acquired on a debt free/cash free basis.

Both the initial and deferred considerations will be paid 65% cash and 35% shares in Be Heard. Any stretch consideration will be payable 50% cash and 50% shares. Any share consideration paid under the deferred or stretch plan will be calculated subject to maximum and minimum share price limits.

The initial consideration and associated expenses will be funded from the Group's cash reserves.

The Acquisition is expected to be materially earnings enhancing in the first full year of ownership.

Benefits of the Acquisition

The Board believes the Acquisition will provide a number of strategic and operational benefits which will create long-term value for shareholders. In particular:

• The Directors of Be Heard see demand for digital creative and content services as one of the key growth drivers for the Group as people spend more time using smartphones, tablets and other connected devices and clients increase expenditure in this area. 
• The Acquisition moves Be Heard squarely into content marketing, which represents a significant market opportunity, accounting for 12% of digital marketing budgets according to an April 2016 report by Econsultancy, second only to paid search.
• Kameleon brings a highly experienced and talented team with cutting-edge creative and marketing skills into the Group, adding award-winning content strategy, story-telling, production and marketing capabilities across video, social and mobile platforms.
• It has developed a scalable proprietary suite of analytics and project management tools to help clients create bespoke content marketing roadmaps and help plan, manage and optimise campaigns, in line with Be Heard's results-driven philosophy.
• Kameleon works with some of the world's leading brands, creating opportunities to expand the range of services that Be Heard can offer these clients as part of the enlarged Group.
• Kameleon is already partnering successfully with Be Heard's existing businesses - digital media planning and buying agency agenda21 and UX, design and build specialist MMT Digital - highlighting the opportunities and synergies between the three Group agencies.

The Founding Partners at Kameleon are taking shares in Be Heard to participate in the Group's growth, aligning their interests with those of our existing shareholders.

Peter Scott, Executive Chairman of Be Heard said:

"Digital content is a natural next step for Be Heard as we develop our range of services across the digital ecosystem and Kameleon is precisely the sort of agency we want - fast-growing, at the heart of digital transformation and ready to work with us to take their business to the next level. Mark, Richard and the team have superb strategic, creative and analytics skills and an impressive client list, all of which will help us as we create the most compelling digital marketing proposition around. We have a very healthy pipeline and hope to update the market with more deals that fit our strict acquisition criteria in due course."

Mark Webster, CEO of Kameleon said:

"It's great to be joining Be Heard Group at this formative stage. Digital content marketing has fundamentally changed the relationship between consumers and brands and the speed of this change continues to accelerate. We share Be Heard's belief that there is another way for independent digital agencies to come together to deliver outstanding work for clients and scale up. Working with agenda21 and MMT Digital we will capitalise on the advantages that Be Heard brings and take our business to the next level."

Application has been made to the London Stock Exchange for the admission of 33,585,456 new ordinary shares, representing the initial consideration shares, to trading on AIM. Admission of the new shares is expected to take place at 8.00am on 12 December 2016. The Company's total issued share capital following admission will consist of 714,476,301 ordinary shares of one pence each with one voting right per share. The above figure of 714,476,301 may be used by shareholders as the denominator for the calculations by which they can determine if they are required to notify their interest in, or a change to their interest in, the Company following admission.