Public Policy Holding Company, Inc.

Acquisition of California-based KP Public Affairs

Public Policy Holding Company (AIM: PPHC, "PPHC" or the "Group"), a leading bi-partisan, full-service US government affairs business, announces the acquisition of KP Public Affairs ("KP"), one of the largest advocacy and public relations firms in California, for a total maximum consideration of $35.0 million, with an initial consideration of $11.4 million payable on completion (the "Acquisition").

KP is a leading California lobbying, government affairs and public relations firm.  Founded in 1996, the firm represents some of the world's best-known organizations on issues of local, state, and national importance.

Acquisition highlights

·      PPHC's first acquisition as an AIM listed business and complements the Group's full-service offering in the public policy marketplace

·      The acquisition of KP is in line with the Group's strategy to broaden its offering into state-level advocacy and public relations in key state markets, as outlined to the IPO

·      Following completion, KP will continue operating under its existing brand and with its longstanding and incentivised management team and staff, as a wholly owned subsidiary of PPHC

·      The maximum total consideration for the Acquisition is $35.0 million with an initial consideration of $11.4 million, c.90% cash and c.10% in shares

·      Acquisition expected to be accretive to underlying earnings per share in the first full financial year post completion, being FY23

Overview of KP

·      KP provides full-service lobbying, public affairs, and public relations consulting to corporate, non-profit, and US-government clients, predominately in the State of California

·      California is the largest individual state economy in the US and is measured as the fifth largest global economy. California is also at the forefront of major issues including climate change, privacy, and environmental regulations

·      KP has been ranked as one of the largest lobbying firms in California for more than 20 years, with clients including Fortune 500 corporations, industry associations, local governments, and small businesses

·      KP employs 31 professionals including its six shareholding principals whose PPHC stock will be subject to vesting criteria in line with the current principals of PPHC and its operating companies

·      For the year ending 31 December 2021, KP reported revenue of approximately $10.9 million and adjusted profit before tax⁽¹⁾ of $3.2 million

·      Net assets of KP transferred at completion amount to $0.1 million, entirely in cash 

¹ Adjusted profit before tax is calculated after applying the PPHC remuneration policy to KP, which includes a bonus pool of 25% of pre-bonus EBITDA payable to employees.

Terms of the acquisition

·      The initial consideration of $11.4 million will be satisfied on completion, which occurred on 1 October 2022, in part by the issuance of 739,589 New Common Shares of $0.001 each at a price of £1.4185 per Common Share

·      The initial cash consideration of $10.3 million was funded from PPHC's existing cash resources (net cash as at 30 June 2022 was $17.9 million)

·      Future payments are capped at a maximum total aggregate consideration of $35.0 million and are structured based on the growth in profit contribution of KP to the Group for the period to 31 December 2026, promoting incentivisation and alignment with the Group

·      Such future payments will be split in cash and shares in accordance with pre-agreed parameters

Issue of new Ordinary Shares

As part of the consideration payable on completion, 739,589 New Common Shares of $0.001 each (the "Common Shares") are to be issued.  Application will be made for the new Common Shares, which will rank pari passu with the existing Common Shares in issue, to be admitted to trading on AIM. Dealings are expected to commence on or around 7 October 2022.

Following this issue of shares, the Company's total issued and voting share capital upon admission will consist of 108,938,694 Common Shares. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, securities of the Company.

Stewart Hall, CEO of PPHC, commented:

"KP is consistently ranked as one of California's leading advocacy and public relations firms and will make an excellent addition to PPHC. We are delivering on the strategy set out at IPO to broaden our services to key state capitals and to deepen our expertise in key industries, including technology, renewable energy, and natural resources through acquiring strong, proven businesses, as well as organically."

"The firm's Managing Partners, Jonathan Ross, Michael Burns, Ed Manning, Patrick George, Alison MacLeod, Jeff Sickenger and their stellar team have long been one of the largest practices in California.  More importantly, their deep policy expertise and longstanding commitments to clients promises to make KP a strong addition. We have a proven track record of integrating outstanding, entrepreneurial businesses, and I look forward to working closely with the team."

Mike Burns, Managing Partner of KP Public Affairs, commented:

"PPHC is a unique organization, which brings together highly complementary businesses. Joining the Group will mark a significant milestone in the growth of KP and we are excited about the opportunities ahead. This is a pivotal time in the development of public affairs connections between California and Washington DC, with the technology industry and Silicon Valley currently engaging proactively with government policy, both at the state and federal level."

Enquiries

About PPHC

PPHC is a leading bi-partisan, full-service US government affairs business. It operates a portfolio of independent firms offering public affairs, crisis management, lobbying and advocacy services on behalf of corporate, trade association and non-profit client organisations. Clients engage the Group to enhance and defend their reputations, advance policy goals, manage regulatory risk, or otherwise engage with US federal and state-level policy makers, stakeholders, media, and directly to the public at large.

Since its inception in 2014, the Group acquired and integrated nine businesses, now operating as six separate, independent companies, focused on the federal government level in the US, and with expanding reach into key US states and metropolitan areas. The six operating entities which form the operating subsidiaries of the Group are Crossroads Strategies LLC, Forbes Tate Partners LLC, Seven Letter, O'Neill & Associates and Alpine Group Partners LLC, and KP Public Affairs.

For more information, see www.pphcompany.com

About KP

KP Public Affairs is a leading California lobbying, government affairs and public relations firm. In operation since 1996, the firm represents some of the world's best-known organizations on issues of local, state, and national importance. Our team is composed of experts in a wide range of policy and regulatory issues, project management, earned media and communications, social and digital media, coalition building, and grassroots outreach and engagement. We work in a variety of industry sectors including technology, agriculture, land use and development, natural resources, financial services, and healthcare.

For more information about our firm and services, please visit www.ka-pow.com