The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this announcement via a Regulatory Information Service ('RIS'), this inside information is now considered to be in the public domain.

Public Policy Holding Company, Inc.

("PPHC" or the "Group")

Acquisition of MultiState Associates

Acquisition broadens PPHC's footprint into all 50 US States

Strong trading momentum with growing client demand for the Group's expertise and integrated capabilities

Public Policy Holding Company (AIM: PPHC), the US-based government relations and public affairs group providing clients with a fully integrated and comprehensive range of services including government and public relations, research and digital campaigns, announces the acquisition of MultiState Associates, Inc. ("MultiState"), one of the largest US-based state and local government relations specialists, for an initial consideration of $22 million (the "Acquisition"). The Acquisition will be substantially and immediately accretive to the Group's underlying earnings.

MultiState is a leading provider of state-based government relations services, state issues tracking and compliance solutions. Founded in 1984 and located in Virginia, the firm represents some of the world's best-known organisations on issues of local, state and national importance.

Acquisition highlights 

·    PPHC's second significant acquisition since IPO in December 2021.

·    The Acquisition is in line with the Group's inorganic growth strategy and broadens its offering into state-level advocacy and public relations, offering clients comprehensive policy solutions across jurisdictions. 

·    MultiState's services are highly complementary to PPHC's with its strength in research and compliance adding to and enhancing PPHC's broader client offering.

·    As a wholly-owned subsidiary of PPHC, MultiState will retain its distinct brand identity and its long-standing management team and staff.

·    The initial consideration of $22 million was funded 80% ($17.6 million) in cash and 20% ($4.4 million) through the issue of new common shares in PPHC to the owners of MultiState (the "New Common Shares").

·    The Group has separately announced today that it has entered into a $17 million credit facility, which has partially been deployed alongside balance sheet cash to fund the cash element of the initial consideration.

·    Further earnout payments are contingent on MultiState achieving profit growth targets between 2022 and 2027, promoting alignment with the Group's growth objectives.

·    The Acquisition will be substantially and immediately accretive to underlying earnings per share in 2023.

·    Significant revenue and profit synergy potential via the referral of existing clients from the PPHC network.

Overview of MultiState

·    MultiState operates in all 50 US states and across Canada, servicing over 300 corporate clients, in line with the PPHC's client profile, including several Fortune 500 constituents.

·    Operations are well diversified with low client concentration - the largest client represents c.5% of revenues and the top 30 clients account for c.45%.

·    Total of 77 employees largely based out of Alexandria, Virginia. Senior executives include Joseph Crosby (CEO), Edward Griesmer (President), Jeffery Hartgen (Chairman), Maureen Riehl (General Counsel) and Joseph Rinzel (Principal).

·    MultiState achieved a revenue CAGR of 10% from 2018 to 2021, reporting net revenue of $12.8 million for the year ended 31 December 2021. Profit before tax amounted to $3.5 million, after adjusting for PPHC's remuneration policy.

Key terms of the Acquisition

·    The initial consideration of $22 million was satisfied on completion, which occurred on 1 March 2023, in part by the issuance of 2,740,717 New Common Shares of $0.001 each at a price of £1.3378 per Common Share, totaling $4.4 million, and the balance of $17.6 million paid in cash.

·    Shares issued to the selling entity will be subject to a three-year vesting period, and all 13 key principals will additionally be subject to certain restrictive covenants. The initial cash consideration of $17.6 million was funded from a combination of PPHC's existing cash resources and a credit facility entered into, and announced today, with Bank of America.

·    As part of the purchase consideration, in addition to the initial consideration, three future payments could be made with the final payment taking place after the end of 2027. These payments are contingent on MultiState delivering profit growth targets between 2022 and 2027. Such future payments will be paid 50% in PPHC shares and 50% in cash.

·    Including the initial consideration of $22 million, the aggregate consideration is maximised at $70 million. This maximum would be achieved if MultiState was to realise more than 25% compound annual profit growth through to 2027.

·    Net assets of MultiState transferred at completion amount to $3.0 million.  

PPHC trading update

·    The Group's strong trading momentum continued into the second half of 2022 with growing client demand for the Group's expertise and integrated capabilities.

·    While still subject to audit, revenues for 2022 are expected to be approximately $109 million. This implies a c.10% increase versus 2021 and c.7% organic growth.

·    Underlying EBITDA margin is expected to be in line with management's expectations.

·    As a result, the Group expects to propose a final dividend in line with its stated policy of distributing up to 70% of profit after tax. This will be payable following publication of the Group's preliminary results for the financial year ended 31 December 2022.

·    The Group has continued to make further progress and is confident that the outcome of the mid-term elections, government spending programmes ramping up, and the increasing importance of state legislation will support ongoing growth in 2023.

Issue of New Common Shares

As part of the consideration payable upon completion, 2,740,717 New Common Shares of $0.001 each are to be issued. An 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 6 March 2023.

Following this issue of shares, the Group's total issued and voting share capital upon admission will consist of 112,017,621 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 Group.

Investor Presentation

PPHC will host a presentation via the Investor Meet Company platform on Wednesday, 8 March 2023 at 12:30 (GMT). The presentation will enable existing and prospective investors the opportunity to listen to management discuss the Acquisition, PPHC's operations, growth strategy, and recent financials as provided in this announcement.

Stewart Hall, CEO of PPHC, commented:

"The acquisition of MultiState fits perfectly with our strategy of broadening our geographic footprint into key US state capitals and metropolitan areas, while extending our offering by adding key service capabilities in research and compliance. MultiState has a talented team and its strategic capabilities will solidify PPHC's leadership position as the largest and most comprehensive public policy firm in the US. Linking our well-established businesses in Washington DC, Sacramento, California and Boston, Massachusetts to MultiState's network in 50 states makes the Group uniquely suited to support corporate clients in the most complex risks and opportunities they face.

"Our growth in the resilient and fragmented $17+bn US strategic communications market is driven by increased inter-connectedness of federal, state and international policies and risk exposure. I am confident that our combined businesses will benefit greatly from new capabilities, new geographies and new client opportunities."

Joseph Crosby, CEO of MultiState, commented:

"PPHC is bringing together highly specialised government relations businesses at a scale that's never been seen. This Acquisition marks a significant milestone during MultiState's 40^th year in business as well as for each of my talented partners and colleagues. It also marks a milestone for our clients and the industry, as federal and state policy issues are evermore interdependent and require the professionalism and seamless integration that only PPHC and MultiState now offer."

Seale & Associates, Inc advised Multistate on the transaction.

Enquiries

About PPHC

Incorporated in 2014, PPHC is a US-based government relations and public affairs group providing clients with a fully integrated and comprehensive range of services including government and public relations, research and digital campaigns. Retained by over two-thirds of its +700 clients, including corporates, trade associations and non-governmental organisations, the Group is active in all major sectors of the U.S. economy, including healthcare and pharmaceuticals, financial services, energy, technology, telecoms and transportation. PPHC's services support clients to enhance and defend their reputations, advance policy goals, manage regulatory risk, and engage with US federal and state-level policy makers, stakeholders, media and the public.

PPHC operates a holding company structure and currently has seven operating entities comprising Crossroads Strategies, Forbes Tate Partners, Seven Letter, O'Neill & Associates and Alpine Group Partners, KP Public Affairs, and MultiState Associates. Operating in the strategic communications market, the Group has a strong track record of organic and acquisitive growth, the latter focused on enhancing its capabilities and to establish new verticals, either within new geographies or new related offerings.

For more information, see www.pphcompany.com.