CorpAcq To Go Public Via Business Combination With Churchill Capital Corp VII

CorpAcq is a corporate compounder and preferred acquirer of founder-led small and medium-sized enterprises in the UK anchored by a diversified portfolio of 41 stable and profitable businesses

Transaction is expected to provide CorpAcq with capital to optimize its balance sheet and the opportunity to fund accelerated growth and scale with a broader acquisition pipeline

CorpAcq has grown revenue at an annual rate of 16% and adjusted EBITDA1 of 17% over the last 4 years including average organic revenue growth of 4% and subsidiary-level profit growth of 7%, respectively

Transaction implies an initial enterprise value of approximately $1.58 billion, providing an attractive entry point for Churchill VII's shareholders at approximately 10x current year adjusted EBITDA

CorpAcq intends to initiate a dividend policy from closing targeting an attractive dividend yield that will be supported by free cash flow from current operations

ALTRINCHAM, England and NEW YORK, Aug. 1, 2023 /PRNewswire/ -- CorpAcq Holdings Limited ("CorpAcq"), a corporate compounder with a proven track record of acquiring and supporting founder-led businesses, and Churchill Capital Corp VII ("Churchill VII") (NYSE:CVII), a special purpose acquisition company, announced today that they have entered into a definitive agreement for a business combination (the "transaction"). The transaction values CorpAcq at a pro forma enterprise value of approximately $1.58 billion and is expected to provide CorpAcq with up to $592 million in the cash held in Churchill VII's trust account (assuming no redemptions), which will help facilitate advancing CorpAcq's strategy and accelerating its growth initiatives. Upon closing of the transaction, the combined company (the "Company") will operate as CorpAcq and intends to list on the New York Stock Exchange.

Based in Altrincham, England and founded in 2006, CorpAcq has cultivated a leading reputation as a "preferred buyer" for founder-led small and medium-sized enterprises ("SMEs") based on its founder-friendly, management empowered value proposition and focus on investing for long-term performance. Through a disciplined approach, CorpAcq has acquired and built a diversified portfolio of well-established businesses in the UK with strong asset bases, high barrier to entry business models, profitable growth, free cash flow generation and experienced management teams who typically remain in-place after acquisition. As of the end of July 2023, CorpAcq's portfolio consists of 41 businesses. The average age of its existing portfolio of companies is greater than 30 years old with at least one member of the pre-acquisition management teams still represented in 98% of the acquired companies. CorpAcq is one of a small group of companies in the Northern European region that employ the compounder model of acquiring and holding small to medium-sized businesses, at least one of which has grown to a portfolio size of more than 225 companies.

CorpAcq's approach to maintaining autonomy within its businesses and commitment to a perpetual ownership horizon has enabled it to purchase quality businesses at attractive single-digit multiples of cash flow and generate strong returns on investment. CorpAcq management helps to professionalize each business it acquires and provide a range of support functions that drive long-term operational improvements, growth, and sustainability. This acquisition strategy, supplemented by the current portfolio of mature and stable companies, creates an opportunity for investors to own a differentiated platform with a compelling combination of potential for earnings growth and strong risk-adjusted returns. Additionally, CorpAcq expects to initiate an annual dividend policy following the close of the transaction that is supported by the underlying cash flow generated from the current portfolio.

Churchill Capital is a leader in listed equity growth vehicles. Churchill Capital invests in, executes value-enhancement strategies for and provides other support for high-quality, entrepreneurial businesses in the public markets. Its public equity growth vehicles have a track record of acquiring profitable, growing businesses of scale. Churchill VII consummated its initial public offering in February 2021.

Simon Orange, Chairman and Founder of CorpAcq, said, "Today is an exciting milestone in CorpAcq's history and validation of our team, our tremendous growth and our approach of partnering closely with and empowering portfolio companies to drive long-term performance. We are thrilled to partner with Churchill VII. With their team's deep M&A and capital markets expertise, track record of value-added investing in companies as well as an extensive relationship network, we are confident that Churchill VII is the right partner to propel CorpAcq's next phase of growth. As a public company, we believe CorpAcq will be better positioned to accelerate organic growth, expand our acquisition pipeline deeper in the UK and deliver compounding returns to shareholders, all while staying true to our ethos of fostering autonomy at our portfolio companies and investing over a long time horizon."

Michael Klein, Chairman and CEO of Churchill VII, said, "When we launched Churchill VII, we wanted to identify a profitable, cash flow generating partner with strong management, a highly differentiated business model and clear growth opportunities. We believe CorpAcq fits all our criteria and more with its proven acquisition and operating strategy, established positioning in the UK SME space, track record of topline growth and profitability and talented management team. With its meaningful financial returns, current industry positioning, substantial cash flow to support dividends and upside potential to accelerate its acquisition pace in new markets, we believe the Company is a highly attractive opportunity for shareholders. We look forward to working with Simon and the rest of CorpAcq's management team as we position this business for future success."

CorpAcq Founder and Chairman Simon Orange will continue to lead the Company, along with Chief Executive Officer David Martin and the rest of CorpAcq's seasoned leadership team.

Key CorpAcq Highlights

• Track Record of Revenue Growth, Profitability and Cash Flow Generation: Since its inception, CorpAcq has delivered meaningful financial returns and sustained value over several economic cycles with prudent financial leverage. The company has a record of organic topline growth and cash flow generation with a disciplined, lower-risk acquisition strategy that has diversified and enhanced the CorpAcq platform. From 2018 to 2022, CorpAcq reported a compound annual growth rate (CAGR) for revenue of 16%, with average organic growth outpacing the UK GDP, and an adjusted EBITDA2 CAGR of 17% during the same period. CorpAcq exited 2022 at a run-rate of $850 million revenue and adjusted EBITDA of $133 million3 and has added an additional $80 million of revenue and $12 million of subsidiary-level profit4 from acquisitions year to date. This strong performance has continued into 2023 with organic subsidiary-level profit growth increasing by 8% in the first half of the year.
• Diversified Portfolio Aligned with Favorable End-Markets and Risk Mitigation: Anchored by stable, mature UK SMEs across multiple large industries, CorpAcq's portfolio of 41 businesses creates diversification and helps contribute to overall portfolio resilience through economic cycles. CorpAcq's businesses have a long, well-established history of operating successfully and are aligned with attractive industry trends in the UK with exposure to essential end-markets, providing a clear opportunity for organic growth to outperform GDP.
• "Preferred Buyer" Status Driven by Management-Empowered Value Proposition: CorpAcq offers an alternative equity avenue for founders of SMEs who want to remain involved in their companies and empower existing management teams to accelerate business performance while maintaining their brand, identification and legacy. CorpAcq looks to be a strategic partner to these businesses, helping to professionalize the operations and drive sustained operational improvements. This approach has allowed CorpAcq to become a "preferred buyer" for profitable, well-established, founder-led SMEs in the UK by maintaining autonomy within the business through a decentralized and scalable structure and holding the investment over a perpetual horizon.
• Strong and Experienced Management Team: Led by Founder and Chairman Simon Orange and CEO David Martin, CorpAcq has a highly qualified and long-tenured management team that has a demonstrated track record of success with its established M&A playbook and operating business model. The leadership team brings together the necessary commercial knowledge, extensive networks and operational expertise to drive successful acquisitions and value creation.
• Attractive and Growing Acquisition Pipeline: With its strong reputation and proprietary sourcing channels, CorpAcq has a robust pool of opportunities in its core UK market where there is a large total addressable market of more than 90,000 companies in key sectors to CorpAcq, including residential and nonresidential construction, manufacturing, infrastructure, industrials, transportation and consumer. In addition, the increased capital from the public markets and expertise from Churchill VII will provide CorpAcq the opportunity to scale its business model to target larger transactions and operate in new geographies over the medium-term.
• Compelling Profile for Compounding Returns for Investors: CorpAcq offers an opportunity for shareholders to own a growth platform strategy that has generated high risk-adjusted returns at an attractive valuation. CorpAcq's focus and discipline to acquire stable and profitable businesses at attractive single-digit multiples of cash flow have led to strong returns on investment and historical double-digit net income growth. In addition to strong earnings and revenue growth potential, CorpAcq is anticipated to have the capacity to deliver a strong annual dividend yield with a more flexible capital structure.   

1 Adjusted EBITDA definition and reconciliation provided in the appendix.

2 Adjusted EBITDA definition and reconciliation provided in the appendix.

3 Sum of FY2022 Adj. EBITDA for CorpAcq and incremental subsidiary-level profit from 2022 acquisitions

4 Subsidiary-level profit is measured as earnings before interest, tax, depreciation and amortization and excludes management fees to CorpAcq.

Summary of the Transaction

The transaction values CorpAcq at a pro forma enterprise value of $1.58 billion, providing an attractive entry point for Churchill VII shareholders with a discount to other leading European compounders. The transaction is expected to deliver up to $592 million in gross proceeds from the cash held in Churchill VII's trust account (assuming no redemptions by Churchill VII shareholders). Upon completion of the transaction, CorpAcq expects to have up to approximately $199 million in cash on its balance sheet, of which $129 million is coming from transaction proceeds, to improve liquidity and financial flexibility, accelerate growth in its core UK market and expand its pipeline of acquisition opportunities. Assuming no redemptions, existing CorpAcq shareholders will receive up to approximately $257 million in cash as part of the transaction and are expected to own approximately 46% of the Company post-close (assuming no redemptions).

In connection with the transaction, Churchill VII's sponsor has elected to forfeit 15 million founder shares and unvest an additional 12.1 million shares to align with its shareholders and the long-term value creation and performance of CorpAcq.

The transaction, which has been approved by the Boards of Directors of CorpAcq and Churchill VII, is expected to close in late 2023 or early 2024 and is subject to approval by Churchill VII's shareholders, Churchill VII having available cash at closing of at least $350 million net of transaction fees and other customary closing conditions.

Additional information about the transaction, including a copy of the merger agreement will be filed by Churchill VII in a Current Report on Form 8-K with the Securities and Exchange Commission (the "SEC") and available at www.sec.gov.