SQS Software Quality Systems AG: Acquisition of Double Consulting S.r.l. ('Double Consulting')

Disclosure of an inside information pursuant to Art. 17 of the EU Market Abuse Regulation (EU 596/2014, MAR)

29 September 2017

SQS Software Quality Systems AG

("SQS" or "the Company")

Acquisition of Double Consulting S.r.l. ("Double Consulting")

SQS Software Quality Systems AG (AIM: SQS), the leading global provider of quality assurance services for digital business processes, announces that it has agreed to acquire Double Consulting S.r.l. ("Double Consulting"), a leading Italian management consultancy ("MC") business, at a valuation of EUR10.5 million (the "Acquisition"). The consideration for the acquisition will be entirely funded from the Company's existing cash reserves.

Background

Double Consulting was founded in 2005, headquartered in Rome, Italy and having an additional presence in Switzerland. The Company, which offers a range of consulting, IT services and outsourcing, complements SQS's existing position in the growing management consulting market and strengthens SQS's offerings in the financial services and insurance sectors (BFSI).

Double Consulting's dynamic structure and its focus on developing more effective methods and innovative solutions for its customers have seen the Company grow steadily and establish a strong position within BFSI in the Italian marketplace. For the 12 month period to 31 December 2016, Double Consulting recorded revenues of EUR6.63 million and is profitable at a typical level for a niche management consultancy.

Acquisition Rationale

As reported in the recent half year results, SQS is seeing strong demand for MC services across a number of sectors and geographies, and has secured new clients from some of the world's best known global technology brands, operating at the cutting edge of digital and technology trends.

As the shift to digital systems takes hold in Europe, this evolution opens up particular opportunities for growth where SQS already enjoy strong existing customer relationships. This is particularly the case core geographies, including Italy, where SQS has made good progress, experiencing solid net organic growth.

Given this positive backdrop, SQS believes that Double Consulting represents an excellent fit within SQS' global growth strategy, significantly strengthening its positioning in the BFSI sector within the Italian and European markets. Together SQS and Double Consulting will complement each other working as part of a combined group.

The Acquisition provides SQS with a growing revenue base, supporting SQS's stated strategy of diversifying its geographic revenue sources and increasing its exposure to higher margin MC business.

Double Consulting brings with it a strong management team headed by Francesco Rosetti, CEO, who will continue to lead the business under SQS's ownership. It is agreed between the parties that Mr. Rosetti will serve as managing director of Double Consulting for at least three years after the closing subject to mutual satisfaction of SQS and Mr. Rosetti.

Acquisition Consideration, Transaction Structure and Timings

The acquisition values the entire issued and to be issued share capital of Double Consulting at EUR10.5 million and will be adjusted downwards if the net cash position of the Company on First Closing is less than EUR700,000. The consideration for the acquisition will be paid in tranches as follows and will be entirely funded from the Company's existing cash and debt resources.

The transaction structure will be as follows:

SQS will acquire 51% of the share capital of Double Consulting from the selling shareholders on 3 October 2017 (the "First Closing");

SQS will acquire a further 39% of the share capital of Double Consulting by 31 March 2018 (the "Second Closing").

One selling shareholder will retain a 10% stake.

Dik Vos, Chief Executive Officer of SQS, commented:

"At SQS, we have a clear strategy to offer our clients best-in-class digital transformation services, delivered on a truly global basis. We have made good progress across Europe, including good growth in Italy, so the acquisition of Double Consulting allows SQS to expedite our ambitions in the BFSI sector and in that key geography. The acquisition will also augment our continued shift toward higher margin MC projects, which will drive future growth and progress towards our target of at least 9% operating margins by 2019. We warmly welcome Double Consulting's talented team to SQS and look forward to continuing to build upon their client base and exceptional reputation as the leading management consultancy in the region."

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