Furniture retailer DFS has exchanged contracts to acquire Sofology for an initial enterprise value of £25m on a debt-free, cash-free basis payable upon completion. In addition, further payments could be made approximately 12 months following completion based upon a multiple of seven times the underlying EBITDA generated by Sofology over a future 12-month period, less the £25m that will have already been paid.

Sofology is a specialist sofa retailer with 37 stores across the UK. The Business Growth Fund previously invested £10m into Sofology in March 2016 for a minority interest to support the company's UK expansion plans.

Sofology chief executive Jason Tyldesley, together with the current management team will continue to lead the business post-completion. 

Doncaster-headquartered DFS expects that Sofology will retain its current headquarters in Golborne in Greater Manchester and maintain full independent control over its customer experience and all customer-facing activities.

DFS said that no store closures would occur as a result of the acquisition. In addition, the store opening programmes of both DFS and Sofology will continue "given the proven ability of the two brand fascias to trade successfully alongside each other in multiple locations".

"While the UK furniture retail market continues to be very challenging, we remain focused on making strategic progress to strengthen our position in living room furniture,” said DFS chief executive Ian Filby. “This acquisition represents a clear opportunity for DFS to accelerate our proven strategy of broadening our appeal, generating substantial long-term returns for shareholders underpinned by well-understood synergies.

"Sofology's distinctive market position is a good fit with our existing brands. Jason and his team should be congratulated for creating a fantastic and fast-growing business and I'm looking forward to working with Jason and the team as they continue to grow Sofology as part of the group."