Real Good Food has acquired Rainbow Dust Colours, a cake decoration company, for an initial amount of £4m.
An additional cash consideration of £3.5m would be paid in the form of an earn-out based on gross margin achieved in the one year after the closure of the deal.
This could further increase by £3.5m depending on an earn-out, based on gross margin achieved in the 12 months following completion of the acquisition.
Real Good Food executive chairman Pieter Totte said:"The increasing popularity of cake decoration has become a global phenomenon.
"We are excited by the growth prospects which this market offers and we will look to build on the knowledge and expertise which both Renshaw and Rainbow Dust possess to become a world leader in the sector.This acquisition is the first of a number of initiatives designed to refocus our corporate strategy and deliver increased shareholder value."
Lloyds Bank has funded the initial payout for the Real Good Food.
Rainbow Dust employs 28 staff and supplies cake decorating products to the sugarcraft industry.
