24 deals update MBO of Excelsior Technologies
Completion Date: 06/2012 Target: Excelsior Technologies Acquirer: MBO team (backed by Growth Capital Partners) Deal Value: Confidential
Details: Growth Capital Partners, the provider of blended equity and debt to the UK’s small and medium-sized businesses, has backed the MBO of Excelsior Technologies; a North Wales-based flexible packaging manufacture, from its North American shareholder
Funding: Growth Capital Partners
Corporate Financial Advisers: Livingstone Partners LLP, advisers to the MBO team; Baker Tilly, advisers to the vendor
Financial Due Diligence: RSM Tenon – Nick Williams, corporate finance director; Peter Vandervelde, corporate finance director; Philip Rossiter, corporate finance senior manager; Nan Zhu, transaction services executive; Alex Milne, corporate finance executive
Commercial Due Diligence: CIL Controlling interest in XMA Print Solutions
Completion Date: 07/2012 Target: XMA Print Solutions Acquirer: XMA Deal Value: Confidential Details: XMA acquired one ordinary B share in Ergoservices Funding: Equity Legal Advisers: XMA – Pitmans LLP (Philip Weaver)
mergers & acquisitions Completion accounts vs locked box?
Lamport Bassitt’s Oliver Kelly compares two pricing mechanisms used on share sale transactions
Historically, completion accounts have been the usual mechanism and are generally considered buyer-friendly. Over the past few years, locked box structures have been seen more frequently. They are considered to be the preferred mechanism for sellers and are often used in auction sales.
The key distinction between completion accounts and locked box is the date of economic risk transfer.
Under a completion accounts mechanism, a buyer will pay on completion a price which assumes an estimated level of assets but on the basis of adjustment post completion if the estimated level was incorrect. The price paid by the buyer is adjusted post completion following preparation and agreement of completion accounts. The final price may not be known for months after completion.
The adjustment of the price under a completion accounts mechanism is usually upwards and downwards. Such adjustments are on a pound-for-pound basis and usually paid for in cash.
The concept of completion accounts generally means the seller gets the full value and benefit of trading to the point of completion. The
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completion accounts process as there is no post-completion adjustment, other than pre- identified and agreed claims for ’leakage’, eg shareholder salaries.
As this mechanism requires the buyer to price the business using historic accounts, it has no ability to adjust the price after completion and buyers therefore rely, to a greater extent, on contractual protection in the form of warranties and sometimes more extensive due diligence. The seller gets the value of the business at the locked box date. The buyer gets the value of the business some months prior to completion. Usually provisions are agreed to provide an element of return (often through an interest charge covering the interim) for the seller for trading between the locked box date and completion.
For a more a detailed analysis contact Oliver Kelly of Lamport Bassitt.
Oliver Kelly
disadvantage from his perspective is the uncertainty of knowing what adjustment to the purchase price would be made and in some cases the difficulty of negotiating and arguing the accounting interpretations involved.
By contrast, a locked box provides for a price to be calculated using a recent historical balance sheet of the target before the date of signing of the SPA. It is simpler than a
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – SEPTEMBER 2012 Details:
023-8083-1902
oliver.kelly@
lamportbassitt.co.uk
Central Pharma Contract Packing
Completion Date: 02/08/2012 Target: Central Pharma Contract Packing Acquirer: Central Pharma Holdings
Deal Value: Undisclosed
Details: A sale of CPCPL to a newco owned jointly by private equity and two of the selling owner-managers
Funding: Private Equity, Co-operative Bank plc and Barclays Bank plc Corporate Financial Advisers: Drew Mellor, VentureCF
Legal Advisers: Jonathon Roy, Paris Smith LLP acted for sellers; George Green LLP acted for the buyer Financial Due Diligence: BDO, Southampton
UPM Tilhill
Completion Date: 20/07/2012 Target: Landscaping and arboriculture divisions of UPM Tilhill Acquirer: Ground Control Deal Value: Undisclosed
Details: HMT Corporate Finance, led by partners Andrew Thomson and Mark O’Leary, advised Ground Control, an award- winning commercial landscaping business based in Essex, on its recent acquisition of the landscaping and arboriculture divisions of UPM Tilhill
Legal Advisers: Blake Lapthorn Financial Due Diligence: HMT Corporate Finance
Two Counties Community Care
Completion Date: 02/07/2012 Target: Two Counties Community Care Acquirer: Enara Finance Deal Value: Confidential
Details: Shoosmiths acted for Enara Finance on the acquisition, which is the latest transaction in its buy-and-build programme. The Shoosmiths team was: Emma Gibson (lead partner), Nina Smith (solicitor)
Funding: HSBC Bank plc as lead arrangers Corporate Financial Advisers: Hazlewoods
Legal Advisers: Enara – Shoosmiths; Two Counties – Harrison Clark LLP
Helix Power
Completion Date: 06/2012 Target: Helix Power Acquirer: Novusmodus LLP Deal Value: £5 million
Details: RSM Tenon provided limited due diligence for Novusmodus, which funds growth capital for European cleantech businesses, on its investment in Helix Power
Financial Due Diligence: RSM Tenon – Rebecca Guerin, corporate finance director; Kim Robinson, corporate finance senior manager
Tax Due Diligence: Steve Jacob, associate director of taxation, RSM Tenon
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