mergers & acquisitions 37


Get ahead with heads of terms


David Tighe, partner in Penningtons Manches’ corporate team, explains the value of using heads of terms when embarking on corporate transactions


What’s not to like about a set of succinct and well drafted heads of terms? The reason I ask is because on a couple of occasions recently we’ve had clients who’ve found it impossible to resist the temptation to crack on with the full legal documents on the back of an email exchange and their recollection of discussions with their opposite number.


It may be a sign that the market is getting a little exuberant, and so deals have to be done at pace or not at all, but it’s not an ideal recipe for a smooth transaction.


In the absence of heads of terms, unless the lawyers employ their psychic powers, they will either need to take a bit of a punt when preparing the documents and ’fill


in the blanks’ by making educated guesses in a number of areas. Or they may try to plug the gaps by going round the houses again with their clients (which means that the parties may as well have gone for heads of terms in the first place).


If the first alternative is the preferred choice then, when the documents hit the mailbox of the other side, the odds are that that they will feel that they don’t reflect their understanding of the deal. Cue misunderstandings, two steps back and another round of negotiations. Cue delays and extra costs plus possible cracks in the goodwill that’s previously been built up between the parties.


Sale of 100% shares of Premium Timber Products


Completion Date: 22/06/15 Target: Premium Timber Products Acquirer: Meyer Timber Group Deal Value: Undisclosed


Details: Baker Tilly’s M&A and private equity team completed the sale of Premium Timber Products to Meyer Timber Group. Premium is one of the UK’s leading suppliers of joinery products to the DIY retail sector. Meyer Timber is a leading UK distributor of wood-based products


Corporate Finance Advisers: Baker Tilly: Ian Wherry, partner; Clodagh Muggeridge, associate director; Gemma Legg, associate


Legal Advisers: Ashfords LLP Project Luna Completion Date: 07/15


Target: Sale of specific satellite news gathering (SNG) assets of Arqiva Acquirer: SCCI Links Broadcast Deal Value: Undisclosed


Details: Strategic disposal of vehicle fleet and assets of the SNG division of Arqiva. Arqiva provides television and radio transmission, distribution and media management for the world’s leading broadcasters. The disposed vehicles and assets provide satellite uplink capability for events ranging from live theatre production through to global sporting tournaments


Funding: From own resources Corporate Finance Advisers: Spectrum Corporate Finance Legal Advisers: Internal, Pinsent Masons, Trethowans Financial Due Diligence: Internally performed Commercial Due Diligence: Internally performed


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – SEPTEMBER 2015


Completion Date: 06/15 Target: First Choice Business Systems Acquirer: Xeretec Deal Value: Undisclosed


Details: Shaw Gibbs provided further support for Xeretec to purchase the Kent-based print and document management solutions provider First Choice Business Systems, playing a major role in the due diligence and provided ongoing advice in respect of the transaction. This is the second transaction which Shaw Gibbs has advised on


Corporate Finance Advisers: Shaw Gibbs Legal Advisers: Osbourne Clarke


Completion Date: 27/07/15 Target: BOFA International Deal Value: £23 million


Details: HMT LLP led by partners Mark Lucas and Ian Barton and director Peter Wear advised on the management buyout of BOFA International which was backed by LDC and The Royal Bank of Scotland


Funding: LDC Private Equity, RThe oyal Bank of Scotland Corporate Finance Advisers: HMT


Legal Advisers: Shoosmiths, Steele Raymond and Blake Morgan Financial Due Diligence: Baker Tilly Commercial Due Diligence: CIL


Project Skywalker


So, once you have a ’deal’, ask your lawyers (or perhaps your financial advisers – we’re not precious) to prepare a well-crafted two or three page document. The majority of it is not going to be legally binding but it will have unambiguous moral force and will cover the following:


• Key commercial and financial terms. How much, when will it be paid, how is any earn-out to be calculated?


• What’s the process to completion? What are the critical steps? How is due


MBO of BOFA International


Completion Date: 05/06/15 Target: TPI for Packaging Acquirer: David Peters Deal Value: Undisclosed


Details: Shaw Gibbs, led by corporate finance manager Paul Wilson approached a number of businesses on David Peter’s behalf to acquire new packaging business TPI for Packaging, a Stoke on Trent firm who supply polythene and packaging products. Shaw Gibbs will be providing ongoing compliance work for TPI


Funding: RBS Invoice Finance Corporate Finance Advisers: Shaw Gibbs Legal Advisers: Tollers LLP


Acquisition of UYT from Honda


Completion Date: 07/15 Target: UYT Acquirer: The Yongtai Group Deal Value: £30 million


Details: Transcend Corporate, the Reading and Birmingham based M&A boutique, has advised Yongtai Group, of Shandong China, on the acquisition of UYT for £30m. UYT is an automotive component manufacturer of Body-in-White components and sunroof assemblies and principally supplies Honda UK


Corporate Finance Advisers: Transcend Corporate, Ian Curtis Legal Advisers: Squire Patton Boggs, Ed Dawes Financial Due Diligence: BDO, John Parkinson


Next Deadline Monday September 14 – for the October issue Submit to: steve@elcot.co.uk Elcot Publications is not responsible for the accuracy of information in the Deals Update section which is supplied by individual firms www.businessmag.co.uk TPI for Packaging


diligence going to be handled and access to be given to documents and people?


• Set out the timing expectations.


• Provide a framework for potentially ’sensitive’ areas. For example, what is the parties’ approach to warranties and indemnities – who is giving them and on what basis (joint and several or proportionate?) and what are the principal limitations to protect the sellers?


In addition, a few legally binding paragraphs should be included, covering exclusivity and confidentiality, and it’s job done. Happy days – it will be time well spent.


Details: David Tighe 01865-722106 david.tighe@penningtons.co.uk www.penningtons.co.uk


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