Http://. Recruitment Company Sales – Legal Aspects Peter Savage 14 March 2012 From ‘Deal?’ to ‘Done!’ CORPORATE.

http://www.morrlaw.com/recruitment

Recruitment Company Sales – Legal Aspects

Peter Savage14 March 2012

From ‘Deal?’ to ‘Done!’

CORPORATE

REDHILL | WOKING | WIMBLEDON | CAMBERLEY

Overview1. Trade Sales as an Exit2. Acquisition Structuring 3. Funding4. Heads of Terms and Confidentiality5. Due Diligence6. Documentation7. Apportioning Risk: Warranties and Disclosure,

Indemnities and Tax8. Problem areas…

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1. Trade Sales as an ExitAlternatives:

- MBO/Private Equity- Flotation- Family succession- Stagnation? Winding down?

Features:- 100% exit - Buyer funding - Strategic reasons for purchase in addition to financial

RI Recruitment Industry M&A Conference From ‘Deal?’ to ‘Done!’

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2. Acquisition StructuringSale of Shares:

- ‘Target’ company- Liabilities all transfer

Sale of Assets:- Name and assets only are

sold- Contracts (and contractors)

assigned- Employees- Third party consents

Distress Sales:- Opportunism- Risk and price- Know your bargaining

position

How to proceed:- Tax advice- Know your bargaining

position

RI Recruitment Industry M&A Conference From ‘Deal?’ to ‘Done!’

REDHILL | WOKING | WIMBLEDON | CAMBERLEY

3. FundingDebt and how to find it.

What are banks looking for?

What assets can secure a loan? Debtor book financing, personal or company property, future performance…

Personal guarantees

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4. Heads of Terms

Non binding terms:• Price: earn out • Ongoing employment• Timetable

Legally binding terms:• Confidentiality• Exclusivity• Non-compete

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5. Due Diligence

Commercial: Specific to your business and industry

Financial: Tax and Accounts

Legal: Everything else – contracts, litigation, personnel- Questionnaire and replies- Handling documents

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6. Documentation Share purchase agreement:- Who pays what and when?- What is done on and after completion?- Who takes the risk if things go wrong?

Disclosure letter

Employment or consultancy agreements

RI Recruitment Industry M&A Conference From ‘Deal?’ to ‘Done!’

REDHILL | WOKING | WIMBLEDON | CAMBERLEY

7. Apportioning RiskWarranties:- verify due diligence - a price adjustment

Disclosure- Legal effect of disclosure- Disclosure letter and bundle

Limitations:- Financial and time limits- Control of claims

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7. Apportioning Risk (2)Indemnities:- for specified matters and best avoided if possible- gives pound for pound payment for any loss incurred

Tax:- apportioned around the date on which the price is set - completion accounts or ‘last’ accounts- sellers pays prior to this date, buyer afterwards

RI Recruitment Industry M&A Conference From ‘Deal?’ to ‘Done!’

REDHILL | WOKING | WIMBLEDON | CAMBERLEY

8. Problem AreasMaintaining client and contractor relationships – effect of change of control

Protecting an earn out

Minority shareholders

Employee confidentiality and share schemes

RI Recruitment Industry M&A Conference From ‘Deal?’ to ‘Done!’

RI Recruitment Industry M&A Conference From ‘Deal?’ to ‘Done!’

REDHILL | WOKING | WIMBLEDON | CAMBERLEY

9. Questions?

PETER SAVAGE, PARTNER, HEAD OF CORPORATE & COMMERCIAL AND HEAD OF RECRUITMENT - MORRISONS SOLICITORS LLP

[email protected]

http://www.morrlaw.com/recruitment

Recent Deal experience:• Advising award-winning IT and telecoms staffing business

E-Resourcing Limited on its recent acquisition of specialist SAP consulting firm Williams McKinley Limited

• Trade sale of Anystaff Recruitment Limited

• Sale of facilities management and recruitment provider to the food industry to Private Equity funded acquirer

• MBO of privately owned blue collar temporary requirement business

• Sale of recruitment process outsourcing specialist to a US acquirer