M&A Preliminary Matters
Preparatory Task
Dear Sarah,
Acquisition of Alphacom Limited
Many thanks to you and the team for your help on the successful completion of Project Saracen. It
was a trickier deal than we had anticipated but we have now managed the full integration of the
business into the group and head office in the States seem happy with the results being generated.
As you know, we are looking to increase market share in the UK digital advertising sector, and have
been considering potential targets in conjunction with our corporate finance adviser, Yu Yang. We’ve
identified a small advertising agency, Alphacom Limited, as a prospect. The company has one
subsidiary (Alphacom Research Limited) which trades in the UK.
Alphacom Limited has a solid management team comprising Kalusha Chitalu, Simon Forster and
Sarah Gardner. The management team hold about 10 per cent of the shares in the company between
them. I have come across them on a regular basis and am impressed by their drive and experience in
this sector. Whilst the management team are looking to sell their shares, I think that their continued
involvement in the company for at least the next couple of years is key to the future success of the
business.
The company has a strong client portfolio which again is attractive to Rethink and it also has offices in
a prime location in central London, which as you know, we have been seeking, without much
success, over the past couple of years. The management team feel that in order for the business to
grow, they need to combine forces with a larger industry player and this view seems to be held by
the majority shareholder, Gandover Holdings Limited, which is looking for an exit from the company
in any case. We think that the potential synergies between Rethink Limited and Alphacom could
provide us with the opportunity we have been looking for to strengthen our offering to the UK
market in the digital advertising sector.
All of the shareholders, led by Gandover Holdings Limited, are pushing for a share sale. As you know,
we generally run our businesses separately through subsidiary companies in our group structure. On
that basis, the Board are minded to proceed with this transaction as a share sale as this seems to suit
both sides and would speed up the negotiation process.
We have a Board meeting tomorrow afternoon where I will need to present my thoughts to the
Board on whether a share acquisition is the best way forward or not. I have little time to prepare for
the meeting due to other business commitments. Please would you prepare a briefing note for me
on the factors to be taken into account when deciding whether this transaction should proceed as a
share purchase and why Gandover Holdings Limited, together with the other shareholders, are
pushing for this rather than an asset sale.
I look forward to hearing from you.
Kind regards,
John
John Harcastle, UK Group Chief Executive, Rethink Limited
I suggest that your note covers the following matters:
, 1. A structure diagram indicating the key parties and documents for the acquisition if it
proceeds as a share purchase.
2. A structure diagram indicating the key parties and documents for the acquisition if it
proceeds as an asset purchase.
3. An outline of the key considerations for Rethink Limited in deciding whether to proceed with
a share purchase rather than an asset purchase.
4. A list of factors outlining why the sellers want the transaction to proceed as a share sale.
Share purchase:
Before acquisition of shares – After acquisition of shares
ALPHACOM LIMITED RETHINK LIMITED
APLHACOM RESEARCH
LIMITED ALPHACOM LIMITED
Shareholders: ALPHACOM RESEARCH
LIMITED
10% - Kalusha Chitalu,
Simon Forster and Sarah
Gardner.
Major shareholder -
Gandover Holdings Limited
Asset purchase:
The buyer acquires the underlying assets needed to carry on the business, such as premises, plant
and machinery, and intellectual property.
ALPHACOM LIMITED RETHINK LIMITED
Management team Acquires assets
Client portfolio
Office premises
Key considerations for buyer to proceed with a share purchase rather than an asset purchase
Lack of disruption to the trade – customers and traders usually content to carry on dealing
with the company as before. Whereas, an asset sale is more likely to prompt them to review
their dealings with new owners.
Preparatory Task
Dear Sarah,
Acquisition of Alphacom Limited
Many thanks to you and the team for your help on the successful completion of Project Saracen. It
was a trickier deal than we had anticipated but we have now managed the full integration of the
business into the group and head office in the States seem happy with the results being generated.
As you know, we are looking to increase market share in the UK digital advertising sector, and have
been considering potential targets in conjunction with our corporate finance adviser, Yu Yang. We’ve
identified a small advertising agency, Alphacom Limited, as a prospect. The company has one
subsidiary (Alphacom Research Limited) which trades in the UK.
Alphacom Limited has a solid management team comprising Kalusha Chitalu, Simon Forster and
Sarah Gardner. The management team hold about 10 per cent of the shares in the company between
them. I have come across them on a regular basis and am impressed by their drive and experience in
this sector. Whilst the management team are looking to sell their shares, I think that their continued
involvement in the company for at least the next couple of years is key to the future success of the
business.
The company has a strong client portfolio which again is attractive to Rethink and it also has offices in
a prime location in central London, which as you know, we have been seeking, without much
success, over the past couple of years. The management team feel that in order for the business to
grow, they need to combine forces with a larger industry player and this view seems to be held by
the majority shareholder, Gandover Holdings Limited, which is looking for an exit from the company
in any case. We think that the potential synergies between Rethink Limited and Alphacom could
provide us with the opportunity we have been looking for to strengthen our offering to the UK
market in the digital advertising sector.
All of the shareholders, led by Gandover Holdings Limited, are pushing for a share sale. As you know,
we generally run our businesses separately through subsidiary companies in our group structure. On
that basis, the Board are minded to proceed with this transaction as a share sale as this seems to suit
both sides and would speed up the negotiation process.
We have a Board meeting tomorrow afternoon where I will need to present my thoughts to the
Board on whether a share acquisition is the best way forward or not. I have little time to prepare for
the meeting due to other business commitments. Please would you prepare a briefing note for me
on the factors to be taken into account when deciding whether this transaction should proceed as a
share purchase and why Gandover Holdings Limited, together with the other shareholders, are
pushing for this rather than an asset sale.
I look forward to hearing from you.
Kind regards,
John
John Harcastle, UK Group Chief Executive, Rethink Limited
I suggest that your note covers the following matters:
, 1. A structure diagram indicating the key parties and documents for the acquisition if it
proceeds as a share purchase.
2. A structure diagram indicating the key parties and documents for the acquisition if it
proceeds as an asset purchase.
3. An outline of the key considerations for Rethink Limited in deciding whether to proceed with
a share purchase rather than an asset purchase.
4. A list of factors outlining why the sellers want the transaction to proceed as a share sale.
Share purchase:
Before acquisition of shares – After acquisition of shares
ALPHACOM LIMITED RETHINK LIMITED
APLHACOM RESEARCH
LIMITED ALPHACOM LIMITED
Shareholders: ALPHACOM RESEARCH
LIMITED
10% - Kalusha Chitalu,
Simon Forster and Sarah
Gardner.
Major shareholder -
Gandover Holdings Limited
Asset purchase:
The buyer acquires the underlying assets needed to carry on the business, such as premises, plant
and machinery, and intellectual property.
ALPHACOM LIMITED RETHINK LIMITED
Management team Acquires assets
Client portfolio
Office premises
Key considerations for buyer to proceed with a share purchase rather than an asset purchase
Lack of disruption to the trade – customers and traders usually content to carry on dealing
with the company as before. Whereas, an asset sale is more likely to prompt them to review
their dealings with new owners.
