23rd January 2007
Kerman and Co acted for the Founders of Tree LLP in the acquisition by Cagney plc. The initial consideration was £1,012, 668 in cash and shares.
Tree was established in 2001 by managing partners Matthew Bayfield and Steve Mattey (the 'Founders'). The Founders have established a successful business that is leading edge in the consumer research sector. This has arisen by combining focus group research techniques with quantitative data analysis to give predictive insights into consumer behaviour. Tree's clients include O2, Fortnum and Mason, Banardos, Skoda, Greenwich University, Victim Support and Volkswagen Commercial Vehicles.
In consideration for the acquisition, Archibald Ingall Stretton ('AIS'), the direct marketing agency, a 40 per cent. shareholder, has received £405,067 and
the Founders, who will remain part of the Group going forward, will receive, in aggregate, a cash consideration of £394,941 and 5,488,000 new ordinary shares.
The Founders have entered in to an agreement whereby their initial consideration will be deferred until 30th April 2007. If, for any reason, Cagney does not
satisfy the deferred consideration the Founders are able to retain their 60 per cent. of Tree London Ltd leaving Cagney with the 40 per cent. acquired from AIS.
From 1st May 2007 until 1st August 2007 the Founders have the right to acquire Cagney's 40 per cent. for the same consideration as paid to AIS. After that date Cagney has the right to hold the 40 per cent. or sell to a third party.
This structure has been put in place to allow for an early completion, desirable for all parties, and the Directors of Cagney plc are confident it is a commercially balanced and beneficial arrangement.
The Founders have agreed that they will retain all of their shares for the first year after Admission and any sales thereafter will be subject to conventional
orderly market arrangements. Application will be made to the London Stock Exchange for the shares to be admitted to trading on AIM. The new ordinary
shares will rank pari passu with the Company's existing ordinary shares and trading is expected to commence on completion of the deferred consideration
arrangement.
It is understood that Cagney plans to expand Tree's services and products. The Founders will be incentivised based on future profit performance of the business.
In 2007 and 2008 the Founders will receive a sliding scale multiple to a maximum of 6.2% of profit after tax, the absolute amount also capped. Any future payments will be a mixture of cash and shares.
In the year ended 31 December 2005, Tree reported revenues of £1.2 million and profits before interest, tax and exceptional items of £89,000. As at 31 December 2005 the company reported net assets of £262,000. Unaudited accounts for the year ended 31st December 2006 show a net fee income of £1.8m and profit before interest and tax of £200,000.
Michael Bennett, assisted by Richard Baxter, led the Kerman team acting for the Founders.