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Notes 26-31

28. Acquisitions

The Group accounts for acquisitions in accordance with IFRS 3 'Business Combinations'. IFRS 3 requires the acquiree's identifiable assets, liabilities and contingent liabilities (other than non-current assets or disposal groups held for sale) to be recognised at fair value at acquisition date. In assessing fair value at acquisition date, management make their best estimate of the likely outcome where the fair value of an asset or liability may be contingent on a future event. In certain instances, the underlying transaction giving rise to an estimate may not be resolved until some years after the acquisition date. IFRS 3 requires the release to profit of any acquisition reserves which subsequently become excess in the same way as any excess costs over those provided at acquisition date are charged to profit. At each period end management assess provisions and other balances established in respect of acquisitions for their continued probability of occurrence and amend the relevant value accordingly through the income statement or as an adjustment to goodwill as appropriate under IFRS 3.

The fair value adjustments for certain acquisitions included in the following tables have been determined provisionally at the balance sheet date.

Acquisition of 24/7 Real Media, Inc
On 2 July 2007 the Company finalised its acquisition of 100% of the issued share capital of 24/7 Real Media, Inc ('24/7'). The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group.

  Book
value at
acquisition
£m
Fair value
adjustments1
£m
Fair value
to Group
£m
Intangible assets 5.2 50.2 55.4
Property, plant and equipment 5.2 5.2
Interests in associates and other investments 3.3 3.3
Current assets 80.0 80.0
Total assets 93.7 50.2 143.9
Current liabilities (31.8) (5.0) (36.8)
Bonds and bank loans (7.5) (7.5)
Trade and other payables due after one year (18.4) (18.4)
Deferred taxes (19.3) (19.3)
Provisions (2.5) (2.5)
Total liabilities (57.7) (26.8) (84.5)
Net assets 36.0 23.4 59.4
Goodwill     270.7
Consideration     330.1
Consideration satisfied by:
Cash     316.5
Debt redemption premium     3.4
Shares to be issued     5.7
Capitalised acquisition costs     4.5

Note
1 Fair value adjustments comprise adjustments to bring the book value of the assets and liabilities of 24/7 to fair value, principally through the recognition of intangible assets (comprising customer relationships, proprietary tools and brands) and related deferred tax liabilities.

Net cash (outflows)/inflows in respect of 24/7 comprised:

  £m
Cash consideration (316.5)
Cash at bank and in hand acquired 34.5
Debt redemption premium (3.4)
Acquisition costs (4.5)
  (289.9)

The post-acquisition contribution of 24/7 to the Group's revenue and operating profit was not material.

Other acquisitions
The Group acquired a number of other subsidiaries in the year. The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group.

  Book
value at
acquisition
£m
Fair value
adjustments
£m
Fair
value to
Group
£m
Intangible assets 2.4 36.2 38.6
Property, plant and equipment 7.0 (0.4) 6.6
Current assets 124.9 (1.7) 123.2
Total assets 134.3 34.1 168.4
Current liabilities (94.1) (9.8) (103.9)
Trade and other payables due after one year (6.3) (6.2) (12.5)
Deferred taxes (0.2) (5.9) (6.1)
Provisions (2.0) (1.3) (3.3)
Total liabilities (102.6) (23.2) (125.8)
Net assets 31.7 10.9 42.6
Minority interest     (6.6)
Goodwill     239.9
Consideration     275.9
Consideration satisfied by:
Cash     173.1
Shares issued     2.3
Payments due to vendors     98.5
Capitalised acquisition costs     2.0

In aggregate, acquisitions completed in 2007 (including 24/7) contributed £132.2 million to revenues, £14.7 million to operating profit and £24.7 million to headline PBIT. There were no material acquisitions completed between 31 December 2007 and the date the financial statements have been authorised for issue.

If all acquisitions had been completed on the first day of the financial year, Group revenues for the period would have been £6,442.8 million, operating profit would have been £818.4 million and Headline PBIT would have been £955.6 million.