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, including TNS, have been determined provisionally at the balance sheet date.

Acquisition of Taylor Nelson Sofres plc

On 29 October 2008 the Group completed its acquisition of the issued share capital of Taylor Nelson Sofres plc (TNS). 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
Accounting
policy
alignments1

Fair Value
adjustments2

Fair Value
to Group
Intangible assets 17.4 708.3 725.7
Property, plant and equipment 88.8 (7.9) 10.3 91.2
Interests in associates and
other investments
2.8 15.1 (1.4) 16.5
Deferred tax assets 44.1 (29.4) 14.7
Current assets 601.8 (119.0) (9.3) 473.5
Total assets 754.9 (111.8) 678.5 1,321.6
Current liabilities (548.2) 115.9 (51.7) (484.0)
Bonds and bank loans3 (577.8) (577.8)
Trade and other payables
due after one year
(18.7) 0.1 (38.0) (56.6)
Deferred tax liabilities (34.3) (210.2) (244.5)
Provisions (41.2) 0.4 (16.0) (56.8)
Total liabilities (1,220.2) 116.4 (315.9) (1,419.7)
Net (liabilities)/assets (465.3) 4.6 362.6 (98.1)
Minority interest (9.6)
Goodwill 1,132.7
Consideration 1,025.0
Consideration satisfied by:
Cash 737.0
Shares4 267.7
Shares to be issued 2.8
Capitalised acquisition costs 17.5

Notes

1
Accounting policy alignments comprise adjustments to bring the assets and liabilities of TNS into compliance with WPP plc’s accounting policies. These were principally in relation to revenue recognition and the application of the equity method of accounting to joint ventures which had been previously accounted for under the proportional method.
2
Fair value adjustments comprise adjustments to bring the book value of the assets and liabilities of TNS to fair value, principally through the recognition of intangible assets (comprising customer relationships, proprietary tools and brands), their related deferred tax liabilities and other provisions including taxes.
3
At acquisition date TNS had £577.8 million of debt, of which £395.7 million was paid off by WPP in November 2008 out of its own debt facilities. The total of consideration and debt acquired for TNS is therefore £1,602.8 million.
4
Share consideration comprises 80.5 million ordinary shares.

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

  £m
Cash consideration (737.0)
Cash and cash equivalents (net) 18.2
Acquisition costs (17.5)
  (736.3)

The post-acquisition contribution of TNS was £269.6 million to revenue, £12.4 million to operating profit and £33.2 million to headline PBIT. Operating profit is stated after charging £18.5 million amortisation of acquired intangible assets.

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 1.7 18.7 20.4
Property, plant and equipment 5.5 (0.1) 5.4
Current assets 147.1 147.1
Total assets 154.3 18.6 172.9
Current liabilities (106.3) (0.3) (106.6)
Trade and other payables due after one year (4.2) (19.7) (23.9)
Deferred tax liabilities (0.2) (4.3) (4.5)
Provisions (1.2) (1.2)
Total liabilities (111.9) (24.3) (136.2)
Net assets/(liabilities) 42.4 (5.7) 36.7
Minority interest (15.8)
Goodwill 132.4
Consideration 153.3
Consideration satisfied by:
Cash
108.2
Payments due to vendors 37.4
Capitalised acquisition costs 7.7

In aggregate, other acquisitions completed in 2008 contributed £106.7 million to revenues, £17.9 million to operating profit and £19.8 million to headline PBIT. There were no material acquisitions completed between 31 December 2008 and the date the financial statements have been authorised for issue.

If all acquisitions, including TNS, had been completed on the first day of the financial year, Group revenues for the period would have been £8,534.4 million, operating profit would have been £824.8 million and headline PBIT would have been £1,207.8 million.

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