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

REDHILL | WOKING | WIMBLEDON | CAMBERLEY Overview 1.Trade Sales as an Exit 2.Acquisition Structuring 3.Funding 4.Heads of Terms and Confidentiality 5.Due Diligence 6.Documentation 7.Apportioning Risk: Warranties and Disclosure, Indemnities and Tax 8.Problem areas… RI Recruitment Industry M&A Conference From ‘Deal?’ to ‘Done!’

REDHILL | WOKING | WIMBLEDON | CAMBERLEY 1. Trade Sales as an Exit Alternatives: -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!’

REDHILL | WOKING | WIMBLEDON | CAMBERLEY 2. Acquisition Structuring Sale 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. Funding Debt 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 RI Recruitment Industry M&A Conference From ‘Deal?’ to ‘Done!’

REDHILL | WOKING | WIMBLEDON | CAMBERLEY 4. Heads of Terms Non binding terms: Price: earn out Ongoing employment Timetable Legally binding terms: Confidentiality Exclusivity Non-compete RI Recruitment Industry M&A Conference From ‘Deal?’ to ‘Done!’

REDHILL | WOKING | WIMBLEDON | CAMBERLEY 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 RI Recruitment Industry M&A Conference From ‘Deal?’ to ‘Done!’

REDHILL | WOKING | WIMBLEDON | CAMBERLEY 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 Risk Warranties: - verify due diligence - a price adjustment Disclosure -Legal effect of disclosure -Disclosure letter and bundle Limitations: -Financial and time limits -Control of claims RI Recruitment Industry M&A Conference From ‘Deal?’ to ‘Done!’

REDHILL | WOKING | WIMBLEDON | CAMBERLEY 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 Areas Maintaining 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!’

REDHILL | WOKING | WIMBLEDON | CAMBERLEY 9. Questions? PETER SAVAGE, PARTNER, HEAD OF CORPORATE & COMMERCIAL AND HEAD OF RECRUITMENT - MORRISONS SOLICITORS LLP 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