Notes to the Financial Statements continued for the year ended 31 May 2022
34 Acquisitions Acquisition of IPM business
On 1 June 2021, shareholder approval was passed for the acquisition of the IPM business of Iron Mountain, comprising substantially all of the assets of Iron Mountain Intellectual Property Management, Inc. together with certain other assets of affiliates of Iron Mountain exclusively related to the IPM business. The primary reasons for the business combination are to: • Scale up the Group’s core business to create a global business and platform for further growth • Generate revenue synergies through allowing the enlarged division to offer NCC’s broader suite of established verification services as well as the newer Escrow-as-a-Service (EaaS) cloud offering to the IPM business’ existing customer base • Present an exciting new opportunity to sell NCC’s cyber security services from its Assurance division into the IPM business’ broad and blue-chip customer base in the medium term • Be accretive to earnings per share from completion, even without factoring in revenue synergies • Result in greater strategic strength for the future Management considers shareholder approval of the transaction determines a change in control and therefore the date of shareholder approval is considered to be the acquisition date for the transaction. Shareholder approval was granted on 1 June 2021 and the IPM Software Resilience business has been consolidated into the Group results from that date (see Note 3). Transfer of consideration for the acquisition was made on 7 June 2021, which is commonly referenced within these Financial Statements as being the date of practical completion of the transaction. Details of assets acquired that are subject to provisional fair value adjustments are noted below. The acquisition for an original total consideration of $220.0m was subsequently adjusted during the year ended 31 May 2022 to $216.1m (£152.0m) to reflect a normalised working capital adjustment of $2.7m and a final positive net working capital adjustment of $1.2m. The acquisition was funded through an equity net placing of £70.2m ($98.4m) on 17 May 2021 combined with a new three year $70m term loan and the remaining $47.7m funded via existing cash balances and our revolving credit facility. The term loan was entered into on 12 May 2021 but not drawn down until 2 June 2021. The fair value of assets and liabilities acquired can be summarised as follows:
Fair value £m
Identifiable intangible assets (Note 12): Customer relationships
91.4
Computer software Right-of-use assets
1.2 0.2 3.8
Trade and other receivables Trade and other payables
(0.2)
Deferred income Lease liabilities Deferred tax liability
(12.1)
(0.2) (0.7)
Total identifiable assets acquired, and liabilities assumed
83.4 68.6
Goodwill (Note 12)
Total consideration
152.0
Satisfied by: Cash
152.0
No cash was acquired as part of the acquisition. Total costs directly attributable to the acquisition of the IPM business totalling £8.5m have been expensed to Individually Significant Items during the year ended 31 May 2021 (£7.6m) and the year ended 31 May 2022 (£0.9m). Issue costs of £2.4m were incurred as part of the equity placing and have been debited to the share premium account in the year ended 31 May 2021. The fair value of the financial assets includes trade receivables with a fair value of £3.8m and a gross contractual value of £5.2m.
200
NCC Group plc — Annual report and accounts for the year ended 31 May 2022
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