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    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    12. ACQUISITIONS   

 
Atlanet a Radianz b Other c Total  
Year ended 31 March 2006 £m   £m   £m   £m  

 
Fair value of consideration
65   143   69   277  
Less: fair value of net assets acquired
35   104   17   156  

 
Goodwill arising
30   39   52   121  

 
Consideration:
               
Cash
58   120   52   230  
Deferred consideration
7     17   24  
Debt assumed
  23     23  

 
Total
65   143   69   277  

 
The outflow of cash and cash equivalents is as follows:
               
Cash consideration
58   115   52   225  
Less: cash acquired
5   44   11   60  

 
  53   71   41   165  

 


 
Infonet d Albacom e Other f Total  
Year ended 31 March 2005 £m   £m   £m   £m  

 
Fair value of consideration
520   131   19   670  
Less: fair value of net assets acquired
334   122   9   465  

 
Goodwill arising
186   9   10   205  

 
Consideration:
               
Cash
520   93   23   636  
Deferred consideration
  38   1   39  

 
Total
520   131   24   675  

 
The outflow of cash and cash equivalents is as follows:
               
Cash consideration
520   93   23   636  
Less: cash acquired
205     5   210  

 
  315   93   18   426  

 

Year ended 31 March 2006
aAtlanet
On 28 February 2006 the group acquired 100% of the issued share capital of Atlanet SpA (Atlanet) for total consideration of £65 million, including deferred consideration of £7 million and acquisition costs of £1 million. The net assets acquired in the transaction and the goodwill arising were as follows:

  Book and  
  fair value  
  £m  

 
Intangible assets
2  
Property, plant and equipment
25  
Receivables
46  
Cash and cash equivalents
5  
Payables
(43 )

 
Group’s share of original book value and fair value of net assets
35  

 
Goodwill
30  

 
Total consideration
65  

 

The fair value adjustments relating to the acquisition of Atlanet are provisional due to the timing of the transaction and will be finalised during the 2007 financial year.
     From the date of acquisition, Atlanet has contributed to the group’s results revenue of £7 million and a net loss of £1 million. If the acquisition had occurred on 1 April 2005, the group’s revenue would have been higher by £90 million, and profit for the year would have been lower by £1 million (year ended 31 March 2005, £112 million higher and £1 million lower, respectively). The residual excess over the net assets acquired is recognised as goodwill. Goodwill comprises principally the assembled workforce, expected cost savings and synergies.

bRadianz
On 29 April 2005, the group acquired 100% of the issued share capital of Radianz Limited (Radianz) for total consideration of £143 million, including acquisition costs of £5 million. The net assets acquired in the transaction, and the goodwill arising, were as follows:

  Book value  

Fair
value
adjustments

  Fair value  
  £m   £m   £m  

 
Intangible assets
  22   22  
Property, plant and equipment
55   (4 ) 51  
Receivables
40     40  
Cash and cash equivalents
44     44  
Payables
(53 )   (53 )

 
Group’s share of original book value and fair value of net assets
86   18   104  

 
Goodwill
        39  

 
Total consideration
        143  

 

From the date of acquisition Radianz has contributed to the group’s results £60 million of revenue and a net loss of £30 million. If the acquisition had occurred on 1 April 2005, the group’s revenue and profit after tax would have been higher by £4 million and £nil, respectively (year ended 31 March 2005, £38 million and £1 million, respectively).
     Intangible assets, comprising a brand, customer lists and customer relationships, were recognised at their respective fair values. The residual excess over the net assets acquired is recognised as goodwill. Goodwill comprises principally the assembled work force, expected cost savings and synergies.

cOther
During the year ended 31 March 2006 the group acquired a number of other smaller subsidiary undertakings and businesses including principally SkyNet Systems Limited, the CARA Group and Total Network Solutions Limited. The combined net assets and goodwill arising in respect of these acquisitions were as follows:

  Book and  
  fair value  
  £m  

 
Property, plant and equipment
5  
Inventories
4  
Receivables
26  
Cash and cash equivalents
11  
Payables
(29 )

 
Group’s share of original book value and fair value of net assets
17  

 
Goodwill
52  

 
Total consideration
69  

 

If these acquisitions had occurred on 1 April 2005, the group’s revenue and profit after tax would have been higher by £15 million and £nil, respectively.

Year ended 31 March 2005
dInfonet
On 25 February 2005 the group acquired 100% of the issued share capital of Infonet Services Corporation (Infonet) for total consideration of £520 million including acquisition costs of £10 million (£315 million, net of cash in the business). At 31 March 2005, the fair value adjustments relating to the acquisition of Infonet were provisional, however no further changes to these adjustments were necessary when the fair values were finalised in the 2006 financial year. The net assets acquired in the transaction, and the goodwill arising, were as follows:

  Book
value
  Fair
value
adjustments
  Fair value  
  £m   £m   £m  

 
Intangible assets
  78   78  
Property, plant and equipment
200   (100 ) 100  
Receivables
93   (19 ) 74  
Cash and cash equivalents
205     205  
Payables
(94 ) 4   (90 )
Provisions and non current liabilities
(14 ) (18 ) (32 )
Minority interest
(1 )   (1 )

 
Group’s share of original book value and fair value of net assets
389   (55 ) 334  

 
Goodwill
        186  

 
Total consideration
        520  

 

Intangible assets, comprising a brand and customer relationships, were recognised at their respective fair values. The residual excess over the net assets acquired is recognised as goodwill. Goodwill comprises principally the assembled work force, expected cost savings and synergies.

eAlbacom
On 4 February 2005 the group acquired the 74% interest in Albacom SpA (Albacom) not already held for total consideration of £131 million, including deferred consideration of £38 million and acquisition costs of £5 million. The deferred consideration is dependent upon the financial performance of Albacom in the 2009 financial year and the minimum payable is £38 million. At 31 March 2005, the fair value adjustments relating to the acquisition of Albacom were provisional, however no further changes to these adjustments were necessary when the fair values were finalised in the 2006 financial year. The net assets acquired in the transaction, and the goodwill arising, were as follows:

  Book value   Fair
value
adjustments
  Fair value  
  £m   £m   £m  

 
Intangible assets
190     190  
Property, plant and equipment
188   (11 ) 177  
Inventories
5     5  
Receivables
206     206  
Payables
(301 ) (14 ) (315 )
Provisions and non current liabilities
(139 )   (139 )
Minority interest
(2 )   (2 )

 
Group’s share of original book value and fair value of net assets
147   (25 ) 122  

 
Goodwill
        9  

 
Total consideration
        131  

 

The residual excess over the net assets acquired was recognised as goodwill. Goodwill comprises principally the assembled work force, expected cost savings and synergies.

fOther
During the year ended 31 March 2005 the group acquired a number of other smaller subsidiary undertakings and businesses, principally BIC Systems Group Limited. The combined net assets acquired in the transaction and goodwill arising in respect of these acquisitions were as follows:

             
  Book value   Fair
value
adjustments
  Fair value  
  £m   £m   £m  

 
Intangible assets
  6   6  
Receivables
3     3  
Cash and cash equivalents
5     5  
Payables
(5 )   (5 )

 
Group’s share of original book value and fair value of net assets
3   6   9  

 
Goodwill
        10  

 
Total consideration
        19  

 

 

 

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