28 Business combinations
On 30 September 2006, the Group acquired 100% of the voting rights of Mergermarket, a financial information company providing information to financial institutions, corporations and their advisers. In addition, several other businesses were acquired in the current year including Promissor, Paravia Bruno Mondadori (PBM), National Evaluation Systems (NES), PowerSchool and Chancery in the Education business and Quote.com in IDC. None of these other acquisitions were individually material to the Group. In 2005, the amounts shown below mainly relate to the acquisition of AGS Publishing.
The assets and liabilities arising from acquisitions are as follows:
| 2006 | 2005 | ||||||
|---|---|---|---|---|---|---|---|
| All figures in £ millions | Notes | Mergermarket Carrying amount |
Mergermarket Fair value adjs |
Mergermarket Fair value |
Other Fair value |
Total Fair value |
Total Fair value |
| Property, plant and equipment | 11 | 1 | – | 1 | 12 | 13 | 7 |
| Intangible assets | 12 | – | 34 | 34 | 122 | 156 | 89 |
| Intangible assets – Pre-publication | 17 | – | – | – | 4 | 4 | 15 |
| Inventories | – | – | – | 14 | 14 | 10 | |
| Trade and other receivables | 11 | – | 11 | 13 | 24 | 32 | |
| Cash and cash equivalents | 14 | – | 14 | 14 | 28 | 3 | |
| Trade and other liabilities | (21) | – | (21) | (31) | (52) | (42) | |
| Financial liabilities – Borrowings | – | – | – | (3) | (3) | – | |
| Deferred income tax liabilities | 14 | – | (10) | (10) | (16) | (26) | (21) |
| Retirement benefit obligations | 24 | – | – | – | (2) | (2) | (2) |
| Provisions for other liabilities and charges | 22 | – | – | – | (3) | (3) | (1) |
| Equity minority interest | – | – | – | (9) | (9) | 8 | |
| Net assets acquired at fair value | 5 | 24 | 29 | 115 | 144 | 98 | |
| Goodwill | 97 | 149 | 246 | 155 | |||
| Total | 126 | 264 | 390 | 253 | |||
| Satisfied by: | |||||||
| Cash | (109) | (273) | (382) | (249) | |||
| Deferred consideration | (17) | – | (17) | (5) | |||
| Net prior year adjustments | – | 9 | 9 | 1 | |||
| Total consideration | (126) | (264) | (390) | (253) | |||
| Book value of net assets acquired | 5 | 43 | 48 | 58 | |||
| Fair value adjustments | 24 | 72 | 96 | 40 | |||
| Fair value to the Group | 29 | 115 | 144 | 98 | |||
The fair value adjustments relating to the acquisition of Mergermarket are provisional and will be finalised during 2007. They include the valuation of intangible assets and the related deferred tax effect. Adjustments to 2005 provisional fair values largely relate to the acquisition of AGS Publishing.
Net cash outflow on acquisition:
| All figures in £ millions | 2006 | 2005 |
|---|---|---|
| Cash – current year acquisitions | (382) | (249) |
| Deferred payments for prior year acquisitions and other items | (9) | – |
| Cash and cash equivalents acquired | 28 | 3 |
| Cash outflow on acquisition | (363) | (246) |
The goodwill arising on the acquisition of Mergermarket is attributable to the profitability of the acquired business and the significant synergies expected to arise.
Mergermarket contributed £9m of sales and £2m to the Group's profit before tax between the date of acquisition and the balance sheet date. Other businesses acquired contributed £15m to the Group's profit before tax between the date of acquisition and the balance sheet date.
If the acquisitions had been completed on 1 January 2006, Group sales for the period would have been £4,199m and profit before tax would have been £478m.