JKL ACQUISITION AND DISPOSAL
On 25 June 2002 Leo Burnett Worldwide acquired Stockholm based leading Swedish communications consultancy JKL. CCP advised the shareholders of JKL who had been named Sweden's top PR and communications firm for several years and had recently expanded its operations to Copenhagen (Denmark) and Helsinki (Finland).
Leo Burnett, with worldwide billings of over $10 billion, is a wholly owned subsidiary of Chicago-based Bcom3 Group Inc., one of the world's largest marketing communications companies who, in turn, is now owned by the French advertising giant Publicis.
The two principal shareholder-managers of JKL were recommended to CCP by successful Swedish entrepreneurs who had dealt with us on a previous transaction. Our experience in the business to business services sector and our knowledge and experience of dealing with large US based multi-national corporations were especially relevant in this transaction.
CCP was approached in early 2002 to assist in the latest of a series of approaches that had been made to the shareholders of JKL by Leo Burnett. The initial brief was to ascertain whether this latest approach was genuine and if so to assist the shareholders in ongoing negotiations.
JKL had existing links to Leo Burnett's Norwegian communications consultancy and a merger of the businesses would provide common ownership of the market leader in each of the Nordic countries.
However, this seemingly straight forward transaction with obvious strategic fit had some significant complications, such as:
1. if the shareholders were to sell, was this the best strategic partner and valuation achievable;
2. as in any people business, JKL's principal assets were it's people and, in JKL's case, significantly it's principal shareholder-managers and therefore the deal structure would involve ongoing incentive and earn-out arrangements, further complicated by the merger with the purchaser's Norwegian operations; and
3. on 7 March 2002, it was announced that Bcom3 itself was the subject of a takeover by Paris-based Publicis Groupe to form the world's fourth largest marketing communications company.
After first gaining a full understanding of the JKL business, CCP played a significant role in progressing discussions with Leo Burnett. Concurrently, we developed a JKL Information Memorandum which primarily assisted in the presentation of information to Leo Burnett, but also put us in a position to informally test the wider market in terms of other potential acquirers of the company. Whilst no formal discussions took place, this process allowed us to advise on strategic alternatives and potential valuations.
CCP's experience in negotiating overall valuation and the structuring of consideration was paramount in meeting the objectives of both buyer and seller. From Leo Burnett's perspective, protection of their investment and the setting of future incentives were key; for the shareholders of JKL, up front cash was compensation for giving up "legal control" of their company, but just as important was the ongoing "management control" of the enlarged business necessary to achieve the earn-out and other management incentives.
The announced takeover of Bcom3 during this transaction cast considerable uncertainty over the process. We constantly asked for and were given assurances that the purchaser would deliver……..they did, albeit that ultimate sign off was not achieved until the actual day of completion!
As always, CCP advised its clients throughout the transaction process, from the negotiation of Heads of Agreement, through the due diligence and legal process to eventual signing of the Sale and Purchase Agreement.
JKL continue to recommend CCP to their own Scandinavian corporate clients.
CALL CCP 0207 630 2010 FOR FURTHER INFORMATION
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