Are partners really self employed?
2 October 2018
Gannons represented Draft House Holding Limited in the sale of the company to BrewDog PLC for over £14.5 million plus deferred consideration.
Draft House was founded in 2009 when it opened its first bar in Battersea. Since then it has expanded to 13 bars in London and a further bar was opened in Milton Keynes. BrewDog acquired all 14 Draft House Bars and retained all 213 staff members.
Gannons represented the business being sold and its shareholders.
We drafted and reviewed the heads of terms which set the parameters of the deal.
The sellers were largely high net worth individuals. We needed to ensure that they were comfortable with the deal and liaise with them in order to secure the necessary shareholder consents required to complete. Many did not want to attend the completion meeting, so we obtained powers of attorney allowing the directors to sign the sale documentation on their behalf.
As Draft House had grown at such as rapid rate, in certain places the paperwork had to catch up with the company growth. Gannons worked with Draft House in order to overcome this hurdle by compiling missing records.
We had to ensure that the entire SPA represented the deal that the shareholders expected. Hence, we worked through commercial decisions where appropriate and negotiated solutions.
The sellers are liable for warranties. To cut down on the risk for the sellers, we undertook a review of the data room to disclose against the warranties in appropriate cases. This thereby reduced the risk and size of any claim.
We dealt with exercising EMI prior to sale – we dealt with the procedures for exercising EMI options prior to completion. The option holders become shareholders of the company immediately prior to the sale and receive their share of the sale proceeds. When EMI options are exercised prior to completion, companies often fail to consider that the EMI monies will be paid into the company and take account of how that will affect the completion accounts.
As a crucial step before the sale took place, we needed to oversee the restructuring of the Draft House subsidiary companies. This meant removing from the Draft House group certain companies that BrewDog did not wish to purchase.
The restructure involved setting up a new special purpose vehicle. The transfer of shares in a subsidiary company to the special purpose vehicle was for tax purposes. The balance sheets had to reflect the fact that the distribution was within the powers of the directors. UK company law requires a solvency statement from the directors in order to allow this. The solvency statement required dealing with inter-company loans in an appropriate manner to avoid repercussions for the shareholders.
The targets used for the payment of deferred consideration required review. The deferred consideration was based on Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). The sellers did not want expenditure post acquisition to be used unfairly to reduce EBITDA. We drafted various safeguards to protect the sellers.
The buyer acquired the business free of charges upon completion. In order for that to happen, Gannons liaised with the banks to discharge all charges and secure confirmation of discharge from the banks.
Everyone worked together to get a complex restructuring and sale completed within a short timescale. Gannons were really helpful and responsive and got us over the line