Annual Report 2010

Adecco Group –
Notes to consolidated financial statements
in millions, except share and per share information

Note 2 • Acquisitions

The Company made several acquisitions in 2010, 2009, and 2008. With the exception of the MPS Group (“MPS”) acquisition, the Company does not consider any of its 2010, 2009, or 2008 acquisition transactions to be material, individually or in the aggregate, to its consolidated balance sheets or results of operations.

The following table illustrates the aggregate impact of the 2010 and 2009 acquisitions:

in EUR

2010

2009

 

 

 

Impact of acquisitions

 

 

Net tangible assets acquired

205

65

Identified intangible assets

306

18

Goodwill

503

89

Debt acquired

 

(3)

Deferred tax liabilities

(107)

(5)

Noncontrolling interests

1

3

Total consideration

908

167

In January 2010, the Company acquired all outstanding common shares of MPS for EUR 831, net of cash acquired. MPS is one of the largest professional staffing firms in North America with also a strong position in the UK, and is a leading provider of specialty staffing, consulting, and business solutions across various professional business lines such as information technology, finance and accounting, legal, engineering and healthcare. The purchase price was funded with the prepaid forward sale of Adecco S.A. shares (for further details refer to Note 1) and with internal resources. MPS was consolidated by the Company as of January 31, 2010, and the results of MPS’s operations have been included in the consolidated financial statements since February 1, 2010.

The following table summarises the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:

in EUR

 

 

 

Fair value of assets acquired and liabilities assumed

 

Cash acquired

70

Trade accounts receivable, net

206

Other current assets

28

Deferred tax assets

31

Other assets

30

Intangible assets:

 

• Marketing related (trade names)

161

• Customer base

137

• Other

8

Goodwill

497

Current liabilities

(151)

Other liabilities

(9)

Deferred tax liabilities

(107)

Total fair value of assets acquired and liabilities assumed

901

The goodwill of EUR 497 arising from the acquisition consists largely of the synergies and economies of scale expected from combining operations of Adecco and MPS. Approximately EUR 149 of tax deductible goodwill was recognised with the MPS acquisition.

The majority of the marketing related intangible assets (trade names) is considered to have infinite lives and are not amortised. Customer base intangible assets acquired have estimated average useful lives of five to nine years and are amortised on a straight-line basis over their useful lives.

The goodwill and intangible assets were assigned to the following segments:

in EUR

North
America

UK &
Ireland

Germany &
Austria

Benelux

Other

Total

 

 

 

 

 

 

 

Goodwill

380

74

6

12

25

497

Intangible assets

246

52

2

4

2

306

MPS revenues and net income attributable to Adecco shareholders included in the 2010 consolidated operating results since the acquisition date amount to EUR 1,183 and EUR 31, respectively.

Amortisation expense, net of tax for MPS intangible assets included in the 2010 consolidated results of operations since the acquisition date amounts to EUR 15.

The following unaudited pro forma information shows consolidated operating results as if the MPS acquisition had occurred on January 1, 2010 and January 1, 2009:

in EUR

2010

2009

 

 

 

Pro forma consolidated operating results

 

 

Revenues

18,747

15,992

Net income/(loss) attributable to Adecco shareholders

419

(5)

Basic earnings per share

2.18

(0.03)

Diluted earnings per share

2.16

(0.03)

The 2010 pro forma net income attributable to Adecco shareholders includes the MPS January 2010 net loss of EUR 4, which considers additional amortisation of definite-lived intangible assets, net of tax of EUR 1. The 2009 pro forma net loss attributable to Adecco shareholders includes the MPS net loss of EUR 13 which considers adjustments for amortisation of definite-lived intangible assets, net of tax of EUR 14, acquisition costs of EUR 7 and interest expense of EUR 2. The pro forma results of operations do not necessarily represent operating results which would have occurred if the acquisition had taken place on the basis assumed above, nor are they indicative of future operating results of the combined companies.

In October 2009, the Company acquired 100% of the outstanding shares of Spring Group Plc. (“Spring”), for EUR 94, net of cash acquired. As a result of this acquisition, EUR 52 and EUR 11 of goodwill and intangible assets, respectively, were recorded. Spring is a multi-branded recruitment services provider with operations in the UK, Europe, USA, and Asia Pacific. Spring’s three core businesses – Professional Staffing, General Staffing, and Managed Solutions – cover a broad range of industry sectors and clients ranging from market leading multinationals to small and medium sized enterprises. The Spring acquisition was financed with available cash.

In November and December 2008, the Company acquired 100% of the outstanding shares of DNC de Nederlanden Compagnie N.V. (“DNC”), for EUR 56, net of cash acquired. As a result of this acquisition, EUR 67 and EUR 21 of goodwill and intangible assets, respectively, were recorded. DNC is a Dutch specialised secondment firm working in the IT, Finance, Legal, Management Support & Information Management segments.

In December 2008, the Company acquired 100% of the outstanding shares of Groupe Datavance (“Datavance”) for EUR 41, net of cash acquired and an additional maximum contingent consideration of EUR 27 payable between 2010 and 2012. The contingent consideration is based on the three-year EBITDA growth and will be recorded as additional goodwill at the time the contingency is resolved. No payments were made in 2010. Goodwill and intangible assets recognised for the Datavance acquisition, excluding contingent consideration, amounted to EUR 43 and EUR 15, respectively. Datavance is a French company which specialises in the IT sector.

Both, the DNC and Datavance acquisitions, were financed with available cash.

Total acquisition related costs expensed in 2010 and 2009 amounted to EUR 7 and EUR 5, respectively and are included in SG&A within the consolidated statement of operations.