TIDMATG
RNS Number : 3035C
Auction Technology Group PLC
17 June 2021
THIS ANNOUNCEMENT (INCLUDING THE APPIX) AND THE INFORMATION
CONTAINED HEREIN ARE RESTRICTED AND ARE NOT FOR PUBLICATION,
RELEASE, DISTRIBUTION OR FORWARDING, DIRECTLY OR INDIRECTLY, IN
WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA,
THE REPUBLIC OF SOUTH AFRICA, JAPAN OR ANY OTHER JURISDICTION IN
WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE
UNLAWFUL.
FURTHER, THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND
DOES NOT CONSTITUTE AN OFFER OF SECURITIES IN ANY JURISDICTION.
PLEASE SEE THE IMPORTANT NOTICES AT THE OF THIS ANNOUNCEMENT.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
Auction Technology Group plc Press Release
17 June 2021
Auction Technology Group plc
("ATG", the "Company", or the "Group")
Proposed placing of Ordinary Shares
ATG, the operator of world-leading online auction marketplaces
("Marketplaces") and proprietary global auction platform technology
for curated online auctions, today announces its intention to
conduct a non-pre-emptive placing of 19,999,990 new ordinary shares
of 0.01 pence each in the capital of the Company (the "Placing
Shares"), at the Placing Price (as defined below) representing just
less than 20.0% of the current issued ordinary share capital of the
Company (the "Placing"). Certain directors and executive management
of the Company intend to participate in the Placing.
ATG proposes to use the net proceeds of the Placing to partly
fund the acquisition of Platinum Parent, Inc., the holding company
of LiveAuctioneers (the "Acquisition"), a leading curated online
North American Arts & Antiques ("A&A") Marketplace, as
separately announced today.
The Placing will be conducted through an accelerated
bookbuilding process (the "Bookbuilding Process") which will be
launched immediately following this announcement. The Placing is
subject to the terms and conditions set out in Appendix 1 to this
announcement (which forms part of this Announcement, such
announcement and its Appendices together being this
"Announcement").
Reasons for the placing
The net proceeds of the Placing will be predominantly used to
fund the acquisition of LiveAuctioneers for a total consideration
of approximately $525 million, as separately announced today.
Details of the Placing
J.P. Morgan Securities plc, which conducts its UK investment
banking activities as J.P. Morgan Cazenove ("J.P. Morgan
Cazenove"), and Numis Securities Limited ("Numis") are acting as
Joint Global Coordinators and Joint Bookrunners (the "Joint Global
Coordinators" or the "Banks") in connection with the Placing.
The Placing is subject to the terms and conditions set out in
the Appendix 1 to this Announcement.
The Banks will commence the Bookbuilding Process immediately
following the release of this Announcement in respect of the
Placing. The price at which the Placing Shares are to be placed
(the "Placing Price") will be determined at the close of the
Bookbuilding Process by agreement between the Company and the
Banks.
The book will open with immediate effect following this
Announcement. The timing of the closing of the book, pricing and
allocations are at the absolute discretion of the Banks and the
Company. Details of the Placing Price and the number of Placing
Shares to be allotted and issued will be announced as soon as
reasonably practicable after the close of the Bookbuilding
Process.
The Placing Shares, when issued, will be fully paid and will
rank pari passu in all respects with each other and with the
existing ordinary shares of the Company, including, without
limitation, the right to receive all dividends and other
distributions declared, made or paid after the date of issue.
Applications will be made to (i) the Financial Conduct Authority
(the "FCA") for admission of the Placing Shares to listing on the
premium listing segment of the Official List; and (ii) London Stock
Exchange plc for admission of the Placing Shares to trading on its
main market for listed securities (together, "Admission").
Settlement for, and Admission of, the Placing Shares is expected
to take place on or before 8.00 a.m. on 22 June 2021. The Placing
is conditional upon, among other things, Admission becoming
effective. The Placing is also conditional upon the placing
agreement between the Company and the Banks (the "Placing
Agreement") becoming unconditional and not being terminated in
accordance with its terms. Appendix 1 to this Announcement sets out
further information relating to the terms and conditions of the
Placing.
ATG acknowledges that it is seeking to issue Placing Shares
amounting to up to just less than 20.0 per cent. of its existing
issued ordinary share capital on a non-pre-emptive basis and
therefore members of its Board of Directors and senior management
have consulted with the Company's major institutional shareholders
ahead of the release of this Announcement. Given the expected
revenue accretion of the Acquisition to be funded in part with
proceeds from the Placing, the Company believes the structure of
the Placing, including its issue of shares on a non-pre-emptive
basis, is very much aligned with shareholder and other stakeholder
interests. The Placing structure has been chosen as it minimises
time to signing of the Acquisition reducing both the complexity and
time required to provide certainty of funds to the Company in the
context of the Acquisition. The consultation has confirmed the
Board's view that the Placing is in the best interests of
shareholders, as well as wider stakeholders in the Company and will
promote the success of the Company.
To permit the Placing, J.P. Morgan Cazenove and Numis have
waived the 180 day lock-up arrangement put in place at the time of
the ATG IPO. Following the placing, the Company shall be subject to
a new lock-up for a period of 180 days following the date of the
Placing Agreement, subject to certain customary carve-outs agreed
between the Joint Global Coordinators and the Company.
This Announcement should be read in its entirety. In particular,
you should read and understand the information provided in the
"Important Notices" section of this Announcement. The Appendix to
this Announcement sets out further information relating to the
terms and conditions of the Placing. Unless otherwise stated,
capitalised terms in this Announcement have the meanings ascribed
to them in the Appendix (which forms part of this
Announcement).
Investors who have chosen to participate in the Placing, by
making an oral or written offer to acquire Placing Shares, will be
deemed to have read and understood this Announcement in its
entirety (including the Appendices) and to be making such offer on
the terms and subject to the conditions herein, and to be providing
the representations, warranties, agreements, acknowledgements and
undertakings contained in Appendix 1.
Background, strategy and reasons for the Acquisition
ATG operates world-leading Marketplaces and a proprietary
auction Platform for curated online auctions, connecting bidders
with auctioneers. The Group was founded approximately 50 years ago
and is headquartered in London, UK, with offices across three
countries (UK, US and Germany). As a key partner to and advocate
for auctioneers, the Company creates value by providing them with
access to robust online marketplace capabilities, a global bidder
base and a range of value-added tools and services that enable them
to maximise value on lots sold. The Group's pro forma revenue for
FY20 was GBP52.3 million. In February 2021, the Company completed
its successful listing on the premium listing segment of the
Official List and on the London Stock Exchange's main market for
listed securities at a market capitalisation of GBP600 million. In
the IPO Prospectus, the Company clearly conveyed its strategic
direction to its Shareholders and the key pillars for its future
growth, including its overall M&A strategy. The Company has a
strong track record of M&A following on from the notable
acquisition of Proxibid in February 2020 as well other smaller
acquisitions such as Auction Mobility, BidSpotter US and
Lot-tissimo.
LiveAuctioneers is an operator of a leading North American
A&A Marketplace, connecting bidders with more than 6,000
auctioneers since inception (including approximately 1,600
auctioneers as at 31 March 2021) via its online platform, helping
auctioneers to realise operational efficiencies and bidders to
access a wide range of exceptional items through secure online
auctions. LiveAuctioneers is headquartered in New York City. The
Directors believe there is a strong strategic rationale for the
Acquisition of the LiveAuctioneers Group.
Following Completion, LiveAuctioneers' Chief Executive Officer,
Phil Michaelson and Chief Technology Officer, Rob Cummings, will
remain involved in the business and will continue to run
LiveAuctioneers in North America. Under the terms of the
Acquisition, Phil Michaelson, Rob Cummings and certain other
Management Sellers have agreed to retain an ongoing Share ownership
in ATG in order to support the delivery of the full strategic,
operational and financial benefits of the Acquisition. This
includes agreeing to lock-up arrangements relating to the
Consideration Shares receivable by them.
The acquisition of LiveAuctioneers is in line with the M&A
and growth strategies laid out at IPO
As set out in the IPO Prospectus, the Directors believe future
growth is important to the ongoing success of the Group and that
expanding the Group's geographical and industry footprint is
important to allow it to efficiently invest in key elements of the
online buying experience (payments, delivery, improved buyer
experience) that will enable its Marketplaces to remain competitive
with the many other forms of online buying. The Directors believe
that the acquisition of LiveAuctioneers is directly in line with
this strategy, developing the Group's footprint in the North
American A&A vertical / geography. ATG expects the Combined
Group to benefit from similar operational and technical benefits
that have been realised from the acquisitions of Proxibid,
BidSpotter US and Lot-tissimo such as through the Group's 'hub and
spoke' model and, in due course, technological redundancy of legacy
systems.
The Acquisition also demonstrates ATG's commitment to the growth
strategy laid out at the IPO addressing all of the key pillars,
including:
-- Increasing total addressable market
-- Expansion into a market in the early stages of online adoption
-- Increased auctioneer and bidder client base
-- Efficient investment in value enhancing end-to-end UX,
features, and functionality for auctioneers and bidders
-- Adding highly accretive businesses to the group via M&A
-- Enhancing and accelerating the value-add proposition for auctioneers and customers
Increasing total addressable market ("TAM")
The Acquisition adds a significant incremental piece to the
Group's total addressable market with the addition of one of the
leading curated online A&A marketplaces in North America.
The Directors believe that the US A&A segment (the
LiveAuctioneers Group's US TAM) was worth $21.0 billion in 2020 and
the value of goods sold through the auction channel overall in the
US A&A segment (excluding Christie's and Sotheby's) will be
worth $6.6 billion in 2023 (Source: Company estimates based on
internal data). The Directors estimate that the US A&A online
auction segment (excluding Christie's and Sotheby's) was worth $1.8
billion in 2019 and believe this will grow to an estimated $4.0
billion by 2023, with an estimated CAGR of approximately 22 per
cent. per annum between 2021-23 (Source: Company estimates based on
internal data). The differential between the current size of the US
A&A online auction segment and the US A&A TAM represents a
significant growth opportunity for the Group.
The LiveAuctioneers Marketplace is a leading US A&A online
auction marketplace with more than 50 million website visits
(growing at a CAGR of 23.5 per cent. since FY18), more than one
million registered bidders (growing 18.9 per cent. since FY18) and
almost 120,000 active bidders (growing 34.8 per cent. since FY18)
in FY20 and the Directors believe that these factors mean that the
LiveAuctioneers Group is well-positioned to capture an increasing
portion of the US A&A TAM.
LiveAuctioneers is well positioned in North American A&A and
has carved out a differentiated proposition from its competitors,
most notably:
-- LiveAuctioneers has c.1,600 auctioneers
-- LiveAuctioneers charges a transparent headline commission
-- LiveAuctioneers has a highly engaging website with strong functionality (e.g. payments, personalisation and item categorisation)
-- LiveAuctioneers has a highly competitive service offering,
with further scope to expand into other adjacencies, e.g. shipping,
financing, insurance, restoration/repair
-- LiveAuctioneers has a wide ranging category focus and covers
all key A&A categories, whilst also having one of the highest
number of lots on its site vs key peers
Expansion into a market in the early stages of online
adoption
The Acquisition brings greater access to a market with
relatively low online penetration and with a considerable scope to
grow online share in the market as more bidders move online. By way
of illustration, as of its FY20, online share (i.e. gross
merchandise value (GMV) of goods sold online via the
LiveAuctioneers Marketplace as a percentage of total hammer value
(THV) for the auctions listed by LiveAuctioneers) was 15.4 per
cent., up from 12.0 per cent. in its FY18. In the auctions listed
on ATG's European-focused A&A Marketplaces (The Saleroom and
Lot-tissimo), online share was 17 per cent. in ATG's FY20,
highlighting the clear headroom available. The Directors believe
that these A&A Marketplaces have a similar capacity for growth
as that experienced by the online segment for I&C, where online
share for the auctions listed on ATG's I&C Marketplaces
(Proxibid, BidSpotter US and BidSpotter UK) was 39 per cent. in
ATG's FY20. A&A auctions have traditionally been carried out in
an offline, in-person setting where there is less accessibility for
bidders whilst also incurring higher costs to the auctioneers and
thus the shift to online has significant benefits for both
auctioneers and bidders. There are also a significant number of
North American A&A auctioneers that do not have a meaningful
online presence and thus there is a further growth opportunity due
to the number of auctioneers that could be added to the Combined
Group's current auctioneer base. LiveAuctioneers have seen strong
growth both from auctioneers moving online but also from revenue
retained from historic cohorts. LiveAuctioneers auctioneer net
revenue retention was 108% in its FY18, 104% in FY19 and 119% in
FY20.
Increasing the auctioneer and bidder client base
The Acquisition will add approximately 1,600 new auctioneer
clients (as at 31 March 2021) who operate approximately 27,000
auctions per year (for the 12 months ending 31 December 2020) and
collectively deliver winning bidders on approximately 1.3 million
lots (for the 12 months ending 31 December 2020). It also expands
the bidder base by more than 120,000 (as at 31 March 2021) in the
North American A&A vertical / geography who conducted over 56
million sessions (for the 12 months ending 31 December 2020),
further expanding the footprint currently provided by Proxibid and
Auction Mobility. The Acquisition will have significant benefits
for both the Existing Group's and the LiveAuctioneers Group's
auctioneers, providing them with a more integrated service, whilst
also saving them time and reducing their costs, enabling them to
compete more effectively and efficiently, particularly against
other online channels for secondary, unique, and specialised items,
such as eBay and Etsy. The Directors believe that the
LiveAuctioneers Group's auctioneers will also benefit from the
ability of the Combined Group to offer Auction Mobility's
capabilities, which will enable auctioneers to further build out
their white label offering, giving auctioneers the ability to build
their brands alongside the Existing Group's brands, and thus
enhancing the overall auctioneer value-add proposition.
The incremental inventory from the combination of the Existing
Group's premium white label offering plus Marketplace sales with
that of the LiveAuctioneers Marketplace will increase the appeal
and value for bidders at auction. The incremental bidder base will
also help to increase competition in auctions, providing greater
revenue to the consignors and auctioneers as well as enabling
auctions on those Marketplaces to provide a truer reflection of the
market price for those goods. This translates into higher benefits
to consignors of the goods to the auctioneers, which should in turn
lead to more items being sold at auction.
Bidders will have access to a far wider range of items from a
wider universe of auctioneers and can benefit from the enhanced
customer service auctioneers will be able to provide as a result of
efficiencies realised through the Combined Group's expanded service
offering. The Acquisition will enable bidders around the world to
gain access to approximately 1.3 million lots in a secure, easy,
and engaging online environment. The Directors also believe that
bidders will buy with more confidence and believe they are playing
a role in sustainable buying and a greener planet.
Fully integrated payments solution
The Acquisition adds the ability to provide a fully integrated
payments solution to the Combined Group, helping to simplify the
fragmented payments process for auctioneers and bidders.
LiveAuctioneers provides bidders the functionality to pay
auctioneers through: (i) third-party payment processors, (ii)
LiveAuctioneers invoicing; (iii) credit and debit card payments and
pre-authorisation; and (iv) Automated Clearing House payments. For
successful bidders, payments can be taken automatically from card
details saved to the LiveAuctioneers Group's system via an
"autopay" functionality. This helps to ensure quicker remittance of
funds to auctioneers and consignors, as payment is deducted
automatically 72 hours after the issue of an invoice following an
auction. The Directors believe that the addition of
LiveAuctioneers' payments processing functionality will
significantly accelerate the Existing Group's payments
functionality. This adds significant value-add functionality for
the auctioneer helping to mitigate compliance risk whilst also
helping auctioneers to comply with their obligations to collect
taxes. Historically, bidders would have to make payments via less
efficient methods, which would increase the likelihood of defaults
in payment and increase the time-period between the auction and a
consignor receiving the proceeds of the sale. The addition of a
fully integrated payments solution will also add functionality for
the bidder, helping to enhance the wider bidder end-to-end
experience and provide a buying experience more in line with bidder
expectations and wider e-commerce transactions. The Directors
believe that LiveAuctioneers payments solution, which has been
developed on a modular basis, will be integrated into the Combined
Group's North American Marketplaces (Proxibid and BidSpotter US)
within six to twelve months of Completion,
enabling quick availability across the North American
Marketplaces, with integration across the UK and DACH region
Marketplaces within twelve to fifteen months of Completion.
Additional investment would be required to extend the solution to
the UK and Europe. LiveAuctioneers' payments function has
experienced notable increase in volumes over the three months ended
31 March 2021, following initial launch in December 2020, due to
its enhanced focus on communicating the benefits of the same to
auctioneers, with more than 450 auction houses using the
service.
The Acquisition enhances ATG's shared success value proposition
with real value delivered to all participants in the
marketplace
Management believe that the Acquisition will deliver real value
to the three core participants in their marketplace.
For auctioneers, the Acquisition will bring an incremental
bidder base that increases competition for each lot, driving higher
asset sale prices for auctioneers; a fully integrated payments
solution that improves security, reduces chargeback risk, improves
bidder confidence; and gets consignors their money faster and
simpler payments that reduces hassle and increases collection
efficiency for auctioneers leading lowering operating costs.
For consignors, the Acquisition will bring an incremental bidder
base that increases competition for each lot, driving higher asset
sale prices for consignors; higher values for assets sold that
increases the number of items consignors will choose to sell online
at auction; incremental geography for A&A that justifies more
rapid investment in value-added services, further enhancing value
for consignors; and proven value of online auctions that means more
consignors will use it as a channel for disposal of assets,
reducing waste, and further enhancing ATG's role in the
circular/sustainable economy.
For bidders, the Acquisition will bring access to 1.3 million
lots in a secure, easy, and engaging online environment that
responds to bidder desire for sustainable shopping; investment
efficiencies that give ATG the ability to invest in more ecommerce
basics, providing a more familiar end-to-end user experience; and
buildout of the auction ecosystem that increases the appeal of
auctions, opening up new revenue streams for the service providers
in the auction ecosystem and making it easier for bidders to find
them.
Compelling financial benefits
The Acquisition adds a significant bidder and auctioneer base to
the Combined Group. The Acquisition will add approximately 1,600
new auctioneers, taking the total number between the Existing Group
and the LiveAuctioneers Group to approximately 3,600. In light of
LiveAuctioneers' North American A&A focus, ATG and
LiveAuctioneers have a very limited shared auctioneer base and the
Directors believe them to be highly complementary. The Acquisition
also adds a notable bidder base, with LiveAuctioneers having more
than one million registered bidder accounts, taking the total
number of registered bidder accounts for the Combined Group to
approximately six million as at 31 March 2021 and the Directors
believe them to also be highly complementary.
The Directors believe the Acquisition will enhance the growth
and profitability profile of the Combined Group and will support
and accelerate the Company's strategy laid out in the IPO
Prospectus. The Existing Group's unaudited pro forma revenue for
FY20 was GBP52.3 million having grown from GBP37.0 million in FY18
at a CAGR of 19%. LiveAuctioneers' revenue as at FY20 was $30.7
million, having grown at a CAGR of 23% since FY18. LiveAuctioneers
also brings a strong track record of profitability with Adjusted
EBITDA of $16.5 million in their FY20, at an Adjusted EBITDA margin
of 54%. LiveAuctioneers' operating cash flow (adjusted
EBITDA-Capex) in FY20 was $14.8 million with cash generation of 89%
(operating cash flow / adjusted EBITDA).
The Acquisition is expected to be very materially earnings per
Share accretive immediately post Completion, before the realisation
of any synergies. The Directors expect the Combined Group will be
highly cash generative with low capital intensity and significant
operating leverage, given the largely fixed costs base.
Overview of Acquisition terms, financing and approvals
-- Acquisition of LiveAuctioneers for an enterprise value of up
to $525 million, with $500m consideration due on Completion and
Earn Out consideration of up to $25 million
-- The acquisition will be financed by way of:
o Cash consideration:
-- An equity financing by way of a cashbox placing via
accelerated bookbuild for just less than 20.0% of the issued share
capital of ATG (the "Capital Raising")
-- New debt financing of approximately $204 million resulting in
pro-forma leverage of up to c.3.0x
o Key LiveAuctioneers management will be rolling not less than
35% of their existing holding into ATG Shares. Based on current
estimates this represents approximately $19 million which is
subject to change based on the timing of completion and closing
mechanics
o Any remaining consideration to be funded via cash or
additional vendor equity issuance at Completion
-- The Acquisition is a Class 1 transaction for ATG under the
Listing Rules of the FCA. A Circular and Prospectus containing
further details on the Acquisition, the recommendation of ATG's
board of directors and the notice of the general meeting of the
Company (to be held to approve, amongst other matters, the
Acquisition, agreement to pay the Reverse Termination Fee of $25m
if triggered and to authorise the Directors to allot shares in
connection with the Acquisition) will be issued in due course
-- TA Associates, ECI Partners, the Directors, Senior Management
and Jupiter Investment Management Limited, who collectively hold
46% of the Enlarged Share Capital of ATG, have irrevocably
committed to vote in favour of the resolutions
-- Completion is also conditional, amongst other things, upon
approval of the Acquisition by relevant antitrust authorities,
including approval in the UK and US
Summary key performance indicators and historical financial
information on LiveAuctioneers
FY18 (for twelve FY19 (for twelve FY20 (for twelve
months to 31 months to 31 months to 31 December
$ million December 2018) December 2019) 2020)
------------------------ ------------------ ------------------ ------------------------
THV 1,844 2,087 2,438
------------------------ ------------------ ------------------ ------------------------
THV growth (%) n.a 13% 17%
------------------------ ------------------ ------------------ ------------------------
Online share
(%) 12% 13% 15%
------------------------ ------------------ ------------------ ------------------------
GMV 221 261 375
------------------------ ------------------ ------------------ ------------------------
GMV growth (%) n.a. 18% 44%
------------------------ ------------------ ------------------ ------------------------
Take-rate (%) 8.4% 8.3% 7.5%
------------------------ ------------------ ------------------ ------------------------
FY18 (for twelve FY19 (for twelve FY20 (for twelve
months to 31 months to 31 months to 31 December
$ million December 2018) December 2019) 2020)
------------------------ ------------------ ------------------ ------------------------
Revenue 21.1 23.7 30.7
------------------------ ------------------ ------------------ ------------------------
% growth n.a 13% 30%
------------------------ ------------------ ------------------ ------------------------
Adjusted EBITDA 12.2 12.1 16.5
------------------------ ------------------ ------------------ ------------------------
% margin 58% 51% 54%
------------------------ ------------------ ------------------ ------------------------
Capex (including
capitalized software
costs) 0.2 0.0 1.8
------------------------ ------------------ ------------------ ------------------------
% of sales 1% 0% 6%
------------------------ ------------------ ------------------ ------------------------
OpFCF 12.0 12.1 14.8
------------------------ ------------------ ------------------ ------------------------
% cash conversion 98% 100% 89%
------------------------ ------------------ ------------------ ------------------------
LiveAuctioneers, LLC is the trading entity of the
LiveAuctioneers Group. Prior to 21st May 2019, LiveAuctioneers, Inc
was the majority owner of LiveAuctioneers, LLC. On 21st May 2019,
Platinum Parent, Inc., through its subsidiary Platinum
Intermediate, Inc., purchased LiveAuctioneers, Inc and its
subsidiaries, including LiveAuctioneers, LLC (the "2019
LiveAuctioneers Acquisition").
The financial information included within this announcement has
been extracted from the LiveAuctioneers Group's available
historical audited financial statements for the three years ended
31 December 2018, 2019 and 2020, which have been prepared in
accordance with accounting principles generally accepted in the
United States ("US GAAP") (the "Historical Audited US GAAP
Financial Statements").
The Historical Audited US GAAP Financial Statements have been
prepared at the LiveAuctioneers, LLP level for the year ended 31
December 2018, and at the Platinum Intermediate, Inc level for the
two years ended 31 December 2019, and 2020. In the case of the year
ended 31 December 2019, which included the 2019 LiveAuctioneers
Acquisition, the period prior to the 2019 LiveAuctioneers
Acquisition reflects the results of operations and cash flows of
LiveAuctioneers, LLC, and the period subsequent to the 2019
LiveAuctioneers Acquisition reflects the Platinum Intermediate, Inc
operations, including LiveAuctioneers, Inc and LiveAuctioneers,
LLC.
In accordance with the Listing Rules, the Circular when
published will include full historical financial information on the
LiveAuctioneers Group for the three years ended 31 December 2018,
2019 and 2020, prepared in accordance with International Financial
Reporting Standards as adopted by the European Union ("IFRS"), in a
form consistent with the accounting policies adopted by ATG in its
latest annual consolidated accounts (the "Historical IFRS Financial
Statements"). The basis for the Historical IFRS Financial
Statements will differ from the Historical Audited US GAAP
Financial Statements as prior to the 2019 LiveAuctioneers
Acquisition the Historical IFRS Financial Statements will be
consolidated at the LiveAuctioneers, Inc level, and subsequent to
the 2019 LiveAuctioneers Acquisition the Historical IFRS Financial
Statements will be consolidated at the Platinum Parent, Inc level.
Whilst not acting as trading entities, consolidating at the
LiveAuctioneers, Inc and Platinum Parent Inc level in the
Historical IFRS Financial Statements will lead to the additional
recognition of certain cash, working capital, tax and professional
expenses amounts in the periods presented.
US GAAP differs in several respects from IFRS. The IFRS
transition exercise remains incomplete at the date of this
presentation.
ATG has identified what it believes to be the material
difference between ATG's IFRS policies and LiveAuctioneers'
accounting policies below. As the IFRS transition exercise is
incomplete there may be additional differences not noted below:
a) Income Statement, Balance Sheet and Cashflow Statement Presentation
The presentation of certain income statement, balance sheet and
cashflow financial statement items may be realigned to conform to
ATG presentation.
b) IFRS first-time adoption (IFRS 1)
For first-time adopters of IFRS, full retrospective application
is subject to certain optional exemptions, designed to reduce the
burden where the cost of retrospective application might exceed the
benefits. Certain exemptions are applicable and may be applied to
the ATG historical financial information under IFRS, including
electing to use a previous valuation of property, plant, and
equipment as the deemed cost for IFRS.
c) Share-based payments
Differences can occur between the US GAAP and IFRS treatment of
share-based payments, including valuation methodology at each
balance sheet date and the option of recognising share-based
payment expense over the vesting period using a straight-line
method rather than using a graded-vesting schedule as required by
IFRS.
d) Income taxes
There are differences that exist between US GAAP and IFRS in the
accounting for income taxes, including the presentation of deferred
taxes.
e) Purchase price accounting and goodwill
There are differences that exist between US GAAP and IFRS in the
accounting for business combinations, including the identification
of intangible assets. Further, under US GAAP goodwill arising from
business combinations can be amortised annually whereas at least
annual impairment reviews are required under IFRS.
f) Capitalised development costs
There are differences that exist between US GAAP and IFRS in the
criteria for capitalising development costs.
g) Lease accounting
There are differences that exist between US GAAP and IFRS in
accounting for leases, in particular IFRS requires the recognition
of a lease liability and right of use asset for all leases and no
longer permits the recognition of lease expenses in the income
statement on an annual basis.
h) Accounting for debt
There are differences that exist between US GAAP and IFRS in
accounting for debt, specifically debt modifications
IMPORTANT INFORMATION
Sources, Bases and Important Notes
1. Unless otherwise stated:
a. Financial information relating to ATG has been extracted from
the audited results for the twelve months ended 31 September
2020
b. Financial information relation to LiveAuctioneers have been
extracted or derived from the audited results for the twelve months
ended 31 December 2020
c. References to FY18, FY19, FY20 and FY21 mean:
i. In the case of ATG, the financial years ended 31 September
2018, 2019, 2020 and 2021, and H1 FY21 means the 6-month period
ended 31 March 2021.
ii. In the case of LiveAuctioneers, the financial years ended 31
December 2018, 2019, 2020 and 2021.
2. All LiveAuctioneers financial information in this
announcement is presented in accordance with US GAAP and may differ
from the financial information to be included in due course in the
Circular and Prospectus, as further detailed above under the
heading "Summary key performance indicators and historical
financial information on LiveAuctioneers".
3. The economic effect of the Management RSUs is that the
Rollover Management Sellers will, following the expiry of the
Acquisition Lock-Up Period, receive Shares at an effective price of
750p per Share.
4. The maximum number of new Shares required will only be known
on Completion depending on, amongst other things, (i) how many
options over Platinum Parent, Inc. shares are exchanged at
Completion pursuant to the terms of the Rollover, (ii) the per
share Acquisition value of a Platinum Parent, Inc. share, (iii) the
closing share price of the Shares on the date of Completion and
(iv) the US $ to pound sterling exchange rate at Completion.
5. Certain figures in this announcement have been subject to rounding adjustments.
Enquiries
ATG
For investor enquiries investorrelations@auctiontechnologygroup.com
For media enquiries press@auctiontechnologygroup.com
Tulchan Communications +44 207 353 4200
(Public relations advisor to ATG@tulchangroup.com
ATG)
Tom Murray, Sunni Chauhan, Matt
Low
Numis Securities Limited
(Sponsor, Joint Global Co-ordinator,
Joint Financial Adviser and Debt
Adviser) +44 207 260 1205
Nick Westlake, Matt Lewis, William
Baunton
J.P. Morgan Securities plc
(Joint Global Co-ordinator and
Joint Financial Adviser) +44 207 134 8765
Bill Hutchings, Barry Meyers,
Beau Freker
The preceding summary should be read in conjunction with the
full text of the following announcement and its appendices,
together with the Circular and Prospectus which will be published
in due course.
IMPORTANT NOTICES
THIS ANNOUNCEMENT (INCLUDING THE APPIX) AND THE TERMS AND
CONDITIONS SET OUT HEREIN (TOGETHER, THIS "ANNOUNCEMENT") IS FOR
INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR FORM ANY PART
OF AN OFFER TO SELL OR ISSUE, OR A SOLICITATION OF AN OFFER TO BUY,
SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY SECURITIES IN THE UNITED
STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE
UNITED STATES AND THE DISTRICT OF COLUMBIA (COLLECTIVELY, THE
"UNITED STATES")), AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA,
JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NO PUBLIC OFFERING OF THE PLACING
SHARES IS BEING MADE IN ANY SUCH JURISDICTION. ANY FAILURE TO
COMPLY WITH THESE RESTRICTIONS MAY CONSTITUTE A VIOLATION OF THE
SECURITIES LAWS OF SUCH JURISDICTIONS.
This Announcement is not for public release, publication,
distribution or forwarding, in whole or in part, directly or
indirectly, in or into the United States, Australia, Canada, the
Republic of South Africa, Japan or any other jurisdiction in which
such release, publication, distribution or forwarding would be
unlawful. No public offering of the securities referred to herein
is being made in any such jurisdiction or elsewhere.
The securities referred to herein have not been and will not be
registered under the US Securities Act of 1933, as amended (the
"Securities Act"), or under the securities laws of any state or
other jurisdiction of the United States, and may not be offered or
sold in the United States, except pursuant to an exemption from the
registration requirements of the Securities Act and in compliance
with any applicable securities laws of any state or other
jurisdiction of the United States. No public offering of the
Placing Shares is being made in the United States.
No action has been taken by the Company, J.P. Morgan Securities
plc ("JPM") or Numis Securities Limited ("Numis") or any of their
respective affiliates, or any of its or their respective directors,
officers, partners, employees, advisers or agents (collectively,
"Representatives") that would, or is intended to, permit an offer
of the Placing Shares or possession or distribution of this
Announcement or any other publicity material relating to such
Placing Shares in any jurisdiction where action for that purpose is
required. Persons receiving this Announcement are required to
inform themselves about and to observe any restrictions contained
in this Announcement. The distribution of this Announcement, and
the Placing and/or the offer or sale of the Placing Shares, may be
restricted by law in certain jurisdictions. Persons (including,
without limitation, nominees and trustees) who have a contractual
or other legal obligation to forward a copy of this Announcement
should seek appropriate advice before taking any action. Persons
distributing any part of this Announcement must satisfy themselves
that it is lawful to do so.
This Announcement has not been approved by the Financial Conduct
Authority or the London Stock Exchange.
Members of the public are not eligible to take part in the
Placing. This Announcement is directed at and is only being
distributed to persons: (a) if in member states of the European
Economic Area, "qualified investors" within the meaning of Article
2(e) of Regulation (EU) 2017/1129 (the "Prospectus Regulation")
("Qualified Investors"); or (b) if in the United Kingdom, Qualified
Investors within the meaning of Article 2(e) of the UK version of
Regulation (EU) 2017/1129 as it forms part of UK law by virtue of
the European Union (Withdrawal) Act 2018 (the "UK Prospectus
Regulation") who are (i) persons who fall within the definition of
"investment professionals" in Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005, as
amended (the "Order"), or (ii) persons who fall within Article
49(2)(a) to (d) of the Order; or (c) persons to whom they may
otherwise lawfully be communicated (each such person above, a
"Relevant Person"). No other person should act or rely on this
Announcement and persons distributing this Announcement must
satisfy themselves that it is lawful to do so. By accepting the
terms of this Announcement, you represent and agree that you are a
Relevant Person, if in the United Kingdom, or a Qualified Investor,
if in a member state of the EEA. This Announcement must not be
acted on or relied on by persons who are not Relevant Persons, if
in the United Kingdom, or Qualified Investors, if in a member state
of the EEA. Any investment or investment activity to which this
Announcement or the Placing relates is available only to Relevant
Persons, if in the United Kingdom, and Qualified Investors, if in a
member state of the EEA, and will be engaged in only with Relevant
Persons, if in the United Kingdom, and Qualified Investors, if in a
member state of the EEA.
No offering document or prospectus will be made available in any
jurisdiction in connection with the matters contained or referred
to in this Announcement or the Placing and no such offering
document or prospectus is required (in accordance with the
Prospectus Regulation or UK Prospectus Regulation) to be
published.
This Announcement does not constitute, or purport to include the
information required of, a disclosure document under Chapter 6D of
the Australian Corporations Act 2001 (Cth) ("Corporations Act") and
will not be lodged with the Australian Securities and Investments
Commission. No offer of Placing Shares is or will be made to
persons in Australia pursuant to this Announcement, except to a
person who is a "sophisticated investor" within the meaning of
section 708(8) of the Corporations Act or a "professional investor"
within the meaning of section 708(11) of the Corporations Act and a
wholesale client under section 761G(7) of the Corporations Act . If
any Placing Shares are issued, they may not be offered for sale (or
transferred, assigned or otherwise alienated) to investors in
Australia for at least 12 months after their issue, except in
circumstances where disclosure to investors is not required under
Part 6D.2 of the Corporations Act.
Certain statements in this Announcement are forward-looking
statements with respect to the Company's expectations, intentions
and projections regarding its future performance, strategic
initiatives, anticipated events or trends and other matters that
are not historical facts and which are, by their nature, inherently
predictive, speculative and involve risks and uncertainty because
they relate to events and depend on circumstances that may or may
not occur in the future. All statements that address expectations
or projections about the future, including statements about
operating performance, strategic initiatives, objectives, market
position, industry trends, general economic conditions, expected
expenditures, expected cost savings and financial results are
forward -- looking statements. Any statements contained in this
Announcement that are not statements of historical fact are, or may
be deemed to be, forward -- looking statements. These
forward-looking statements, which may use words such as "aim",
"anticipate", "believe", "could", "intend", "estimate", "expect",
"may", "plan", "project" or words or terms of similar meaning or
the negative thereof, are not guarantees of future performance and
are subject to known and unknown risks and uncertainties. There are
a number of factors including, but not limited to, commercial,
operational, economic and financial factors, that could cause
actual results, financial condition, performance or achievements to
differ materially from those expressed or implied by these forward
-- looking statements. Many of these risks and uncertainties relate
to factors that are beyond the Company's ability to control or
estimate precisely, such as changes in taxation or fiscal policy,
future market conditions, currency fluctuations, the behaviour of
other market participants, the actions of governments or
governmental regulators, or other risk factors, such as changes in
the political, social and regulatory framework in which the Company
operates or in economic or technological trends or conditions,
including inflation, recession and consumer confidence, on a
global, regional or national basis. Given those risks and
uncertainties, readers are cautioned not to place undue reliance on
forward-looking statements. Forward-looking statements speak only
as of the date of this Announcement. Each of the Company, JPM and
Numis expressly disclaims any obligation or undertaking to update
or revise publicly any forward-looking statements, whether as a
result of new information, future events or otherwise unless
required to do so by applicable law or regulation.
In particular, no statement in this Announcement is intended to
be a profit forecast or profit estimate and no statement of a
financial metric (including estimates of adjusted EBITDA, profit
before tax, free cash flow or net debt) should be interpreted to
mean that any financial metric for the current or future financial
years would necessarily match or exceed the historical published
position of the Company and its subsidiaries. Certain statements in
this Announcement may contain estimates. The estimates set out in
this Announcement have been prepared based on numerous assumptions
and forecasts, some of which are outside of the Company's influence
and/or control, and is therefore inherently uncertain and there can
be no guarantee or assurance that it will be correct. The estimates
have not been audited, reviewed, verified or subject to any
procedures by the Company's auditors. Undue reliance should not be
placed on them and there can be no guarantee or assurance that they
will be correct.
JPM is authorised by the Prudential Regulation Authority ("PRA")
and regulated in the United Kingdom by the PRA and the Financial
Conduct Authority ("FCA"). Numis is authorised and regulated in the
United Kingdom by the FCA. Each of JPM and Numis is acting
exclusively for the Company and for no one else in connection with
the Placing and will not regard any other person (whether or not a
recipient of this Announcement) as a client in relation to the
Placing or any other matter referred to in this Announcement and
will not be responsible to anyone other than the Company for
providing the protections afforded to its clients or for giving
advice in relation to the Placing or any other matter referred to
in this Announcement.
This Announcement is being issued by and is the sole
responsibility of the Company. No representation or warranty,
express or implied, is or will be made as to, or in relation to,
and no responsibility or liability is or will be accepted by or on
behalf of JPM or Numis (apart from the responsibilities or
liabilities that may be imposed by the Financial Services and
Markets Act 2000, as amended ("FSMA") or the regulatory regime
established thereunder) or by their respective affiliates or any of
their respective Representatives as to, or in relation to, the
accuracy, adequacy, fairness or completeness of this Announcement
or any other written or oral information made available to or
publicly available to any interested party or its advisers or any
other statement made or purported to be made by or on behalf of JPM
or Numis or any of their respective affiliates or any of their
respective Representatives in connection with the Company, the
Placing Shares or the Placing and any responsibility and liability
whether arising in tort, contract or otherwise therefor is
expressly disclaimed. No representation or warranty, express or
implied, is made by JPM or Numis or any of their respective
affiliates or any of their respective Representatives as to the
accuracy, fairness, verification, completeness or sufficiency of
the information or opinions contained in this Announcement or any
other written or oral information made available to or publicly
available
to any interested party or its advisers, and any liability
therefor is expressly disclaimed.
The information in this Announcement may not be forwarded or
distributed to any other person and may not be reproduced in any
manner whatsoever. Any forwarding, distribution, reproduction or
disclosure of this Announcement, in whole or in part, is
unauthorised. Failure to comply with this directive may result in a
violation of the Securities Act or the applicable laws of other
jurisdictions.
This Announcement does not constitute a recommendation
concerning any investor's options with respect to the Placing.
Recipients of this Announcement should conduct their own
investigation, evaluation and analysis of the business, data and
other information described in this Announcement. This Announcement
does not identify or suggest, or purport to identify or suggest,
the risks (direct or indirect) that may be associated with an
investment in the Placing Shares. The price and value of securities
can go down as well as up and investors may not get back the full
amount invested upon the disposal of the shares. Past performance
is not a guide to future performance. The contents of this
Announcement are not to be construed as legal, business, financial
or tax advice. Each investor or prospective investor should consult
with his or her or its own legal adviser, business adviser,
financial adviser or tax adviser for legal, business, financial or
tax advice.
Any indication in this Announcement of the price at which the
Company's shares have been bought or sold in the past cannot be
relied upon as a guide to future performance. Persons needing
advice should consult an independent financial adviser. No
statement in this Announcement is intended to be a profit forecast
or profit estimate for any period and no statement in this
Announcement should be interpreted to mean that earnings, earnings
per share or income, cash flow from operations or free cash flow
for the Company for the current or future financial periods would
necessarily match or exceed the historical published earnings,
earnings per share or income, cash flow from operations or free
cash flow for the Company.
All offers of the Placing Shares will be made pursuant to an
exemption under the UK Prospectus Regulation from the requirement
to produce a prospectus. This Announcement is being distributed and
communicated to persons in the United Kingdom only in circumstances
in which section 21(1) of FSMA does not apply.
The Placing Shares to be issued pursuant to the Placing will not
be admitted to trading on any stock exchange other than the main
market for listed securities of the London Stock Exchange.
In connection with the Placing, JPM and Numis and any of their
respective affiliates or any of their respective Representatives,
acting as investors for their own account, may take up a portion of
the Placing Shares in the Placing as a principal position and in
that capacity may retain, purchase, sell, offer to sell for the own
accounts or otherwise deal for their own account in such Placing
Shares and other securities of the Company or related investments
in connection with the Placing or otherwise. Accordingly,
references to Placing Shares being offered, acquired, placed or
otherwise dealt in should be read as including any issue or offer
to, or acquisition, placing or dealing by, JPM and Numis and any of
their respective affiliates and their respective Representatives
acting in such capacity. In addition, JPM and Numis and any of
their respective affiliates or their respective Representatives may
enter into financing arrangements (including swaps, warrants or
contracts for difference) with investors in connection with which
JPM and Numis and any of their respective affiliates may from time
to time acquire, hold or dispose of shares. JPM and Numis do not
intend to disclose the extent of any such investment or
transactions otherwise than in accordance with any legal or
regulatory obligations to do so.
The Appendix to this Announcement sets out the terms and
conditions of the Placing. By participating in the Placing, each
Placee will be deemed to have read and understood this Announcement
(including the Appendix) in its entirety, to be participating in
the Placing and making an offer to acquire and acquiring Placing
Shares on the terms and subject to the conditions set out in the
Appendix to this Announcement and to be providing the
representations, warranties, undertakings and acknowledgements
contained in the Appendix to this Announcement.
Neither the content of the Company's website (or any other
website) nor the content of any website accessible from hyperlinks
on the Company's website (or any other website) is incorporated
into, or forms part of, this Announcement.
This Announcement has been prepared for the purposes of
complying with applicable law and regulation in the United Kingdom
and the information disclosed may not be the same as that which
would have been disclosed if this Announcement had been prepared in
accordance with the laws and regulations of any jurisdiction
outside the United Kingdom.
UK Product Governance Requirements
Solely for the purposes of the product governance requirements
contained within the FCA Handbook Product Intervention and Product
Governance Sourcebook (the "UK Product Governance Rules"), and
disclaiming all and any liability, whether arising in tort,
contract or otherwise, which any 'manufacturer' (for the purposes
of the UK Product Governance Rules) may otherwise have with respect
thereto, the Placing Shares have been subject to a product approval
process, which has determined that such Placing Shares are: (a)
compatible with an end target market of retail investors and
investors who meet the criteria of professional clients and
eligible counterparties, each as defined in Chapter 3 of the FCA
Handbook Conduct of Business Sourcebook ("COBS"); and (b) eligible
for distribution through all permitted distribution channels (the
"UK target market assessment"). Notwithstanding the UK target
market assessment, distributors should note that: the price of the
Placing Shares may decline and investors could lose all or part of
their investment; the Placing Shares offer no guaranteed income and
no capital protection; and an investment in the Placing Shares is
compatible only with investors who do not need a guaranteed income
or capital protection, who (either alone or in conjunction with an
appropriate financial or other adviser) are capable of evaluating
the merits and risks of such an investment and who have sufficient
resources to be able to bear any losses that may result therefrom.
The UK target market assessment is without prejudice to the
requirements of any contractual, legal or regulatory selling
restrictions in relation to the Placing. Furthermore, it is noted
that, notwithstanding the UK target market assessment, the JPM and
Numis will only procure investors who meet the criteria of
professional clients and eligible counterparties.
For the avoidance of doubt, the UK target market assessment does
not constitute: (a) an assessment of suitability or appropriateness
for the purposes of COBS 9A and COBS 10A, respectively; or (b) a
recommendation to any investor or group of investors to invest in,
or purchase or take any other action whatsoever with respect to the
Placing Shares. Each distributor is responsible for undertaking its
own UK target market assessment in respect of the Placing Shares
and determining appropriate distribution channels.
EU Product Governance Requirements
Solely for the purposes of the product governance requirements
contained within: (a) EU Directive 2014/65/EU on markets in
financial instruments, as amended ("MiFID II"); (b) Articles 9 and
10 of Commission Delegated Directive (EU) 2017/593 supplementing
MiFID II; and (c) local implementing measures (together, the "MiFID
II Product Governance Requirements"), and disclaiming all and any
liability, whether arising in tort, contract or otherwise, which
any 'manufacturer' (for the purposes of the MiFID II Product
Governance Requirements) may otherwise have with respect thereto,
the Placing Shares have been subject to a product approval process,
which has determined that such Placing Shares are: (i) compatible
with an end target market of retail investors and investors who
meet the criteria of professional clients and eligible
counterparties, each as defined in MiFID II; and (ii) eligible for
distribution through all distribution channels as are permitted by
MiFID II (the "Target Market Assessment"). Notwithstanding the
Target Market Assessment, distributors should note that: the price
of the Placing Shares may decline and investors could lose all or
part of their investment; the Placing Shares offer no guaranteed
income and no capital protection; and an investment in the Placing
Shares is compatible only with investors who do not need a
guaranteed income or capital protection, who (either alone or in
conjunction with an appropriate financial or other adviser) are
capable of evaluating the merits and risks of such an investment
and who have sufficient resources to be able to bear any losses
that may result therefrom. The Target Market Assessment is without
prejudice to the requirements of any contractual, legal or
regulatory selling restrictions in relation to the Placing.
Furthermore, it is noted that, notwithstanding the Target Market
Assessment, JPM and Numis will only procure investors who meet the
criteria of professional clients and eligible counterparties.
For the avoidance of doubt, the Target Market Assessment does
not constitute: (a) an assessment of suitability or appropriateness
for the purposes of MiFID II; or (b) a recommendation to any
investor or group of investors to invest in, or purchase, or take
any other action whatsoever with respect to the Placing Shares.
Each distributor is responsible for undertaking its own target
market assessment in respect of the Placing Shares and determining
appropriate distribution channels.
APPIX I: TERMS AND CONDITIONS OF THE PLACING
IMPORTANT INFORMATION FOR INVITED PLACEES ONLY REGARDING THE
PLACING
MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE
PLACING. THIS ANNOUNCEMENT (INCLUDING APPIX 1 ) AND THE TERMS AND
CONDITIONS SET OUT HEREIN (TOGETHER, THIS "ANNOUNCEMENT") ARE FOR
INFORMATION PURPOSES ONLY AND ARE DIRECTED ONLY AT PERSONS WHOSE
ORDINARY ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING
AND DISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE
PURPOSES OF THEIR BUSINESS AND WHO HAVE PROFESSIONAL EXPERIENCE IN
MATTERS RELATING TO INVESTMENTS AND ARE : (A) IF IN MEMBER STATES
OF THE EUROPEAN ECONOMIC AREA (THE "EEA"), PERSONS WHO ARE
QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(E) OF
REGULATION (EU) 2017/1129 (THE "PROSPECTUS REGULATION") ("QUALIFIED
INVESTORS"); OR (B) IF IN THE UNITED KINGDOM, QUALIFIED INVESTORS
WITHIN THE MEANING OF ARTICLE 2(E) OF THE UK VERSION OF REGULATION
(EU) 2017/1129 AS IT FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN
UNION (WITHDRAWAL) ACT 2018 (THE "UK PROSPECTUS REGULATION") WHO
ARE (I) PERSONS WHO FALL WITHIN THE DEFINITION OF "INVESTMENT
PROFESSIONALS" IN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND
MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMED (THE
"ORDER"), OR (II) PERSONS WHO ARE HIGH NET WORTH COMPANIES,
UNINCORPORATED ASSOCIATIONS OR PARTNERSHIPS OR TRUSTEES OF HIGH
VALUE TRUSTS AS DESCRIBED IN ARTICLE 49(2)(A) TO (D) OF THE ORDER;
OR (c) OTHERWISE, PERSONS TO WHOM IT MAY OTHERWISE BE LAWFUL TO
COMMUNICATE IT TO (EACH SUCH PERSONS IN (B) REFERRED TO AS
"RELEVANT PERSONS"). NO OTHER PERSON SHOULD ACT OR RELY ON THIS
ANNOUNCEMENT. BY ACCEPTING THE TERMS OF THIS ANNOUNCEMENT YOU
REPRESENT AND AGREE THAT YOU ARE EITHER A QUALIFIED INVESTOR OR A
RELEVANT PERSON. THIS APPIX AND THE TERMS AND CONDITIONS SET OUT
HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT
QUALIFIED INVESTORS IN THE EEA AND RELEVANT PERSONS IN THE UNITED
KINGDOM. PERSONS DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY
THEMSELVES THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT
ACTIVITY TO WHICH THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS
SET OUT HEREIN RELATE IS AVAILABLE ONLY IN MEMBER STATES OF THE EEA
TO QUALIFIED INVESTORS AND IN THE UNITED KINGDOM TO RELEVANT
PERSONS AND WILL BE ENGAGED IN ONLY WITH QUALIFIED INVESTORS IN
MEMBER STATES OF THE EEA AND RELEVANT PERSONS IN THE UNITED
KINGDOM. THE INFORMATION CONTAINED HEREIN IS NOT FOR RELEASE,
PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN
PART, IN OR INTO THE UNITED STATES (INCLUDING ITS TERRITORIES AND
POSSESSIONS, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF
COLUMBIA (COLLECTIVELY, THE "UNITED STATES")), AUSTRALIA, CANADA,
THE REPUBLIC OF SOUTH AFRICA OR JAPAN OR ANY OTHER JURISDICTION IN
WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL
OR REQUIRE A PROSPECTUS OR SIMILAR DOCUMENT TO BE FILED. THIS
ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN DO NOT CONSTITUTE
AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES, AUSTRALIA,
CANADA, THE REPUBLIC OF SOUTH AFRICA, JAPAN OR IN ANY OTHER
JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT (INCLUDING APPIX) DOES NOT ITSELF CONSTITUTE
AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE
COMPANY.
THE PLACING SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE US SECURITIES ACT OF 1933, AS AMED (THE "SECURITIES
ACT"), OR UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION OF THE UNITED STATES, AND MAY NOT BE OFFERED OR
SOLD, DIRECTLY OR INDIRECTLY WITHIN, INTO OR IN THE UNITED STATES,
EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN COMPLIANCE WITH THE SECURITIES LAWS OF
ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THERE WILL BE
NO PUBLIC OFFER OF THE PLACING SHARES IN THE UNITED STATES, THE
UNITED KINGDOM OR ELSEWHERE.
EACH PLACEE SHOULD CONSULT ITS OWN ADVISERS AS TO LEGAL,
BUSINESS, FINANCIAL, TAX AND RELATED ASPECTS OF ACQUIRING THE
PLACING SHARES.
All offers of the Placing Shares will be made pursuant to an
exemption under the Prospectus Regulation and the UK Prospectus
Regulation from the requirement to produce a prospectus. This
Announcement is being distributed and communicated to persons in
the UK only in circumstances to which section 21(1) of the
Financial Services and Markets Act 2000, as amended ("FSMA") does
not apply.
Persons who are invited to and who choose to participate in the
placing (the "Placing") of the Placing Shares (as defined below) by
making an oral or written offer to acquire Placing Shares
(including any individuals, funds or others on whose behalf a
commitment to acquire Placing Shares is given) ("Placees") will be
deemed to have read and understood this Announcement in its
entirety and to be making such offer on the terms and conditions,
and to be providing (and shall only be permitted to participate in
the Placing on the basis that they have provided) the
representations, warranties, indemnities, acknowledgements,
undertakings and agreements, contained in this Appendix. In
particular, each such Placee represents, warrants, acknowledges and
agrees to each of Auction Technology Group plc (the "Company"),
J.P. Morgan Securities plc ("JPM") and Numis Securities Limited
("Numis" and, together with JPM, the "Joint Bookrunners") that:
1. If it is in the United Kingdom it is a Relevant Person and if
it is in the member state of the EEA it is a Qualified Investor,
and undertakes that it will acquire, hold, manage or dispose of any
Placing Shares that are allocated to it for the purposes of its
business;
2. If it is in Australia, it is a "sophisticated investor"
within the meaning of section 708(8) of the Corporations Act or a
"professional investor" within the meaning of section 708(11) of
the Corporations Act and a wholesale client under section 761G(7)
of the Corporations Act;
3. it is acquiring the Placing Shares for its own account or is
acquiring the Placing Shares for an account with respect to which
it exercises sole investment discretion and has the authority to
make and does make the representations, warranties, indemnities,
acknowledgments, undertakings and agreements contained in this
Announcement;
4. it understands (or if acting for the account of another
person, such person has confirmed that such person understands) the
resale and transfer restrictions set out in this Announcement
(including this Appendix);
5. if it is a financial intermediary, as that term is used in
Article 5(1) of the Prospectus Regulation and the UK Prospectus
Regulation, that it understands that any Placing Shares subscribed
for by it in the Placing will not be acquired on a
non-discretionary basis on behalf of, nor will they be acquired
with a view to their offer or resale to, persons in circumstances
which may give rise to an offer of securities to the public other
than an offer or resale in a member state of the EEA to Qualified
Investors or in the United Kingdom to Relevant Persons, or in
circumstances in which the prior consent of the Joint Bookrunners
has been given to each such proposed offer or resale;
6. it understands that the Placing Shares have not been and will
not be registered under the Securities Act or with any securities
regulatory authority of any state or other jurisdiction of the
United States and may not be offered or sold, directly or
indirectly, within the United States except pursuant to an
exemption from the registration requirements of the Securities Act
and in compliance with any applicable securities laws of any state
or other jurisdiction of the United States;
7. it and the person(s), if any, for whose account or benefit it
is acquiring the Placing Shares are either (a)(i) outside the
United States and will be outside the United States at the time the
Placing Shares are acquired by it and (ii) acquiring the Placing
Shares in an "offshore transaction" within the meaning of
Regulation S; or (b) a "qualified institutional buyer" as defined
in Rule 144A under the Securities Act (a "QIB") who has executed
and delivered to the Company and the Joint Bookrunners a US
investor letter substantially in the form provided to it;
8. if it is resident in Canada, it is resident in either the
province of Ontario, Quebec, Alberta or British Columbia; is
purchasing as principal, or is deemed to be purchasing as principal
in accordance with applicable Canadian securities laws, for
investment only and not with a view to resale or redistribution; is
not an individual; is an "accredited investor" as such term is
defined in section 1.1 of National Instrument 45-106 - Prospectus
Exemptions ("NI 45-106") or, in Ontario, as such term is defined in
section 73.3(1) of the Securities Act (Ontario); and is a
"permitted client" as such term is defined in section 1.1 of
National Instrument 31-103 Registration Requirements, Exemptions
and Ongoing Registrant Obligations ("NI 31-103"); and
9. the Company and the Joint Bookrunners will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and agreements.
The Placing Shares have not been approved or disapproved by the
US Securities and Exchange Commission, any state securities
commission or other regulatory authority in the United States, nor
have any of the foregoing authorities passed upon or endorsed the
merits of the Placing or the accuracy or adequacy of this
Announcement. Any representation to the contrary is a criminal
offence in the United States.
No representation is made by either of the Joint Bookrunners or
their respective affiliates to any Placees regarding an investment
in the Placing Shares.
IMPORTANT INFORMATION FOR PLACEES ONLY REGARDING THE PLACING
Bookbuild
Following this Announcement, the Joint Bookrunners will today
commence the bookbuilding process in respect of the Placing (the
"Bookbuild") to determine demand for participation in the Placing
by Placees. This Appendix gives details of the terms and conditions
of, and the mechanics of participation in, the Placing. No
commissions will be paid to Placees or by Placees in respect of any
Placing Shares. Members of the public are not entitled to
participate.
The Joint Bookrunners and the Company shall be entitled to
effect the Placing by such alternative method to the Bookbuild as
they may, in their absolute discretion, determine.
Details of the Placing Agreement and of the Placing Shares
The Company has today entered into an agreement (the "Placing
Agreement") with the Joint Bookrunners under which, subject to the
terms and conditions set out therein, each of the Joint Bookrunners
has agreed, severally and not jointly or jointly and severally, as
agent for and on behalf of the Company, to use its reasonable
endeavours to procure Placees for up to 19,999,990 ordinary shares
of 0.01 pence each in the capital of the Company (the "Placing
Shares") representing up to just less than 20.0 per cent. of the
Company's existing issued share capital, at a price to be
determined following completion of the Bookbuild and, to the extent
that any Placee defaults in paying the Placing Price (as defined
below) in respect of any of the Placing Shares allocated to it,
each of the Joint Bookrunners has agreed, severally and not jointly
or jointly and severally, to subscribe for such Placing Shares at
the Placing Price. JPM and Numis are acting as joint global
co-ordinators and joint bookrunners in connection with the
Placing.
The Placing Shares will, when issued, be credited as fully paid
and will rank pari passu in all respects with the existing ordinary
shares of 0.01 pence each in the capital of the Company (the
"Ordinary Shares"), including the right to receive all dividends
and other distributions declared, made or paid in respect of such
Ordinary Shares after the date of issue of the Placing Shares.
The allotment and issue of the Placing Shares will be effected
by way of a placing of new Ordinary Shares in the Company for
non-cash consideration. JPM will subscribe for ordinary shares and
redeemable preference shares in Project Haka Limited ("JerseyCo"),
a Jersey incorporated wholly owned subsidiary of the Company, for
an amount approximately equal to the net proceeds of the Placing.
The Company will allot and issue the Placing Shares on a
non-pre-emptive basis to Placees in consideration for the transfer
to the Company by JPM of the ordinary shares and redeemable
preference shares in JerseyCo that will be issued to JPM.
Applications for listing and admission to trading
Applications will be made to the Financial Conduct Authority
(the "FCA") for admission of the Placing Shares to listing on the
premium listing segment of the Official List of the FCA (the
"Official List") and to London Stock Exchange plc (the "London
Stock Exchange") for admission of the Placing Shares to trading on
its main market for listed securities (together, "Admission").
It is expected that Admission will become effective at or around
8.00 a.m. on 22 June 2021 and that dealings in the Placing Shares
will commence at that time. The Placing is conditional upon, among
other things, Admission becoming effective and the Placing
Agreement not being terminated in accordance with its terms.
Participation in, and principal terms of, the Placing
1. Each of JPM and Numis is acting as a joint global
co-ordinator, joint bookrunner and agent of the Company in
connection with the Placing.
2. Participation in the Placing will only be available to
persons who may lawfully be, and are, invited to participate by the
Joint Bookrunners. Each of the Joint Bookrunners and their
respective agents and affiliates are each entitled to enter bids in
the Bookbuild as principal.
3. The Bookbuild will establish a single price per Placing Share
payable to the Joint Bookrunners by all Placees whose bids are
successful (the "Placing Price"). The final number of Placing
Shares and the Placing Price will be determined by the Company (in
consultation with the Joint Bookrunners) following completion of
the Bookbuild. Any discount to the market price of the existing
Ordinary Shares will be determined in accordance with the FCA's
Listing Rules. The Placing Price and the final number of Placing
Shares to be issued will be announced on a FCA-listed regulatory
information service (a "Regulatory Information Service") following
the completion of the Bookbuild.
4. To bid in the Bookbuild, prospective Placees should
communicate their bid by telephone or in writing to their usual
sales contact at either of the Joint Bookrunners. Each bid should
state the number of Placing Shares which the prospective Placee
wishes to subscribe for at either the Placing Price which is
ultimately established by the Company and the Joint Bookrunners or
at prices up to a price limit specified in its bid. Bids may be
scaled down by the Joint Bookrunners on the basis referred to in
paragraph 11 below.
5. A bid in the Bookbuild will be made on the terms and subject
to the conditions in this Appendix and will be legally binding on
the Placee on behalf of which it is made and, except with the Joint
Bookrunners' consent, will not be capable of variation or
revocation after the time at which it is submitted. Each Placee's
obligations will be owed to the Company and the Joint Bookrunners.
Each Placee will also have an immediate, separate, irrevocable and
binding obligation, owed to each of the Joint Bookrunners as agent
of the Company, to pay in cleared funds immediately on the
settlement date, in accordance with the registration and settlement
requirements set out below, an amount equal to the product of the
Placing Price and the number of Placing Shares such Placee has
agreed to subscribe for and the Company has agreed to allot to
them.
6. The Bookbuild is expected to close no later than 5.00 p.m.
(London time) on 18 June 2021, but may be closed earlier or later
at the absolute discretion of the Joint Bookrunners. The Joint
Bookrunners may, in agreement with the Company, accept bids that
are received after the Bookbuild has closed.
7. Each prospective Placee's allocation will be agreed between
the Joint Bookrunners and the Company and will be confirmed orally
or in writing by either of the Joint Bookrunners (each as agent of
the Company) following the close of the Bookbuild. This
confirmation to such Placee will constitute an irrevocable legally
binding commitment upon that person (who will at that point become
a Placee) in favour of the Joint Bookrunners and the Company to
subscribe for the number of Placing Shares allocated to it at the
Placing Price on the terms and conditions set out in this Appendix
and in accordance with the Company's articles of association and
each Placee will be deemed to have read and understood this
Announcement (including this Appendix) in its entirety.
8. All obligations under the Bookbuild and Placing will be
subject to fulfilment or, where applicable, waiver of the
conditions referred to below under "Conditions of the Placing" and
to the Placing not being terminated on the basis referred to below
under "Right to terminate under the Placing Agreement".
9. By participating in the Bookbuild, each Placee will agree
that its rights and obligations in respect of the Placing will
terminate only in the circumstances described below and will not be
capable of rescission or termination by the Placee after
confirmation (oral or otherwise) by a Joint Bookrunner.
10. Each prospective Placee's allocation and commitment will be
evidenced by a contract note or trade confirmation issued to such
Placee by either of the Joint Bookrunners. The terms of this
Appendix will be deemed incorporated by reference therein.
11. Subject to paragraphs 4 and 5 above, the Joint Bookrunners
may choose to accept bids, either in whole or in part, on the basis
of allocations determined in agreement with the Company and may
scale down any bids for this purpose on such basis as they may
determine. The Joint Bookrunners may also, notwithstanding
paragraphs 4 and 5 above, subject to the prior consent of the
Company (i) allocate Placing Shares after the time of any initial
allocation to any person submitting a bid after that time; and (ii)
allocate Placing Shares after the Bookbuild has closed to any
person submitting a bid after that time. The Company reserves the
right (upon agreement with the Joint Bookrunners) to reduce or seek
to increase the amount to be raised pursuant to the Placing.
12. Except as required by law or regulation, no press release or
other announcement will be made by the Joint Bookrunners or the
Company using the name of any Placee (or its agent), in its
capacity as Placee (or agent), other than with such Placee's prior
written consent.
13. Irrespective of the time at which a Placee's allocation
pursuant to the Placing is confirmed, settlement for all Placing
Shares to be subscribed for pursuant to the Placing will be
required to be made at the same time, on the basis explained below
under "Registration and settlement".
14. To the fullest extent permissible by law, none of the Joint
Bookrunners or the Company or any of their respective affiliates or
any of their respective directors, officers, partners, employees,
advisers or agents (collectively, "Representatives") shall have any
responsibility or liability to Placees (or to any other person
whether acting on behalf of a Placee or otherwise). In particular,
none of the Joint Bookrunners or the Company or any of their
respective affiliates or any of their respective Representatives
shall have any responsibility or liability (including to the
fullest extent permissible by law, any fiduciary duties) in respect
of the conduct of the Bookbuild or of such alternative method of
effecting the Placing as the Joint Bookrunners and the Company may
agree.
Conditions of the Placing
The Placing is conditional upon the Placing Agreement becoming
unconditional and not having been terminated in accordance with its
terms. The obligations of the Joint Bookrunners under the Placing
Agreement in respect of the Placing Shares are conditional on,
inter alia:
1. the acquisition agreement dated 17 June 2021 between, amongst
others, the Company and Platinum Parent Inc. (the "Acquisition
Agreement") not having been amended in any material respect or
terminated or lapsed, in each case prior to Admission;
2. the Company complying in all material respects with all of
its obligations and having satisfied all conditions to be satisfied
under the Placing Agreement or under the terms and conditions of
the Placing which fall to be performed or satisfied on or prior to
Admission, save to an extent which the Joint Bookrunners, following
consultation with the Company, do not consider (acting in good
faith) to be material in the context of the Placing and
Admission;
3. certain of the representations and warranties of the Company
contained in the Placing Agreement being untrue or inaccurate or
misleading at the date of the Placing Agreement or immediately
prior to Admission,
by reference to the facts and circumstances then subsisting ; and
4. Admission occurring not later than 8.00 a.m. (London time) on 22 June 2021 .
The Joint Bookrunners have discretion to waive compliance with
certain of the conditions and/or agree an extension in time for
their satisfaction. Any such extension or waiver will not affect
Placees' commitments as set out in this Announcement.
If (a) any of the conditions contained in the Placing Agreement,
including those described above, are not fulfilled (or, where
permitted, waived or extended in writing by the Joint Bookrunners)
or become incapable of fulfilment on or before the date or time
specified for the fulfilment thereof (or such later date and/or
time as the Joint Bookrunners may agree); or (b) the Placing
Agreement is terminated in the circumstances specified below, the
Placing will not proceed and the Placees' rights and obligations
hereunder in relation to the Placing Shares shall cease and
terminate at such time and each Placee agrees that no claim can be
made by the Placee in respect thereof. Any such extension or waiver
will not affect Placees' commitments as set out in this
Announcement.
Neither the Joint Bookrunners nor any of their respective
affiliates nor any of their respective Representatives shall have
any responsibility or liability to any Placee (or to any other
person whether acting on behalf of a Placee or otherwise) in
respect of any decision they may make as to whether or not to waive
or to extend the time and/or the date for the satisfaction of any
condition to the Placing nor for any decision they may make as to
the satisfaction of any condition or in respect of the Placing
generally, and by participating in the Placing each Placee agrees
that any such decision is in the absolute discretion of the Joint
Bookrunners.
Lock-up ([1])
The Company has undertaken that it will not, and will procure
that none of its subsidiaries will, at any time between the date of
the Placing Agreement and the date which is 180 days after the date
of the Placing Agreement without the prior written consent of the
Joint Bookrunners enter into certain transactions involving or
relating to the Ordinary Shares, subject to certain customary
carve-outs agreed between the Joint Bookrunners and the
Company.
By participating in the Placing, Placees agree that the exercise
by the Joint Bookrunners of any power to consent to waive the
undertaking by the Company of a transaction which would otherwise
be subject to the lock-up under the Placing Agreement shall be
within the absolute discretion of the Joint Bookrunners, and that
they do not need to make any reference to, consult with, or seek
consent from, Placees and that the Joint Bookrunners shall have no
liability to Placees whatsoever in connection with any such
exercise of the power to grant consent or failure so to
exercise.
Right to terminate under the Placing Agreement
Each of the Joint Bookrunners, for itself in its capacity as
joint global co-ordinator and joint bookrunner, is entitled, in its
absolute discretion acting in good faith and after consultation
with the Company, at any time before Admission, to terminate the
Placing Agreement by giving notice to the Company if, amongst other
things, (a) there has been a material adverse change in any major
financial market in the United Kingdom or the United States ; (b)
there has been a ny material adverse change in the international
financial markets; (c) there has been any outbreak or escalation of
hostilities, war, act of terrorism, declaration of emergency or
martial law or other calamity or crisis or event in the United
Kingdom or the United States; or (d) there has been any change or
development involving a prospective change in national or
international political, financial, economic, monetary or market
conditions or currency exchange rates or controls, in each case the
effect of which the Joint Bookrunners consider (acting in good
faith), following consultation with the Company, to be so material
in the context of the Placing and Admission as to make it
impractical or inadvisable to proceed with the Placing.
If any of the termination conditions as specified in the Placing
Agreement shall occur, then the Joint Bookrunners may, in their
absolute discretion acting in good faith and after such
consultation with the Company by reference to the then existing
facts and circumstances as may be reasonably practicable in the
circumstances: (i) allow the Placing to proceed on the basis of
this Announcement; or (ii) give notice to the Company to terminate
the Placing Agreement. Upon notice being given by the Joint
Bookrunners to the Company, the parties to the Placing Agreement
shall be released and discharged (except for any liability arising
before or in relation to such termination) from their respective
obligations under or pursuant to the Placing Agreement, subject to
certain exceptions.
By participating in the Placing, Placees agree that the exercise
or non-exercise by the Joint Bookrunners of any right of
termination or other discretion under the Placing Agreement shall
be within the absolute discretion of the Joint Bookrunners, and
that they do not need to make any reference to, consult with, or
seek consent from, Placees and that the Joint Bookrunners shall
have no liability to Placees whatsoever in connection with any such
exercise or failure so to exercise.
No prospectus
No offering document, admission document or prospectus has been
or will be prepared or submitted to be approved by the FCA (or any
other authority) or submitted to the London Stock Exchange or in
any other jurisdiction in relation to the Placing or Admission and
no such prospectus is required (in accordance with the UK
Prospectus Regulation) to be published in the United Kingdom or any
equivalent document in any other jurisdiction .
Placees' commitments will be made solely on the basis of their
own assessment of the Company, the Placing and the Placing Shares
based on information contained in this Announcement (including
Appendix 1) and any information publicly announced to a Regulatory
Information Service by or on behalf of the Company on or prior to
the date of this Announcement and subject to the further terms set
forth in the trade confirmation to be provided to individual
prospective Placees.
Each Placee, by accepting a participation in the Placing, agrees
that the content of this Announcement (including this Appendix) and
all other publicly available information previously and
simultaneously published by or on behalf of the Company by
notification to a Regulatory Information Service is exclusively the
responsibility of the Company and has not been independently
verified by the Joint Bookrunners. Each Placee, by accepting
participation in the Placing, further confirms that it has neither
received nor relied on any other information, representation,
warranty, or statement made by or on behalf of the Company or the
Joint Bookrunners or any other person and none of the Company or
Joint Bookrunners or any of their respective affiliates or any of
their respective Representatives will be liable for any Placee's
decision to participate in the Placing based on any other
information, representation, warranty or statement which the Placee
may have obtained or received. Each Placee acknowledges and agrees
that it has relied on its own investigation of the business,
financial or other position of the Company in accepting a
participation in the Placing. Nothing in this paragraph shall
exclude or limit the liability of any person for fraudulent
misrepresentation by that person.
Registration and settlement
Settlement of transactions in the Placing Shares (ISIN:
GB00BMVQDZ64) following Admission will take place within the CREST
system, subject to certain exceptions. In the event of any
difficulties or delays in the admission of the Placing Shares to
CREST or the use of CREST in relation to the Placing, the Company
and the Joint Bookrunners may agree that the Placing Shares should
be issued in certificated form. The Joint Bookrunners and the
Company reserve the right to require settlement for and delivery of
the Placing Shares (or a portion thereof) to Placees in
certificated form or by such other means as they deem necessary if
delivery or settlement is not possible or practicable within the
CREST system or would not be consistent with the regulatory
requirements in the Placee's jurisdiction.
Each Placee agrees that it will do all things necessary to
ensure that delivery and payment is completed in accordance with
the standing CREST or certificated settlement instructions that it
has in place with the relevant Joint Bookrunner.
The Company will deliver the Placing Shares to a CREST account
operated by the Joint Bookrunners (or either one of them) as agent
for the Company and the relevant Joint Bookrunner will enter its
delivery (DEL) instruction into the CREST system. The Joint
Bookrunners (or either one of them) will hold any Placing Shares
delivered to this account as nominee for the Placees until
settlement. The input to CREST by a Placee of a matching or
acceptance instruction will then allow delivery of the relevant
Placing Shares to that Placee against payment.
It is expected that settlement will be on 22 June 2021 on a T+2
basis and on a delivery versus payment basis in accordance with the
instructions given to the Joint Bookrunners.
Interest is chargeable daily on payments not received from
Placees on the due date in accordance with the arrangements set out
above at the rate of two percentage points above LIBOR as
determined by the Joint Bookrunners.
Each Placee is deemed to agree that, if it does not comply with
these obligations, the Joint Bookrunners may sell any or all of the
Placing Shares allocated to that Placee on such Placee's behalf and
retain from the proceeds, for the account and benefit of each of
the Joint Bookrunners, an amount equal to the aggregate amount owed
by the Placee plus any interest due. The relevant Placee will,
however, remain liable for any shortfall below the aggregate amount
owed by it and may be required to bear any stamp duty or stamp duty
reserve tax or other similar taxes (together with any interest or
penalties thereon) imposed in any jurisdiction which may arise upon
the sale of such Placing Shares on such Placee's behalf. By
communicating a bid for Placing Shares, each Placee confers on each
of the Joint Bookrunners all such authorities and powers necessary
to carry out any such transaction and agrees to ratify and confirm
all actions which each of the Joint Bookrunners lawfully takes on
such Placee's behalf.
If Placing Shares are to be delivered to a custodian or
settlement agent, Placees should ensure that the contract note or
trade confirmation is copied and delivered immediately to the
relevant person within that organisation.
Insofar as Placing Shares are registered in a Placee's name or
that of its nominee or in the name of any person for whom a Placee
is contracting as agent or that of a nominee for such person, such
Placing Shares should, subject as provided below, be so registered
free from any liability to UK stamp duty or stamp duty reserve tax.
If there are any other circumstances in which any stamp duty or
stamp duty reserve tax or other similar taxes (and/or any interest,
fines or penalties relating thereto) is payable in respect of the
allocation, allotment, issue or delivery of the Placing Shares (or
for the avoidance of doubt if any stamp duty or stamp duty reserve
tax is payable in connection with any subsequent transfer of or
agreement to transfer Placing Shares), none of the Joint
Bookrunners or the Company shall be responsible for the payment
thereof.
Placees (or any nominee or other agent acting on behalf of a
Placee) will not be entitled to receive any fee or commission in
connection with the Placing.
Representations and warranties
By submitting a bid and/or participating in the Placing, each
prospective Placee (and any person acting on such Placee's behalf)
irrevocably acknowledges, confirms, undertakes, represents,
warrants and agrees (as the case may be) with each Joint Bookrunner
and the Company, in each case as a fundamental term of its
application for Placing Shares, that:
1. it has read and understood this Announcement (including this
Appendix) in its entirety and that its participation in the
Bookbuild and the Placing and its acquisition of Placing Shares is
subject to and based upon all the terms, conditions,
representations, warranties, indemnities, acknowledgements,
agreements and undertakings and other information contained herein
and it undertakes not to redistribute or duplicate this
Announcement and that it has not relied on, and will not rely on,
any information given or any representations, warranties or
statements made at any time by any person in connection with
Admission, the Bookbuild, the Placing, the Company, the Placing
Shares or otherwise;
2. that no offering document, admission document or prospectus
has been or will be prepared in connection with the Placing or is
required under the Prospectus Regulation or UK Prospectus
Regulation and it has not received and will not receive a
prospectus, admission document or other offering document in
connection with the Bookbuild, the Placing or the Placing
Shares;
3. the Placing does not constitute a recommendation or financial
product advice and the Joint Bookrunners have not had regard to its
particular objectives, financial situation and needs;
4. ((i) it has made its own assessment of the Company, the
Placing Shares and the terms of the Placing based on this
Announcement (including Appendix 1) and any information publicly
announced to a Regulatory Information Service by or on behalf of
the Company prior to the date of this Announcement (the "Publicly
Available Information"); (ii) the Ordinary Shares are admitted to
the premium listing segment of the Official List of the FCA and to
trading on the London Stock Exchange's main market for listed
securitiesand the Company is therefore required to publish certain
business and financial information in accordance with the Market
Abuse Regulation (EU) No.596/2014 ("MAR"), in the period up to and
including 31 December 2020, and from 1 January 2021 in accordance
with the UK version of the Market Abuse Regulation (EU)
No.596/2014, which forms part of UK law by virtue of the European
Union (Withdrawal) Act 2018) ("UK MAR") and the rules and practices
of the London Stock Exchange (the "Exchange Information"), which
includes a description of the nature of the Company's business,
most recent balance sheet and profit and loss account, and similar
statements for preceding years, and it has reviewed such Exchange
Information as it has deemed necessary or that it is able to obtain
or access the Exchange Information without undue difficulty; and
(iii) it has had access to such financial and other information
(including the business, financial condition, prospects,
creditworthiness, status and affairs of the Company, the Placing
and the Placing Shares, as well as the opportunity to ask
questions) concerning the Company, the Placing and the Placing
Shares as it has deemed necessary in connection with its own
investment decision to acquire any of the Placing Shares and has
satisfied itself that the information is still current and relied
on that investigation for the purposes of its decision to
participate in the Placing. Each Placee further acknowledges and
agrees that it has relied on its own investigation of the business,
financial or other position of the Company in deciding to
participate in the Placing;
5. if it received any "inside information" as defined in the UK
MAR concerning the Company or its shares or other securities or
related financial instruments in advance of the Placing, it has not
(i) dealt in the securities of the Company; (ii) encouraged or
required another person to deal in the securities of the Company;
or (iii) disclosed such information to any person except as
permitted by UK MAR, prior to the information being made publicly
available;
6. it has the power and authority to carry on the activities in
which it is engaged, to subscribe and/or acquire Placing Shares and
to execute and deliver all documents necessary for such
subscription and/or acquisition;
7. none of the Joint Bookrunners or the Company or any of their
respective affiliates or any of their respective Representatives or
any person acting on behalf of any of them has provided, and none
of them will provide, it with any material or information regarding
the Placing Shares or the Company or any other person other than
this Announcement, nor has it requested any of the Joint
Bookrunners, the Company or any of their respective affiliates or
any of their respective Representatives or any person acting on
behalf of any of them to provide it with any such material or
information;
8. (i) none of the Company or the Joint Bookrunners or any of
their respective affiliates or any of their respective
Representatives or any person acting on their behalf has made any
warranties or representations to it, express or implied, with
respect to the Company, the Placing and the Placing Shares or the
accuracy, fairness, completeness or adequacy of the Publicly
Available Information or the Exchange Information, and each of them
expressly disclaims any liability in respect thereof; and (ii) it
will not hold the Joint Bookrunners or any of their respective
affiliates or any of their respective Representatives or any person
acting on their behalf responsible for any misstatements in or
omissions from any Publicly Available Information or any Exchange
Information. Nothing in this paragraph or otherwise in this
Announcement excludes the liability of any person for fraudulent
misrepresentation made by that person;
9. the content of this Announcement is exclusively the
responsibility of the Company and that neither the Joint
Bookrunners nor any of their respective affiliates nor any of their
respective Representatives nor any person acting on their behalf
has or shall have any responsibility or liability for any
information, representation or statement contained in this
Announcement or any information previously or subsequently
published by or on behalf of the Company, including, without
limitation, any Publicly Available Information or Exchange
Information, and will not be liable for any Placee's decision to
participate in the Placing based on any information, representation
or statement contained in this Announcement or any information
previously or simultaneously published by or on behalf of the
Company or otherwise. Each Placee further represents, warrants and
agrees that the only information on which it is entitled to rely
and on which such Placee has relied in committing itself to acquire
the Placing Shares is contained in this Announcement and any
Publicly Available Information including (without limitation) the
Exchange Information, such information being all that it deems
necessary and/or appropriate to make an investment decision in
respect of the Placing Shares and that it has neither received nor
relied on any other information given, investigation made or
representations, warranties or statements made by either of the
Joint Bookrunners or the Company or any of their respective
affiliates or any of their respective Representatives or any person
acting on their behalf and neither the Joint Bookrunners nor the
Company nor any of their respective affiliates nor any of their
respective Representatives nor any person acting on its or their
behalf will be liable for any Placee's decision to accept an
invitation to participate in the Placing based on any other
information, representation, warranty or statement;
10. it has not relied on any information relating to the Company
contained in any research reports prepared by the Joint Bookrunners
or any of their respective affiliates or any of their respective
Representatives or any person acting on their behalf and
understands that (i) none of the Joint Bookrunners or any of their
respective affiliates or any of their respective Representatives or
any person acting on their behalf has or shall have any liability
for public information or any representation; (ii) none of the
Joint Bookrunners or any of their respective affiliates or any of
their respective Representatives or any person acting on their
behalf has or shall have any liability for any additional
information that has otherwise been made available to such Placee,
whether at the date of publication, the date of this Announcement
or otherwise; and (iii) none of the Joint Bookrunners or any of
their respective affiliates or any of their respective
Representatives or any person acting on their behalf makes any
representation or warranty, express or implied, as to the truth,
accuracy or completeness of such information, whether at the date
of publication, the date of this Announcement or otherwise;
11. in making any decision to acquire Placing Shares, (i) it has
such knowledge and experience in financial, business and
international investment matters as is required to evaluate the
merits and risks of taking up the Placing Shares; (ii) it is
experienced in investing in securities of a similar nature to the
Ordinary Shares and in the sector in which the Company operates and
is aware that it may be required to bear, and is able to bear, the
economic risk of participating in, and is able to sustain a
complete loss in connection with, the Placing; (iii) it has relied
on its own examination, due diligence and analysis of the Company
and its affiliates taken as a whole, including the markets in which
the Company and its affiliates operate, and the terms of the
Placing, including the merits and risks involved, and not upon any
view expressed or information provided by or on behalf of either of
the Joint Bookrunners; (iv) it has had sufficient time and access
to information to consider and conduct its own investigation with
respect to the offer and purchase of the Placing Shares, including
the legal, regulatory, tax, business, currency and other economic
and financial considerations relevant to such investment and has so
conducted its own investigation to the extent it deems necessary
for the purposes of its investigation, and (v) it will not look to
the Company, the Joint Bookrunners, any of their respective
affiliates, any of their respective Representatives or any person
acting on their behalf for all or part of any such loss or losses
it or they may suffer;
12. it satisfies any and all standards for investors in the
Placing Shares imposed by the jurisdiction of its residence or
otherwise;
13. (i) unless otherwise specifically agreed with the Joint
Bookrunners, it and each account it represents is not and, at the
time the Placing Shares are acquired, will not be, a resident of
Australia (unless it is (i) a "sophisticated investor" within the
meaning of section 708(8) of the Corporations Act or a
"professional investor" within the meaning of section 708(11) of
the Corporations Act and a wholesale client under section 761G(7)
of the Corporations Act), Canada, the Republic of South Africa,
Japan or any other jurisdiction in which it is unlawful to make or
accept an offer to acquire the Placing Shares; (ii) it and each
account it represents is either (1)(a) outside the United States
and will be outside the United States at the time the Placing
Shares are acquired by it and (b) acquiring the Placing Shares in
an "offshore transaction" within the meaning of Regulation S; or
(2) a QIB who has executed and delivered to the Company and the
Joint Bookrunners a US investor letter substantially in the form
provided to it; and (iii) it is not acquiring any of the Placing
Shares as a result of any form of "directed selling efforts" within
the meaning of Regulation S or as a result of any form of "general
solicitation" or "general advertising" within the meaning of Rule
502(c) under the Securities Act;
14. (i) it and each account it represents is acquiring the
Placing Shares for investment purposes, and is not acquiring the
Placing Shares with a view to the offer, sale, resale, transfer,
delivery or distribution, directly or indirectly of any such
Placing Shares in or into the United States, Australia, Canada, the
Republic of South Africa, Japan or any other jurisdiction in which
the same would be unlawful; and (ii) it understands, and each
account it represents has been advised, that the Placing Shares
have not been and will not be registered or qualified for
distribution by way of a prospectus under the securities
legislation of the United States, Australia, Canada, the Republic
of South Africa, Japan and, subject to certain exceptions, may not
be offered, sold, acquired, renounced, distributed or delivered or
transferred, directly or indirectly, within or into those
jurisdictions or in any country or jurisdiction where any such
action for that purpose is required;
15. it understands, and each account it represents has been
advised that, (i) the Placing Shares have not been and will not be
registered under the Securities Act or with any regulatory
authority of any state or other jurisdiction of the United States;
(ii) the Placing Shares are being offered and sold only (a) to
persons reasonably believed to be QIBs in transactions exempt from,
or not subject to, the registration requirements of the Securities
Act or (b) in an "offshore transaction" within the meaning of and
pursuant to Regulation S under the Securities Act; and (iii) the
Placing Shares may only be reoffered or resold in transactions
exempt from, or not subject to, the registration requirements of
the Securities Act and no representation has been made as to the
availability of any exemption under the Securities Act or any
relevant state or other jurisdiction's securities laws for the
reoffer, resale, pledge or transfer of the Placing Shares;
16. it will not distribute, forward, transfer or otherwise
transmit this Announcement or any other materials concerning the
Placing (including any electronic copies thereof), directly or
indirectly, whether in whole or in part, in or into the United
States, Australia, Canada, the Republic of South Africa or
Japan;
17. if it is a pension fund or investment company, its
acquisition of Placing Shares is in full compliance with applicable
laws and regulations;
18. neither it, nor the person specified by it for registration
as holder of Placing Shares is, or is acting as nominee or agent
for, and the Placing Shares will not be allotted to, a person who
is or may be liable to stamp duty or stamp duty reserve tax under
any of sections 67, 70, 93 and 96 of the Finance Act 1986
(depositary receipts and clearance services), it is not
participating in the Placing as nominee or agent for any person to
whom the allocation, allotment, issue or delivery of the Placing
Shares would give rise to such a liability and the Placing Shares
are not being acquired in connection with arrangements to issue
depositary receipts or to issue or transfer Placing Shares into a
clearance service;
19. it has complied and will continue to comply with its
obligations under the Criminal Justice Act 1993, MAR, UK MAR, any
delegating acts, implementing acts, technical standards and
guidelines and Section 118 of FSMA thereunder, and in connection
with money laundering and terrorist financing under the Proceeds of
Crime Act 2002 (as amended), the Terrorism Act 2000 (as amended),
the Terrorism Act 2006, and the Money Laundering, Terrorist
Financing and Transfer of Funds (Information on the Payer)
Regulations 2017 (as amended) and any related or similar rules,
regulations or guidelines issued, administered or enforced by any
government agency having jurisdiction in respect thereof (the
"Regulations") and the Money Laundering Sourcebook of the FCA and,
if making payment on behalf of a third party, that satisfactory
evidence has been obtained and recorded by it to verify the
identity of the third party as required by the Regulations. If
within a reasonable time after a request for verification of
identity, the Joint Bookrunners have not received such satisfactory
evidence, the Joint Bookrunners may, at their absolute discretion,
terminate the Placee's Placing participation in which event all
funds delivered by the Placee to the Joint Bookrunners will be
returned without interest to the account of the drawee bank or
CREST account from which they were originally debited;
20. if it is a financial intermediary, as that term is used in
Article 5(1) of the Prospectus Regulation and Article 5(1) of the
UK Prospectus Regulation, that the Placing Shares subscribed for by
it in the Placing will not be subscribed for on a non-discretionary
basis on behalf of, nor will they be subscribed for with a view to
their offer or resale to, persons in a member state of the EEA
other than Qualified Investors or persons in the UK other than
Relevant Persons, or in circumstances in which the prior consent of
the Joint Bookrunners has been given to the proposed offer or
resales;
21. if it is in the United Kingdom it is a Relevant Person and
if it is in a member state of the EEA it is a Qualified Investor
and undertakes that it will subscribe for, hold, manage or dispose
of any Placing Shares that are allocated to it for the purposes of
its business;
22. it understands that any investment or investment activity to
which this Announcement relates is available only to Relevant
Persons in the United Kingdom and Qualified Investors in a member
state of the EEA and will be engaged in only with Relevant Persons
in the United Kingdom and Qualified Investors in a member state of
the EEA, and further understands that this Announcement must not be
acted on or relied on by persons who are not Relevant Persons in
the United Kingdom and Qualified Investors in a member state of the
EEA;
23. that it has not offered or sold and will not offer or sell
any Placing Shares to persons in the United Kingdom, except to
Relevant Persons or otherwise in circumstances which have not
resulted and which will not result in an offer to the public in the
United Kingdom within the meaning of section 85(1) of the FSMA;
24. that any offer of Placing Shares may only be directed at
persons in member states of the EEA who are Qualified Investors and
represents, warrants and undertakes that it has not offered or sold
and will not offer or sell any Placing Shares to persons in the EEA
prior to Admission except to Qualified Investors or otherwise in
circumstances which have not resulted in and which will not result
in an offer to the public in any member state of the EEA within the
meaning of the Prospectus Regulation;
25. it has only communicated or caused to be communicated and
will only communicate or cause to be communicated any invitation or
inducement to engage in investment activity (within the meaning of
section 21 of FSMA) relating to the Placing Shares in circumstances
in which section 21(1) of FSMA does not require approval of the
communication by an authorised person;
26. it has complied and will comply with all applicable laws
(including all relevant provisions of FSMA in the United Kingdom)
with respect to anything done by it in relation to the Placing
Shares;
27. if in the United Kingdom, it is a Qualified Investor within
the meaning of Article 2(e) of the UK Prospectus Regulation and is
also a person (i) having professional experience in matters
relating to investments and who falls within the definition of
"investment professionals" in Article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 (as
amended) (the "Order"); or (ii) who falls within Article 49(2)(a)
to (d) of the Order; or (iii) to whom this Announcement may
otherwise lawfully be communicated;
28. if it is in a member state of the EEA, it is a Qualified Investor;
29. if in the United Kingdom, unless otherwise agreed by the
Joint Bookrunners, it is a "professional client" or an "eligible
counterparty" within the meaning of Chapter 3 of the FCA's Conduct
of Business Sourcebook and it is purchasing Placing Shares for
investment only and not with a view to resale or distribution;
30. if it is in Australia, it is (i) a "sophisticated investor"
within the meaning of section 708(8) of the Corporations Act or a
"professional investor" within the meaning of section 708(11) of
the Corporations Act and a wholesale client under section 761G(7)
of the Corporations Act and the issue of the Placing Shares to it
under the Placing does not require a prospectus or other form of
disclosure document under the Corporations Act, and no Placing
Shares may be offered for sale (or transferred, assigned or
otherwise alienated) to investors in Australia for at least 12
months after their issue, except in circumstances where disclosure
to investors is not required under Part 6D.2 of the Corporations
Act;
31. no action has been or will be taken by either the Company or
the Joint Bookrunners or any person acting on behalf of the Company
or the Joint Bookrunners that would, or is intended to, permit a
public offer of the Placing Shares in any country or jurisdiction
where any such action for that purpose is required;
32. it is acting as principal only in respect of the Placing or,
if it is acting for any other person: (i) it is duly authorised to
do so and has full power to make the acknowledgments, undertakings,
representations and agreements and give the indemnities herein on
behalf of each such person; and (ii) it is and will remain liable
to the Company and/or the Joint Bookrunners for the performance of
all its obligations as a Placee in respect of the Placing
(regardless of the fact that it is acting for another person). Each
Placee agrees that the provisions of this paragraph shall survive
the resale of the Placing Shares by or on behalf of any person for
whom it is acting;
33. (i) it and any person acting on its behalf is entitled to
acquire the Placing Shares under the laws of all relevant
jurisdictions which apply to it; (ii) it has paid any issue,
transfer or other taxes due in connection with its participation in
any territory; (iii) it has fully observed such laws and obtained
all such governmental and other guarantees, permits,
authorisations, approvals and consents which may be required
thereunder and complied with all necessary formalities and that it
has not taken any action or omitted to take any action which will
or may result in the Joint Bookrunners, the Company or any of their
respective affiliates or any of their respective Representatives
acting in breach of the legal or regulatory requirements of any
jurisdiction in connection with the Placing; and (iv) the
acquisition of the Placing Shares by it or any person acting on its
behalf will be in compliance with applicable laws and regulations
in the jurisdiction of its residence, the residence of the Company,
or otherwise;
34. it has all necessary capacity and has obtained all necessary
consents and authorities to enable it to commit to its
participation in the Placing and to perform its obligations in
relation thereto (including, without limitation, in the case of any
person on whose behalf it is acting, all necessary consents and
authorities to agree to the terms set out or referred to in this
Announcement) and will honour such obligations;
35. it (and any person acting on its behalf) has the funds
available to pay for the Placing Shares it has agreed to acquire
and acknowledges, agrees and undertakes that it (and any person
acting on its behalf) will make payment for the Placing Shares
allocated to it in accordance with the terms and conditions of this
Announcement (including this Appendix) on the due time and date set
out herein, failing which the relevant Placing Shares may be placed
with other persons or sold as the Joint Bookrunners may in their
absolute discretion determine and without liability to such Placee,
and it will remain liable for any amount by which the net proceeds
of such sale falls short of the product of the Placing Price and
the number of Placing Shares allocated to it and may be required to
bear any stamp duty or stamp duty reserve tax or other similar
taxes (together with any interest or penalties due pursuant to the
terms set out or referred to in this Announcement) which may arise
upon the sale of such Placee's Placing Shares on its behalf;
36. its allocation (if any) of Placing Shares will represent a
maximum number of Placing Shares which it will be entitled, and
required, to acquire, and that the Joint Bookrunners or the Company
may call upon it to acquire a lower number of Placing Shares (if
any), but in no event in aggregate more than the aforementioned
maximum;
37. neither the Joint Bookrunners nor any of their respective
affiliates nor any of their respective Representatives nor any
person acting on behalf of any of them, are making any
recommendations to it or advising it regarding the suitability or
merits of any transactions it may enter into in connection with the
Placing and participation in the Placing is on the basis that it is
not and will not be a client of either of the Joint Bookrunners and
the Joint Bookrunners have no duties or responsibilities to it for
providing the protections afforded to their respective clients or
customers or for giving advice in relation to the Placing nor in
respect of any representations, warranties, undertakings or
indemnities contained in the Placing Agreement nor for the exercise
or performance of any of their rights and obligations thereunder
including any rights to waive or vary any conditions or exercise
any termination right;
38. the person whom it specifies for registration as holder of
the Placing Shares will be (i) itself; or (ii) its nominee, as the
case may be. Neither the Joint Bookrunners nor the Company will be
responsible for any liability to stamp duty or stamp duty reserve
tax or other similar taxes resulting from a failure to observe this
requirement. Each Placee and any person acting on behalf of such
Placee agrees to indemnify on an after-tax basis and hold harmless
the Company, each of the Joint Bookrunners and their respective
affiliates and each of their respective Representatives in respect
of the same on an after-tax basis on the basis that the Placing
Shares will be allotted to the CREST stock account of the Joint
Bookrunners (or either one of them) who will hold them as nominee
on behalf of such Placee until settlement in accordance with its
standing settlement instructions;
39. it will indemnify, on an after-tax basis, and hold harmless
the Company, each of the Joint Bookrunners and their respective
affiliates and their respective Representatives from any and all
costs, claims, liabilities and expenses (including legal fees and
expenses) arising, directly or indirectly, out of or in connection
with any breach by it of the representations, warranties,
acknowledgements, agreements and undertakings in this Appendix and
further agrees that the provisions of this Appendix shall survive
after completion of the Placing;
40. it acknowledges that it irrevocably appoints any director or
authorised signatories of the Joint Bookrunners as its agent for
the purposes of executing and delivering to the Company and/or its
registrars any documents on its behalf necessary to enable it to be
registered as the holder of any of the Placing Shares agreed to be
taken up by it under the Placing;
41. in connection with the Placing, either of the Joint
Bookrunners and any of their respective affiliates acting as an
investor for their own account may acquire Placing Shares and in
that capacity may acquire, retain, purchase or sell for their own
account such Ordinary Shares in the Company and any other
securities of the Company or related investments and may offer or
sell such securities or other investments otherwise than in
connection with the Placing. Accordingly, references in this
Announcement to shares being issued, offered or placed should be
read as including any issue, offering or placement of such shares
in the Company to the Joint Bookrunners or their respective
affiliates in such capacity. In addition, the Joint Bookrunners may
enter into financing arrangements and swaps with investors in
connection with which the Joint Bookrunners may from time to time
acquire, hold or dispose of such securities of the Company,
including the Placing Shares. Neither the Joint Bookrunners nor
their respective affiliates intend to disclose the extent of any
such investment or transactions otherwise than in accordance with
any legal or regulatory obligation to do so;
42. a communication that the transaction or the book is
"covered" (i.e. indicated demand from investors in the book equals
or exceeds the amount of the securities being offered) is not any
indication or assurance that the book will remain covered or that
the transaction and securities will be fully distributed by the
Joint Bookrunners. The Joint Bookrunners reserve the right to take
up a portion of the securities in the Placing as a principal
position at any stage at their sole discretion, inter alia, to take
account of the Company's objectives, MiFID II requirements and/or
their allocation policies;
43. its commitment to acquire Placing Shares on the terms set
out in this Announcement (including this Appendix) and in the
contract note or trade confirmation will continue notwithstanding
any amendment that may in the future be made to the terms and
conditions of the Placing and that Placees will have no right to be
consulted or require that their consent be obtained with respect to
the Company's or the Joint Bookrunners' conduct of the Placing;
44. neither the Company nor the Joint Bookrunners owes any
fiduciary or other duties to any Placee in respect of any
acknowledgements, confirmations, representations, warranties,
undertakings or indemnities in the Placing Agreement;
45. it may not rely on any investigation that any of the Joint
Bookrunners or any person acting on its behalf may or may not have
conducted with respect to the Company and its affiliates, the
Placing Shares or the Placing and the Joint Bookrunners have not
made any representation or warranty to it, express or implied, with
respect to the suitability or merits of any transactions it may
enter into in connection with the Placing, or as to the condition,
financial or otherwise, of the Company and its affiliates, or as to
any other matter relating thereto, and no information has been
prepared by, or is the responsibility of, the Joint Bookrunners for
the purposes of the Placing;
46. these terms and conditions and any agreements entered into
by it pursuant to these terms and conditions (including any
non-contractual obligations arising out of or in connection with
such agreements) shall be governed by and construed in accordance
with the laws of England and it submits (on behalf of itself and on
behalf of any person on whose behalf it is acting) to the exclusive
jurisdiction of the English courts as regards any claim, dispute or
matter arising out of any such agreements and such non-contractual
obligations, except that enforcement proceedings in respect of the
obligation to make payment for the Placing Shares (together with
any interest chargeable thereon) may be taken by the Joint
Bookrunners in any jurisdiction in which the relevant Placee is
incorporated or in which any of its securities have a quotation on
a recognised stock exchange; and
47. if it is resident in Canada:
(a) it understands that the offering of the Placing Shares is
being made on a private placement basis only in the provinces of
British Columbia, Alberta, Ontario and Quebec (the "Canadian
Private Placement Provinces") on a basis exempt from the
requirement that the Company prepare and file a prospectus with the
relevant securities regulatory authorities in Canada and as such,
any resale of the Placing Shares must be made in accordance with an
exemption from, or in a transaction not subject to, the prospectus
requirements of applicable securities laws;
(b) it is resident in one of the Canadian Private Placement Provinces;
(c) it is purchasing the Placing Shares as principal, or is
deemed to be purchasing as principal in accordance with applicable
Canadian securities laws, for investment only and not with a view
to resale or redistribution;
(d) it is not an individual;
(e) it is an "accredited investor" as such term is defined in
section 1.1 of NI 45-106 or, in Ontario, as such term is defined in
section 73.3(1) of the Securities Act (Ontario), as applicable;
(f) it is a "permitted client" as such term is defined in section 1.1 of NI 31-103;
(g) it understand that any resale of the Placing Shares acquired
by it in the Placing must be made in accordance with applicable
Canadian securities laws, which may vary depending on the relevant
jurisdiction, and which may require resales to be made in
accordance with Canadian prospectus requirements, a statutory
exemption from the prospectus requirements, in a transaction exempt
from the prospectus requirements or otherwise under a discretionary
exemption from the prospectus requirements granted by the
applicable local Canadian securities regulatory authority and that
these resale restrictions may under certain circumstances apply to
resales of the Placing Shares outside of Canada; and
(h) no person has made any written or oral representations to
such Placee (i) that any person will resell or repurchase the
Instruments, (ii) that any person will refund the purchase price of
the Placing Shares, or (iii) as to the future price or value of the
Placing Shares; and
48. the Company, the Joint Bookrunners and their respective
affiliates and their respective Representatives and others will
rely upon the truth and accuracy of the acknowledgements,
representations, warranties, indemnities, undertakings and
agreements set forth herein and which are given to each of the
Joint Bookrunners on its own behalf and on behalf of the Company
and are irrevocable and it irrevocably authorises the Company and
the Joint Bookrunners to produce this Announcement, pursuant to, in
connection with, or as may be required by any applicable law or
regulation, administrative or legal proceeding or official inquiry
with respect to the matters set forth herein. It agrees that if any
of the acknowledgements, representations, warranties, undertakings
and agreements made in connection with its subscribing and/or
acquiring of Placing Shares is no longer true or accurate, it shall
promptly notify the Company and the Joint Bookrunners.
The agreement to allot and issue Placing Shares to Placees (or
the persons for whom Placees are contracting as nominee or agent)
free of stamp duty and stamp duty reserve tax relates only to their
allotment and issue to Placees, or such persons as they nominate as
their agents, direct from the Company for the Placing Shares in
question. Such agreement is subject to the representations,
warranties and further terms above and assumes, and is based on the
warranty and representation from each Placee, that the Placing
Shares are not being acquired in connection with arrangements to
issue depositary receipts or to issue or transfer the Placing
Shares into a clearance service. If there are any such
arrangements, or the settlement relates to any other dealing in the
Placing Shares, stamp duty or stamp duty reserve tax or other
similar taxes may be payable, for which neither the Company nor the
Joint Bookrunners will be responsible and each Placee shall
indemnify on an after-tax basis and hold harmless the Company, the
Joint Bookrunners and their respective affiliates and their
respective Representatives for any stamp duty or stamp duty reserve
tax or other similar tax paid or otherwise payable by them in
respect of any such arrangements or dealings. If this is the case,
each Placee should seek its own advice and notify the Joint
Bookrunners accordingly.
Neither the Company nor the Joint Bookrunners is liable to bear
any capital duty, stamp duty and all other stamp, issue,
securities, transfer, registration, documentary or other duties or
taxes (including any interest, fines or penalties relating thereto)
payable in or outside the United Kingdom by any Placee or any other
person on a Placee's acquisition of any Placing Shares or the
agreement by a Placee to acquire any Placing Shares. Each Placee
agrees to indemnify on an after-tax basis and hold harmless the
Company, each of the Joint Bookrunners and their respective
affiliates and their respective Representatives from any and all
interest, fines or penalties in relation to any such duties or
taxes.
Each Placee should seek its own advice as to whether any of the
above tax liabilities arise and notify the Joint Bookrunners
accordingly.
Each Placee, and any person acting on behalf of each Placee,
acknowledges and agrees that the Joint Bookrunners and/or any of
their respective affiliates may, at their absolute discretion,
agree to become a Placee in respect of some or all of the Placing
Shares. Each Placee acknowledges and is aware that the Joint
Bookrunners are receiving a fee in connection with their role in
respect of the Placing as detailed in the Placing Agreement. When a
Placee or person acting on behalf of the Placee is dealing with
either of the Joint Bookrunners any money held in an account with
the relevant Joint Bookrunner on behalf of the Placee and/or any
person acting on behalf of the Placee will not be treated as client
money within the meaning of the rules and regulations of the FCA
made under FSMA. The Placee acknowledges that the money will not be
subject to the protections conferred by the client money rules; as
a consequence, this money will not be segregated from the relevant
Joint Bookrunner's money in accordance with the client money rules
and will be used by the relevant Joint Bookrunner in the course of
its own business; and the Placee will rank only as a general
creditor of the relevant Joint Bookrunner.
The rights and remedies of the Joint Bookrunners and the Company
under these terms and conditions are in addition to any rights and
remedies which would otherwise be available to each of them and the
exercise or partial exercise of one will not prevent the exercise
of others.
All times and dates in this Announcement may be subject to
amendment by the Joint Bookrunners (in their absolute discretion).
The Joint Bookrunners shall notify the Placees and any persons
acting on behalf of the Placees of any changes.
In this Announcement, "after-tax basis" means in relation to any
payment made to the Company, the Joint Bookrunners or their
respective affiliates or their respective Representatives pursuant
to this Announcement where the payment (or any part thereof) is
chargeable to any tax, a basis such that the amount so payable
shall be increased so as to ensure that after taking into account
any tax chargeable (or which would be chargeable but for the
availability of any relief unrelated to the loss, damage, cost,
charge, expense or liability against which the indemnity is given
on such amount (including on the increased amount)) there shall
remain a sum equal to the amount that would otherwise have been so
payable.
APPIX II - Risk Factors
Any investment in the Capital Raising Shares is subject to
a number of risks. Prior to investing in the Capital Raising
Shares, you should carefully consider risks associated with
any investment in securities and, in particular, the Capital
Raising Shares, as well as each of the Existing Group's, the
LiveAuctioneers Group's and (subject to Completion) the Combined
Group's business, its industry and the macroeconomic environment
in which it operates, together with all other information
contained in this announcement and its appendices including,
in particular, the risk factors described below.
The risk factors described below represent the risks that
the Directors believe to be material to the Company, the Existing
Group, the LiveAuctioneers Group and (subject to Completion)
the Combined Group and/or the industry and macroeconomic environment
in which any of them operates as at the date of this announcement.
However, these risk factors are not the only ones facing the
Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group. Other risks and uncertainties
relating to an investment in the Capital Raising Shares and
to each of the Existing Group's, the LiveAuctioneers Group's
and (subject to Completion) the Combined Group's business,
its industry and the macroeconomic environment in which it
operates, that are not currently known to the Existing Group
or the LiveAuctioneers Group, or that the Directors currently
deem immaterial, may individually or cumulatively also have
a material adverse effect on each of the Existing Group's,
the LiveAuctioneers Group's and (subject to Completion) the
Combined Group's business, results of operations, financial
condition and/or prospects. If any such risks occur, the price
of the Capital Raising Shares may decline, and you could lose
all or part of your investment. An investment in the Capital
Raising Shares involves complex financial risks and is suitable
only for investors who (either alone or in conjunction with
an appropriate financial or other adviser) are capable of
evaluating the merits and risks of such an investment and
who have sufficient resources to be able to bear any losses
that may result therefrom. You should consider carefully whether
an investment in the Capital Raising Shares is suitable for
you in light of the information in this announcement and its
appendices and your personal circumstances.
Risks relating to the company
A. RISKS RELATING TO THE ACQUISITION
A.1 Completion is subject to the satisfaction or waiver of
a number of conditions which, if not satisfied or waived,
could result in the Acquisition not proceeding and in which
case the Platinum Parent, Inc. Purchaser may be liable to
pay a break fee to Platinum Parent, Inc..
Completion is subject to the satisfaction or waiver of a number
of conditions, some of which are outside of the control of
the parties, including:
* approval of the Resolutions by a requisite percentage
of the Shareholders;
approval of the Acquisition by the relevant antitrust authorities
in the US and UK (including the expiration or termination
of any applicable waiting periods under US antitrust laws)
(the "Regulatory Conditions"); and
* the Placing Agreement not having been terminated and
having become wholly unconditional save in respect of
any conditions relating to the Acquisition.
In relation to the conditions related to antitrust laws and
approval, such consents and/or expiry of any waiting periods
may take a longer time than expected to obtain, may not be
granted and/or the relevant authorities may consider, as a
condition to granting their approval or confirmation, requiring
divestitures or restrictions on the conduct of the Combined
Group's business. This could delay and/or prevent Completion,
reduce the expected benefits of the Acquisition or result
in a material adverse effect on the business, results of operations,
financial condition and prospects of the Combined Group.
If Completion does not occur, the Existing Group may experience
a delay in the achievement of its strategic objectives and
could suffer a significant impact on its reputation. Additionally
(i) subject to the approval of the Reverse Termination Fee
Resolution, in the event that the Regulatory Conditions are
not satisfied or otherwise waived by the Platinum Parent,
Inc. Purchaser by 5pm on 20 July 2022, (ii) if Shareholders
do not approve the Resolutions and (iii) and in certain other
circumstances, and a party elects to terminate the Acquisition
Agreement, the Platinum Parent, Inc. Purchaser has agreed
to pay a reverse termination fee of $25 million to LiveAuctioneers
(the "Reverse Termination Fee"). If Shareholders do not approve
the agreement to pay the Reverse Termination Fee, the amount
of such fee payable by the Platinum Parent, Inc. Purchaser
shall be capped at GBP12.5 million (inclusive of VAT), which
is equal to one per cent. of the market capitalisation of
the Company at the close of business on the day prior to the
announcement of the Acquisition. If Completion does not occur,
this could have a material adverse effect on the business,
financial condition, results of operation and prospects of
the Existing Group.
A.2 Completion may occur even if there is an adverse change
in the business, financial condition, results of operations
and prospects of the Existing Group or the LiveAuctioneers
Group.
The Acquisition Agreement contains very limited rights for
the Existing Group to terminate it prior to Completion if
a breach of warranty or conduct undertaking occurs. In particular,
the Platinum Parent, Inc. Purchaser may only terminate the
Acquisition Agreement (i) with the prior written consent of
Platinum Parent, Inc.; (ii) in the event of a material breach
of the Acquisition Agreement by Platinum Parent, Inc. or the
Sellers which remains unremedied 30 days after the Platinum
Parent, Inc. Purchaser notifies Platinum Parent, Inc. of such
breach; (iii) if the Capital Raising does not complete; (iv)
if the Regulatory Conditions are not satisfied or otherwise
waived by the Purchaser by 5pm on 20 July 2022; (v) if the
Platinum Parent, Inc. Purchaser or the Company are injuncted
from consummating the Acquisition; or (vi) if Shareholders
do not approve the Resolutions. Accordingly, the Platinum
Parent, Inc. Purchaser has no right to terminate the Acquisition
Agreement if either the LiveAuctioneers Group or the Existing
Group suffers a material adverse change.
As a result, Completion may occur even if there is a material
adverse change in relation to the LiveAuctioneers Group or
the Existing Group. If a material adverse change occurs and
Completion proceeds, the commercial benefits of the Acquisition
identified by the Directors may cease to exist or may be materially
reduced, and the Combined Group may be unable to integrate
the LiveAuctioneers Group into the Group more widely or it
may no longer be commercially beneficial to so do. Any of
the above could have a detrimental effect on the Combined
Group's business, results of operations, financial condition
and/or prospects.
A.3 The Combined Group may fail to realise anticipated benefits
of the Acquisition or the total cost of the Acquisition may
exceed the Combined Group's cost expectations.
Realising the benefits of the Acquisition will depend partly
on the efficient management and coordination of the activities
of the Existing Group and the LiveAuctioneers Group. This
is likely to require a significant amount of management time
and, as a result, may affect or impair the ability of the
management team of the Combined Group to run the business
effectively during the period of integration. There is a risk
that the anticipated benefits of the Acquisition may fail
to materialise, or that they may not meet management or shareholder
expectations. If the Acquisition takes place, the LiveAuctioneers
Group will need to be integrated into the internal management
and other reporting requirements of the Existing Group. The
Combined Group may encounter difficulties when seeking so
to integrate the LiveAuctioneers Group, as a result of differences
in organisational structure, IT systems, operating cultures,
internal controls and financial reporting and management and
operational issues. In particular, certain remedial actions
relating to the LiveAuctioneers Group's data protection, IT
systems security infrastructure and cybersecurity processes
following a data breach in 2020 will need to be implemented
as part of the integration process. See the risk factor entitled
"The LiveAuctioneers Group may suffer losses as a result of
a data breach attack in June 2020" below. If the integration
process takes longer, or proves more costly, than expected,
or difficulties relating to the integration, of which the
Directors are not yet aware, arise, there is a risk that the
operations of the Combined Group may be negatively affected.
The Combined Group may also incur higher than expected integration,
transaction and costs relating to the Acquisition. In the
short to medium term following Completion, the Directors intend
to maintain the LiveAuctioneers Marketplace on the LiveAuctioneers
Group's technology platform and integrate relevant features
on a modular basis between this platform and the Existing
Group's Platform. However, integrating aspects of these differing
tech stacks may be impractical, or may be delayed or cost
more to implement than the Directors had anticipated. Additionally,
elements of the LiveAuctioneers Group's technology platform
may not be sufficiently scalable and/or secure to enable a
quick and efficient integration with the Platform. In particular,
the Directors believe that the LiveAuctioneers Group's payments
solution will be integrated into the Combined Group's other
North American Marketplaces within six months of Completion,
with integration across the UK and DACH region Marketplaces
within 12-15 months of Completion, but such integration may
be delayed (which would impede the Combined Group's ability
to realise anticipated benefits of the Acquisition) and/or
more expensive to implement than the Directors had anticipated.
Similarly, the Combined Group may experience difficulties
in retention and integration of employees from the LiveAuctioneers
Group, including difficulties relating to differing corporate
cultures and internal control and financial reporting environments.
The Directors value the LiveAuctioneers Group employees and
the loss of key personnel may have a short-term impact on
the LiveAuctioneers Group's relationships with certain of
its auctioneer customers. Additionally, if any senior employee
of the LiveAuctioneers Group were to leave, this could require
additional direct input and oversight by the Existing Group's
management team, which could distract them from pursuing the
Existing Group's (and, from Completion, the Combined Group's)
growth strategy.
In addition, the Existing Group will incur legal, accounting
and transaction fees and other costs related to the Acquisition.
Some of these costs are payable regardless of whether Completion
occurs and such costs may be higher than anticipated, which
may reduce the net benefits of the Acquisition and have a
detrimental effect on the Combined Group's business, results
of operations, financial condition and/or prospects.
A.4 Increased indebtedness of the Group in connection with
the New Senior Facilities Agreement and the Acquisition may
affect the Combined Group's flexibility in the longer term.
Following Completion, as a result of the draw down of the
New Senior Facilities Agreement the Combined Group will have
increased debt relative to the Existing Group's historical
level of debt. As at 31 March 2021, the Existing Group had
borrowings of GBP38.6 million and a net cash position of GBP6.1
million.
Assuming satisfaction of the relevant conditions relating
to the New Senior Facilities Agreement, in order to pay the
Cash Consideration under the Acquisition Agreement the Company
intends to draw the New Senior Term Facility of $183 million
in full, together with up to $21 million of the revolving
credit facility which has been re-designated as part of the
New Senior Term Facility. Under the terms of the New Senior
Facilities Agreement, the Existing Group and (subject to Completion)
the Combined Group must comply with the terms of various covenants
for so long as it continues to have outstanding indebtedness.
Such covenants include maximum adjusted net leverage ratios
and a minimum interest cover ratio. Additionally, the New
Senior Facilities Agreement will limit the ability in certain
circumstances of the Company and its subsidiaries to pay dividends,
make certain restricted payments and investments (including
acquisitions), enter into certain transactions, transfer or
otherwise sell or dispose of assets, grant certain security
and/or provide guarantees and incur additional debt.
This increase in indebtedness will increase the Group's finance
costs. In the longer term, this increased level of debt could
have the effect of, amongst other things, reducing the Combined
Group's flexibility to respond to changing business and economic
conditions and/or reduce funds available for the Combined
Group's investments in capital expenditure and other activities
and may create competitive disadvantages for the Combined
Group relative to other companies with lower debt levels,
which could have a material adverse effect on the business,
financial condition, results of operation and prospects of
the Combined Group.
A.5 The LiveAuctioneers Group may suffer losses as a result
of a data breach attack in June 2020.
The LiveAuctioneers Group contracts with a third-party supplier
to provide a development analytics tool in relation to the
LiveAuctioneers Group's IT infrastructure and systems. In
June 2020, an unauthorised third party was able to access
certain of that supplier's systems and thereby was able to
access that supplier's IT systems and a number of that supplier's
partners' IT systems, including the LiveAuctioneers Group's
systems, and was able to access personal information from
the LiveAuctioneers Group's bidder database. The data breach
compromised the personal information of 3.4 million users
of the LiveAuctioneers Group's platform. The data that was
exposed as a result of this unauthorised access included user
account information such as names, email addresses, mailing
addresses, phone numbers, and encrypted passwords. The unauthorised
third party was able to decrypt the passwords following the
unauthorised access to the LiveAuctioneers Group's systems.
The LiveAuctioneers Group took steps to mitigate the results
of this unauthorised access upon becoming aware of it, including
resetting bidder account passwords, notifying bidders and
recommending that they change the password to any other online
account which had used the same password.As part of its regulatory
obligations, the LiveAuctioneers Group notified relevant regulatory
authorities, including various data protection regulators
in the US, the UK, Canada, the EU and elsewhere. The LiveAuctioneers
Group has received confirmation from some of these regulators
that no regulatory action will be taken, however there remains
a risk that the LiveAuctioneers Group could face regulatory
action in the future in relation to the attack. The LiveAuctioneers
Group has also engaged a number of third parties to perform
penetration tests and vulnerability assessments of the LiveAuctioneers
Group's IT systems to assist with recommendations to improve
the LiveAuctioneers Group's IT systems security infrastructure
and cybersecurity processes. Whilst the LiveAuctioneers Group
has implemented a number of the actions recommended by such
third parties, some of these recommendations remain to be
implemented. There can be no assurance that the steps taken
by the LiveAuctioneers Group since the attached will be successful
in addressing all of the risks arising from this unauthorised
access including any risk of litigation, regulatory action
or unauthorised access to the LiveAuctioneers Group's systems
in the future.
Additionally, and particularly given the extensive press coverage
of the attack, the LiveAuctioneers Group's reputation could
be adversely impacted as a result of the data breach if auctioneers,
bidders or other potential users of the platform were to view
the LiveAuctioneers Group's platform as being less secure
as a result, as further detailed in the risk factors entitled
"An inability to maintain a consistently high-quality and
secure experience for each of the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
auctioneers and bidders across its respective Marketplaces
or the Platform or the LiveAuctioneers Group's platform or
to keep pace with innovation and changes in technology could
result in fewer auctioneers and/or bidders using the Marketplaces,
the Platform and/or the LiveAuctioneers Group's platform"
and "Each of the Existing Group and the LiveAuctioneers Group
relies, and (following Completion) the Combined Group will
rely, on its brand and reputation, which could be impaired."
As a result of this data breach incident, the LiveAuctioneers
Group is currently subject to individual claims against it
and litigation and is potentially exposed to regulatory action
and/or further individual claims and litigation, which could
have a material adverse effect on the LiveAuctioneers Group's
and (subject to Completion) the Combined Group's business,
financial condition, results of operations and prospects.
A.6 The Capital Raising is not conditional on Completion and
if Completion does not occur, the net proceeds of the Capital
Raising will be retained by the Company.
The Capital Raising is not conditional on Completion and may
therefore complete while the Acquisition does not. In such
circumstances, the Directors' current intention is that the
net proceeds of the Capital Raising will be invested by the
Company on a short term basis in high quality, highly liquid
assets and/or in pursuing other M&A opportunities.
If the Group is unable to identify uses for the net proceeds
of the Capital Raising which the Directors consider to be
appropriate then the Company may seek to return some of the
net proceeds of the Capital Raising to Shareholders, at which
point the Directors will evaluate how best, in their view,
to execute such return of capital. However, there can be no
guarantee that such proceeds will be returned to Shareholders
in a timely manner or at all. Additionally, the Company has
incurred and will incur costs and expenses in connection with
the Capital Raising and the Acquisition, which will diminish
the available proceeds to return to Shareholders. In particular,
if Completion does not occur, in certain circumstances the
Platinum Parent, Inc. Purchaser may be required to pay the
Reverse Termination Fee to Platinum Parent, Inc., as detailed
in the risk factor entitled "Completion is subject to the
satisfaction or waiver of a number of conditions which, if
not satisfied or waived, could result in the Acquisition not
proceeding and in which case the Platinum Parent, Inc. Purchaser
may be liable to pay a break fee to Platinum Parent, Inc.."
A.7 The Combined Group may not be able to recover damages
for any losses suffered as a result of a breach of a business
warranty by the Sellers under the Acquisition Agreement.
Under the Acquisition Agreement, each of the Management Sellers
has given certain business representations and warranties
to the Platinum Parent, Inc. Purchaser that are customary
for an acquisition of this nature, certain of which will be
repeated on Completion. The Platinum Parent, Inc. Purchaser
has obtained a representations and warranty insurance policy
(the " R&W Policy ") that will become effective on Completion
pursuant to which the Platinum Parent, Inc. Purchaser will
be able to seek to recover from third-party insurers for losses
incurred as a result of a breach, prior to signing the Acquisition
Agreement, of any of the representations and warranties given
by the Sellers or Platinum Parent, Inc. under the Acquisition
Agreement, subject to the terms thereof and certain exemptions
and exclusions. The liability of the insurers under the R&W
Policy is subject to customary limitations and a coverage
limit of $25 million.
Certain claims under the business warranties given by the
Management Sellers are subject to limitations, including financial
and timing limitations. In certain circumstances therefore,
there may be no recourse for any breaches of such business
warranties, and so the Combined Group may not have contractual
recourse against, or otherwise be able to recover from, the
Sellers, Platinum Parent, Inc. or any other party, in respect
of any losses which it may suffer in respect of a breach of
such business warranties in the Acquisition Agreement. In
particular, if a breach of warranty or representation occurs
between the date of signing the Acquisition Agreement and
the date of Completion, the Platinum Parent, Inc. Purchaser
will not be able to bring a claim under the R&W Policy in
respect of such breach. Even if the Platinum Parent, Inc.
Purchaser is able to successfully claim for a breach of representation
or warranty under the R&W Policy, if the insurers under the
R&W Policy dispute any claim under the policy then the Platinum
Parent, Inc. Purchaser will be delayed in recovering such
sums and may incur costs (including legal expenses) in so
doing, which it may not recover in full.
As a result, any such losses resulting from the breach of
any such business warranties may not be recoverable (either
in full or in part) under the terms of the Acquisition Agreement
and/or the R&W Policy and such losses could have a material
adverse effect on the business, financial condition, results
of operation and prospects of the Combined Group.
A.8 Uncertainties associated with the Acquisition may have
a destabilising effect on employees and/or auctioneer customers
of the Combined Group.
The Acquisition and any uncertainty regarding the effect of
the Acquisition could cause disruptions to the businesses
of the Combined Group. Uncertainty about the effect of the
Acquisition on employees and/or auctioneer customers of the
Existing Group and/or the LiveAuctioneers Group may have an
adverse effect on the respective groups and, consequently,
on the Combined Group following Completion.
These uncertainties may also impair the Combined Group's ability
to attract, retain and motivate key personnel for a period
of time after Completion. If, despite retention efforts, key
employees and/or auctioneer customers depart because of issues
relating to the uncertainty and difficulty of integration
or a desire not to remain, this may adversely affect the financial
position of the Combined Group, and ultimately the trading
price of the Shares.
A.9 The Existing Group and, following Completion, the Combined
Group will have greater exposure to foreign exchange rate
risk.
The Cash Consideration payable by the Platinum Parent, Inc.
Purchaser in relation to the Acquisition is payable in US
dollars and has been set in the Acquisition Agreement. Whilst
the New Senior Term Facility is US dollar denominated, the
net proceeds receivable by the Company in connection with
the Capital Raising will be denominated in pounds sterling
and the amount of the net proceeds will be set on the date
of the Capital Raising. However, the Company will not receive
the proceeds of the Capital Raising until the day following
Capital Raising Shares Admission, at which point the Directors
intend to convert the net proceeds into US dollars. If there
is a weakening of the value of the pound sterling relative
to the US dollar between the date of this document and the
conversion of the net proceeds by the Company into US dollars,
this would affect the amount of US dollars received by the
Company on conversion.
If Completion does not occur and the Company elects to convert
the net proceeds back to pounds sterling in order to pursue
other M&A opportunities or return some proceeds to Shareholders,
if there is a weakening of the US dollar relative to the pound
sterling, this would affect the amount of pounds sterling
received by the Company on conversion.
In addition, the Existing Group and (following Completion)
the Combined Group are also exposed to currency translation
risk. The Existing Group's financial statements are reported
in pounds sterling, which is the Group's (and will (following
Completion) be the Combined Group's) presentation currency,
while the functional currencies of the Existing Group's subsidiaries
in the US and Germany are US dollars and the Euro (respectively)
and the functional currency of the LiveAuctioneers Group is
US dollars. The LiveAuctioneers Group generates most of its
revenue in US dollars and pays its supplier in US dollars.
The Existing Group translates, for the purposes of financial
reporting, revenue and expenses from other currencies into
pounds sterling using the exchange rates prevailing at the
dates of the transactions or valuation where items are remeasured,
while assets and liabilities are translated at period-end
exchange rates, with the effect of such translation being
recognised in the Existing Group's cumulative translation
reserve.
The Existing Group's exposure to this risk was significantly
increased as a result of the Proxibid Acquisition and this
risk will be exacerbated as a result of the Acquisition because,
following Completion, it is expected that approximately 80
per cent. of the revenue of the Combined Group will be generated
in US dollars. Any decline in the value of the US dollar against
the pound sterling, could have a material adverse effect on
the Combined Group's reported results of operations.
The Marketplaces which target the US markets (Proxibid, BidSpotter
US and, following Completion, LiveAuctioneers) generate their
revenue in US dollars. The revenues generated in US dollars
account for a significant proportion of the Existing Group's
and, following Completion and together with the revenues attributable
to the LiveAuctioneers Marketplace, the Combined Group's revenue
(in H1 FY21, approximately 60 per cent. of the Existing Group's
revenue, in its FY20, 36 per cent. of the Standalone ATG Group's
revenue, 100 per cent. of the Standalone Proxibid Group's
revenue and in the LiveAuctioneers Group's FY20 100 per cent.
of the LiveAuctioneers Group's revenue) and therefore the
exchange rate of the US dollar against the pound sterling
is particularly material to the Existing Group and (subject
to Completion) the Combined Group.
Any decline in the value of foreign currencies, particularly
the US dollar and, to a lesser extent, the Euro, against the
pound sterling, could have a material adverse effect on the
Existing Group's and/or (following Completion) the Combined
Group's reported results of operations. The Directors expect
that the Existing Group and (following Completion) Combined
Group will continue to report their financial results in pounds
sterling and, consequently, their reported earnings could
fluctuate materially as a result of foreign exchange translation
gains or losses.
A.10 Existing Shareholders will have a reduced ownership and
voting interest in the Combined Group than they currently
do in the Existing Group.
Due to the issue of the Capital Raising Shares, Shareholders
holding Existing Shares will experience an estimated 20 per
cent. dilution as a result of the issue of the Capital Raising
Shares. Shareholders holding will experience a further dilution
following the issue of the Consideration Shares and Management
RSU Shares. The number of Consideration Shares and Management
RSU Shares is not fixed and will depend on, amongst other
things, (i) how many options over Platinum Parent, Inc. shares
are exchanged at Completion pursuant to the terms of the Rollover,
(ii) the per share Acquisition value of a Platinum Parent,
Inc. share, (iii) the closing share price of the Shares on
the date of Completion and (iv) the US $ to pound sterling
exchange rate at Completion. The interests of the Rollover
Management Sellers may not always be aligned with those of
other Shareholders. In exercising their voting rights, the
Rollover Management Sellers may be motivated by interests
that differ from those of the other Shareholders.
A.11 The Combined Group will have greater exposure to concentration
risk.
In H1 FY21, the Existing Group generated 67 per cent. of its
revenue and in its FY20, the LiveAuctioneers Group generated
89 per cent. of its revenue from North America. Subject to
Completion, the Directors expect that approximately 80 per
cent. of the revenues of the Combined Group will be generated
from lots sold via the Marketplaces, the Platform or the LiveAuctioneers
Group platform which originate in North America.
As a result of an increased percentage of the Combined Group's
revenue being attributable to North America, (subject to Completion)
the Combined Group will have a greater exposure to events
in North America, and therefore a greater concentration risk,
including increased risks relating to natural catastrophic
events (as detailed in the risk factor entitled "Factors outside
of the Existing Group's, the LiveAuctioneers Group's or (following
Completion) the Combined Group's control, such as fires, floods
and other natural catastrophic events, any epidemics or pandemics,
or man-made events such as terrorism, protests or other harassment
could have a material adverse effect on its business, results
of operations, financial condition and prospects") and macroeconomic
factors (as detailed in the risk factor entitled "General
economic factors, including a decline in consumer spending,
may adversely affect the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
business, financial performance and results of operations,
including impacting the willingness of bidders to purchase
goods or reducing the prices at which they are willing to
make such purchases") in North America.
RISKS RELATING TO THE GROUP, THE LIVEAUCTIONEERS GROUP AND
(SUBJECT TO COMPLETION) THE COMBINED GROUP
B. RISKS RELATING TO THE GROUP'S, THE LIVEAUCTIONEERS GROUP'S
AND (SUBJECT TO COMPLETION) THE COMBINED GROUP'S BUSINESS
ACTIVITIES AND INDUSTRY
B.1 The Existing Group and the LiveAuctioneers Group face
and (subject to Completion) the Combined Group will face competition
on a number of fronts and may fail to compete effectively.
The industry in which the Existing Group and the LiveAuctioneers
Group operate, and (subject to Completion) the Combined Group
will operate, is competitive and rapidly changing. The Existing
Group and the LiveAuctioneers Group face, and (subject to
Completion) the Combined Group will face, competition in a
number of respects.
Some of the Existing Group's, the LiveAuctioneers Group's
and/or (subject to Completion) the Combined Group's existing
competitors may have greater brand recognition, as well as
financial, distribution, advertising and marketing resources
than the Existing Group, the LiveAuctioneers Group and/or
(subject to Completion) the Combined Group, and may be able
to secure better terms with auctioneers and bidders, adopt
more aggressive pricing and maintain more capacity to absorb
costs. Further, new competitors with greater financial and
other resources and/or different business models or strategies
may enter the markets in which any of the Existing Group and/or
the LiveAuctioneers Group operates presently or in which either
of them (subject to Completion) the Combined Group operates
in the future, which could intensify competition. These may
include competitors who currently operate in different segments
or markets within the wider online marketplace industry, some
of whom may already enjoy strong name and brand recognition
and have access to large user bases, and who may be able to
provide users with certain products and services that the
Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group do not offer, should they
enter the markets of the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group. Competitive
pressures that each of the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group experiences
may intensify if its competitors consolidate or enter into
business combinations or alliances.
The Directors believe that eBay, Etsy and Ritchie Bros., among
others, compete directly with A&A, A&A and I&C auctioneers
(respectively) who use the Marketplaces and/or Platform in
relation to acquiring consignments of items for sale and attracting
prospective bidders, and the Existing Group and LiveAuctioneers
Group compete (and, following Completion, the Combined Group
will compete) with eBay, Etsy and Ritchie Bros., among others,
in relation to the provision of a secure and user-friendly
end-to-end buying experience. In this way, the Existing Group
and the LiveAuctioneers Group compete, and (subject to Completion)
the Combined Group will also compete, with eBay and Etsy in
the A&A vertical and Ritchie Bros. in the I&C vertical.
The Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group may experience competitive
pressure relating to its respective take rate. For example,
the Existing Group's, the LiveAuctioneers Group's and/or (subject
to Completion) the Combined Group's competitors may seek to
undercut the Group by offering a lower (and therefore more
attractive) take rate.
Additionally, existing or future competitors may succeed in
entering and establishing successful operations in new geographic
markets (where the Existing Group, the LiveAuctioneers Group
and/or (subject to Completion) the Combined Group is not yet
active but has intent to expand) prior to the Existing Group's,
the LiveAuctioneers Group's and/or (subject to Completion)
the Combined Group's entry into those markets. This may make
it more difficult for any of the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group to
establish itself in those markets. Similarly, take rates in
any new markets that the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group may
seek to penetrate may have pre-existing competitors who charge
lower take rates, and the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group may
need to reduce its own respective take rate to enhance its
competitive position in such markets.
Commission on lots sold represents the majority of the Existing
Group's annual revenue (in its FY20, 61 per cent. of the Standalone
ATG Group's revenue and 75 per cent. of the Standalone Proxibid
Group's revenue) and the LiveAuctioneers Group's annual revenue
and (subject to Completion) will represent the majority of
the Combined Group's revenue. Since the Existing Group, the
LiveAuctioneers Group and (subject to Completion) the Combined
Group only earn commission on winning bids which are placed
online via its respective Marketplaces or Platform, the Existing
Group's and the LiveAuctioneers Group's respective business
faces, and (subject to Completion) the Combined Group's business
will face, competition from in-person and telephone bidders
at physical auction houses, as further detailed in the risk
factor entitled "A decrease in successful online bids and/or
a decline in the value of inventory listed by auctioneers
on its Marketplaces or Platform would reduce the Existing
Group's, the LiveAuctioneers Group's and/or (subject to Completion)
the Combined Group's commissions, which are the Existing Group's,
the LiveAuctioneers Group's and (subject to Completion) the
Combined Group's primary revenue stream."
Additionally, the Existing Group and the LiveAuctioneers Group
compete, and (subject to Completion) the Combined Group will
compete, to attract and retain potential auctioneers and bidders
with platforms operated by other auction marketplaces and
white/private label providers in what is a fragmented market,
and the Existing Group's, the LiveAuctioneers Group's and/or
(subject to Completion) the Combined Group's success in competing
with these competitors depends upon a number of factors, including
those detailed in the risk factor entitled "The Existing Group,
the LiveAuctioneers Group and/or (subject to Completion) the
Combined Group may be unable to retain existing, or attract
new, bidders and auctioneers, who are the principal drivers
of the Existing Group's, the LiveAuctioneers Group's and (subject
to Completion) the Combined Group's respective revenue."
If the Existing Group and the LiveAuctioneers Group is not
able to maintain its respective market position and effectively
compete in the markets in which it operates, or in which either
of them and/or (subject to Completion) the Combined Group
will operate, or into which it or they seek to expand, its
respective business, financial condition, results of operations
and prospects may be materially adversely affected.
B.2 The Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group may be unable to retain
existing, or attract new, bidders and auctioneers, who are
the principal drivers of the Existing Group's, the LiveAuctioneers
Group's and (subject to Completion) the Combined Group's respective
revenue.
The Existing Group's, the LiveAuctioneers Group's and (subject
to Completion) the Combined Group's revenues and performance
are driven primarily by the volume and price of goods sold
through its respective Marketplaces and the Platform, which
in turn depend significantly upon the number of bidders and
auctioneers using the Marketplaces and the Platform.
The Existing Group's, the LiveAuctioneers Group's and (subject
to Completion) the Combined Group's strategy relies on bidders
and auctioneers returning to use its Marketplaces or the Platform
on a regular basis as one of the drivers of revenue stability
and growth for the Existing Group, the LiveAuctioneers Group
and/or (subject to Completion) the Combined Group. Revenue
attributable to existing auctioneer customers typically represents
a substantial portion of the Existing Group's and the LiveAuctioneers
Group's respective revenues in each financial period, and
(subject to Completion) is expected to represent a substantial
portion of the Combined Group's revenues. For example, net
revenue retention (representing revenue from the pool of auctioneers
from whom revenue was generated in the prior financial period,
expressed as a percentage of the revenue generated by these
auctioneers in the prior financial period) was 117 per cent.
for the Existing Group's Aggregated Operations in its FY20
and 119 per cent. for the LiveAuctioneers Group in its FY20.
Additionally, part of the Existing Group's, the LiveAuctioneers
Group's and (subject to Completion) the Combined Group's growth
strategy is to increase its revenues by attracting new bidders
and auctioneers to its Marketplaces or Platform.
The Existing Group's, the LiveAuctioneers Group's and (subject
to Completion) the Combined Group's ability to retain existing
bidders and auctioneers and to attract new bidders and auctioneers
to utilise its Marketplaces or the Platform will depend on
a number of factors, including:
* the uptake of online auctions across the auction
landscape more generally by moving bidders from
offline channels (such as in-room and phone-based
bidding) to online channels;
* the volume of bidders and auctioneers that will
return to physical auction rooms once the COVID-19
pandemic and the mitigation responses thereto have
substantially passed;
* the overall volume of active users of its
Marketplaces or the Platform;
* the strength of the markets and customer demand for
the goods sold via its Marketplaces or the Platform;
* the competition from other auction or e-commerce
platforms for the types of goods sold on the
Marketplaces or the Platform;
* the Existing Group's, the LiveAuctioneers Group's
and/or (subject to Completion) the Combined Group's
fee structure and payment terms in comparison to its
competitors;
* the maintenance and enhancement of the Existing
Group's, the LiveAuctioneers Group's and (subject to
Completion) the Combined Group's Marketplaces and the
Platform as well as auction management solutions and
other ancillary services to keep pace with auctioneer
and bidder demands;
* the strength of the Existing Group's, the
LiveAuctioneers Group's and/or (subject to
Completion) the Combined Group's brands;
* the strength of the Existing Group's, the
LiveAuctioneers Group's and/or (subject to
Completion) the Combined Group's white label
offerings for auctioneers;
* the level and effectiveness of the Existing Group's,
the LiveAuctioneers Group's and/or (subject to
Completion) the Combined Group's sales and marketing
activities directed towards attracting auctioneers
and bidders, including marketing opportunities that
the Existing Group, the LiveAuctioneers Group and/or
(subject to Completion) the Combined Group offers,
such as within the Existing Group's trade magazine,
the Antiques Trade Gazette;
* the Existing Group's, the LiveAuctioneers Group's
and/or (subject to Completion) the Combined Group's
search engine optimisation ("SEO") strategy, which
influences the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined
Group's domain authority and ranking within internet
search results;
* the effect of exclusivity clauses in certain of the
Existing Group's and (subject to Completion) the
Combined Group's agreements with auctioneers in the
US which restrict the Existing Group's and/or
(subject to Completion) the Combined Group's ability
to do business with specific competitors of such
auctioneers; and
* the amount and effectiveness of the Existing Group's,
the LiveAuctioneers Group's and/or (subject to
Completion) the Combined Group's customer
relationship management ("CRM") expenditure directed
towards retaining auctioneers and bidders.
Moreover, each of the Existing Group and the LiveAuctioneers
Group relies, and (subject to Completion) the Combined Group
will rely, on the value it delivers to auctioneers rather
than on contracts to retain auctioneers' business. The Existing
Group's agreements with auctioneers do not require auctioneers
to continue to use its Marketplaces or the Platform for ongoing
sales of goods. Even with those auctioneers who pay monthly
subscription-style event fees to host auctions on the Existing
Group's or the LiveAuctioneers Group's Marketplaces or Platform,
auctioneers (other than certain auctioneers in North America)
are free to use other auction platforms (including their own
websites or platforms) or other venues to sell their goods,
concurrently or otherwise. Some of the Existing Group's and
some of the LiveAuctioneers Group's auctioneer customers have
in the past ceased using its Marketplaces and/or the Platform
and have set up their own platform(s). Accordingly, there
is no guarantee that auctioneers or bidders will use, or continue
to use, any of the Marketplaces or the Platform for the sale
or purchase of goods or that the proportion of these goods
sold on the Existing Group's, the LiveAuctioneers Group's
or, (subject to Completion) the Combined Group's Marketplaces
or the Platform rather than via other platforms or venues
will not decrease.
If a significant number of the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
existing bidders or auctioneers were to stop using one or
more of its Marketplaces or the Platform the Existing Group,
the LiveAuctioneers Group and/or (subject to Completion) the
Combined Group (as the case may be) would, over time, lose
the benefit of the "network effect" (i.e. the virtuous circle
which the Directors believe is generated by a steadily growing
number of new and returning bidders choosing to place more
bids through the Existing Group's, the LiveAuctioneers Group's
and/or (subject to Completion) the Combined Group's Marketplaces,
thus encouraging more items to be listed by more auctioneers
and vice versa), potentially leading to a decline in the number
of bidders and/or auctioneers and, consequently, revenue.
If any of the Existing Group, the LiveAuctioneers Group or
(subject to Completion) the Combined Group is unable to attract
or maintain sufficient numbers of auctioneers to or on its
Marketplaces or the Platform, it may need to reduce its take
rate (including commissions) in order to incentivise auctioneers
to hold more auctions on its Marketplaces or the Platform
and to incentivise bidders (both new and existing) to use
its Marketplaces or the Platform.
Any of the foregoing could have a material adverse effect
on the Existing Group's, the LiveAuctioneers Group's and/or
(subject to Completion) the Combined Group's business, financial
condition, results of operations and prospects.
B.3 A decrease in successful online bids and/or a decline
in the value of inventory listed by auctioneers on its Marketplaces
or Platform would reduce the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
commissions, which are the Existing Group's, the LiveAuctioneers
Group's and (subject to Completion) the Combined Group's primary
revenue stream.
The Existing Group's and the LiveAuctioneers Group's primary
revenue stream is, and (subject to Completion) the Combined
Group's primary revenue stream will be, from commissions paid
by successful (i.e. winning) bidders, which are only payable
to the Existing Group, the LiveAuctioneers Group or (subject
to Completion) the Combined Group when a winning bid is made
by an online bidder using its Marketplaces or Platform. Such
commissions comprise the majority of the Existing Group's
and the LiveAuctioneers Group's revenue (in H1 FY21, 66 per
cent. of the Existing Group's revenue, in its FY20, 61 per
cent. of the Standalone ATG Group's revenue and 75 per cent.
of the Standalone Proxibid Group's revenue) and, subject to
Completion, will constitute the majority of the Combined Group's
revenue. In order to maintain and grow its respective revenues
from commissions on online sales, the Existing Group, the
LiveAuctioneers Group and (subject to Completion) the Combined
Group must not only attract bidders to its Marketplaces and
Platform, but a significant proportion of those bidders must
also make successful bids on auctions on those Marketplaces
or the Platform. To the extent the auctions taking place on
any of the Marketplaces or Platform are simultaneously taking
place in physical auction houses or on other internet platforms
not owned by the Existing Group, the LiveAuctioneers Group
or (subject to Completion) the Combined Group, winning bidders
not using its Marketplaces or Platform would not generate
any commission for the Existing Group, the LiveAuctioneers
Group or (subject to Completion) the Combined Group.
In addition, as the Existing Group's and the LiveAuctioneers
Group's commissions are calculated, and (subject to Completion)
the Combined Group's commissions will be calculated, as a
percentage of the winning bid price, the amount of commissions
that the Existing Group, the LiveAuctioneers Group and/or
(subject to Completion) the Combined Group is able to generate
also depends on the prices achieved on the inventory sold
in the auction. Various factors may affect the proportion
of bidders on the Existing Group's, the LiveAuctioneers Group's
and/or (subject to Completion) the Combined Group's Marketplaces
or the Platform who make successful bids (the "conversion
rate") and the price achieved on the inventory, including:
* the number of potential bidders who are signed up to
its Marketplaces or Platform but do not place a bid,
for example if the range of inventory available is
not adequate, does not meet their needs or is not
priced competitively enough, to entice them to bid at
all;
* the quality of the inventory, including the market
perceptions of the quality and value of such
inventory, and the number of bidders bidding on
particular inventory;
* the effectiveness of the Existing Group's, the
LiveAuctioneers Group's and/or (subject to
Completion) the Combined Group's conversion rate
optimisation efforts to encourage bidders on its
Marketplaces or the Platform to place bids;
* auctioneers' ability to respond to changing consumer
tastes and supply inventory that is attractive to
bidders, in a timely manner and at competitive
prices;
* the level of disposable income or financing available
to the Existing Group's, the LiveAuctioneers Group's
and/or (subject to Completion) the Combined Group's
bidder base as compared with bidders not using the
Existing Group's, the LiveAuctioneers Group's and/or
(subject to Completion) the Combined Group's
Marketplaces or the Platform;
* the availability of the Marketplaces and Platform,
including any IT failures or outages, even if such
failures are only brief, given the time-sensitive
nature of auctions;
* the number of auctions held as online-only (where all
winning bids will contribute positively to the
conversion rate) rather than live auctions with
in-room and telephone bidders; and
* whether the auction is conducted only on the Existing
Group's, the LiveAuctioneers Group's and/or (subject
to Completion) the Combined Group's Marketplaces
and/or the Platform or whether it is simultaneously
conducted on multiple platforms.
If any of these factors, among others, were to cause the conversion
rate or commission levels to decline, it could cause the Existing
Group's, the LiveAuctioneers Group's and/or (subject to Completion)
the Combined Group's revenue to decline or to grow less quickly,
which could have a material adverse effect on its business,
financial condition, results of operations and prospects.
B.4 The Existing Group's, the LiveAuctioneers Group's and/or
(subject to Completion) the Combined Group's business models
may come under significant pressure should a significant number
of auctioneers choose to take bidder generation, technology
development and customer service (amongst other things) in-house
and so bypass the Marketplaces or Platform, including as a
result of auctioneers who use the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
white label offering attempting to maintain their own platforms
rather than use the Existing Group's Platform.
The Existing Group's and the LiveAuctioneers Group's business
models include, and (subject to Completion) the Combined Group's
business model will include, a white label offering, which
enables auctioneers to maintain their own brands whilst using
the Existing Group's Platform or the LiveAuctioneers Group's
platform on their own websites. The Existing Group's white
label offering represented a small proportion of revenue in
FY20 (one per cent. of the Standalone ATG Group's revenue
and zero per cent. of the Standalone Proxibid Group's revenue)
but this grew for the Existing Group in its H1 FY21, following
the Auction Mobility Acquisition in October 2020 (10 per cent.
of the Existing Group's revenue in H1 FY21). The LiveAuctioneers
Group does not generate revenue directly via its white label
offering, which is included at no additional cost to auctioneers
other than the event fee for the auction. The Existing Group
and (subject to Completion) the Combined Group intends to
enhance its white label offering with a premium and fully
customisable white label service through Auction Mobility,
capitalising in particular on its reputation within the North
American A&A vertical / geography but expanding it to other
verticals / geographies as well in due course. However, the
white label offering inherently gives rise to certain risks
as auctioneers using this offering are not utilising the Existing
Group's, the LiveAuctioneers Group's or (subject to Completion)
the Combined Group's, branded Marketplaces to the same extent
and may therefore find it easier to change to alternative
platforms. Auctioneers may choose to use a white label solution
provided by one of the Existing Group's, the LiveAuctioneers
Group's or (subject to Completion) the Combined Group's, competitors.
Alternatively, use of the Existing Group's, the LiveAuctioneers
Group's or (subject to Completion) the Combined Group's, white
label offering could, in time, result in auctioneers attempting
to replicate the power and size of the Marketplaces for bidder
generation, technology development, customer support and conversion
tools so as to enable them to bypass the Existing Group's,
or (subject to Completion) the Combined Group Platform, or
the LiveAuctioneers Group's platform entirely and maintain
their own platform. If a sufficient number of auctioneers
were to choose not to continue to use the Existing Group's,
the LiveAuctioneers Group's and/or (subject to Completion)
the Combined Group's offering as a result, this could have
a material adverse effect on the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
business, financial condition, results of operations and prospects.
B.5 An inability to maintain a consistently high-quality and
secure experience for each of the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
auctioneers and bidders across its respective Marketplaces
or the Platform or the LiveAuctioneers Group's platform or
to keep pace with innovation and changes in technology could
result in fewer auctioneers and/or bidders using the Marketplaces,
the Platform and/or the LiveAuctioneers Group's platform.
The Existing Group's and the LiveAuctioneers Group's and (subject
to Completion) the Combined Group's success and ability to
compete depends (or (subject to Completion) in the case of
the Combined Group will depend) on its ongoing ability to
maintain a consistent, convenient, high quality and secure
experience for auctioneers and bidders across its Marketplaces,
the Platform and/or the LiveAuctioneers Group's platform,
through well-trained and skilled personnel as well as effective
technology and digital tools that have the right features
and are reliable, secure and easy to use.
Each of the Existing Group's, the LiveAuctioneers Group's
and (subject to Completion) the Combined Group's ability to
deliver such an experience depends and will depend on its
ability to adapt to changing technologies, including changing
consumer trends in relation to technologies and adapting to
new technologies that the Existing Group, the LiveAuctioneers
Group, (subject to Completion) the Combined Group and/or the
market have not yet encountered, as well as adapting to evolving
industry standards. In particular, it is necessary for the
Marketplaces, the Platform and the LiveAuctioneers Group's
platform to evolve and innovate through regular improvements
and enhancements to functionality, performance, conversion
rate optimisation (i.e. features that help to increase the
proportion of bidders that make successful bids), reliability,
design, security and scalability of its technology. The Existing
Group, the LiveAuctioneers Group and (subject to Completion)
the Combined Group may be unable to attract and retain sufficient
technical personnel required to deliver such improvements
and enhancements. An inability to keep pace with innovation
and changes in technology could result in a deterioration
in the user experience and, consequently, fewer auctioneers
and/or bidders using the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
Marketplaces, the Platform and/or the LiveAuctioneers Group's
platform.
Each of the Existing Group, the LiveAuctioneers Group and
(subject to Completion) the Combined Group needs to continually
update, test and enhance its respective software, to seek
to ensure that its respective technology operates effectively
across multiple devices, operating systems and internet browsers.
Software development involves significant amounts of time
and financial resources to update, code and test new and upgraded
solutions and integrate them into the Existing Group's, the
LiveAuctioneers Group's and/or (subject to Completion) the
Combined Group's existing technology infrastructure.
Additionally, whilst some of the Existing Group's technologies
are developed and maintained in-house, the Existing Group
contracts with third-party developers in relation to development
and maintenance. In particular, the Existing Group relies
on a third-party developer, Objectivity Limited ("Objectivity"),
with respect to certain software development. The Existing
Group has had an agreement in place with Objectivity since
2017 and Objectivity has assisted the Existing Group in the
development of software through a number of "work packages"
which each governs the specific software development services
to be provided by Objectivity. Objectivity represented the
Existing Group's highest expenditure of any supplier in FY20.
Similarly, the LiveAuctioneers Group also contracts with third-party
developers in relation to development and maintenance of its
IT infrastructure and has in the past experienced disruptions
in its operations due to a third-party, as detailed in the
risk factor entitled "The LiveAuctioneers Group may suffer
losses as a result of a data breach attack in June 2020".
If the Existing Group or (subject to Completion) the Combined
Group is unable to secure ongoing "work packages" with Objectivity
on a favourable basis, or if either of them or the LiveAuctioneers
Group is unable to secure contracts with other third-party
developers on a favourable basis, or if the Existing Group,
the LiveAuctioneers Group and/or (subject to Completion) the
Combined Group or third parties on whom such party relies,
in particular Objectivity, experience difficulties in developing
key software in a timely manner, within anticipated cost parameters,
effectively, or at all, this could delay or prevent the development,
introduction or implementation of new solutions and enhancements
to its technology infrastructure.
As access to the internet via desktop and laptop computers
declines due to the increased use and functionality of mobile
devices, voice-assisted speakers, wearables and automobile
in-dash systems, the functionality and user experiences associated
with the use of devices other than a desktop computer, such
as a smaller screen size or lack of a screen, may make the
use of the Marketplaces, the Platform and/or the LiveAuctioneers
Group's platform through such devices more difficult than
through a desktop computer, lower the use of the Marketplaces,
the Platform and/or the LiveAuctioneers Group platform and/or
require additional technological innovation by the Existing
Group, the LiveAuctioneers Group and/or (subject to Completion)
the Combined Group to keep pace with changing device preferences.
In addition, consumer purchasing patterns can differ on alternative
devices, and it is uncertain how the proliferation of mobile
devices will impact the use of the Marketplaces, the Platform
and/or the LiveAuctioneers Group's platform. Each of the Existing
Group, the LiveAuctioneers Group and (subject to Completion)
the Combined Group will need to ensure that its online offering
remains attractive as consumers shift to these alternative
means of accessing the internet.
If any of the Existing Group, the LiveAuctioneers Group and/or
(subject to Completion) the Combined Group is unable to consistently
meet customer expectations or to develop or improve customer-facing
technology in a timely manner that responds to its own or
auctioneers' or bidders' evolving needs, its business, financial
condition, results of operations and prospects will be adversely
affected.
B.6 The Existing Group and (subject to Completion) the Combined
Group may be unable to successfully manage its future growth.
The Existing Group has grown rapidly since FY16 and the Directors
believe future growth is important to the ongoing success
of the Existing Group and (subject to Completion) the Combined
Group. The Existing Group and (subject to Completion) the
Combined Group may fail to achieve further growth, may encounter
setbacks in its ongoing expansion, or may be unable to successfully
manage its expanding operations, any of which could have a
material adverse effect on its business, financial condition,
results of operations and prospects. Additionally, the Existing
Group incurred losses for the year of GBP3.5 million, GBP8.8
million and GBP16.0 million for FY18, FY19 and FY20, respectively,
and losses of GBP24 million for the six-months of H1 FY21,
and the Existing Group and/or (following Completion) the Combined
Group may not be able to achieve profitability.
Each of the Existing Group's, the LiveAuctioneers Group's
and (subject to Completion) the Combined Group's growth strategy
contemplates significant investments and initiatives designed
to continue the growth of its revenue and market share, particularly
through acquisitions and the ongoing development of the Platform
and/or the LiveAuctioneers Group's platform.
In implementing its growth strategy, the Existing Group, the
LiveAuctioneers Group and (subject to Completion) the Combined
Group must effectively manage an increasing number of distinct
business divisions and revenue streams, as well as new business
opportunities, whilst maintaining operational service quality
and increasing capacity and Marketplace traffic to meet the
expectations of existing and prospective auctioneers and bidders.
The Existing Group's, the LiveAuctioneers Group's and (subject
to Completion) the Combined Group's respective growth strategy
also entails developing new offerings with which it has less
experience. For example, the Existing Group and (subject to
Completion) the Combined Group intends to expand its service
offerings to auctioneers and bidders in the future, including
developing an ecosystem on its Marketplaces which would support
bidders and auctioneers in accessing financing, logistics,
maintenance and repair, restoration and inventory storage
via third parties. However, each of the Existing Group's,
the LiveAuctioneers Group's and (subject to Completion) the
Combined Group's efforts and investments may be unsuccessful
in growing its business as planned. The Existing Group, the
LiveAuctioneers Group and/or (subject to Completion) the Combined
Group may incur higher than expected capital expenditures
and other costs, and may be unable to realise the anticipated
benefits of the capital expenditure and other investments,
within the anticipated timelines or at all. The Existing Group,
the LiveAuctioneers Group and (subject to Completion) the
Combined Group may also have reduced amounts of cash available
for use towards other initiatives.
The implementation of the Existing Group's, the LiveAuctioneers
Group's and (subject to Completion) the Combined Group's respective
growth strategy, including the Acquisition, is also expected
to expose each of the Existing Group, the LiveAuctioneers
Group and (subject to Completion) the Combined Group to additional
competitive and operational complexities, and may place additional
requirements and strain on the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
respective infrastructure and systems, controls, procedures
and management, including the need to invest in recruiting
and training incremental personnel with relevant expertise,
and to expand the scope of the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
current technology systems beyond current expectations. In
addition, the Existing Group's, the LiveAuctioneers Group's
and/or (subject to Completion) the Combined Group's investments
in new technology may not provide anticipated benefits or
may expose any or all of them to additional risks, for example,
due to poor implementation or due to unexpected outcomes of
new functionalities. Some of the Existing Group's, the LiveAuctioneers
Group's and (subject to Completion) the Combined Group's systems
are interdependent and a failure of one of these systems may
result in dependent systems failing. Any updates to the Existing
Group's, the LiveAuctioneers Group's and/or (subject to Completion)
the Combined Group's systems and infrastructure to support
its operations and growth and/or respond to changes in regulations
and markets, create risks associated with implementing new
systems and integrating them with existing ones, including
as a result of the Acquisition, as detailed in the risk factors
entitled "The Combined Group may fail to realise anticipated
benefits of the Acquisition or the total cost of the Acquisition
may exceed the Combined Group's cost expectations" and "The
Existing Group has in the past made, and in the future it
and/or (subject to Completion) the Combined Group may make,
acquisitions and investments, which may prove unsuccessful
or divert its resources, result in operating difficulties
and otherwise disrupt the Existing Group's or the Combined
Group's operations".
The Directors believe the Existing Group's, the LiveAuctioneers
Group's and (subject to Completion) the Combined Group's innovation
and collaboration-driven cultures are core to their success
and such culture may fail to be maintained or adequately adapted
to meet the needs of future and evolving operations, in particular
as the Existing Group, the LiveAuctioneers Group and (subject
to Completion) the Combined Group grow internationally. Each
of the Existing Group, the LiveAuctioneers Group and (subject
to Completion) the Combined Group may also fail to apply best
practices in marketing, CRM, IT processes and systems as it
expands into new businesses or into new markets.
If the Existing Group's, the LiveAuctioneers Group's and/or
(subject to Completion) the Combined Group's fails to implement
its growth strategy and manage the related risks and costs
successfully, its business, financial condition, results of
operations and prospects may be materially adversely affected.
B.7 The Existing Group has in the past made, and in the future
it and/or (subject to Completion) the Combined Group may make,
acquisitions and investments, which may prove unsuccessful
or divert its resources, result in operating difficulties
and otherwise disrupt the Existing Group's and/or the Combined
Group's operations.
Acquisitions and investments, such as the Acquisition, are
a significant component of the Existing Group's and (subject
to Completion) Combined Group's growth strategy. The Existing
Group has in the past made, and in the future it or (subject
to Completion) the Combined Group may make, acquisitions and
investments which are material to its financial condition
and results of operations. For example, in February 2020 the
Existing Group acquired Proxibid which has had a material
effect on the Existing Group's financial condition and results
of operations, with the Existing Group's THV (Total Hammer
Value, representing the total final sale value of all lots
listed on the Existing Group's Marketplaces or Platform) growing
from GBP1,500 million in FY19 to GBP4,900 million in FY20
(with the Standalone Proxibid Group accounting for GBP3,200
million of that sum and the Standalone ATG Group accounting
for GBP1,700 million). Similarly, in October 2020, the Existing
Group completed the Auction Mobility Acquisition, with the
Existing Group's revenue from its white label offering growing
from a small proportion of its revenue in FY20 (one per cent.
of the Standalone ATG Group's revenue and zero per cent. of
the Standalone Proxibid Group's revenue) to 10 per cent. of
the Existing Group's revenue in H1 FY21. Please also refer
to the risk factors in Section A (Risks relating to the Acquisition)
of this Error! Reference source not found. .
The Existing Group and/or (subject to Completion) the Combined
Group may make additional significant acquisitions in the
future and, subject to the provisions of the Listing Rules
or other applicable law, Shareholders may not have the opportunity
to vote on or approve future acquisitions.
The process of acquiring and integrating another company or
technology could create unforeseen operating difficulties
and expenditures and involves a number of risks, such as:
* diversion of management time and focus from operating
the business;
* use of resources as part of the initial target
scoping, due diligence and integration processes that
are needed in other areas of the business;
* implementation or remediation of controls, procedures
and policies of the acquired company in order to
bring them up to the standards of, and achieve
uniformity with, those applied by the Existing Group
or the Combined Group more widely;
* difficulties integrating the systems of the acquired
operations with those of the Existing Group or the
Combined Group, potential delays and difficulties
associated with incrementally migrating the
operations to the Platform and the potential
diversion of technology resource from the ongoing
development of the Platform and the existing
Marketplaces in addition to the opportunity cost of
trying to achieve certain technical synergies from
integrating an acquisition which may result in the
diversion of key employees from the achievement of
other synergies;
* difficulties in co-ordination of product, engineering
and selling and marketing functions, including
difficulties and additional expenses associated with
supporting legacy services and products and hosting
infrastructure of the acquired company and difficulty
converting the auctioneer clients of the acquired
company onto the Existing Group's or the Combined
Group's contract terms;
* disparities in the revenues, licensing, support or
professional services model of the acquired company;
* difficulties in retention and integration of
employees from the acquired company including
difficulties relating to differing corporate cultures
as well as integration and re-restructuring costs,
both one-off and ongoing;
* failures in due diligence prior to acquisition,
leading to unforeseen costs or liabilities;
* adverse effects on the Existing Group's or the
Combined Group's existing business relationships with
auctioneers and bidders;
* adverse tax consequences;
* regulatory risks, including the risk that such
acquisition or investment attracts scrutiny from
competition authorities, as further detailed in the
risk factor entitled "The Group is subject to
regulatory oversight by competition authorities,
including the Competition and Markets Authority in
the UK";
* litigation or other claims arising out of the
acquisitions;
* the need to integrate operations across different
cultures and languages and to address the particular
economic, currency, political and regulatory risks
associated with specific countries; and
* a failure to generate expected margins or cash flows,
or to realise the anticipated benefits of any
acquisitions, including expected operational, revenue,
technical and other synergies or other benefits
within anticipated timeframes or at all.
In addition, the Existing Group's and/or the Combined Group's
assessments of, and assumptions regarding acquisition targets
may prove to be incorrect, and actual results may differ significantly
from expectations. A significant portion of the purchase price
of acquisitions may be allocated to acquired goodwill and
other intangible assets, which must be assessed for impairment
at least annually and could therefore have a material effect
on the Existing Group's or the Combined Group's financial
position. If the Existing Group's or the Combined Group's
acquisitions or investments do not yield expected returns,
it may be required to take charges or impairments to its operating
results based on this impairment assessment process, which
could adversely affect the Existing Group's or the Combined
Group's business, financial condition, results of operations
and prospects.
Moreover, acquisitions or investments in jurisdictions other
than the ones the Existing Group currently operates in, or
(subject to Completion) the Combined Group will operate in,
would subject it to market practices, as well as other regulatory
and tax requirements, that differ from those it is currently
familiar with, which may in turn expose the Existing Group
and/or the Combined Group to unanticipated risks.
Any of the above risks associated with acquisitions could
have a material adverse effect on the Existing Group's and/or
the Combined Group's business, financial condition, results
of operations and prospects.
B.10 The loss of senior executives or one or more of the Existing
Group's, the LiveAuctioneers Group's and/or (subject to Completion)
the Combined Group's key employees could adversely affect
its business, results of operations and financial condition.
Each of the Existing Group's, the LiveAuctioneers Group's
and (subject to Completion) the Combined Group's success depends
to a large extent on the experience and knowledge of its key
executive officers and other key employees, and loss of the
services of one or more of such persons could adversely affect
its business.
Each of the Existing Group's, the LiveAuctioneers Group's
and (subject to Completion) the Combined Group's success also
depends on its ability to attract, motivate and retain skilled
development, technical, operating and sales and marketing
personnel, and it may not be able to continue attracting similarly
qualified and skilled individuals to join its staff and senior
management or to retain its current personnel. For example,
the Existing Group is currently in the process of recruiting
a new Chief Marketing Officer. Competition for qualified employees
(particularly in the technology field) is intense and changes
in labour or tax laws could require the Existing Group, the
LiveAuctioneers Group and/or (subject to Completion) the Combined
Group to incur higher labour costs. The specialised skills
the Existing Group, the LiveAuctioneers Group and (subject
to Completion) the Combined Group require are difficult and
time consuming to acquire and, as a result, such skills are
in short supply and may be more expensive to employ (particularly
in concentrated tech hubs such as London). Further, the effects
of the United Kingdom's withdrawal from the European Union
(commonly referred to as "Brexit") have resulted in a reduction
in freedom of movement between the United Kingdom and Europe,
which could impair in particular the Existing Group's, and
(subject to Completion) the Combined Group's, ability to hire
new personnel from the European Union.
If the Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group loses a number of qualified
employees to its competitors, new entrants or otherwise, is
unable to attract, retain and motivate the additional highly
skilled employees required for the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
activities, or is required to pay substantially higher wages
in order to attract and retain the highly qualified and skilled
personnel it needs, this could delay or curtail the successful
implementation of the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
strategic objectives and result in significant costs being
incurred, which could have a material adverse effect on its
business, financial condition, results of operations and prospects.
B.11 Each of the Existing Group and the LiveAuctioneers Group
relies, and (following Completion) the Combined Group will
rely, on its brand and reputation, which could be impaired.
Any failure to maintain the Marketplaces, Platform or the
LiveAuctioneers Group's platform, or perception that the Marketplaces,
the Platform or the LiveAuctioneers Group's platform are not
maintained, at the level expected by the Existing Group's,
the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's auctioneers or bidders, or any failure
to maintain high quality customer service, could adversely
affect the Existing Group's, the LiveAuctioneers Group's and/or
(following Completion) the Combined Group's reputation and
undermine the strength of its brands. Any negative information
or commentary relating to the Existing Group, the LiveAuctioneers
Group, (following Completion) the Combined Group, the Marketplaces,
the Platform, or the LiveAuctioneers Group's platform, whether
accurate or not, may be widely disseminated on social networking
platforms, which could amplify any adverse effect on the reputation
of the Existing Group, the LiveAuctioneers Group, (following
Completion) the Combined Group, the Marketplaces, the Platform,
and/or the LiveAuctioneers Group's platform. Each of the Existing
Group, the LiveAuctioneers Group and/or (following Completion)
the Combined Group may also suffer reputational harm or suffer
negative publicity as a result of the actions of auctioneers
using its Marketplaces, the Platform, or the LiveAuctioneers
Group platform for example listing items that are defective
or incorrectly described, or items which give rise to controversy,
including firearms and offensive items, as further detailed
in the risk factor entitled "The Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group could
incur liability by reason of the actions of auctioneers on
its Marketplaces, the Platform or the LiveAuctioneers Group's
platform". Similarly, none of the Existing Group nor the LiveAuctioneers
Group tests, nor (following Completion) will the Combined
Group test, any products which are sold on its Marketplaces,
the Platform or the LiveAuctioneers platform prior to their
sale, including electrical products and industrial equipment,
and so there is a risk that such products could be defective
and potentially dangerous if they have not been properly tested,
or tested at all, by auctioneers, in which case the Existing
Group, the LiveAuctioneers Group and/or (following Completion)
the Combined Group could suffer reputational harm.
In addition, the Existing Group has an editorial team that
publishes editorial reviews and opinionated comments relating
to auction items and the state of the market for certain categories
of goods in the Existing Group's trade magazine, the Antiques
Trade Gazette. This editorial content, whilst controlled by
the Existing Group, could have a negative effect on consumer
sentiment relating to the A&A market and/or any of the Marketplaces,
or could be perceived unfavourably by auctioneers and/or bidders,
which could have a material adverse effect on the Existing
Group's or (following Completion) the Combined Group's reputation.
Any negative publicity associated with the Existing Group,
the LiveAuctioneers Group and/or (following Completion) the
Combined Group or its Marketplaces, or any deterioration in
the strength of the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
or their Marketplaces' brands or reputation could adversely
affect the volume of traffic through the Marketplaces and
therefore have a material adverse effect on the Existing Group's,
the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's business, financial condition, results
of operations and prospects.
B.12 The Existing Group, the LiveAuctioneers Group and/or
(following Completion) the Combined Group may be unable to
adequately promote its services through digital marketing,
social media, e-mails or other marketing efforts and would
be adversely affected by any adverse fluctuations in search
engine search result rankings.
Each of the Existing Group and the LiveAuctioneers Group relies
and (subject to Completion) the Combined Group will rely on
its ability to attract auctioneers and bidders to the Marketplaces
through internet search results on search platforms such as
Google, as well as advertising through digital marketing and
social media (including via Facebook, Twitter and Instagram).
Each of the Existing Group and the LiveAuctioneers Group views
these as an important means of promoting its services and
reaching auctioneers and bidders. The Existing Group and the
LiveAuctioneers Group also provide, and (following Completion)
the Combined Group will provide, e-mails and "push" communications
to existing bidders and other visitors informing them of what
is currently, or will be, available for purchase via its Marketplaces.
The Directors believe these platforms help (in the case of
the Existing Group and the LiveAuctioneers Group) and will
help ((subject to Completion) in the case of the Combined
Group) generate a substantial portion of its revenue and form
an important part of the customer experience.
An important factor in attracting bidders to the Marketplaces
is how prominently listings are displayed in response to search
queries for key search terms. Search engines typically rely
on algorithms to determine which websites are included in
search results and at what ranking. The Existing Group's,
the LiveAuctioneers Group's and (following Completion) the
Combined Group's domain name ranking may change from time
to time, due to factors that may be outside the control of
the Existing Group, the LiveAuctioneers Group and/or (following
Completion) the Combined Group, such as a change in a search
engine's ranking algorithm or methodology. Historically, the
Existing Group has been able to maintain a stable, targeted
and efficient level of marketing spend due to its high ranking
in search results. If the Marketplaces are ranked lower or
fail to appear in search results for any reason, visits to
the Marketplaces could decline, and the Existing Group, the
LiveAuctioneers Group and/or (following Completion) the Combined
Group may not be able to replace this traffic. The Marketplaces
have experienced fluctuations in search result rankings in
the past and the Directors anticipate that such fluctuations
will occur from time to time in the future. Adverse changes
in search engine rankings may have an adverse effect on the
Existing Group's, the LiveAuctioneers Group's and/or (following
Completion) the Combined Group's business, financial condition,
results of operations and prospects. Additionally, to further
grow online presence, the Existing Group is currently executing
a revised and enhanced SEO strategy but there is no guarantee
that it will be effective or, if it is initially effective,
that it will remain effective.
If the Existing Group's, the LiveAuctioneers Group's and/or
(following Completion) the Combined Group's domain name authority
decreases, or the price of marketing the Marketplaces via
search engines or on social media platforms increases, the
Existing Group's, the LiveAuctioneers Group's and/or (following
Completion) the Combined Group's marketing spend may need
to be increased, or a larger portion may need to be allocated
to search engine marketing which will increase the Existing
Group's, the LiveAuctioneers Group's and/or the Combined Group's
direct marketing costs.
The Existing Group's, the LiveAuctioneers Group's and/or (subject
to Completion) the Combined Group's growth strategy contemplates,
among other things, an increase in digital marketing activities,
social media engagement and customer support (including enhanced
CRM) across the online channel. If any of the Existing Group,
the LiveAuctioneers Group and/or (following Completion) the
Combined Group is unable to successfully implement these initiatives,
its business and results of operations could be materially
adversely affected.
Each of the Existing Group and the LiveAuctioneers Group is
also exposed, and (subject to Completion) the Combined Group
will also be exposed, to the risk that search engines, e-mail,
current major social media platforms or other messaging services
are replaced with more popular services to which the Existing
Group, the LiveAuctioneers Group and/or (following Completion)
the Combined Group is slow to adapt. Additionally, changes
in how webmail applications organise and prioritise e-mail
may reduce the number of subscribers opening the Existing
Group's, the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's e-mails. Actions by third parties to
block, impose restrictions on, or charge for, the delivery
of e-mails, social media posts or other messages could also
adversely affect the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
business.
Each of the Existing Group and the LiveAuctioneers Group uses
the placement and use of "cookies" (text files stored on an
auctioneer's or user's web browser or device) to support tailored
marketing to consumers. The Existing Group's, the LiveAuctioneers
Group's and (following Completion) the Combined Group's marketing
activities, including its use of cookies, are (or, in the
case of the Combined Group, will be) subject to data protection
regulation as further detailed in the risk factor entitled
"The Existing Group, the LiveAuctioneers Group and/or (following
Completion) the Combined Group's may incur additional costs
in implementing and complying with new regulations, or any
changes to existing regulations, such as the GDPR".
In addition, any disruption or downtime experienced by search
engines, e-mail providers or social networking services, or
a decline in the use or engagement with such platforms and
services by customers and potential customers, could have
a material adverse effect on the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
business, financial condition and results of operations.
B.13 The Existing Group, the LiveAuctioneers Group and/or
(following Completion) the Combined Group could incur liability
by reason of the actions of auctioneers on its Marketplaces,
the Platform or the LiveAuctioneers Group's platform.
The law relating to the liability of online services companies
for information carried on, hosted by or disseminated through
websites operated by such companies is currently unclear,
and there is a risk that any of the Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group could
be held liable for information posted on its websites by third
parties, such as auctioneers. Although none of the Existing
Group nor the LiveAuctioneers Group creates, nor (following
Completion) will the Combined Group create, the listings or
take possession of the items offered for auction on its Marketplaces,
the Platform or the LiveAuctioneers Group's platform, since
it does not verify the authenticity of the items listed it
may be subject to allegations that items listed are counterfeit,
defective or illegal. Although each of the Existing Group
and the LiveAuctioneers Group has processes in place in order
to reduce the risk of fraudulent items being sold via its
Marketplaces, the Platform or the LiveAuctioneers Group platform,
there can be no assurance that such policies and procedures
will be effective in preventing them from materialising in
the future.
In particular, a number of auctioneers using the Proxibid
Marketplace and/or the LiveAuctioneers Marketplace in the
United States sell firearms, which is subject to both US federal
and state law and regulation. Whilst the Existing Group and
the LiveAuctioneers Group have systems in place to confirm
that any auctioneer which indicates at sign-up it is intending
to sell firearms via the Proxibid Marketplace and/or the LiveAuctioneers
Marketplace has the required US Federal Firearms Licence,
neither the Existing Group nor the LiveAuctioneers Group then
verifies or monitors that any subsequent sales by such auctioneers
are compliant with the terms of that licence, and the Existing
Group and the LiveAuctioneers Group rely on the relevant auctioneer
to ensure compliance with this as well as other federal and
state laws and regulations. Additionally, pursuant to the
International Traffic in Arms Regulations ("ITAR"), the Existing
Group, the LiveAuctioneers Group and/or (following Completion)
the Combined Group could incur liability in relation to any
sale of military-grade weaponry on the Marketplaces, the Platform
and/or the LiveAuctioneers Group's platform. ITAR restricts
not only the sale of relevant items for export but also the
brokering of such a sale. The definition of brokering under
ITAR is broad and, although the Existing Group has been advised
that it is unlikely to be deemed to be brokering the sale
by an auctioneer of an item, there can be no assurance that
relevant regulators will not take a contrary view. The Existing
Group has banned the sale of items restricted under ITAR with
effect from 4 January 2021. The most likely impact of an auction
being found to be non-compliant with ITAR would be for the
US Department of Defense Trade Controls to require the auction
to be closed or for an ITAR-registered broker to be present
at the auction but in extreme cases the Existing Group, the
LiveAuctioneers Group and/or (following Completion) the Combined
Group could face criminal penalties of not more than a $1,000,000
fine and/or imprisonment for culpable individuals of not more
than 20 years and civil penalties of a fine of up to approximately
$1,200,000, if the Existing Group, the LiveAuctioneers Group
or (following Completion) the Combined Group were found to
have committed a wilful violation of ITAR, including providing
wilful untrue statements regarding material facts and making
wilful omission of material facts.
Some auctioneers, particularly in Germany and the UK, may
also sell offensive or "hate" items, which are subject to
additional local restrictions with which the Existing Group,
the LiveAuctioneers Group and (following Completion) the Combined
Group must comply-for example Paragraph 86 of the German Criminal
Code which outlaws the use of symbols of unconstitutional
organisations including the Nazi regime. Although the law
is currently unclear as to whether the Existing Group, the
LiveAuctioneers Group and/or (following Completion) the Combined
Group or the relevant auctioneer would be liable for non-compliance
with this legislation, if the Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group were
to be found liable, it could be subject to a fine, the quantum
of which is subject to the discretion of the relevant German
court but could, in an extreme scenario, be in the region
of approximately EUR10 million. In order to comply with this
legislation, with limited exceptions, the Existing Group and
the LiveAuctioneers Group prohibit auctioneers from listing
offensive items on any of its Marketplaces. This includes
items that promote or glorify hatred or violence toward people
on the basis of race, ethnicity, religion, gender, identity,
disability or sexual orientation, or that promote organisations
with such views. However, the Existing Group and the LiveAuctioneers
Group recognise that there may be legitimate reasons for preserving
antique items that represent historical injustices or antiquated
social norms. The Existing Group's policies relating to "hate"
items requires auctioneers to include information about historical
context when such items are listed and expressly forbids the
sale of all such items except in accordance with those requirements
and, in particular, expressly forbids the sale of all items
promoting or linked to white supremacist groups including
the Ku Klux Klan; Nazi items unless established as legitimate
historical artefacts produced before 1945; items that support
or imply support of terrorist groups; items that convey racist,
homophobic or otherwise offensive portrayals of their subjects;
and items of an explicit or offensive sexual nature. Additionally,
the Existing Group's terms and conditions with its auctioneers
prohibit the sale of any lot which is 'harmful' or 'questionable',
which includes (amongst other things) any items which may
cause the auctioneer or the Existing Group to suffer civil
or criminal liability of any kind. The Existing Group employs
a compliance team to monitor compliance with the above restrictions
and remove listings if issues are identified. Similarly, the
LiveAuctioneers Group's terms and conditions with its auctioneers
prohibit the sale of any lot which would violate any applicable
laws or regulations or which would subject the LiveAuctioneers
Group or its suppliers to potential harm, damages or liability.
However, there can be no assurance the Existing Group, the
LiveAuctioneers Group or (following Completion) the Combined
Group will always be effective in identifying listings in
breach of its policies.
Particularly given recent events in the United States, as
well as the change in US administration and in control of
the US Senate, laws and regulations in the United States governing
the sale of firearms could change, as could laws and regulations
governing liability of online service companies for information
carried on, hosted by or disseminated through websites operated
by such companies. See also the risk factor entitled "The
Existing Group and the LiveAuctioneers Group are, and (following
Completion) the Combined Group will be, subject to a range
of laws and regulations of general applicability, as well
as evolving laws and regulations affecting the use of the
internet and e-commerce". Future restrictions on online sales
of firearms could reduce or eliminate the Existing Group's,
the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's revenue associated with auctions of firearms,
and changes more broadly to the liability regime that would
apply to the Existing Group, the LiveAuctioneers Group and/or
(following Completion) the Combined Group could have a material
adverse effect on its business, financial condition, results
of operations and prospects. Changes in consumer sentiment
with respect to the availability for bidding of firearms or
items associated with extremist groups could also lead to
reputational damage for the Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group were
such items to remain available for auction on Marketplaces,
the Platform or the LiveAuctioneers Group platform, and would
also require greater compliance resources to be dedicated
to monitoring of listings. Similarly, firearms acquired through
a Marketplace that are used in the commission of crimes or
terrorist incidents could also give rise to reputational damage,
as detailed in the risk factor entitled "Each of the Existing
Group and the LiveAuctioneers Group relies, and (following
Completion) the Combined Group will rely, on its brand and
reputation, which could be impaired".
Additionally, the Existing Group and the LiveAuctioneers Group
allow, and (following Completion) the Combined Group will
allow, third-party auctioneers to advertise their products
and auctions, including links to their websites, on the Existing
Group's, the LiveAuctioneers Group's or (following Completion)
the Combined Group's websites (respectively). These third-party
websites are outside of the Existing Group's, the LiveAuctioneers
Group's and the Combined Group's control and may contain information
or content which may be subject to copyright or trademark
infringement claims or other claims (based on the nature and
content of the information disseminated) under the laws of
the UK, US or other relevant jurisdictions. While the Existing
Group and the LiveAuctioneers Group review, and (following
Completion) the Combined Group will review, advertisements
before they are placed on the Existing Group's, the LiveAuctioneers
Group's or (following Completion) the Combined Group's websites
(respectively) in order to mitigate this risk, it does not
audit the website of each third-party seeking to advertise
on its websites. Further, while the Existing Group's and the
LiveAuctioneers Group's contracts with auctioneers confirm
that the Existing Group acts only as a conduit of products
on its Marketplaces and its Platform and that the LiveAuctioneers
Group acts only as a conduit of products on the LiveAuctioneers
Marketplace and its platform, and that it is the responsibility
of the relevant auctioneer to ensure that all sales are compliant
with applicable law, the laws in this area are evolving and
could evolve in such as a way as to create greater liability
for the Existing Group, the LiveAuctioneers Group and/or (following
Completion) the Combined Group.
B.14 The Marketplaces', the Platform's and LiveAuctioneers
Group's platform's systems and processes may be subject to
undetected errors, defects or bugs which could adversely affect
the Existing Group's, the LiveAuctioneers Group's and/or (following
Completion) the Combined Group's business.
Each of the Existing Group's, the LiveAuctioneers Group's
and (following Completion) the Combined Group's business is
dependent on the suitability, reliability, durability and
performance of its Marketplaces', the Platform's and the LiveAuctioneers
Group's platform's systems and processes, including third-party
components and systems that support its business. The software
underlying the Marketplaces, the Platform and the LiveAuctioneers
Group's platform is complex and may contain undetected errors,
defects or bugs. In the past, the Existing Group and the LiveAuctioneers
Group have experienced instances where defects have been released
onto the Platform despite its engineering and quality assurance
processes. Although these defects have usually been discovered
and resolved quickly and there has been no material adverse
effect on the Existing Group's or the LiveAuctioneers Group's
business as a result of any such instances to date, the Existing
Group, the LiveAuctioneers Group or (following Completion)
the Combined Group may discover significant errors, defects
or bugs in the future that it may not be able to correct in
a timely, cost-effective manner, or at all. In addition, the
Existing Group's and LiveAuctioneers Group's services are,
and (subject to Completion) the Combined Group's services
will be, integrated with products and systems developed by
third parties. Such third-party software programs may contain
undetected errors, defects or bugs when they are first introduced
or when subsequent updates are released.
Additionally, the Existing Group and the LiveAuctioneers Group
provide white label auction products (via GAP White Label
and Auction Mobility in the case of the Existing Group and
via its own white label offering in the case of the LiveAuctioneers
Group) which auctioneers can use to run auctions via their
own websites, and the back-office systems (via GAP Office
and Wavebid in the case of the Existing Group and via its
payments processing service in the case of the LiveAuctioneers
Group) which auctioneers can use to support the administrative
aspects of running an auction house. If the software supplied
by the Existing Group, the LiveAuctioneers Group or (following
Completion) the Combined Group is defective, including if
such software contains a virus or other forms of malware,
this software could cause loss or damage to an auctioneer
which may result in claims being brought against the Existing
Group, the LiveAuctioneers Group and/or the Combined Group.
If such a claim were successfully brought against the Existing
Group, the LiveAuctioneers Group or the Combined Group, its
insurance may not cover such claim fully or at all and its
reputation, business, results of operations, financial condition
and prospects may be materially adversely affected.
Errors, defects or bugs could be found in the Existing Group's
or the LiveAuctioneers Group's existing, or any of their or
(following Completion) the Combined Group's future, services
or third-party products upon which its services are dependent.
This could cause, among other things, delays in, or loss of
market acceptance of, its services, loss of key internal systems,
diversion of resources and injury to its reputation, which
could have a material adverse effect on the Existing Group's,
the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's business, financial condition, results
of operations and prospects.
Any security intrusion, virus or other breach may also compromise
information held by the Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group (see
further the risk factor below entitled "Security breaches
and other disruptions to, or failures in, the Group's IT infrastructure
and networks, or those of third parties, could disrupt the
Group's business, comprise sensitive and confidential information,
affect the Group's reputation, increase its operational costs,
and cause losses.").
B.15 Disruptions in third-party systems and processes that
the Existing Group and the LiveAuctioneers Group rely on,
and/or that (following Completion) the Combined Group will
rely on, could result in lower sales and increased costs.
The Marketplaces, the Platform and the LiveAuctioneers Group's
platform are designed to work in conjunction with hardware,
software and data hosted and maintained by third parties,
including Microsoft and Amazon Web Services. Any significant
disruption in the supply or maintenance of such third-party
hardware, software and data could impair the Existing Group's,
the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's ability to offer its services until the
functionality offered by the third-party providers is rectified
or replaced. In addition, the Existing Group and the LiveAuctioneers
Group utilise, and (subject to Completion) the Combined Group
will utilise, services provided by third parties to enhance
its current service offering and respond to emerging industry
standards and other technological changes in a timely and
cost-effective manner.
The Existing Group and the LiveAuctioneers Group also rely,
and (subject to Completion) the Combined Group will also rely,
on third parties to provide payment processing services, as
the Marketplaces, the Platform and the LiveAuctioneers Group's
platform are integrated with such processing systems, which
are offered to auctioneers if they do not wish to arrange
payment themselves. If these companies become unwilling or
unable to provide these payment services, if such services
are disrupted, or if the cost of providing such services increases,
the Existing Group's, the LiveAuctioneers Group's and/or (following
Completion) the Combined Group's operations may be disrupted
and the Existing Group, the LiveAuctioneers Group and/or (following
Completion) the Combined Group may lose revenue from referral
and transaction fees that it generates from such services.
Any significant failure of payment processing systems, including
third-party systems such as those maintained by banks, could
have a material adverse effect on the Existing Group's, the
LiveAuctioneers Group's and/or (following Completion) the
Combined Group's revenue and undermine confidence in the Marketplaces,
the Platform and/or the LiveAuctioneers Group's platform.
The Existing Group, the LiveAuctioneers Group and/or (following
Completion) the Combined Group may be unable to source alternative
providers of such services in a timely manner, or at all.
Any failure by the Existing Group, the LiveAuctioneers Group
and/or (following Completion) the Combined Group or its third-party
service providers to maintain and improve the relevant technology
systems and infrastructure may result in system interruptions.
Like many technology-based businesses, each of the Existing
Group and the LiveAuctioneers Group and its respective third-party
service suppliers have experienced, and may experience, material
system interruptions, which could be caused by any number
of factors, including fires, floods, power loss, telecommunications
failures, physical or electronic break-ins, earthquakes, acts
of war or terrorism or other events or disruptions. Additionally,
in the event of such interruptions the Existing Group, the
LiveAuctioneers Group and/or (following Completion) the Combined
Group may need, for commercial reasons, to compensate its
auctioneers for income lost as a result of being unable to
host auctions on the Marketplaces, the Platform and/or the
LiveAuctioneers Group's platform during those interruptions,
or may otherwise result in auctioneers reducing their use
of the Marketplaces, Platform and/or the LiveAuctioneers Group's
platform. The Existing Group, the LiveAuctioneers Group and/or
(following Completion) the Combined Group may fail to replace
the functionality or data provided by the third-party vendors
that is presently incorporated into the Existing Group's and/or
LiveAuctioneers Group's. or (following Completion) is at a
point in time incorporated into the Combined Group's, technology
infrastructure in the event that the hardware, software or
data provided by the third parties becomes obsolete or incompatible
with its services, or is not adequately maintained or updated.
If any of the factors noted above were to occur, it could
impair the Existing Group's, the LiveAuctioneers Group's and/or
(following Completion) the Combined Group's ability to process
bidder traffic and transactions which, in turn, might materially
adversely affect its business, financial condition, results
of operations and prospects.
B.16 Security breaches and other disruptions to, or failures
in, the Existing Group's, the LiveAuctioneers Group's and/or
(following Completion) the Combined Group's IT infrastructure
and networks, or those of third parties, could disrupt its
business, compromise sensitive and confidential information,
affect its reputation, increase its operational costs and
cause losses.
The Existing Group and the LiveAuctioneers Group rely, and
(subject to Completion) the Combined Group will rely, on information
technology networks and systems, some of which are managed
by third parties, to process, encrypt, transmit and store
electronic information and sensitive or confidential data,
and to manage or support a variety of business processes and
activities, including user registration and payments. The
Existing Group and the LiveAuctioneers Group also collect
and store, and (subject to Completion) the Combined Group
will collect and store, sensitive data in information technology
networks (including third-party servers or applications by
means of "cloud computing"), including intellectual property,
proprietary business information (including proprietary business
information on the Existing Group's, the LiveAuctioneers Group's
and/or (following Completion) the Combined Group's bidders
and auctioneers), personally identifiable information of the
Existing Group's, the LiveAuctioneers Group's and/or (following
Completion) the Combined Group's employees, bidders and auctioneers
and other confidential information.
The Existing Group's and the LiveAuctioneers Group's systems,
data (wherever stored), software or networks, and those of
third parties, are, and (subject to Completion) the Combined
Group's will be, vulnerable to security breaches, including
unauthorised access from within the Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group or
by third parties, computer viruses or other malicious code
and other cyber threats that could have an adverse security
impact. The Existing Group, the LiveAuctioneers Group, (following
Completion) the Combined Group and third parties may be unable
to anticipate evolving technologies used to effect security
breaches or prevent attacks by hackers or breaches due to
employee error or malfeasance, in a timely manner, or at all.
Cyber-attacks in particular have become far more prevalent
in the past few years, leading potentially to the manipulation
and/or theft of confidential and proprietary business and
personal information, or loss of access to, or destruction
of, data on the Existing Group's, the LiveAuctioneers Group's
and/or (following Completion) the Combined Group's systems,
as well as interruptions or malfunctions in its or third parties'
operations.
The Existing Group and the LiveAuctioneers Group are regularly
subject to attempted attacks on its information technology
networks. The LiveAuctioneers Group suffered a data breach
attack on its network in June 2020, as further detailed in
the risk factor entitled "The LiveAuctioneers Group may suffer
losses as a result of a data breach attack in June 2020".
Although to date no such attack on the Existing Group has
been successful, if one were to be successful, or if a further
attack on the LiveAuctioneers Group were succesful, the Existing
Group, the LiveAuctioneers Group and/or (following Completion)
the Combined Group, auctioneers, bidders, vendor partners,
employees or other individuals are at risk of suffering materially
from such attacks and breaches, including as a result of public
disclosure, loss or misuse of confidential, proprietary or
personal information. As a result, the Existing Group, the
LiveAuctioneers Group and/or (following Completion) the Combined
Group could be exposed to related litigation, liability and/or
regulatory intervention, fines and sanctions (particularly
as a result of the increasing regulatory focus on promoting
the protection of customer/client information and the integrity
of information technology systems) that are either not insured
against or not fully covered through the Existing Group's,
the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's insurance policies. The Existing Group
and the LiveAuctioneers Group are, and (subject to Completion)
the Combined Group will be, also subject to risks related
to compliance with the GDPR, as detailed in the risk factor
entitled "The Existing Group, the LiveAuctioneers Group and/or
(subject to Completion) the Combined Group may incur additional
costs in implementing and complying with new regulations,
or any changes to existing regulations, such as the GDPR".
The Existing Group, the LiveAuctioneers Group and/or (following
Completion) the Combined Group may also experience losses
in auctioneers, bidders or vendor partners, as well as reputational
harm, competitive disadvantage and sometimes physical damage.
Any such attacks and breaches could also adversely affect
the Existing Group's, the LiveAuctioneers Group's and/or (following
Completion) the Combined Group's ability to process transactions,
which could result in the Existing Group, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group incurring
significant losses of revenue, as well as significant additional
costs to modify its protective measures or to investigate
and remediate vulnerabilities.
B.17 The Existing Group and the LiveAuctioneers Group use,
and (subject to Completion) the Combined Group will use, open
source software, which may pose particular risks to its proprietary
software and services including additional security risks
and claims relating to breach of licence.
Each of the Existing Group and the LiveAuctioneers Group use,
and (subject to Completion) the Combined Group will use, open
source software in the Marketplaces, the Platform and/or the
LiveAuctioneers Group's platform and expects to continue to
do so in the future. Open source licence terms may be ambiguous,
and many of the risks associated with open source software
cannot be eliminated. Use of certain open source software
can lead to greater risks than use of third-party commercial
software, as open source licensors generally do not provide
warranties or controls on the origin of their software. Whilst
each of the Existing Group and the LiveAuctioneers Group considers
that it complies with the terms of the open source licences
and it takes steps to monitor such compliance, the Existing
Group, the LiveAuctioneers Group and/or (following Completion)
the Combined Group could potentially face claims from third
parties claiming ownership of, or demanding release of, the
open source software or derivative works developed using such
software (which could include its proprietary source code),
or otherwise seeking to enforce the terms of the applicable
open source licence. These claims could result in litigation
and could require the Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group to
enter into or purchase a costly licence or stop offering the
implicated services unless and until the Existing Group, the
LiveAuctioneers Group and/or the Combined Group can re-engineer
them to avoid infringement. This re-engineering process could
require significant additional research and development resources.
Additionally, use of certain open source software can lead
to greater risks than use of third-party commercial software,
as open source licensors generally do not provide warranties,
indemnities or other contractual protections with respect
to the functionality of the open source software. Use of open
source software by the Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group may
also present additional security risks because the source
code for such software is publicly available, which may make
it easier for third parties to analyse it and determine how
to breach systems that rely on open source software.
Any of these risks could be difficult to eliminate or manage,
and, if not addressed successfully, could have a material
adverse effect on the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
business, financial condition, results of operations and prospects.
B.18 Failure to adequately protect, maintain or enforce the
Existing Group's, the LiveAuctioneers Group's and/or (following
Completion) the Combined Group's intellectual property rights
could substantially harm its business and results of operations.
The Existing Group and the LiveAuctioneers Group rely, and
(subject to Completion) the Combined Group will rely, on a
combination of trademark, copyright, confidential information,
trade secrets and contractual restrictions to protect its
intellectual property. The Existing Group owns a large number
of domain names relating to its business and considers its
key domain names to be the-saleroom.com, proxibid.com, lot-tissimo.com,
i-bidder.com, BidSpotter.com, BidSpotter.co.uk and lofty.com
and it takes steps to maintain these registrations by activating
auto-renewal of these domain names. The LiveAuctioneers Group
also owns a large number of domain names relating to its business
and considers its key domain names to be LiveAuctioneers.com,
auctioncentralnews.com and Jasper52.com. The Existing Group
also owns 36 registered trademarks in the territories of the
EU, UK and US relating to the Marketplaces and the ATG brand.
The LiveAuctioneers Group owns two registered trademarks in
the territories of the EU and US relating to the LiveAuctioneers
brand. However, there is no guarantee that any or all of these
measures will provide complete protection to the Existing
Group, the LiveAuctioneers Group or (following Completion)
the Combined Group. In particular, the domain names listed
above are of significant value to the Existing Group's and
the LiveAuctioneers Group's operations, and (following Completion)
will be of significant value to the Combined Group's operations,
and any loss of rights in or damage to the value of those
intellectual property would adversely affect the Existing
Group's, the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's business.
Neither the Existing Group nor the LiveAuctioneers Group has
comprehensive registered protection for all of its intellectual
property in all jurisdictions of the world. For example, the
Existing Group does not hold registered trademarks in respect
of the trade names "The Saleroom", "GAP Office" or "Antiques
Trade Gazette" and the LiveAuctioneers Group does not hold
registered trademarks in respect of the trade name "Jasper52".
Additionally, the Existing Group does not have exclusive rights
to its trade names in every country, and others may use the
same or similar trade names in other, non-competing industries.
In Germany, the Existing Group has entered into a co-existence
agreement with a third-party in relation to use of the name
"ATG". The contemporaneous usage by third parties of the "ATG"
trade name, or any of the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
other trade names, could result in confusion among consumers
between the Existing Group's, the LiveAuctioneers Group's
and/or (subject to Completion) the Combined Group's brand
and other brands, which may undermine the its reputation and
brand image and reduce the value of its trade names. Each
of the Existing Group, the LiveAuctioneers Group and (following
Completion) the Combined Group also faces the risk that it
is unable to use unregistered intellectual property or that
it becomes subject to ownership or infringement claims brought
by owners of other rights, including registered trademarks,
which are similar to the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
intellectual property.
Litigation or similar proceedings may be necessary in the
future, as they have on occasion been in the past (in respect
of the Existing Group), to protect, register and enforce the
Existing Group's, the LiveAuctioneers Group's and/or (following
Completion) the Combined Group's intellectual property rights,
to protect its trade secrets and domain names and determine
the validity and scope of the proprietary rights of others.
Any litigation or other adverse proceedings could result in
substantial costs and diversion of resources and could have
a material adverse effect on the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
business, financial condition, results of operations and prospects.
Monitoring the unauthorised use of each of the Existing Group's,
the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's intellectual property rights is difficult
and any measures it takes to protect its intellectual property
rights may prove inadequate to prevent misappropriation of
its intellectual property, which may result in:
* the Existing Group's, the LiveAuctioneers Group's
and/or (following Completion) the Combined Group's
trademarks becoming generic and losing the protection
of intellectual property laws;
* substantial costs and diversion of resources; and/or
* counterclaims or other claims against the Existing
Group, the LiveAuctioneers Group and/or (following
Completion) the Combined Group,
and could significantly harm its results of operations. Changes
in law, rule, or regulation, or the interpretation thereof,
particularly intellectual property laws, may affect the Existing
Group's, the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's ability to protect, register or enforce
its intellectual property rights. Domain names generally are
regulated by internet regulatory bodies, and the regulation
of domain names is subject to change. Regulatory bodies have
established and may continue to establish top-level domains,
appoint additional domain name registrars or modify the requirements
for holding domain names. The Existing Group and/or, the LiveAuctioneers
Group may not be able to, or it may no longer be cost effective
to, maintain all domain names which are currently owned or
maintained by either of them. The loss of use of a domain
name may result in the incurring of additional expenses, including
requiring the development of new branding. This could have
a material adverse effect on the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
business, financial condition, results of operations and prospects.
B.19 The Existing Group and/or (following Completion) the
Combined Group may have difficulty finding suitable acquisition
targets.
Selective acquisitions and other investments play an important
part in the Existing Group's growth strategy, and, from time
to time, the Existing Group, or (following Completion) the
Combined Group, may evaluate potential strategic acquisition
or investment opportunities. The Existing Group or (following
Completion) the Combined Group may not be able to identify
acquisition or investment opportunities that meet its strategic
objectives, or, to the extent such opportunities are identified,
may not be able to negotiate terms with respect to the acquisition
or investment that are acceptable to it or on terms that are
commercially favourable including as a result of competition
from other companies in relation to such opportunities. The
Existing Group and/or (following Completion) the Combined
Group may incur substantial expenses and devote significant
management time and resources in seeking to complete acquisitions
which may not come to fruition.
In addition, the Existing Group's or (following Completion)
the Combined Group's cash generation from its trading activities
may be insufficient to finance the pursuit or realisation
of acquisitions. In this instance, the Existing Group or (following
Completion) the Combined Group would need to access external
sources of finance in order to execute its growth strategy,
increasing its leverage. There can be no assurance given that
financing would be available to the Existing Group or (following
Completion) the Combined Group in order for it to pursue acquisition
opportunities on acceptable terms or at all. Limitations on
the Existing Group's or (following Completion) the Combined
Group's access to capital could arise from events or causes
beyond the Existing Group's or (following Completion) the
Combined Group's control, including a reduction in its creditworthiness,
decreases in the availability of credit or the tightening
of terms required by lenders. Any limitation on the Existing
Group's or (following Completion) the Combined Group's ability
to access capital could limit the Existing Group's and/or
(following Completion) the Combined Group's liquidity and
ability to pursue acquisitions opportunities which would limit
its growth and could have a material adverse effect on its
business and prospects.
B.20 Provisions of the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
current or future debt instruments could restrict its ability
to pursue its business strategies.
Each of the Existing Group and the LiveAuctioneers Group utilise
debt as part of its finance strategy. The Existing Group's,
the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's level of indebtedness may increase in
the future, including as a result of undertaking acquisitions
and investments. In particular, the Existing Group's level
of indebtedness is expected to increase in connection with
the utilisation of the New Senior Term Facility in connection
with the payment of the Cash Consideration payable to the
Sellers in connection with the Acquisition, as detailed in
the risk factor entitled "Increased indebtedness of the Group
in connection with the New Senior Facilities Agreement and
the Acquisition may affect the Combined Group's flexibility
in the longer term."
Under the terms of the New Senior Facilities Agreement, the
Existing Senior Facilities Agreement and other of its debt
instruments (in respect of the Existing Group) and the LiveAuctioneers
Group's facilities agreement] (in respect of the LiveAuctioneers
Group), the Existing Group, the LiveAuctioneers Group and/or
(subject to Completion) the Combined Group must comply with
the terms of various covenants for so long as the relevant
agreements are outstanding. Such covenants include maximum
adjusted net leverage ratios and a minimum interest cover
ratio.
The provisions of the New Senior Facilities Agreement, the
Existing Senior Facilities Agreement, the LiveAuctioneers
Group's facilities agreement or the provisions of any of the
Existing Group's or the LiveAuctioneers Group's other debt
instruments or any debt instruments which the Existing Group,
the LiveAuctioneers Group and/or (subject to Completion) the
Combined Group may enter into in the future, may limit its
ability or the ability of any of its subsidiaries to, amongst
other things:
* pay dividends or make other distributions to
Shareholders;
* make acquisitions, investments, loans or advances;
* transfer or otherwise sell or dispose of assets;
* grant certain security and/or provide guarantees; and
* incur additional indebtedness.
Although the Existing Group does not anticipate a default
under the New Senior Facilities Agreement, the Existing Senior
Facilities Agreement, or any of its other debt instruments,
if the Existing Group, or (following Completion) the Combined
Group defaults under any of its debt instruments and such
event of default is not cured or waived, this could result
in an acceleration of indebtedness then outstanding under
the New Senior Facilities Agreement, the Existing Senior Facilities
Agreement, and/or the relevant debt instrument. Similarly,
although the LiveAuctioneers Group does not anticipate a default
under any of its other debt instruments, if the LiveAuctioneers
Group defaults under any of its debt instruments and such
event of default is not cured or waived, this could result
in an acceleration of indebtedness then outstanding under
the relevant debt instrument.
The Existing Group is repaying its existing debt facilities
using cash on its balance sheet and obtaining new financing
in connection with the New Senior Facilities Agreement. Whilst
it has no requirement or plans to further refinance its existing
debt instruments or obtain new financing in the medium term,
the Existing Group and/or (following Completion) the Combined
Group may seek to refinance its existing debt instruments
or to obtain new financing (for example, to fund its acquisition
strategy). Should the Existing Group and/or (following Completion)
the Combined Group seek to enter into debt instruments in
the future, whether in replacement of or in addition to its
existing debt instruments, it cannot be sure that additional
financing will be available to it on reasonable terms or at
all. In addition, the terms of future debt agreements could
include more restrictive covenants, which could further restrict
the Existing Group's, the LiveAuctioneers Group's and/or (following
Completion) the Combined Group business operations.
Interest rates under the Existing Senior Facilities Agreement
are based partly on US dollar and sterling LIBOR, the London
interbank offered rate, which is the basic rate of interest
used in lending between banks on the London interbank market
and is widely used as a reference for setting the interest
rate on loans globally. Sterling LIBOR will cease to be widely
available by the end of 2021 and US dollar libor by June 2023.
Interest rates under the New Senior Facilities Agreement are
based on US dollar LIBOR; (to the extent pound sterling drawings
are made on the revolving credit facility) will be based partly
on SONIA (the Sterling Overnight Index Average)l; and (to
the extent Euro drawings are made on the revolving credit
facility) partly on EURIBOR. The New Senior Facilities Agreement
includes provisions to enable the facilites to transition
from LIBOR and EURIBOR to be based on new risk-free rates
in due course.
Additionally, as a function of the interest rates under the
Existing and New Senior Facilities Agreement being partly
based on LIBOR or EURIBOR (the Euro interbank offered rate),
and under the New Senior Facilities Agreement being partly
based on SONIA, the Existing Group is exposed to risks resulting
from increases to interest rates, including as a result of
general economic factors, as further detailed in the risk
factor entitled "General economic factors, including a decline
in consumer spending, may adversely affect the Group's business,
financial performance and results of operations, including
impacting the willingness of bidders to purchase goods or
reducing the prices at which they are willing to make such
purchases." The Group's debt service obligations will reduce
cash available for other purposes.
B.21 Goodwill reported in the Existing Group's consolidated
statement of financial position may be written down as a result
of impairment testing, which may result in a loss in the Existing
Group's or (subject to Completion) the Combined Group's statement
of comprehensive income.
As of 31 March 2021, the goodwill recognised in the Existing
Group's consolidated statement of financial position amounted
to GBP140 million, of which 19 per cent. was attributable
to the Proxibid Acquisition and 14 per cent. to the Auction
Mobility Acquisition. The Company expects to recognise additional
goodwill in relation to the LiveAuctioneers Group following
Completion. In accordance with IFRS, goodwill is tested for
impairment at least annually. Impairment may result from,
among other things, a deterioration in the Existing Group's
(or a specific cash-generating unit's or, (subject to Completion)
the Combined Group's) performance, a decline in expected future
cash flows, adverse market conditions, adverse changes in
applicable laws and regulations and a variety of other factors.
For the preparation of its consolidated financial statements,
the Existing Group estimates the recoverable amount of cash-generating
units to which goodwill has been allocated. If the recoverable
amount of the cash-generating unit is less than the carrying
amount of the unit, the impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated to
the unit and then to the other assets of the unit pro-rata
on the basis of the carrying amount of each asset in the unit.
If the Exiting Group or (following Completion, the Combined
Group) has to recognise any impairment in its goodwill (including,
in particular, any deterioration in the goodwill attributable
to the Proxibid Acquisition, but also other acquisitions in
the future), it would have an adverse (non-cash) impact on
its consolidated statement of comprehensive income and consolidated
statement of financial position.
B.22 The Existing Group, the LiveAuctioneers Group and/or
(following Completion) the Combined Group could be adversely
affected if it is unable to grow its revenue in the medium
term through offering incremental ancillary services to auctioneers.
The Existing Group, the LiveAuctioneers Group and/or (following
Completion) the Combined Group may be unable to develop and
provide the additional ancillary services that the Directors
believe will enable the Existing Group, the LiveAuctioneers
Group and (subject to Completion) the Combined Group to earn
additional revenues from such incremental services in the
medium term or, to the extent the Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group does
launch such services, there may be insufficient demand in
the market to support ongoing provision of such services.
For example, the LiveAuctioneers Group has recently launched
a payments processing service and there is no guarantee of
demand from auctioneers for such a service. Further, auctioneers
may not value any additional services as anticipated by the
Existing Group, the LiveAuctioneers Group and/or (following
Completion) the Combined Group.
Additionally, it is expected that such services will be provided
by third-parties. Any significant failure by such third parties
could have a material adverse effect on the Existing Group's,
the LiveAuctioneers Group's and/or (following Completion)
the Combined Group's revenue and undermine confidence in the
Marketplaces, the Platform and/or the LiveAuctioneers Group's
platform, or in the Existing Group, the LiveAuctioneers Group
and/or (following Completion) the Combined Group as a facilitator
of access to such third parties. The Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group may
also be unable to source alternative providers of such services
in a timely manner, or at all.
If the Existing Group, the LiveAuctioneers Group and/or (following
Completion) the Combined Group is unable to increase its take
rate through the provision of incremental ancillary services
in the medium term, this could have a material adverse effect
on its growth strategy, financial condition, results of operations
and prospects.
B.23 Factors outside of the Existing Group's, the LiveAuctioneers
Group's or (following Completion) the Combined Group's control,
such as fires, floods and other natural catastrophic events,
any epidemics or pandemics, or man-made events such as terrorism,
protests or other harassment could have a material adverse
effect on its business, results of operations, financial condition
and prospects.
The Existing Group's, the LiveAuctioneers Group's and (following
Completion) the Combined Group's systems and operations are
vulnerable to damage or interruption from fires, floods, pandemics,
power losses, telecommunications failures, terrorist attacks,
civil unrest, human error, break-ins and similar events. The
Existing Group operates from three locations across the UK,
Germany and the United States, and the LiveAuctioneers Group
operates primarily from three locations across the United
States, meaning that there is some concentration risk. A significant
natural disaster, such as a fire or flood, could have a material
adverse effect on the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
business, financial condition, results of operations and prospects
if it affected any of the Existing Group's, the LiveAuctioneers
Group's or (following Completion) the Combined Group's offices
or cloud data centres, and the Group's insurance coverage
may be insufficient to compensate it for losses that may occur.
For example, in the spring of 2019, the Proxibid Group's revenue
was adversely affected by floods in the Midwest of the United
States, which contributed to lower-than-expected revenue growth
in FY19 compared to FY18. Mitigation efforts associated with
the COVID-19 pandemic affected access to physical premises,
and such restrictions could again be implemented. See further
the risk factor below entitled "The consequences of the COVID-19
pandemic, the associated ongoing mitigation restrictions,
or the lifting of those restrictions, including any related
economic deterioration, may have an adverse impact on auctioneers
and/or potential bidders, which could have a material adverse
effect on the Existing Group, the LiveAuctioneers Group and/or
(following Completion) the Combined Group".
In addition, acts of terrorism, which may be targeted at metropolitan
areas that have higher population density than rural areas,
could cause disruptions in its businesses or the economy as
a whole. The Existing Group's, the LiveAuctioneers Group's
and/or (following Completion) the Combined Group's servers
may also be vulnerable to computer viruses, break-ins, denial-of-service
attacks and similar disruptions from unauthorised tampering
with its computer systems, which could lead to interruptions,
delays, loss of critical data or the unauthorised disclosure
of confidential client data, as described in the risk factor
entitled "The LiveAuctioneers Group may suffer losses as a
result of a data breach attack in June 2020". The Existing
Group, the LiveAuctioneers Group and/or (following Completion)
the Combined Group may not have sufficient protection or recovery
plans in certain circumstances. As the Existing Group and
the LiveAuctioneers Group rely, and (following Completion)
the Combined Group will rely, heavily on its servers, computer
and communications systems and the internet to conduct its
business and provide high-quality customer service, such disruptions
could negatively impact its ability to run its business and
either directly or indirectly disrupt its business, which
could have a material adverse effect on the Existing Group's,
the LiveAuctioneers Group's and (following Completion) the
Combined Group's business, financial condition, results of
operations and prospects.
C. RISKS RELATING TO THE GENERAL ECONOMIC CLIMATE
C.1 The consequences of the COVID-19 pandemic, the associated
ongoing mitigation restrictions, or the lifting of those restrictions,
including any related economic deterioration, may have an
adverse impact on auctioneers and/or potential bidders, which
could have a material adverse effect on the Existing Group,
the LiveAuctioneers Group and (following Completion) the Combined
Group.
The COVID-19 pandemic has caused widespread disruption to
normal business activity across the globe, including the imposition
of restrictions on movement and social distancing measures
in the US, UK and elsewhere. In the US, gross domestic product
("GDP") contracted by 31.4 per cent. during the three month
period to 30 June 2020 and 3.5 per cent. in the calendar year
2020 and, in the UK, GDP contracted by 20.4 per cent. during
the three month period to 30 June 2020, 9.9 per cent. in the
calendar year 2020 and 1.5 per cent. during the three month
period to 31 March 2021, which was generally attributable
to the COVID-19 pandemic. The effects of the COVID-19 pandemic
have had an adverse impact on many of the Existing Group's
and the LiveAuctioneers Group's auctioneers, particularly
those trading on The Saleroom and LiveAuctioneers Marketplaces,
with many auctioneers experiencing significant operational
disruption (including in some cases temporary closure), severely
depressed financial performance and increased risk of insolvency
in the early part of the COVID-19 pandemic. The Saleroom and
LiveAuctioneers Marketplaces were particularly impacted by
this impact on auctioneers during March, April and May 2020.
Additionally, The Saleroom waived many of its monthly event
fees with auctioneers during this period to assist auctioneers
with dealing with the impact of the COVID-19 pandemic, waiving
fees of GBP460,000 in total between 1 April and 30 June 2020.
Similarly, the LiveAuctioneers Group reduced many of its event
fees with auctioneers and provided some temporary commission
discounts during this period, as well as helping auctioneers
to reschedule auctions to a later date, in order to assist
auctioneers with dealing with the impact of the COVID-19 pandemic.
Whilst the Directors believe this was the right step to take
in order to support auctioneers on The Saleroom, the LiveAuctioneers
Marketplace and the market more generally, this had an impact
on the Existing Group's and the LiveAuctioneers Group's profitability
for the period.
Revenue generated by the Existing Group's trade magazine,
the Antiques Trade Gazette, also fell during the second half
of FY20 (recovering slightly in H1 FY21 but remaining below
levels prior to the COVID-19 pandemic) as a result of a reduction
in advertising spend within the publication compared to the
first half of FY20 due to the impact of the COVID-19 pandemic.
The further tightening of restrictions in relation to the
COVID-19 pandemic in the first few months of 2021, in particular
in the UK, continued to have an impact on the Existing Group
and the LiveAuctioneers Group, auctioneers and bidders. Despite
the gradual easing of COVID-19-related restrictions in the
UK and US in the spring/summer of 2021, the Group has not
seen significant further changes in auctioneer or bidder behaviour
to date.
Whilst the direct impact of the COVID-19 pandemic on the Existing
Group and the LiveAuctioneers Group to date has been largely
accretive to revenue (notwithstanding the initial impact on
The Saleroom and LiveAuctioneers Marketplaces in particular),
due to the closure of many physical auction rooms as a result
of COVID-19 restrictions resulting in more auctions being
held online, this trend may not continue following the easing
of those restrictions and therefore the Existing Group's FY20
or H1 FY21 results and/or the LiveAuctioneers Group's FY20
results may not be indicative of the trend in future periods.
Moreover, new auctioneers and bidders acquired during the
COVID-19 pandemic may return to the use of physical auction
rooms following the easing of such restrictions. These risks
could have the effect of reducing the number of auctioneers
and/or bidders using the Marketplaces or Platform, or reducing
projected growth, either of which could have a material adverse
effect on the Existing Group's, the LiveAuctioneers Group's
and/or (following Completion) the Combined Group's business,
financial condition, results of operations and prospects.
C.2 The medium- and long-term impacts of Brexit are not yet
known.
The Existing Group's operations span a number of jurisdictions,
including the DACH Region in the EU and the UK. In time, Brexit
could lead to legal uncertainty and potentially divergent
national laws and regulations as the United Kingdom determines
which European Union laws to replace or replicate. For example,
the laws and regulations that impact the Existing Group's
and/or (subject to Completion) the Combined Group's UK and
EU operations, including privacy and data protection, legal
protection for platforms, workers' rights, and intellectual
property, may now be modified, as further detailed in the
risks entitled "The Existing Group and the LiveAuctioneers
Group are and, (following Completion) the Combined Group will
be, subject to a range of laws and regulations of general
applicability, as well as evolving laws and regulations affecting
the use of the internet and e-commerce" and "The Existing
Group, the LiveAuctioneers Group and/or (subject to Completion)
the Combined Group may incur additional costs in implementing
and complying with new regulations, or any changes to existing
regulations, such as the GDPR." No assurance can be given
as to the impact of any possible judicial decision or change
to English law or administrative practice, whether as a result
of the United Kingdom's departure from the European Union
or otherwise.
In addition, the macroeconomic effects on the Existing Group
and auctioneers and bidders on its Marketplaces and/or Platform
are unknown including, in particular, whether auctioneers
and/or bidders will reduce international cross-border sales
and/or purchases in whole or in part, and whether the UK and/or
EU may experience a recession owing, in whole or in part,
to the trade deal agreed between the UK and the EU not providing
sufficient incentive and/or certainty to businesses, although
the Existing Group has not experienced such effects to date.
Any changes in law or regulation as a result of Brexit that
have a negative impact on the Existing Group, or (following
Completion) the Combined Group, or increase the Existing Group's
costs, and/or (following Completion) the Combined Group's
costs, and any adverse economic conditions arising from the
effects of Brexit, could have a material adverse effect on
the Existing Group's and/or (following Completion) the Combined
Group's, business, financial condition, results of operations
and prospects.
C.3 General economic factors, including a decline in consumer
spending, may adversely affect the Existing Group's, the LiveAuctioneers
Group's and/or (following Completion) the Combined Group's
business, financial performance and results of operations,
including impacting the willingness of bidders to purchase
goods or reducing the prices at which they are willing to
make such purchases.
Whilst the Existing Group's business model is largely cycle-neutral,
the Existing Group's and the LiveAuctioneers Group's businesses
depends (and, following Completion, the Combined Group's business
will depend) on demand for the goods that auctioneers have
available for sale via the Marketplaces or Platform and the
price achieved upon the sale of these goods (which has a direct
impact on the Group's commissions). A number of product categories,
particularly in the A&A vertical, are discretionary purchases,
which are highly dependent on trends in consumer spending
and, consequently, are sensitive to a number of factors that
are beyond the Group's control. In particular, auctioneers
that focus on rarer, higher value, lower volume goods are
often more significantly affected by an economic downturn
due to decreases in discretionary spending (particularly in
the fine art market). Due to the LiveAuctioneers Marketplace's
focus on the A&A vertical, the Combined Group's exposure to
this risk will increase following Completion.
Adverse changes in factors affecting discretionary consumer
spending, including a prolonged slowdown in the UK, US, DACH
or global economy, higher interest rates, inflation, rates
and levels of taxation, levels of unemployment, consumer debt
levels, unsettled financial markets, tightening of credit
markets and other economic factors, whether as a result of
the COVID-19 pandemic, political uncertainty, or any other
reason, could result in a decrease in the supply of, and/or
demand for, goods sold through the Marketplaces or the Platform,
or in a decrease in prices achieved, any of which could lead
to a reduction in the Existing Group's and/or the LiveAuctioneers
Group's THV and consequently its GMV. Any decrease in the
volume or price of goods sold through the Marketplaces or
Platform may have a material adverse impact on the Existing
Group's, the LiveAuctioneers Group's and/or the Combined Group's
business, financial condition, results of operations and prospects
as a result of the reduction in its GMV, on which its commissions
are based.
Economic or industry downturns may also result in longer payment
cycles, increased collection costs and defaults in excess
of the Existing Group's, the LiveAuctioneers Group's and/or
the Combined Group's expectations, particularly due to auctioneer
insolvency. If any of the above circumstances were to arise,
it could have a material adverse effect on the Existing Group's,
the LiveAuctioneers Group's and/or the Combined Group's business,
financial condition, results of operations and prospects.
C.4 The Existing Group and (following Completion) the Combined
Group may be affected by changes in currency exchange rates.
The Existing Group's financial statements are reported in
pounds sterling, which is the Group's (and will (following
Completion) be the Combined Group's) presentation currency.
This exposes the Existing Group to currency translation risk
and (following Completion) the Group's exposure to this risk
will be increased, as detailed in the risk factor entitled
"The Combined Group will have greater exposure to foreign
exchange rate risk".
The Existing Group trades internationally and is exposed to
transactional foreign exchange rate risk on purchases and
sales, primarily in US dollars and, to a lesser extent, in
Euros, because it generates revenues and incurs costs in both
pounds sterling and a number of different foreign currencies.
Additionally, the Lot-tissimo Marketplace, which focuses on
the DACH region, generates its revenue in Euros. The revenue
generated by each of the Existing Group's and/or the Combined
Group's Marketplaces which operates primarily outside of the
UK (Proxibid, BidSpotter US, Lot-tissimo and (following Completion)
LiveAuctioneers) is therefore particularly at risk to any
adverse currency movements as a result of Brexit and its associated
impacts.
D. LEGAL AND REGULATORY RISK
D.1 The Existing Group and the LiveAuctioneers Group are,
and (subject to Completion) the Combined Group will be, subject
to regulatory oversight by competition authorities, including
the Competition and Markets Authority in the UK, which may
impact its acquisition activity.
The Existing Group's, the LiveAuctioneers Groups and (subject
to Completion) the Combined Group's activity, including in
particular its acquisition activity, is subject to the jurisdiction
of various competition bodies, including the Competition and
Markets Authority ("CMA") in the UK, the European Commission
in the EU and the Federal Trade Commission and the Department
of Justice in the US. Private parties may also pursue legal
action against the Group under competition laws in certain
circumstances.
On 22 November 2016, the CMA commenced an investigation (the
"Investigation") into the Existing Group, having determined
it had reasonable grounds for suspecting that the Existing
Group's practices and the agreements it had entered into with
auction house customers may constitute an abuse of a dominant
position under UK and EU competition law. The Investigation
focused on the following restrictions agreed or required by
the Existing Group in its dealings with certain of its auction
house customers (the "Relevant Conduct"): (i) offering discounts
or other incentives to customers in exchange for being appointed
as their exclusive supplier of live online bidding auction
platform services; (ii) requiring customers to offer "no less
favourable terms" to bidders on The Saleroom than those available
to bidders using a competing third-party live online bidding
auction platform or the customer's own live online bidding
auction platform (in particular as regards the bidder commission
charged by auction houses); and (iii) restricting auction
houses from advertising or promoting offers of competing online
auction platforms on landing pages that directly linked to
The Saleroom.
The CMA did not address any statement of objections to the
Existing Group containing formal allegations in respect of
the Existing Group's conduct as, prior to such a statement
of objections being issued, the CMA adopted a decision on
29 June 2017 to accept commitments offered by the Existing
Group (the "Commitments") in order to bring the CMA's Investigation
to a close by addressing the concerns raised by the CMA during
the Investigation (the "Decision"). In the Decision, the CMA
set out its preliminary view that the Relevant Conduct may
restrict competition by (in broad terms): (i) foreclosing
the market to competitors and new entrants and thereby restricting
the degree of competition on the market; and (ii) softening
price competition between competing platforms, reducing choice
for consumers and deterring rival live online bidding auction
platforms from competing with the Existing Group on price.
As part of the Commitments, the Existing Group agreed for
a period of five years commencing on 29 June 2017 not to engage
in any conduct or enter into any agreement or arrangement
that: (i) restricts any UK auction house from using or contracting
with a competing live online auction platform for the provision
of live online auction platform services; (ii) restricts any
UK auction house from charging fees, commissions or any other
forms of remuneration to online bidders using a competing
live online auction platform that are lower than those charged
to online bidders using a live online auction platform of
the Existing Group; or (iii) restricts the freedom of any
UK auction house to advertise or promote the services and
products of a competing live online auction platform (save
on any website or publication owned or operated by the Existing
Group).
As a result of the CMA accepting the Commitments offered by
the Existing Group, the CMA discontinued the Investigation.
As noted in the Commitments, the giving of the Commitments
by the Existing Group does not constitute an admission of
any wrongdoing by the Group, and the Existing Group has not
been the subject of a CMA infringement decision or statement
of objections in this regard. Accordingly, no financial penalty
or any other sanction was imposed on the Existing Group by
the CMA.
The Existing Group is required under the Commitments to inform
the CMA of any breach of the Commitments, and provide a statement
confirming compliance each year. The CMA has not identified
to the Existing Group any breach of the Commitments by the
Existing Group during the time period in which the Commitments
have been in place, nor is the Existing Group aware of any
circumstances that would constitute a breach of the Commitments.
If the CMA has reasonable grounds to suspect that the Existing
Group has failed to adhere to one or more terms of the Commitments,
then the CMA may take action in accordance with its statutory
powers, which may include continuing the Investigation.
In the UK and certain other jurisdictions, notifications of
acquisitions to the relevant competition authority are voluntary
and the Existing Group, or (following Completion) the Combined
Group, may decide not to notify, bearing the risk that the
competition authority may later open an investigation on its
own initiative following completion of an acquisition. The
competition authority may request that a notification be filed
and may require the Existing Group, or (following Completion)
the Combined Group to give certain undertakings, such as disposing
of parts of the Existing Group or (following Completion) the
Combined Group or parts or all of the acquired business, to
satisfy competition concerns.
In the US and certain other jurisdictions, the Existing Group
or (following Completion) the Combined Group may be required
to notify a potential acquisition before such acquisition
has completed, and to obtain clearance from the relevant competition
authority in that jurisdiction. It is possible that the Existing
Group or (following Completion) the Combined Group may not
obtain these clearances, or that they may not be obtainable
within a timescale acceptable to the Existing Group or (following
Completion) the Combined Group, or that they may only be obtained
subject to certain conditions or undertakings, such as the
disposal of parts of the Existing Group or (following Completion)
the Combined Group or parts or all of the target business,
which may not be acceptable to the Existing Group or (following
Completion) the Combined Group. In the event that any required
clearance is not obtained, such acquisition may not be completed.
D.2 The Existing Group and the LiveAuctioneers Group are,
and (subject to Completion) the Combined Group will be subject
to a range of laws and regulations of general applicability,
as well as evolving laws and regulations affecting the use
of the internet and e-commerce.
The Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group could be adversely affected
by changes in, or interpretations of, existing laws, rules
and regulations or the promulgation of new laws, rules and
regulations applicable to the internet and e-commerce, including
data protection and privacy, geo-blocking and other geographically
based restrictions, internet advertising and price display.
The Existing Group and the LiveAuctioneers Group are, and
(subject to Completion) the Combined Group could be, also
subject to, and could be affected by, existing and new laws
and regulations regulating or otherwise addressing consumer
protection, anti-corruption, antitrust and competition, economic
and trade sanctions, tax, data security and network and information
systems security. Law enforcement or regulatory authorities
could prevent or temporarily suspend the Existing Group, the
LiveAuctioneers Group and/or (subject to Completion) the Combined
Group from carrying on some or all of its activities or otherwise
penalise the Existing Group, the LiveAuctioneers Group and/or
(subject to Completion) the Combined Group if its practices
were found not to comply with applicable regulatory or any
binding interpretation of such requirements. Any such changes
or interpretations could decrease demand for the Existing
Group's, the LiveAuctioneers Group's and/or (subject to Completion)
the Combined Group's services, limit marketing methods and
capabilities, affect its margins, increase costs or subject
the Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group to additional liabilities.
There are, and will likely continue to be, an increasing number
of laws and regulations pertaining to the internet and e-commerce
that may impose liability for information retrieved from,
or transmitted over, the internet, display of certain taxes
and fees, online editorial and consumer-generated content,
user privacy, data security, network and information systems
security, behavioural targeting and online advertising, taxation,
liability for third-party e-commerce activities and the quality
of services. Furthermore, the growth and development of e-commerce
may prompt calls for more stringent consumer protection laws
and more aggressive enforcement efforts, which may impose
additional burdens on online businesses generally, including
the Group.
The Existing Group operates, and (subject to Completion) the
Combined Group will operate, marketplaces across the UK, US
and DACH region and, in its FY20, goods were sold via its
Marketplaces or the Platform to bidders in approximately 150
countries. The LiveAuctioneers Group operates a marketplace
across the US and, in its FY20, goods were sold via the LiveAuctioneers
Marketplace to bidders in approximately 70 countries. The
global nature of the the Existing Group's, the LiveAuctioneers
Group's and (subject to Completion) the Combined Group's business
therefore means it may be subject to numerous customs and
international trade laws and regulations in addition to the
laws and regulations of the UK, US (both federal and state)
and DACH region. The Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
failure to comply with local and international trade rules
and restrictions, could expose it to fines and penalties.
The Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group may be required to make
significant expenditure or modify its business practices to
comply with existing or future trade laws and regulations,
which may affect its business, results of operations, financial
condition and business prospects.
Although the Existing Group and the LiveAuctioneers Group
have, and (subject to Completion) the Combined Group will
have, policies and procedures in place designed to promote
compliance with laws and regulations, which are continually
reviewed as the Existing Group and/or the LiveAuctioneers
Group expands, and (subject to Completion) will be reviewed
as the Combined Group expands, its operations in existing
and new jurisdictions, the Existing Group's, the LiveAuctioneers
Group's and/or (subject to Completion) the Combined Group's
employees, partners or agents could take actions in contravention
of its policies and procedures, or violate applicable laws
or regulations. As regulations continue to develop and regulatory
oversight continues to focus on these areas, the Existing
Group's, the LiveAuctioneers Group's and/or (subject to Completion)
the Combined Group's policies and procedures may not comply
at all times with all applicable laws or regulations. In the
event the Existing Group's, the LiveAuctioneers Group's and/or
(subject to Completion) the Combined Group's controls should
fail or the Group is found to not be in compliance for other
reasons, the Existing Group, the LiveAuctioneers Group and/or
(subject to Completion) the Combined Group could be subject
to monetary damages, civil and criminal monetary penalties,
litigation and damage to its reputation and the value of its
brands. The promulgation of new laws, rules and regulations,
or the new interpretation of existing laws, rules and regulations,
in each case that restrict or otherwise unfavourably impact
the ability or manner in which the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group conducts
business, could require the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group to
change certain aspects of its business, operations and commercial
relationships to ensure compliance, which could decrease demand
for services, reduce revenue, increase costs or subject the
Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group to additional liabilities.
A failure to comply with current laws, rules and regulations
or changes to such laws, rules and regulations and other legal
uncertainties may adversely affect the Existing Group's, the
LiveAuctioneers Group's and/or (subject to Completion) the
Combined Group's business, results of operations, financial
condition and business prospects.
D.3 The Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group may incur additional costs
in implementing and complying with new regulations, or any
changes to existing regulations, such as the GDPR.
The introduction of new regulations, or changes to existing
regulations, could make it more expensive for the Existing
Group, the LiveAuctioneers Group and/or (subject to Completion)
the Combined Group to conduct its business, require that the
Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group change the way in which
it operates or require that the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group implement
time-consuming and costly measures. The reputational and financial
penalties associated with any breach of such regulations could
also be significant.
For example, the GDPR, which was introduced in May 2018, has
increased the regulatory burden on the Existing Group and
the LiveAuctioneers Group in processing personal information
of employees, auctioneers, bidders and vendor partners, and
has also increased the potential sanctions for breaches. The
GDPR includes significant financial penalties of up to EUR20
million or four per cent. of the annual worldwide turnover
of the Existing Group, the LiveAuctioneers Group or (subject
to Completion) the Combined Group, whichever is greater. Whilst
the Existing Group and the LiveAuctioneers Group have implemented
policies designed to comply with the GDPR (with such policies
being subject to regular review), there can be no assurance
that regulators will conclude that the Existing Group, the
LiveAuctioneers Group and/or (subject to Completion) the Combined
Group is fully compliant with its respective obligations under
the GDPR. The LiveAuctioneers Group's privacy governance framework,
in particular, will require certain remediation actions in
order to ensure satisfactory compliance of the LiveAuctioneers
Group with the GDPR. In addition, the GDPR is a principles-based
regulation and does not contain a series of prescriptive rules,
and therefore in the event of any breach, the Existing Group,
the LiveAuctioneers Group and/or (subject to Completion) the
Combined Group could be subject to regulatory action or financial
penalties, which could also result in adverse publicity and
reputational damage.
In particular, following the ruling of the Court of Justice
of the European Union in Case C-311/18-Data Protection Commissioner
v Facebook Ireland Ltd and Maximillian Schrems in July 2020,
which held the EU-US privacy shield to be invalid, the position
in relation to international transfers of personal data is
unclear and the Existing Group and the LiveAuctioneers Group
continue to review their data protection policies in line
with changing guidance on the correct practices for international
transfers of personal data from UK and EU supervisory authorities.
The European Commission is currently conducting a data adequacy
assessment of the UK in respect of whether personal data can
continue to flow freely from the EU to the UK following the
end of the Brexit transition period. Pending completion of
that assessment, the legal position in relation to the flow
of personal data from the EU to the UK is currently unclear.
In addition, following Brexit, the data collected and processed
by the Existing Group or the LiveAuctioneers Group is subject
to regulation by a different regulator in the United Kingdom
than in the EU. Although following the end of the Brexit transition
period the UK's data protection laws and regulations have
not changed, it is possible that applicable privacy and data
protection laws and regulations may be interpreted and applied
in a manner that is inconsistent from one jurisdiction to
another or may conflict with other rules or the Existing Group's
or the LiveAuctioneers Group's practices. That concern is
particularly relevant for the GDPR, given that different Member
State regulators may differ as to its interpretation and their
approach to enforcement, and for the Privacy and Electronic
Communications Regulations ("PECR"), which are currently under
review.
On 15 December 2020, the European Commission announced a draft
legislative package comprising the Digital Services Act ("DSA")
and the Digital Markets Act ("DMA"). Although all of the likely
impacts are not yet fully known, this legislative package
is aimed at providers of digital services and online platforms,
such as the Existing Group, the LiveAuctioneers Group and/or
(subject to Completion) the Combined Group. The draft DSA
in particular introduces new and more onerous obligations
for such businesses, together with a stricter enforcement
regime, including penalties for non-compliance. It is intended
to apply to all businesses which offer digital services within
the EU (whether or not they are established in the EU). Additional
obligations would apply to "very large online platforms".
Alongside this, the draft DMA would allow the European Commission
to designate certain consumer-facing online platforms as having
"gatekeeper" status, at which point those businesses would
be subject to more onerous obligations. Although it is currently
unclear whether the Existing Group, the LiveAuctioneers Group
and/or (subject to Completion) the Combined Group would constitute
a "very large online platform" or a "gatekeeper" under the
DSA or DMA, should these measures become law and the Existing
Group, the LiveAuctioneers Group and/or (subject to Completion)
the Combined Group be so designated, they have the potential
to impose additional costs on the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group and/or
constrain certain aspects of its commercial strategy in EU
markets.
Following the effective date of the GDPR, other jurisdictions,
such as the State of California, have promulgated data privacy
regulations. Other states in the United States are considering
data privacy legislation (and federal legislation might also
emerge), and other countries have adopted, or are considering,
data privacy laws. Each set of rules could apply different
standards and could impose different obligations, and as a
global business the Existing Group, the LiveAuctioneers Group
and/or (subject to Completion) the Combined Group would need
the resources to comply with all of them.
If the Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group , or any of its third-party
service providers, is unable to effectively implement measures
required as a result of new regulations or changes to existing
regulations, or ensure compliance by the Existing Group, the
LiveAuctioneers Group and/or (subject to Completion) the Combined
Group with applicable regulatory requirements (including in
relation to privacy and data protection), it could be subject
to fines, penalties and reputational damage which could have
a material adverse effect on its business, operating results
and financial condition.
D.4 The Group is subject to risks associated with violations
of business conduct rules.
The Group's activities are subject to laws regarding the prevention
of money laundering, the prevention of tax evasion, the financing
of terrorism and bribery, although the primary responsibility
for compliance with these regimes generally lies with the
auctioneers using its Marketplaces or Platform. For example,
the 5(th) Anti-Money Laundering Directive (Directive (EU)
2018/843)) ("5AML") came into effect in July 2018 and required
EU member states to transpose amendments into national legislation
by 10 January 2020. Under 5AML, auctioneers are required to
conduct appropriate due diligence on any bidders spending
more than EUR10,000 (or its foreign currency equivalent) in
any single transaction or series of linked transactions.
Auctioneers are responsible for compliance with 5AML in relation
to the auctions they host on the Group's Marketplaces or Platform.
Whilst the Group is not responsible for this compliance, it
has developed features to assist auctioneers with 5AML compliance.
However, there is a risk that auctioneers may misrepresent
their process in relation to their compliance with 5AML or
with anti-money laundering laws or regulations more broadly
(including laws and regulations relating to anti-corruption,
anti-bribery, anti-tax evasion and anti-terrorism financing),
in which event the Group could suffer reputational harm. Additionally,
the auction industry has in the past been the subject of allegations
of money laundering and the Group's reputation may be damaged
if auctioneers on its Platform or Marketplaces (or even those
not on its Platform or Marketplaces) are found to be non-compliant
with relevant anti-money laundering laws. If the Group's reputation
is damaged, this could have a material adverse effect on its
business, operating results and financial condition, as described
in the risk factor entitled "The Group relies on its brand
and reputation, which could be impaired."
Monitoring the Group's own compliance with anti-corruption,
anti-tax evasion and anti-bribery rules imposes a financial
burden on the Group and requires significant technical capabilities.
The Group's compliance policies and procedures may not prevent
all instances of money laundering or bribery, or other prohibited
transactions or behaviours, including those arising from actions
by its employees, for which the Group might be held responsible.
Any such events may have severe consequences, including sanctions,
fines, penalties and reputational consequences, which could
have a material adverse effect on its business, operating
results and financial condition.
D.5 The Existing Group, the LiveAuctioneers Group and/or
(subject to Completion) the Combined Group may be subject
to general litigation, regulatory disputes and government
inquiries.
The Existing Group and the LiveAuctioneers Group have in the
past faced and they, or (subject to Completion) the Combined
Group, may in the future face the risk of claims, lawsuits,
government investigations and other proceedings involving
competition and antitrust, intellectual property, privacy,
consumer protection, accessibility claims, securities, tax,
labour and employment, commercial disputes, services and other
matters. The number and significance of these disputes and
inquiries have increased as the political and regulatory landscape
changes, as the Existing Group and the LiveAuctioneers Group
have grown larger and expanded in scope and geographic reach,
and as the Existing Group's and the LiveAuctioneers Group's
business operations have increased in complexity. In addition,
if the Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group were to undertake a significant
acquisition or the acquisition of a direct competitor, such
acquisition could attract regulatory scrutiny from competition
authorities and could as a result bear substantial additional
costs or fail to gain regulatory approval or require the Existing
Group, the LiveAuctioneers Group and/or (subject to Completion)
the Combined Group to comply with undertakings set by a regulator.
The Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group cannot predict the outcome
of such disputes and inquiries, and such disputes or inquiries
could have an adverse impact on the Group because of legal
costs, diversion of management resources and other factors.
Determining reserves for any litigation or investigation is
a complex, fact-intensive process that is subject to judgement
calls. For instance, in the case of antitrust claims, the
European Commission is under a legal obligation to assess
complaints, and unless a complaint is withdrawn, it must reject
it by a formal decision where it takes the view that there
are no grounds for action. Due to this process, complaints
often remain open for several years. It is possible that a
resolution of one or more such proceedings could require the
Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group to make substantial payments
to satisfy judgments, fines or penalties or to settle claims
or proceedings, any of which could harm the Existing Group's,
the LiveAuctioneers Group's and/or (subject to Completion)
the Combined Group's business.
Legal proceedings or inquiries could also result in reputational
harm, criminal sanctions, consent decrees or orders preventing
the Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group from offering certain products
or services, or requiring a change in the Existing Group's,
the LiveAuctioneers Group's and/or (subject to Completion)
the Combined Group's business practices in costly ways or
requiring development of non-infringing or otherwise altered
products or technologies. Litigation and other claims and
regulatory proceedings against the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group could
result in unexpected expenses and liabilities, which could
have a material adverse effect on the Existing Group's, the
LiveAuctioneers Group's and/or (subject to Completion) the
Combined Group's business, financial condition, results of
operations and prospects.
D.6 The Company is a holding company with no business operations
of its own and depends on its subsidiaries for cash, including
in order to pay dividends.
The Company is a group holding company with no independent
operations and is dependent on earnings and distributions
of funds from its operating subsidiaries for cash, including
in order to pay dividends to Shareholders. The Company currently
intends to retain any future earnings to finance the operation
and expansion of its business, including additional acquisitions.
The Company will review its dividend policy on an ongoing
basis but does not expect to declare or pay any dividends
for the foreseeable future.
Should the Company decide to declare dividends in the future,
as a matter of English law, the Company can pay dividends
only to the extent that it has sufficient distributable reserves
and cash available for this purpose, which depends upon the
Company receiving cash from its operating subsidiaries in
a manner which creates distributable reserves. The Company's
ability to pay dividends to Shareholders therefore depends
on its future Group or (following Completion) Combined Group
profitability, the ability to distribute or dividend profits
from its operating subsidiaries up the Group structure to
the Company, general economic conditions and other factors
the Directors deem significant. The Group's distributable
reserves can be affected by reductions in profitability as
well as by impairment of assets. Similar rules apply in the
US and Germany, where certain of the Company's subsidiaries
are located. Dividends paid between members of the Group or
(following Completion) the Combined Group (including the Company)
may be subject to irrecoverable withholding or other taxes,
reducing the amounts ultimately available for distribution
by the Company.
In addition, the Company may not pay dividends if the Directors
believe this would cause the Company to be inadequately capitalised
or if, for any other reason, the Directors conclude it would
not be in the best interests of the Company.
D.7 The application, interpretation or amendment of tax laws,
rules or regulations in relation to the Existing Group, the
LiveAuctioneers Group and/or (subject to Completion) the Combined
Group are subject to uncertainties and the Existing Group,
the LiveAuctioneers Group and/or (subject to Completion) the
Combined Group may become the subject of a dispute with a
taxation authority.
The tax laws of various jurisdictions to which the Existing
Group and/or the LiveAuctioneers Group are subject, and/or
to which (subject to Completion) the Combined Group will be
subject, are complex and capable of differences in application
or interpretation. The application of tax laws in different
jurisdictions can be subject to diverging and sometimes conflicting
interpretations by taxpayers, tax advisers and taxation authorities,
and judgement and estimation are often required in determining
tax liabilities. Taxation authorities may challenge the application
or interpretation of tax laws, rules and regulations by, or
the tax (including transfer pricing) methodologies of, the
Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group or may seek to determine
that the manner in which the Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group operates
does not achieve the expected or intended tax consequences.
Historical tax liabilities of the LiveAuctioneers Group should
generally remain with the LiveAuctioneers Group following
the Acquisition (and as such will be "inherited" by the Combined
Group). Historical tax assets and attributes of a company
or group (such as carried forward tax losses) may be subject
to restriction or limitation in certain circumstances, including
following a change of ownership. Accordingly, the tax assets
or attributes of the LiveAuctioneers Group may be subject
to restriction or limitation following the Acquisition and
therefore may be wholly or partly unavailable.
Taxation authorities have become more assertive in their interpretation
and enforcement of tax laws, rules and regulations over time,
as tax authorities and governments are increasingly focused
on ways to increase tax revenues. This has contributed to
an increase in audit activity and more stringent interpretations
by taxation authorities. The Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group could
be subject to audit, enquiry or investigation by, or involved
in a dispute with, a taxation authority.
Taxation authorities may seek to assess additional taxes on
the Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group and/or impose interest and
penalties. Any successful challenge by a taxation authority
could increase the worldwide effective tax rates of the Existing
Group, the LiveAuctioneers Group and/or (subject to Completion)
the Combined Group. Any additional taxes or other assessments
may be in excess of the current tax reserves and/or provisions
of the Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group and the Existing Group,
the LiveAuctioneers Group and/or (subject to Completion) the
Combined Group may be required to modify its business practices
to reduce its exposure to additional taxes going forward.
Any of the risks identified above could adversely affect the
business, financial condition, results of operations and prospects
of the Existing Group, the LiveAuctioneers Group and/or (subject
to Completion) the Combined Group.
Additionally, the levels of, and reliefs from, taxation to
which the Existing Group and/or the LiveAuctioneers Group
are subject, or (subject to Completion) the Combined Group
will be subject, or from which it benefits (or, subject to
Completion, will benefit), are subject to changes that may
adversely affect the business and profitability of the Group.
Any change in the Existing Group's, the LiveAuctioneers Group's
and/or (subject to Completion) the Combined Group's tax status
or in tax laws, rules or regulations (including a change in
interpretation by the relevant taxation authorities) in any
jurisdictions where the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group operates,
is tax resident or has a taxable presence such as a branch
or permanent establishment (or in any other jurisdiction,
such as where customers, auctioneers or bidders are located)
could affect the business, financial condition, results of
operations and prospects of the Existing Group, the LiveAuctioneers
Group and/or (subject to Completion) the Combined Group. The
Directors cannot predict the timing or impact of any such
future changes to tax laws, rules or regulations.
E. RISKS RELATING TO THE OFFER AND THE SHARES
E.1 The Shares may be subject to market price volatility and
the market price of the Shares may decline disproportionately
in response to developments that are unrelated to the Company's
operating performance.
The Placing Price is not indicative of the market price of
the Shares following Admission. The market price of the Shares
may be volatile and subject to wide fluctuations. The market
price of the Shares may fluctuate as a result of a variety
of factors, including, but not limited to, those referred
to in these risk factors, as well as period to period variations
in operating results or changes in revenue or profit estimates
by the Existing Group, the LiveAuctioneers Group and/or (following
Completion) the Combined Group, industry participants or financial
analysts. The market price could also be adversely affected
by developments unrelated to the Group's operating performance,
such as the operating and share price performance of other
companies that investors may consider comparable to the Group,
speculation about the Existing Group, the LiveAuctioneers
Group and/or (following Completion) the Combined Group in
the press or the investment community, unfavourable press,
strategic actions by competitors (including acquisitions and
restructurings), changes in market conditions, regulatory
changes, broader market volatility and movements and the take
up (or lack thereof) of Shares under the Capital Raising.
Any or all of these factors could result in material fluctuations
in the price of Shares, which could lead to investors getting
back less than they invested or a total loss of their investment.
E.2 TA Associates will retain significant interests in, and
will continue to exert substantial influence over, the Group
following the Capital Raising and the Acquisition and its
interests may differ from or conflict with those of other
Shareholders.
Immediately following Capital Raising Shares Admission, TA
Associates will continue to beneficially own approximately
25.9 per cent. of the Enlarged Share Capital (assuming that
no Shares are sold by TA Associates). As a result, whilst
the Company and TA Associates will continue to be parties
to the Relationship Agreement, TA Associates will continue
to possess sufficient voting power to have a significant influence
over all matters requiring Shareholder approval, including
the election of Directors, approval of significant corporate
transactions and delay, deferral or prevention of a change
of control. The interests of TA Associates may not always
be aligned with those of other Shareholders. In exercising
its voting rights, TA Associates may be motivated by interests
that differ from those of the other Shareholders and the interests
of TA Associates and its affiliates could conflict with or
differ from the Company's interests. TA Associates shall also
continue to be entitled to appoint a Director to the Board
of the Company and to remove or replace that Director pursuant
to the terms of the Relationship Agreement.
So long as TA Associates continues to own, whether directly
or indirectly, a significant amount of the Group's equity,
TA Associates will continue to be able to substantially influence
or effectively control the Group's ability to enter into any
corporate transactions.
In addition, TA Associates may invest in companies and from
time to time acquire and hold interests in businesses that
compete, directly, or indirectly, with the Group. TA Associates
may also pursue acquisition opportunities that may be complementary
to the Group's business and, as a result, those acquisition
opportunities may not be available to the Group.
E.3 Further issuances of Shares may result in immediate dilution
and depress the price of the Shares.
In the future, the Company may issue additional Shares or
other equity or debt securities convertible into Shares in
connection with a financing, acquisition, litigation settlement
or employee arrangement or otherwise. Any additional capital
raised through the sale of equity could dilute existing Shareholders'
ownership interest, cause the value of existing Shareholders'
investments to decline and cause the trading price of the
Shares to decline. Additional capital raised through the issuance
of equity or debt may result in creditors or other investors
having rights, preferences and privileges that are senior
to those of existing Shareholders. As a result of the Capital
Raising in connection with the Acquisition, existing Shareholders
will suffer an immediate dilution in their ownership interest,
and as a result of the issue of the Consideration Shares and
the Management RSU Shares, Shareholders will suffer a further
filution in their ownership interest, as detailed in the risk
factor entitled "Existing Shareholders will have a reduced
ownership and voting interest in the Combined Group than they
currently do in the Existing Group".
E.4 The market price of the Shares could be negatively affected
by sales of substantial amounts of such Shares in the public
markets, including following the expiry of the IPO Lock-Up
Period or the Acquisition Lock-Up Period, or the perception
that these sales could occur.
The Company, TA Associates, ECI Partners, the Directors and
the Senior Managers are subject and, following Completion
Consideration Shares and Management RSU Shares Admission,
the Management Sellers will be subject, to restrictions on
the issue, sale and/or transfer, as applicable, of their respective
holdings in the Company's issued share capital.
The issue or sale of a substantial number of Shares by the
Company, TA Associates, ECI Partners, the Directors or the
Senior Managers in the public market after the lock-up restrictions
in the IPO Underwriting and Sponsor Agreement, the IPO Senior
Manager Lock-Up Agreements and the IPO Deeds of Election expire
(24 August 2021 in relation to TA Associates and ECI Partners,
25 February 2022 in relation to the Directors, the Senior
Managers and the Other IPO Selling Shareholders) or are waived
by the Company or the Joint Global Co-Ordinators (in the case
of the Other IPO Selling Shareholders) or by the Joint Global
Co-Ordinators (in all other cases), or the perception that
these sales may occur, may depress the market price of the
Shares and could impair the Company's ability to raise capital
through the sale of additional equity securities.
Similarly the sale of a substantial number of Shares by the
Rollover Management Sellers in the public market after the
lock-up restrictions imposed on them in conjunction with the
Acquisition expire (twelve months after the date of Completion)
or are waived by the Company, or the issue or sale of any
further Shares in connection with financing the Shares, or
the perception that any such sales may occur, may depress
the market price of the Shares and could impair the Company's
ability to raise capital through the sale of additional equity
securities.
In addition, certain of the Shares could be granted as security
by TA Associates in connection with margin loan facilities,
the enforcement of which would reduce TA Associates' shareholdings,
may have a significant impact on the Company's shareholding
structure and corporate governance, may depress the market
price of the Shares and could impair the Group's ability to
raise capital through the issue of further Shares.
Other than in connection with the Capital Raising, the Acquisition
or pursuant to employee Share Plans, the Company has no current
plans for an offer of Shares. It is, however, possible that
the Company may decide to offer additional Shares in the future.
Any future sales or issuances of Shares, or the perception
that such sales or issuances could occur, could dilute the
holdings of Shareholders or adversely affect the prevailing
market price of Shares. The Company may also issue additional
Shares or other securities that are convertible into or exercisable
for Shares in future public offerings or private placements
for capital raising purposes or for other business purposes,
potentially at an offering price, conversion price or exercise
price that is below the Offer Price.
E.5 Shareholders in the United States and other jurisdictions
outside the United Kingdom may not be able to exercise their
pre-emption rights.
The Articles provide for pre-emptive rights to be granted
to Shareholders on future equity offerings, unless such rights
are disapplied by a Shareholder resolution. However, securities
laws of certain jurisdictions outside the United Kingdom may
restrict the Group's ability to allow participation by Shareholders
located in such jurisdictions in the Capital Raising and future
equity offerings unless the Company decides to comply with
applicable local laws and regulations and, in the case of
Shareholders in the United States, a registration statement
under the US Securities Act is effective with respect to such
rights and Shares or an exemption from the registration requirements
of the US Securities Act is available. The Company does not
intend to file any such registration statement, and the Company
cannot assure prospective US investors that any exemption
from the registration requirements of the US Securities Act
or applicable non-US securities laws is (in relation to the
Capital Raising) or would be (in relation to future issues
of Shares) available to enable US or other non-UK holders
to exercise such pre-emptive rights or, if available, that
the Company will utilise any such exemption. The holdings
of Shareholders located outside the United Kingdom who are
not able to participate in any future equity offerings could
be further diluted by any such offerings.
E.6 Changes in taxation laws or regulation or the interpretation
of tax laws or regulation could affect the returns received
and retained by Shareholders.
Any change in taxation laws or regulations or the interpretation
of taxation laws or regulations could affect the returns received
and retained by Shareholders. Such changes may include (but
are not limited to) the taxation of investment income, dividends
received or (in the specific context of withholding tax) dividends
paid. Statements in this announcement concerning the taxation
of investors in the Shares are based on current tax law and
practice in the UK and the United States, which are subject
to change. The taxation of an investment in the Group depends
on the individual circumstances of the relevant investor.
Any Shareholder who is in doubt as to its tax position should
consult an appropriate adviser.
E.7 Overseas Shareholders may be subject to exchange rate
risk
The Shares are, and any dividends to be paid in respect of
them will be, denominated in pounds sterling. An investment
in Shares by an investor whose principal currency is not pounds
sterling exposes the investor to foreign currency exchange
rate risk (and any associated tax risks). Any depreciation
of pounds sterling in relation to such foreign currency will
reduce the value of the investment in the Shares or any dividends
in foreign currency terms.
E.8 Overseas Shareholders may have limited ability to bring
actions or enforce judgments against the Company or its Directors
The ability of an overseas Shareholder to bring an action
against the Company may be limited under law. The Company
is a public limited company incorporated in England and Wales,
and the rights of the Shareholders are governed by the laws
of England and Wales and the Company's articles of association.
These rights differ from the rights of shareholders in typical
US corporations and some other non-UK corporations. It may
not be possible for an overseas Shareholder to enforce any
judgments in civil or commercial matters or any judgments
in securities laws of countries other than the United Kingdom
against some or all of the Directors or executive officers
of the Company who are resident in the United Kingdom or countries
other than those in which judgment is made.
Service of process upon the Directors and the officers of
the Company, most of whom reside outside the United States,
may be difficult to obtain within the United States. Furthermore,
since a substantial portion of the directly owned assets of
the Company and the Directors are located outside the United
States, any judgment obtained in the United States against
the Company or the Directors may not be enforceable outside
of the United States, including without limitation judgments
based upon the civil liability provisions of the US federal
securities laws or the laws of any state or territory within
the US. In addition, an award or awards of punitive damages
in actions brought in the US or elsewhere may be unenforceable
in the UK. Investors may also have difficulties enforcing,
in original actions brought in courts in jurisdictions outside
the US, liabilities under US securities laws.
APPENDIX III - Definitions
"2019 LiveAuctioneers Acquisition" means the acquisition of
LiveAuctioneers, Inc. by Platinum Purchaser Inc., on 21 May
2019.
"A&A" means Arts and Antiques.
"Acquisition" means the acquisition by the Platinum Parent, Inc.
Purchaser, a member of the Group, of all of the outstanding equity
securities of Platinum Parent, Inc. pursuant to the Acquisition
Agreement.
"Acquisition Agreement" means the acquisition agreement dated 17
June 2021 and made between the Company, the Platinum Parent, Inc.
Purchaser, Platinum Parent, Inc., a Delaware corporation, Cove Hill
Partners, certain other stockholders of Platinum Parent, Inc.
(together with Cove Hill Partners, the "Sellers"), and CHP
Representative, LLC solely in its capacity of Sellers'
representative.
"Acquisition Lock-Up Period" means the 12-month period starting
on the date of Completion.
"Adjusted EBITDA" means profit/(loss) before taxation, finance
costs (including non-operating gains and losses in respect of
financial instruments), depreciation and amortisation, share-based
compensation and exceptional costs. Adjusted EBITDA at segment
level is consistently defined with the above but excludes central
administration costs including directors' salaries.
"CAGR" means compounded annual growth rate.
"Capital Raising" means the placing of the Capital Raising
Shares.
"Capital Raising Shares" means the 19,999,990 new Shares to be
issued in connection with the Capital Raising.
"Capital Raising Shares Admission" means the admission of the
Capital Raising Shares to the premium listing segment of the
official list of the FCA and to trading on the London Stock
Exchange's main market for listed securities.
"Circular and Prospectus" means the circular and prospectus to
be published by the Company in due course in connection with the
Acquisition.
"Combined Group" means the Group following Completion.
"Completion" means completion of the Acquisition.
"Consideration Shares" means the consideration Shares to be
issued to the Rollover Management Sellers in connection with the
Rollover Options.
"Consideration Shares and Management RSU Shares Admission" means
the admission of the Consideration Shares and Management RSU Shares
to the premium listing segment of the official list of the FCA and
to trading on the London Stock Exchange's main market for listed
securities.
"Cove Hill Partners" means Cove Hill Partners, L.P. and certain
affiliated funds.
"Enlarged Share Capital" means the issued share capital of the
Company, as enlarged by the Capital Raising Shares.
"Existing Group" means the Group prior to Completion.
"FCA" means the Financial Conduct Authority of the United
Kingdom.
"Group" means the Company and its subsidiaries from time to
time.
"I&C" means Industrial and Commercial.
"IFRS" means International Financial Reporting Standards as
adopted for use in the European Union.
"IPO" means the admission of the existing Shares to the premium
listing segment of the official list of the FCA and to trading on
the London Stock Exchange's main market for listed securities on 26
February 2021.
"IPO Prospectus" means the prospectus dated 17 February 2021
published by the Company in connection with the IPO.
"LiveAuctioneers Group" means Platinum Parent, Inc. and its
subsidiaries.
"Management RSU Shares" means the Shares to be issued in
connection with the Management RSUs.
"Management RSUs" means the restricted stock units over new
Shares to be granted to participants of the Rollover.
"Management Sellers" means certain management stockholders in
LiveAuctioneers who have agreed to sell their entire ownership
interests in LiveAuctioneers to the Platinum Parent, Inc.
Purchaser, a member of the Group, pursuant to the Acquisition
Agreement.
"New Shares" means the Capital Raising Shares, the Consideration
Shares and the Management RSU Shares.
"North America" means US and Canada.
"Platinum Parent, Inc. Purchaser" means ATG Media US, Inc.
"Regulatory Conditions" means approval of the Acquisition by the
relevant antitrust authorities in the US and UK (including the
expiration or termination of any applicable waiting periods under
US antitrust laws).
"Relationship Agreement" means the relationship agreement made
between the Company and TA Associates on 17 February 2021 in
connection with the IPO.
"Reverse Termination Fee" means the reverse termination fee
which may be payable by the Platinum Parent, Inc. Purchaser in
connection with the Acquisition.
"Rollover" means the exchange by the Rollover Management Sellers
of a specified percentage of their outstanding options over equity
securities in Platinum Parent, Inc..
"Rollover Management Sellers" means those Management Sellers who
will receive Rollover Options, including Phil Michaelson, Rob
Cummings, Gilad Andorn, Erwin Hungerbuhler, Wyatt Barrett, Suzie
Ryu and Jessica Mizrachi and any other Management Seller who elects
to become a Rollover Management Seller prior to Completion.
"Rollover Options" means options over Shares to be issued to the
Rollover Management Sellers in connection with the Rollover.
"Sellers" means the existing stockholders of Platinum Parent,
Inc. who have agreed to sell their entire ownership interests in
Platinum Parent, Inc. to the Platinum Parent, Inc. Purchaser, a
member of the Group, pursuant to the Acquisition Agreement.
"Shareholders" means holders of Shares.
"Shares" means ordinary shares of 0.01 pence each in the share
capital of the Company.
"TAM" means total addressable market.
"US" means the United States of America, its territories and
possessions, any State of the United States and the District of
Columbia.
[1] To reflect the agreed terms of the Placing Agreement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IOESFEFIWEFSELM
(END) Dow Jones Newswires
June 17, 2021 11:49 ET (15:49 GMT)
Auction Technology (LSE:ATG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Auction Technology (LSE:ATG)
Historical Stock Chart
From Jul 2023 to Jul 2024
