As an entrepreneur an exit may seem a long way away when first assembling your team, but if you get that really right, you may find yourself receiving offers from buyers that would like your team for themselves. In a nutshell, that’s an acqui-hire: an acquisition which is aimed at obtaining a team.
It is otherwise a relatively loose term, and it can take different forms such as:
An acquisition of the corporate entity. However, larger acquisitive corporates may well not want to buy an unknown corporate and bring it into their group, particularly if they only want certain assets and don’t want to pick up liabilities.
An asset acquisition, perhaps where some IP that has been created is to be acquired alongside the team.
A simple payment to release the team from terms such as non-competes, and to waive any possible claims the seller may have against the buyer, perhaps with an IP licence to prevent claims in the future that the buyer is misusing the seller’s IP.
Acqui-hires usually happen relatively early in the growth trajectory of a business (possibly during a distressed time too), but they aren’t necessarily straightforward. For example, some of the key points that start-up teams faced with the option should be considering are:
What will happen to the company afterwards (assuming the corporate is not acquired)? Is it to be wound down? And if so, how long will that take? Or will there be a retained and continuing business? Linked with this, careful thought needs to be given as to what the deal means to creditors.
How is the price to be structured? The buyer will want to retain the people it’s acquiring, so may seek to defer some value and link it to retention. You’ll need to think through what happens if the buyer, for example, terminates without cause.
What will the price mean for any investors? For those operating in the digital assets space, this may also include people who invested for tokens.
The employment proposition for those moving over. Again, it’s likely that the buyer will seek to include deferred incentives, such as options, as part of the package. In addition, visa/immigration considerations may need to be considered, depending on the circumstances.
The tax treatment of the proposed deal structure. This will depend on many factors so taking early advice is crucial in order to maximise deal value.
So, if you’re being talked to about an acqui-hire, there’s a fair bit to consider, but at the very least it demonstrates what a great team you have.
Disclaimer
This note reflects the law as at 24 July 2024. The circumstances of each case vary and this note should not be relied upon in place of specific legal advice.
Forsters’ next-gen talent shines through in the latest Chambers HNW Guide 2024
18 July 2024
News
Our specialist teams advising high-net-worth private clients continue to be recognised as best in class in the latest Chambers HNW Guide.
The guide, which ranks the leading professional advisors to the Private Wealth market based on extensive market research, praises Forsters’ blend of experience and energy: “The team covers multiple areas and is made up of very experienced senior team members with ample experience, as well as younger advisers who are full of energy.”
We maintain high rankings across our full range of expertise:
Private Wealth Law – Band 1
Private Wealth Disputes – Band 1
Real Estate: High Value Residential – Band 1
Family/Matrimonial Finance: Ultra High Net Worth- Band 2
Art and Cultural Property Law – Band 2.
This year’s rankings also highlight Forsters’ breadth of Private Wealth talent from seasoned advisors to rising stars with new and elevated individual rankings for Senior Associates and Partners:
Emma Gillies, elevated to Band 5 in Private Wealth Law
James Brockhurst, newly ranked as Up and Coming in Private Wealth Law
Hannah Mantle, elevated to Band 4 in Private Wealth Disputes
Anna Jassani, newly ranked as an Associate to Watch in Real Estate: High Value Residential
Charles Miéville, elevated to Band 2 in Real Estate: High Value Residential.
The 2024 HNW Guide recognises a total of 26 individual lawyers at Forsters including a record number of Senior Associates. Other notable highlights include:
Catherine Hill, elevated to Band 2 in Art and Cultural Property
Nick Jacob and Dan Ugur continue to be recognised as ‘foreign experts’ in Singapore
Joanne Edwards continuing inclusion in the Spotlight Table for Family/Matrimonial: Mediators.
Explore our complete list of 2024 rankings here and do get in touch with any member of our market leading private wealth team to find out how we can support you.
Time to loosen the green belt? Victoria Du Croz quoted in Property Week
12 July 2024
Views
The Labour Party has pledged to unlock ‘grey-belt’ land to tackle the housing shortage – but what planning issues could they be faced with? Head of Planning, Victoria Du Croz, shared her views in Property Week.
“We don’t have a legal or policy concept of what grey belt is, The National Planning Policy Framework (NPPF) sets out five purposes of the green belt. So, would developers have to show that area of green belt doesn’t meet all five of those purposes, just one of them or some of them for it to be considered grey belt?
I think (Labour’s proposal) shows the misunderstanding about what green-belt land is and what purpose it serves… Many think it’s quintessential rolling green fields, but green-belt land doesn’t need to have any ecological or biodiversity value or any right of access for the public.”
Read the full article here to understand more about the planning hurdles that could impact Labour’s proposed plans.
ERMAs 2024: Forsters win Solicitors Firm of the Year
12 July 2024
News
The ERMAs is a celebration of the professionals working in the leasehold enfranchisement and right to manage sector.
Enfranchisement is a specialist area of law, and Forsters has been dedicated to developing a team with the ability to advise on all aspects of the regime, from lease extensions to the most complex collective enfranchisements.
Being awarded ‘Solicitors Firm of the Year’ is a testament not only to the team’s commitment to their clients, but for remaining at the forefront of change in this sector which has recently seen the passing of the Leasehold and Freehold Reform Act 2024.
“We have an excellent enfranchisement team at Forsters who all share a passion and commitment to enfranchisement and who are involved in some of the most complex enfranchisement cases in the UK. The ERMAs is a special date in the diary for all enfranchisement practitioners and I am so pleased that the team has been acknowledged for their determination and hard work”.
Natasha Rees, Senior Partner
“A thoroughly deserved win by our enfranchisement team at the ERMA’s last night which confirms their position as leaders in this specialised area of property law”.
Lucy Barber, Head of Residential Property
“As an enfranchisement specialist, it was important for me to work in a firm that was fully committed and experienced in advising on this niche area of law. The Forsters’ enfranchisement team offers that and so much more, and so I’m thrilled that this was recognised last night”.
Caroline Wild, Senior Associate
“Forsters has a fantastic enfranchisement team which is packed with talent. It’s great to see that celebrated by this award”.
Connor Rutherford wins the Property Litigation Association’s Alan Langleben Memorial Blog Competition
10 July 2024
News
In this year’s ‘The Alan Langleben Memorial Blog Competition’, the Property Litigation Association challenged its members to tackle the topic of leasehold reform. Trainee, Connor Rutherford, was awarded first prize and saw his entry published in EG.
On Connor’s winning entry, the judges commented:
“His blog is logical and coherent and points out that although, in respect of the Leasehold and Freehold Reform Bill, the legislators seem to be moving us towards commonhold, there are no suggestions/provisions as to approach and implementation.”
Since the competition was launched, the Leasehold and Freehold Reform Act 2024 has received royal assent. Follow this link to read our latest briefing.
The impact of the new Labour Government’s “Day One” rights – Jo Keddie’s views featured in The Lawyer
8 July 2024
Views
Head of Employment at Forsters, Jo Keddie, shared her views on the most significant changes that UK employers are going to have to grapple with. Interviewed for The Lawyer’s Election Special podcast, Jo discussed:
Individual Rights from Day 1
Probationary and Hiring Going forwards
The right to disconnect
“Giving all workers more rights from day one will be a significant shift for employers, as is Labour’s plan to do away with the two-year minimum period for bringing an unfair dismissal claim.
We expect this will result in far more litigation in the Employment Tribunal, which is already overworked with cases taking well over a year to be heard, as well as far more focus by employers on recruitment policies and dismissal strategies.
Indeed, the first impact of a Labour government may be a spike in dismissals as the employers look to remove any employees with less than two years’ service where there is any doubt over their long-term future.”
The future of the UK’s non-dom regime under the Labour Party
5 July 2024
News
With promises of ‘change’ ringing through Westminster and across the nation, Sir Keir Starmer has been appointed the new Prime Minister of the United Kingdom. As had widely been expected, the Labour Party obtained a significant majority in the UK General Election and will have a strong mandate to govern. With a new party in Government, what does the future hold for the UK’s non-dom regime?
Background
The previous Conservative Government announced on 6 March this year that it would seek to abolish the current tax regime for individuals who are UK resident but not UK domiciled in favour of a residency-based system, which would apply from 6 April 2025.
The proposals were that, from 6 April 2025, the remittance basis of taxation, which allows UK resident individuals who are not UK domiciled to pay tax only on foreign income and gains that are “remitted” to the UK, would be abolished and be replaced with a new regime under which those who have been UK resident for at least four years would pay income tax and capital gains tax (“CGT”) on their worldwide income and gains. It was made clear that the new rules would also apply to income and gains arising within trusts, such that the generous trust protections introduced in 2017 would no longer be available to those who have been resident for four years, even if their trusts were set up before 6 April 2025.
For further details of the original Conservative proposals please read our briefing here.
Labour’s plans
Income and gains
No legislation in respect of the proposed reforms to income tax and CGT was put before the previous Parliament, and with that Parliament prorogued on 24 May 2024 (and subsequently dissolved on 30 May 2024), it will be up to the new Parliament to enact legislation to reform or abolish the non-dom regime.
Labour’s General Election manifesto stated that they would “abolish non-dom status once and for all, replacing it with a modern scheme for people genuinely in the country for a short period.” This has been a long-standing, and much mentioned, aim of the Labour Party, but unknown is
(i) the extent to which the new regime will mirror the proposals set out by the previous Conservative Government, (ii) when we might see the detail of Labour’s proposals, and (iii) from what date the new regime would take effect.
Following the March 2024 Budget, Labour expressed broad support for the Conservative proposals, but argued that the proposals still contained a number of “loopholes”, with reference to the transitional reliefs proposed by the Conservatives.
In particular, Labour have indicated that they would eliminate the proposal that non-domiciled individuals already resident in the UK would only be subject to income tax on 50% of their foreign income in the 2025/2026 tax year. Their manifesto refers obliquely to removing the “non-dom discount loophole in 2025/2026”, which seems to indicate their intention to follow-through with the Conservative proposals with fewer restrictions and that they intend for the changes to take effect from 6 April 2025. Whether the changes will remain a legislative priority now that Labour has gained power remains to be seen.
At the same time, however, Labour have also suggested that they recognise the need to encourage UK investment and would consider additional incentives. We could, for example, see an extension or reformulation of the Temporary Repatriation Facility. This is likely to be an area where there will be extensive lobbying, so we will need to wait to see what any draft legislation looks like.
Inheritance tax
On IHT, Labour have indicated that they do not agree that trusts established prior to 6 April 2025 should continue to be sheltered from IHT.
In their manifesto, they stated that they “will end the use of offshore trusts to avoid inheritance tax so that everyone who makes their home here in the UK pays their taxes here.” From this, it would seem that Labour also intend to tie the IHT status of assets held in trusts to the residence status of the settlor or the beneficiaries of a trust.
However, Labour have not commented in detail on the Conservatives’ proposals for a reformed residency based IHT regime, so again we will have to wait for further detail on this front.
Labour were conspicuously silent on IHT generally in their manifesto and prior to the election refused to rule out reform of the regime. It has been suggested that Labour may also seek to restrict certain IHT reliefs not aimed specifically at non-doms, in particular agricultural property relief and business property relief. It has been suggested that there will be a consultation process on the IHT regime generally and the concept of domicile.
What next?
Rachel Reeves, the newly appointed Chancellor of the Exchequer, has said that there will be no “emergency” Budget and that there will not be a Budget before September, and she has stated that she would not deliver a Budget without a formal forecast from the Office of Budget Responsibility, which requires 10 weeks’ notice. Labour’s Annual Conference will take place from 22 to 25 September 2024, so it may be that any Budget is delayed until after this.
It is possible, if Labour decide to substantially mirror the Conservatives’ proposals, that we might see draft legislation prior to a Budget. However, given that there will be a summer recess (albeit there have been suggestions that the recess may be shorter than usual), and that there will be other legislative objectives, it is more likely that draft legislation will coincide with Labour’s first Budget.
It is, therefore, likely that we will need to wait a little longer to see the substantive details of Labour’s proposals.
Whilst we await the details, it is sensible to plan ahead and consider the options available. Please do get in touch with our Private Client team to find out more.
The new Labour Government: 5 key employment law changes
5 July 2024
News
The election is now finally over and the UK has woken up to a new Labour Government. In its campaign, the new Government made it clear that its “New Deal for Working People” would be an integral part of its future plans, suggesting new employment legislation would be introduced within 100 days.
Given the impact of these changes, we provide a summary of the 5 key employment law changes which we believe employers should be aware of. As always, the devil will be in the detail, and some of these proposals may change over time, but one thing is certain: we will all be kept very busy focussing on how best to address and implement these proposals between now and the Autumn!
1. Basic Individual Rights from Day 1
This is the new Government’s most significant change. Briefly:
The Government have committed to granting all workers with important rights from the first day of their employment in relation to unfair dismissal, parental leave and sick pay. Currently, these rights are typically subject to minimum service requirements.
By far the most significant of these proposals is in respect of unfair dismissal, where the Government has committed to removing the 2-year minimum service requirement for bringing a claim (where compensation is capped at the lower of £115,115 or 1 year’s pay).
A requirement of qualifying service has been part of the law of unfair dismissal since it was introduced with the Industrial Relations Act 1971. At the time, the requirement was also two years and, although the threshold has since varied, it has never been less than six months.
We foresee that, in the next few weeks and months, employers might consider quick dismissals before the new rules comes into effect – e.g., removing employees where there is any doubt over their long-term future. Currently, it is easier and less expensive to remove employees who have less than 2 years’ service.
2. Probationary Periods and Hiring Going Forwards
The Government has also referred to the need for “probationary periods with fair and transparent rules and processes”. We envisage a maximum length for these being set (to avoid employers extending probationary periods beyond unreasonable limits) and rules requiring employers to follow dismissal procedures when letting staff go and prohibiting them from dismissing employees without justifiable reasons or cause.
In practice, employers will likely need to upgrade and fine-tune their recruitment policies and processes to ensure that:
they are compliant and reduce the risk of unfair dismissal claims by their new recruits; and
any risks are mitigated by hiring the right people in the first place. We expect to see more careful screening by employers, more investment in psychometric or other testing to ensure a potential candidate is a good fit for the role, and far more rigour and time spent in continuous assessment of new hires during the first few months of their employment.
Going forwards, there will need to be more formal monitoring and feedback sessions during an employee’s probationary period, and these should be properly documented. Management will need to be focussed on areas of underperformance and conduct issues and not shy away from these matters, to ensure that any later decision to dismiss can be properly justified.
3. The Right to Disconnect
The New Deal states that a new “right to switch off” would provide workers with the right to disconnect from work outside of working hours and not be contacted by their employer.
Whilst similar concepts already exist in some other European countries (like Belgium and Ireland), it will be new to the UK so it will be interesting to see how it is adopted, given the UK’s more 24/7 culture.
The Government has said that employers and workers will have the opportunity to agree bespoke workplace policies or contractual terms, suggesting that the right would not be absolute. We suspect that future guidance or a Code of Practice may emerge in the coming months; in any event, employers will likely need be creative in this regard and consider practical measures such as training to respect out of hours emails, calls and cover arrangements.
It is likely that any ‘disconnect’ proposals which employers consider will need to be considered against other well-being initiative and existing policies, such as those relating to flexible working and leave.
4. Zero hours contracts
The Government has suggested it will introduce new rules designed to prevent the abuse of zero hours contracts. Initially this was thought to be an outright ban on zero hours contracts, but the Labour Party’s position has subsequently softened.
Instead, we understand that employers will be allowed to continue to use zero hours contracts provided they are not “abused” or exploitative (for example, where an employer does not guarantee any work, but the worker is obliged to be available for any work that is offered).
A new law is planned to set out the minimum standards expected, and there would be a new right to a contract that reflects hours that are regularly worked (as judged against a 12-week reference period).
Employers will need to review their use of zero-hour contracts to ensure that they comply with the new rules.
5. Fire and Re-hire
The current Government has introduced a new statutory ACAS Code of Practice on Dismissal and Re-Engagement, which is due to go into effect imminently, on 18 July 2024. Unreasonable failure to comply with this risks a Tribunal award against an employer being increased by 25%. Where this relates to a failure to meet collective consultation obligations, the potential liability could be considerable.
The new Labour Government appears poised to go a step further and has suggested that it will end the practice of “fire and rehire” as a lawful way to change an employee’s contractual terms and introduce a new “strengthened” code of practice.
Potential areas for change on fire and rehire include:
improving information and consultation procedures; and
adapting unfair dismissal and redundancy legislation to prevent workers being dismissed for failing to agree to a worse contract.
Whilst “fire and rehire” practices have been under scrutiny in recent times, they can, where used reasonably and with proper consultation, be a helpful tool for employers to implement necessary changes. It will be vital to ensure any future exercises comply with the new rules and anticipated code of practice.
Please do get in touch with our Employment Team if you’d like to discuss how any of these Labour proposals will impact your organisation and how best to plan for these changes.
Forsters have advised Norgine Limited on the acquisition and legal aspects of the fit out of their new 24,000 square foot premises at ARC Uxbridge.
Norgine is a uniquely positioned, specialty pharmaceutical and consumer healthcare company, with over €500 million of annual revenues and a 120-year track record of bringing life-changing products to patients and consumers across our core markets of Western Europe, Australia and New Zealand.
Glenn Dunn, Head of Forsters’ Corporate Occupiers group, advised Norgine and was assisted by Owen Spencer, Molly Haynes and Polly Streather.
