Supreme Acquires Liberty Flights Holdings Ltd

The corporate team in Beyond Law Group’s specialist corporate and commercial practice, Beyond Corporate, has advised Supreme on its acquisition of Liberty Flights Holdings Limited in a deal worth up to £14.75 million.

Liberty Flights Holdings Limited was founded in Darwen in 2010 and is best known for its Liberty Flights vaping brand and Dot Pro device. The firm specialises in high-quality vaping devices and premium e-liquid, in addition to distributing an expansive catalogue of third-party e-liquid brands worldwide. The company generated a revenue of around £9 million and an EBITDA of £1.5 million for the year ending 31 January 2021.

Supreme is a manufacturer, supplier and brand owner of fast-moving consumer products   based in Manchester and listed on AIM, with a focus on manufacturing and/or importing and supplying vaping products, batteries, lighting and sports nutrition and wellness products. Its major clients include B&M, Poundland, The Range and Home Bargains.

As part of the deal, Supreme subsidiary Supreme Imports Limited will acquire 100% of the share capital of Liberty Flights Holdings Limited for a total consideration of up to £14.75 million. This comprises a £7.75 million cash payment upon completion of the acquisition, a £2 million deferred payment payable in 12 months and an earn-out of up to £5 million to be paid, subject to meeting certain performance metrics over a one-year period following the acquisition. Supreme is expected to allow Liberty Flights to operate as a standalone entity for 12 months following the closure of the deal before fully integrating the company.

Beyond Law Group advised Supreme in collaboration with Cortus Advisory Group. CapEQ and Harrison Clark Rickerbys advised Liberty Flights.

 

Lawyer Monthly had the pleasure to speak with Stephen Chadwick, Partner at Beyond Corporate to give us some further insight into this transaction:

Please tell us more about the role Beyond played during this acquisition.

Beyond Corporate is Beyond Law Group’s specialist corporate and commercial practice and has a strong reputation as a leading practice in the North-West.

Our specialist corporate team in Beyond Corporate became involved early in the process once Supreme had identified Liberty Flights as an acquisition they wished to move forward with. We were initially involved in the heads of terms for the acquisition and subsequent due diligence from a legal perspective, then moved on to drafting and agreeing a share purchase agreement and various ancillary documents.

As Supreme is quoted on AIM, care and consideration needed to be given to limiting those persons who knew of the acquisition (with appropriate insider lists being maintained by Supreme), whether any of the class tests in the AIM rules might be breached and what announcements to the AIM market might be required.

What specialised skills and experience did you and your colleagues bring to the process?

Our corporate lawyers are flexible and dynamic, never lose sight of what is important, are able to provide custom-made advice quickly, and have a team with the resources to back it up.

This particular transaction utilised Beyond Corporate’s specialist expertise in corporate and tax, commercial and Intellectual property, real estate, employment and share options. These specialisms are needed on most corporate transactions to some degree. However, for this transaction it was necessary for us to draw on additional real estate and commercial and Intellectual property support.

Beyond Corporate is home to some of the most specialised and highly regarded legal teams in the region. Our corporate team works alongside specialist legal teams including commercial, headed up by ex-Fieldfisher partner James Corlett, and real estate, which is led by James Flynn – a go-to senior lawyer in the real estate and construction sector.

Having access to the specialist knowledge and expertise of such highly respected individuals and teams put Supreme in an exceptionally strong position from the outset. Our breadth of experience across each of our specialist teams helps us to provide our clients with the right solution. We provide a bespoke service for clients and do not have a one-size-fits-all approach to what we do.

Beyond Corporate is home to some of the most specialised and highly regarded legal teams in the region.

Were any major challenges encountered during the acquisition?

In terms of legal challenges, the due diligence process identified some areas of risk where more could be done to reduce the exposure of the target companies (and hence Supreme post acquisition) to potential future issues. In this instance, these issues were predominantly IP- and property-based.

The IP issues were related to a joint venture that the target’s subsidiary was party to and title to property. We identified that these IP issues had the potential to impact upon the value of the business if the exposure was not sufficiently mitigated.

How were these overcome?

The legal challenges were overcome with frank discussions with the sellers and their solicitors and advisers on the issues involved and appropriate mitigating strategies in respect of the risk areas revealed being put in place.

We had to advise the buyer and support the target in its negotiations with its JV partner in order to mitigate the IP risk on a pragmatic and commercial basis to get to a point where the risk was minimised as far as practically possible, and the value retained in the target.

How did you work with other legal counsel to ensure the successful and timely closure of the transaction?

We offer an extremely high-level, personal service for our clients, but we also know from experience how important it is to collaborate and communicate effectively with third parties such as legal counsel in order to expedite the process, mitigate any possible challenges and ensure a timely and successful outcome for all involved.

We believe that true multidisciplinary collaboration requires both sides to combine their perspectives and expertise and tailor them to the clients’ needs. The sellers’ solicitors in this case were Harrison Clark Rickerbys and, whilst protecting their clients’ interests, they were sensible and responsive.

We held weekly Friday Teams calls in which we would update on progress and communicate any questions or concerns. This ensured we were making consistent progress and any underlying issues or challenges were being dealt with in a collaborative and timely manner. Without sensible discussions and solutions on all sides, the acquisition may not have occurred.

What significance do you believe this deal holds for the e-cigarette and vape market in the UK?

Supreme is able to achieve high quality at an affordable price due to its extensive investment in product development and manufacturing facility. This acquisition gives Supreme access to a different pod-based device and different flavours of e-liquids and provides them with an opportunity to tap into a new market with a new customer base. The wider vape market is projected to grow, and the more options available to Supreme, the better their chances of revenue growth.

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