Sale of the London Aquarium to Merlin Entertainments

Client: UK management team of County Hall Entertainments Limited
Sector: Leisure and visitor attractions
Work: Sale of the London Aquarium to Merlin Entertainments

I acted for the UK-based management team of County Hall Entertainments Limited on the sale of the London Aquarium to Merlin Entertainments.

The London Aquarium was already one of London’s established visitor attractions, occupying substantial riverside premises within the historic County Hall building on the South Bank. The transaction involved the acquisition of the aquarium business by Merlin as part of the continued expansion of its portfolio of visitor attractions.

Advising the management team through the sale

I worked closely with the management team throughout the transaction and negotiated the legal documentation with the buyer’s City law firm.

The transaction was structured as an asset sale, requiring detailed consideration of exactly which assets, contracts, rights and liabilities associated with the aquarium business would transfer to the purchaser.

For a management team continuing to operate a substantial business while simultaneously dealing with its sale, one of the challenges is managing the demands of the transaction without allowing the legal process to interfere unnecessarily with the day-to-day operation of the business. My role included helping the management team navigate that process and acting as the principal interface with the purchaser’s lawyers on the transaction documentation.

Due diligence on an operational visitor attraction

The acquisition involved a full legal due diligence exercise.

The due diligence requirements for a major visitor attraction can be extensive. The buyer needs to understand not simply the company’s corporate records, but the legal arrangements underpinning the operation of the attraction: its premises, employees, commercial contracts, suppliers, intellectual property, licences and other operational arrangements.

I worked with the management team in responding to the purchaser’s due diligence enquiries, identifying and providing the relevant information and dealing with legal issues raised during the purchaser’s investigation.

This was particularly important because the London Aquarium was not a business that could simply be relocated following the acquisition. Its value and operation were closely connected with its prominent County Hall premises.

The County Hall lease

An important feature of the transaction was the aquarium’s occupation of its riverside premises at County Hall, the former home of the Greater London Council.

The building was owned by a Japanese private company. As part of the wider acquisition arrangements, Merlin negotiated a new 35-year lease of the aquarium premises with the landlord.

This property element added another dimension to the transaction. The buyer needed both to acquire the operating business and to secure the long-term right to continue operating the attraction from the premises on which that business depended.

It illustrates an important issue in many business sales: the sale agreement cannot be considered in isolation. Property arrangements, key contracts, licences and other third-party relationships may be fundamental to whether the buyer can actually operate the business it is acquiring.

Negotiating the asset sale agreement

I advised on and negotiated the asset sale agreement with the purchaser’s legal team.

An asset sale requires careful definition of what the purchaser is acquiring and what remains with the seller. The agreement also has to allocate responsibility for the business’s liabilities and establish the contractual protections being given to the purchaser.

For the selling side, this means ensuring that the agreement accurately reflects the commercial deal while avoiding the seller or management team assuming liabilities beyond those which have actually been agreed.

Warranties and disclosure

The transaction also involved negotiating the warranties sought by the purchaser and undertaking a detailed disclosure process.

Warranties are an important part of a business sale because they give the buyer contractual statements about the condition and operation of the business it is acquiring. From the seller’s perspective, they can create significant potential liability after completion if they are not properly negotiated and disclosed against.

I advised the management team through this process and the preparation of the disclosure letter, ensuring that relevant matters identified during the transaction were formally disclosed against the purchaser’s warranties.

This required detailed knowledge of the business and close cooperation between the legal advisers and the management team.

Completion and subsequent development

The transaction is a good example of the role I can play when advising the management or owners of an established business on a sale to a much larger corporate purchaser: working directly with the people who know the business, managing the due diligence process and negotiating with the purchaser’s City lawyers to get the transaction through to completion.

Key areas advised on: business sale • asset sale agreement • management team advice • negotiations with City lawyers • legal due diligence • warranties • disclosure letter • commercial contracts • property and lease considerations • transaction management • completion