Annual Report 2011 - Skanska

06NoteContinuedCollateralThe Group has provided collateral (assets pledged) in the form of financial receivablesamounting to SEK 1,073 M (1,000). See also Note 33, “Assets pledged, contingentliabilities and contingent assets.” These assets may be utilized by a customerif Skanska does not fulfill its obligations according to the respective constructioncontract.To a varying extent, the Group has obtained collateral for trade accounts payablein the form of guarantees issued by banks and insurance companies and, in somecases, in the form of guarantees from the parent companies of customers.Note07Business combinationsBusiness combinations (acquisitions of businesses) are reported in compliance withIFRS 3, “Business Combinations.” See “Accounting and valuation principles,” Note 1.Skanska acquired a number of companies during 2011. In 2010 Skanska made noacquisitions.Skanska’s consolidated income statement included net sales of SEK 246 M and netprofit of SEK 6 M for Soraset. If the acquisition had occurred on January 1, 2011,the net sales of the business would have amounted to SEK 1,295 M and its net profitSEK 13 M.Acquisitions of Group companies/businessesAcquisition in the United StatesSkanska completed the acquisition of Industrial Contractors Inc. in Indiana onDecember 28, 2011. Industrial Contractors Inc., which is being renamed IndustrialContractors Skanska Inc. (ICS), is a leading market player in commercial, industrialand power-related construction in the Midwestern U.S., where Skanska has previouslyhad a limited presence. Skanska acquired 100 percent of the shares.The main reasons for the acquisition are to enter the Midwestern market andto expand Skanska’s portfolio of construction services, especially in industrial andpower-related construction. The purchase price allocation is preliminary, and allintangible assets have initially been classified as goodwill.If the acquisition had occurred on January 1, 2011, the net sales of the businesswould have amounted to SEK 3,116 M and its net profit to SEK 60 M.The final purchase price will be set after an audit is completed. This audit will befinished during the first half of 2012. An additional SEK 20 M in purchase price maybe paid as compensation for being able to make a “338 election,” which might makethe entire goodwill amount tax-deductible for 15 years. This would result in aboutSEK 200 M in tax savings over 15 years.Direct acquisition expenditures amounted to SEK 33 M, consisting of attorney andconsultant expenses, and were charged to selling and administrative expenses in theconsolidated income statement.Acquisition in FinlandSkanska acquired 100 percent of Soraset Yhtiöt Oy, a civil construction company,on November 2, 2011. The acquisition will strengthen Skanska’s market positionin Finland and is regarded as complementing its existing operations and enablingSkanska to provide increased service to its customers. Goodwill is attributableto the experience and knowledge that Soraset possesses as well as the synergiesthat will make it possible for Skanska to bid on more complex projects that it couldotherwise do.The contract contains an agreement on contingent consideration. Contingentconsideration is payable provided that specified earnings targets are met and tosome extent that former owners remain employees of the company. The estimatedcontingent consideration is based on earnings reaching their targeted levels. Theestimated contingent consideration totals about SEK 70 M, of which about SEK35 M was recognized as a liability on the acquisition date. The remainder will berecognized as a salary expense during a 4-year period, provided that the conditionsare fulfilled.If earnings exceed the targets and former owners remain employees of the company,former owners will receive 50 percent of the portion of earnings that exceedsthe targets. The total contingent consideration may not exceed SEK 140 M. If earningsfall short of targets, the total contingent consideration can be reduced to zero.Direct acquisition expenditures amounted to SEK 7 M, consisting of consultantexpenses, and were charged to selling and administrative expenses in the consolidatedincome statement.Other acquisitionsOn February 1, 2011, Skanska acquired 100 percent of the shares in the Slovakiancompany Skybau s.r.o. Skybau is a leading construction company in Slovakia in thefield of cast-in-place concrete structures. The acquisition strengthens Skanska’smarket position in the construction sector both in the Czech Republic and Slovakia.Synergies between Skybau’s market knowledge and experience of cast-in-placeconcrete structures, combined with Skanska’s various strengths, account for thegoodwill. Skanska’s consolidated income statement included net sales of SEK 8 Mand a net profit of SEK 0 M for Skybau, which is essentially the same as if the acquisitionhad occurred on January 1.On March 16, 2011, Skanska acquired 100 percent of TKI Invest AB, a Swedishcontracting company in the heating, ventilation and air conditioning (HVAC) industry.The acquisition will enable Skanska to deliver more specialties in the installationfield, and TKI will provide expertise and knowledge, in light of the ever-stricterenergy requirements that the installation field faces. Goodwill is attributable to thatexpertise and knowledge. Skanska’s consolidated income statement included netsales of SEK 168 M and net profit of SEK 2 M for TKI. If the acquisition had occurredon January 1, the net sales of the business would have totaled SEK 224 M and netprofit SEK 3 M.On April 11, 2011, Skanska acquired Marthinsen & Duvholt AS (M&D), aNorwegian company in the civil construction industry. The acquisition consistedof 75 percent of the shares. For the remaining part there is a put/call option. Theacquisition provides important additional expertise to Skanska that will lead to newsynergies, which account for the goodwill item. Skanska’s consolidated incomestatement included net sales of SEK 266 M and a net profit of SEK 10 M for M&D. Ifthe acquisition had occurred on January 1, the net sales of the business would havetotaled SEK 334 M and net profit SEK 12 M.On July 15, Skanska acquired Eshacold Danmark A/S, a Danish company in theasphalt industry. It is part of the Skanska Sweden business area. The purchaserepresents a broadening of Skanska’s asphalt paving product range. Goodwill is attributableto synergies through knowledge of techniques that, among other things,reduce noise. The goodwill item is tax-deductible during a 7-year period. Skanska’sconsolidated income statement included net sales of SEK 10 M and net profit ofSEK 1 M for Eshacold. If the acquisition had occurred on January 1, the net sales ofthe business would have been SEK 18 M and net profit SEK 1 M.On December 14, 2011, Skanska acquired 100 percent of the Polish road constructioncompany PUDiZ Sp. Z o.o. The acquisition enables Skanska to operate in a newgeographic market in Poland. PUDiZ is a financially stable company with a broadrange of road projects, which will strengthen Skanska’s position as a road builder innortheastern Poland. All this accounts for the goodwill item. Skanska’s consolidatedincome statement includes no net sales or net profit for PUDiZ during 2011. If theacquisition had occurred on January 1, the net sales of the business would havetotaled SEK 292 M and net profit SEK –14 M.128 Notes, including accounting and valuation principles Skanska Annual Report 2011