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27 Business combinations

On 22 July 2005 the Group acquired 100% of the voting rights of AGS Publishing, an educational assessments and curriculum materials publisher. In addition, several other businesses were acquired in the current and prior years, none of which were individually material to the Group.

The assets and liabilities arising from acquisitions in each of the years are as follows:

All figures in £ millions	2005					2004 Total Fair value	2003 Total Fair value
	AGS Carrying amount	AGS Fair value adjs	AGS Fair value	Other Fair value	Total Fair value
Tangible fixed assets	1	-	1	6	7	1	10
Intangible assets	-	58	58	31	89	15	44
Intangible assets - pre-publication	15	-	15	-	15	-	-
Inventory	3	-	3	7	10	2	-
Receivables	7	-	7	25	32	3	32
Payables	(5)	(1)	(6)	(36)	(42)	(4)	(95)
Provisions	(2)	-	(2)	(1)	(3)	1	(4)
Deferred taxation	-	(20)	(20)	(1)	(21)	-	(15)
Cash and cash equivalents	(1)	-	(1)	4	3	-	34
Equity minority interests	-	-	-	8	8	(3)	(8)
Net assets/(liabilities) acquired at fair value	18	37	55	43	98	15	(2)
Goodwill	105	-	105	50	155	22	113
Total			160	93	253	37	111
Satisfied by:
Cash			(160)	(89)	(249)	(39)	(87)
Deferred cash consideration			-	(5)	(5)	-	(24)
Costs provided for			-	1	1	(1)	-
Net prior year adjustments			-	-	-	3	-
Total consideration			(160)	(93)	(253)	(37)	(111)
Book value of net assets/(liabilities acquired)			18	40	58	4	(32)
Fair value adjustments			37	3	40	1	30
Fair value to the Group			55	43	98	5	(2)

The fair value adjustments relating to the acquisition of AGS are provisional and will be finalised during 2006. They include the valuation of intangible assets, the related deferred tax effect and recognition of provisions. Adjustments to 2004 provisional fair values largely relate to the acquisition of Dominie Press.

Net cash outflow on acquisition:

All figures in £ millions	2005	2004	2003
Cash - current year acquisitions	(249)	(39)	(87)
Deferred payments for prior year acquisitions and other items	-	(2)	(7)
Cash and cash equivalents acquired	3	-	34
Cash outflow on acquisition	(246)	(41)	(60)

The goodwill arising on the acquisition of AGS is attributable to the profitability of the acquired business and the significant synergies expected to arise.

AGS contributed £21m of sales and £6m to the Group's profit before tax between the date of acquisition and the balance sheet date. Other businesses acquired contributed £1m to the Group's profit before tax between the date of acquisition and the balance sheet date.

If the acquisitions had been completed on 1 January 2005, total Group sales for the period would have been £4,168m, and profit before tax would have been £474m.

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