In efforts to crank up its digital capacity, pan-European marketing services company Hasgrove plc has acquired Odyssey Interactive and Pavilion Communication Services in two separate deals worth £13.6 million.

The double deal fits into Hasgrove’s strategy of acquiring and developing a portfolio of brand leaders in high growth areas in the UK and Europe.

The AIM-listed group acquired Pavilion Communication Services and its subsidiary, an independent digital marketing agency, for up to £9.9 million. The initial payment of £5.6 million will be made in cash and the balance satisfied by the placing of some 1.2 million new ordinary shares at 143.5p.

There will be further deferred payments of up to £4 million based on 65 per cent of EBIT in the period to 28 February 2011. These payments will be made in a mixture of short-term loan notes and a placing of new shares, with a minimum of 50 per cent of the further consideration being paid in loan notes.

The maximum deferred consideration will be payable provided that Pavilion generates an EBIT of more than £6.2 million over the next three-and-a-half years.

The Pavilion deal was funded by Hasgrove’s cash resources and debt provided by KBC Bank. The bank was first introduced to the group by KPC Peel Hunt, which floated Hasgrove on AIM in 2006.

Led by Nigel Barker, regional director for the North of England, KBC Bank provided a £10 million acquisition facility. Barker said: “Hasgrove’s footprint in Europe is closely matched to that of KBC, which offers synergies for the future and with head room in the facility to provide funding for future acquisitions.

KBC received legal support from Eversheds’ partner Kathryn Walters who commented: “The acquisition will no doubt be one of a number of acquisitions that Hasgrove completes within the next 12 months as part of its strategic growth”.

Hasgrove bought Odyssey Interactive, an independent supplier of intranet services, for 3.7 million. The consideration consists of an initial payment of £2.6 million of which £1.8 million is payable in cash and the balance satisfied by the placing of 550,260 new ordinary shares at 143.5p.

In addition, there will be further deferred consideration equal to 50 per cent of Odyssey Interactive’s EBIT for the period to 31 December 2010. These further considerations will be a mixture of short-term loan notes and new ordinary shares with a minimum of 50 per cent of the further consideration being paid in loan notes.

The funds for the transaction came from the Hasgrove’s own resources.

Legal advice was provided to Odyssey by partner Stephen Hadlow of Shammah Nicholls. Hadlow said: “The transaction centred around ensuring the ongoing involvement of the vendors, which was considered key to the future profitability of Odyssey. Hasgrove was a natural acquirer due to their strength in the communications sector and commercial synergies with recent acquisitions.”