Due Diligence. We manage the complexity Committed to the solutions

Transcription

1 01 enote II Due Diligence We manage the complexity Committed to the solutions

2 02 INDEX Page Introduction 3 Due-Diligence-General framework 4 Why to conduct a Due Diligence? 5 Planning of the Due Diligence 6 Due Diligence process 7 Formalization of the acquisition 9 Contractual elements of the acquisition 10 agreement

3 03 INTRODUCTION INTERIM MANAGEMENT O Our Services and Solutions include: ENTERPRISE AND PROJECT MANAGEMENT MANAGEMENT OF THE BUSINESS TRANSFORMATION INTRODUCING COMPANIES TO NEW MARKETS OVERSEAS Using our Tools Box, WE DELIVER, we have developed this enote in order to make available our rich experience in conducting the Due Diligence process along with our proven track record of assisting the companies on this particular.

4 04 DUE DILIGENCE- GENERAL FRAMEWORK Further to our vast experience in conducting Due Diligences, we are in a position to define it as the deep investigation process of business or company segment prior to the acquisition, re-financing or re-structuring, associated with the concerned Corporate Finance transaction. This process will assist the parts in making the relevant investment decisions since the detailed information has been made available and in prospect of the business circumstances. Due Diligence is the requisite bridge-crossing process pertaining to the acquisition deal; without it, the likelihood of failure may well be of great proportions. Due Diligence has been identified as the usual practice, generally accepted by the purchasers of companies so as to ensure that every piece of the puzzle fits on the right location prior to completing the transaction. In doing so, it is avoided any potential post-acquisition schocks.

5 05 WHY TO CONDUCT THE DUE DILIGENCE? the In our opinion, the main reasons to implement the Due Diligence process during the acquisition of a company are associated with the following scenarios: Mitigate any risks associated with the transaction, as a result of providing a detailed investigation of the company followed by the purchaser s interest shown at the time of confirming his intentions (Formal Intentions Letter). Identify and evaluate any synergy practices arisen Identify and assess any hidden contingencies associated with the accountings, balance statement, the real prospect of the business, labour conflicts or legal ramifications. Development of the post-integration strategy Founding the basics for the Final Negotiation

6 06 PLANNING OF THE DUE DILIGENCE The general consensus is that considerations must be given to the scope of the Due Diligence so as to: Deeply understanding of the proposal and the level of access to the necessary information to the parts. Understanding what sort of benefits be expected to arise throughout the Due Diligence process. Identify the parts worries along with the implementation of the adequate mitigation measures. Define the time frame together with the resources to be deployed to the process..

7 07 DUE DILIGENCE PROCESS Upon assessing the complexity of the acquisition process, the scope of the Due Diligence as well as the areas of the business to investigate may vary. The study will include the following essential aspects: Finance analysis Share market and sector analysis along with the company strenghts Key Staff Organization chart analysis Analysis of the key Operations and Technology aspects Labour conflictivity appraisal Tax charge implications Other legal implications Optimizing the investigations so as the Due Diligence process is not disrupting the day-to-day operations. This will be always conducted in coordination with the key players: seller and buyer of the company. Progress Reporting of the investigations so as to bring the transaction to the investor s attention.

8 08 DUE DILIGENCE PROCESS Issuance of the detailed conclusions report, along with providing some mitigation measures and a comprehensive proposal to secure the deal success. ERNEL+ s Interim Mangers will remain committed to ease the understanding of the parts in order for the purchaser to establish and develop his integration strategy of the new company upon the completion of the Due Diligence. Identifying some valuable Lessons learned during the process will allow to strike the deal and it will come in handy to the purchaser. The Due Diligence process provides useful and noteworthy information to both parts in readiness for the next phase of the business integration: procedures and operations improvements, workforce optimization, stakeholder management, costs optimization, identification of economy of scale,

9 09 FORMALIZATION OF THE ACQUISITION Upon the completion of the Final Negotiation, it is deemed to be needed the formalization of the agreement in accordance with the legal requirements and the pertinent laws. This will be accomplished by the formal sanctioning of the Acquisition Contract between the Parts which guarantees the rights and obligations of each part. Since it is considered a key complex step prior to transfering the ownership of the company, partially or completely, along with the shares take over, the documentation must reflect the agreement and conclusions on the negotiation process clearly and in line with the Due Diligence. Also, it must include all the facts, warrantees and any special circumstances to be considered in due course. Last but not least, the conditions and specific clauses of the acquisition agreement will be incoprorated with reference to the type of business.

10 10 CONTRACTUAL ELEMENTS OF THE ACQUISITION AGREEMENT Whilst the details of the acquisition agreement may vary depending on the omcomplexity of the transaction, below are the key points for your ease of reference: I. Date of the Contract: sanctioning the agreement II. III. IV. Parts of the Agreement: Seller and Purchaser Terms of the Contract: two scenarios are available: 100 % of the shares or just a package only (option a: a minor shares portion still remains within the original owner/shareholders whilst the rest is bought by the purchaser; option b: acquisition of a minor shares package only). It is mandatory to establish the clauses of any purchase ( totally or partially )in respect of the new owners along with setting up the time frame for the taking over. Agreed Price: This will include the price breakdown (fixed part and variable part), subject to some agreed key performance indicators).

11 11 CONTRACTUAL ELEMENTS OF THE ACQUISITION AGREEMENT V. Payments: the usual payment practices are as follows: Fixed price payment in cash at front. Fixed price payment in instalments with bank guarantees to be provided until the full agreed quantity be paid off. Mixed payment (a fixed part and escalable part) subject to measurable business metrics, in accordance with the agreed criteria to avoid misunderstandings. Combined payment: part to be paid in cash plus shares swapping. VI. Final Considerations and warrantees: It is mandatory to include all final considerations presented by the seller with regards to the up-to-date finance statements, tax and legal implications, labour laws, in order to protect the purchaser of any issues arisen throughout the process, prior to the fomal acquisition, that may affect the assessment of the company or the agreed price to pay. All bank warrantees to cover any contingencies must be included should the seller did not make the purchaser aware of the changes arisen but incidentally hidden by the seller which wil impact the business operations.

12 12 CONTACTO (+34) (+34) C/ José Ortega y Gasset 40, 1º Izq MADRID Spain info@ernelplus.com