Page 27 - SONEPAR 2021 - AcquisitionBook

PHASE 1:
STRATEGIC ANALYSIS
4.2
PHASE 2:
EXPLORATORY PHASE
PHASE 3:
LETTER OF INTENT
PHASE 4:
DUE DILIGENCE
PHASE 5:
SALE & PURCHASE AGREEMENT
PHASE 6:
CLOSING
PHASE 7:
INTEGRATION & FOLLOW-UP
CREATE A CLEAN TEAM (IF NEEDED)
It is lawful and necessary to review various types of information during the DUE DILIGENCE phase. However, such information may include COMPETITIVELY SENSITIVE INFORMATION which requires extra caution.
Processes must be put in place to ensure that only necessary information is shared, and that the use and recipients of this information are strictly limited to avoid any competition distortion. The main concern with such information sharing relates to potential infringement of rules that prohibit (i) “Gun Jumping” and (ii) anti- competitive agreements.
Consequently, a CLEAN TEAM must be set up for sharing COMPETITIVELY SENSITIVE INFORMATION:
➜ CLEAN TEAM members must preferably consist of external advisors/experts who will report back to the purchaser at a more aggregated level;
➜ in case associates of the purchaser need to access COMPETITIVELY SENSITIVE INFORMATION, the purchaser must ensure that members of the CLEAN TEAM do not include associates involved in the day-to-day operation of, or strategic
decision-making related to, the purchaser’s business (i.e. defining or applying commercial, marketing and pricing policies);
➜ the list of CLEAN TEAM members must be vetted by SONEPAR’s Legal teams.
A specific CONFIDENTIALITY AGREEMENT may have to be signed (Appendix 11).
To identify what COMPETITIVELY SENSITIVE INFORMATION
is, it needs to be considered what seller and purchaser regard
as commercially sensitive, and which they would not from a commercial perspective be willing to share with their competitors
in normal circumstances. The more granular the information, the
more likely it is to be regarded as competitively sensitive. Detailed examples of COMPETITIVELY SENSITIVE INFORMATION and 4 non-COMPETITIVELY SENSITIVE INFORMATION are set forth in Appendix 10.
COMPETITIVELY SENSITIVE INFORMATION that needs to be shared with individuals who are not part of the CLEAN TEAM will first be aggregated and anonymized in such a way that it is compliant with competition laws, subject to prior review by competition law counsel.
4.3 CALIBRATE AND PERFORM THE DUE DILIGENCE
The scope of information, the format and the timeline will be agreed upon with the seller to allow adequate review. In most cases, information will typically be centralized in a DATA ROOM (whether electronic or not), where all requested data will be made available in a defined place to a restricted list of people jointly agreed with the seller.
The scope of the DUE DILIGENCE that SONEPAR wishes to cover shall be made clear in the LOI (e.g. countries, entities, holdings,
4.3.1 FINANCIAL AND TAX
At this stage, a complete audit can be performed to have a fair appraisal of the target’s economics based on its own books and numbers. Priority will be given to external financial and tax advisor at local level in agreement with Group CFO and VP Tax.
Financial DUE DILIGENCE will focus on the review of the past years, current year and forecasts of the target company with a special focus on the quality of earnings (how robust are the historical results), and also on the quality of the NET DEBT (which items should be taken into account to determine the NET DEBT), the analysis of the budget and future projections and the normalized WORKING CAPITAL.
estimated duration, etc.). Sometimes DUE DILIGENCE must cover not just the target company, as there could be some unknown businesses or risks linked to the environment of the seller.
The standard DUE DILIGENCE checklist provided in Appendix 12 shall be used and adapted with the support of external advisors to the local context, considering the local resources, size, risk profile and structure of the target as well as the acquisition process timeline.
Tax DUE DILIGENCE concerns the investigation of the historical and future tax situation and exposure of the target company or companies in the areas of both direct and indirect taxes. It is essential as it will determine the acquisition structure as well as the representations and warranties that will have to be inserted in the SPA. The VP Tax must be involved in all SONEPAR M&A transactions.
At the end of the financial DUE DILIGENCE, the purchaser should be able to update the ACQUISITION SHEET and reassess the acquisition key numbers.
Calibrate and perform the DUE DILIGENCE
SONEPAR - ACQUISITION MANUAL - 2021 - FOR INTERNAL USE ONLY 25