PWC - Growing your business through M&A - Transactions brochure 2013

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Information about PWC - Growing your business through M&A - Transactions brochure 2013
Business & Mgmt

Published on August 13, 2013

Author: GaldeMerkline

Source: slideshare.net

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PWC - Growing your business through M&A - Transactions brochure-2013

Growing your business through M&A www.pwc.be

1Growing your business through M&A Table of contents Introduction – Getting deals done better 3 Corporate finance 4 Vendor due diligence & vendor assistance 5 Valuations 6 Commercial due diligence 7 Synergy analysis & validation 9 Financial due diligence (buy side) 10 Tax due diligence 12 Operational due diligence 13 IT due diligence 14 Legal due diligence, legal deal structuring & documentation 15 Human resources transactions services 16 Business restructuring services 18 Tax structuring 19 Management participations 20 Direct & indirect tax modelling 22 VAT optimisation 24 Post-deal services 25 Corporate simplification 26 Public-private partnerships 27 Compliance in a transactions environment 28 Contacts 29

2 Growing your business through M&A Size matters “Inorganic growth is the solution”

3Growing your business through M&A Getting deals done better If you want to grow your business in today’s market, PwC is a well-known leader in mergers and acquisitions. From raising capital to buying a business or realising value through a sale or restructuring, our team can help. Whether you are a public or private organisation, a management team, or a private equity house, we help you to get deals done faster, with less disruption and less cost. Cross-functional teams bring together the relevant expertise you need, including in-depth knowledge of your industry sector. Our philosophy is simple: we want to make sure you get the maximum return on your transaction. By examining a transaction from every angle, we turn a complex process into a manageable and integrated set of steps. • Corporate finance • Vendor due diligence and vendor assistance • Valuations • Commercial due diligence • Synergy analysis and validation • Financial due diligence (buy side) • Tax due diligence • Operational due diligence • IT due diligence • Legal due diligence, legal deal structuring and documentation • Human resources transactions services • Business restructuring services • Tax structuring • Management participations • Direct and indirect tax modelling • VAT optimisation • Post deal services • Corporate simplification • Public private partnerships • Compliance in a transactions environment Our service offerings include:

4 Growing your business through M&A Corporate finance Is organic growth no longer satisfying the needs of your stakeholders? Or would you like to dispose of non-core assets? From acquisitions to raising finance, our Corporate Finance team brings you a full range of M&A and financial advisory services for any industry sector. If you’re looking to restructure your asset base, we’ll help you dispose of underperforming assets or non-core parts of your business. Wherever you are in the world, you’ll have access to local teams any time you need them. By combining profound industry expertise with local knowledge, you’ll get a better deal. • You’re looking for opportunities to generate value by acquiring or merging with the right business, wherever in the world that business is located. • A reorganisation or change in strategic direction means you need to dispose of an asset or division. • You’re looking for advice on privatisation as you’ve noticed more governments are turning to the private sector to finance and operate many businesses and services previously in the public sector. • Your industry is consolidating due to globalisation and competition, and you are looking for businesses that can offer you a good strategic fit. • You want to realise the value of your business. • You want to raise money for expansion. • From beginning to end, we provide expert advice throughout your transaction. • Our global network keeps us in constant touch with the markets, so we can spot opportunities and assemble teams to execute a deal as the need arises. • We’ll help you to find the right buyer for your business or to identify the right acquisition target to match your strategic ambitions. • We’ll put our industry expertise to work to identify businesses that are good strategic fits, so you can make acquisitions, mergers and alliances that will maintain and build your competitive advantage. Your challenges How PwC can help you

5Growing your business through M&A Vendor due diligence & vendor assistance If your company is up for sale – or you want to sell off one of your divisions – you need to show potential buyers a detailed report attesting to its financial health. Vendor due diligence gives you an in-depth report on the financial health of the company you’re selling. So you’ll have greater control over the sales process and the timing of the sale, which, in turn, can help secure you a fairer price. Our job is to provide comfort to both buyers and sellers, taking an independent view of the business, its performance and its prospects. Vendor assistance can be less time consuming than ‘full scope’ vendor due diligence and is potentially more suitable in situations where the likely purchasers are trade buyers. The key difference between vendor due diligence and vendor assistance is that vendor assistance is provided for the benefit of the vendor only. • Your company’s strategy involves disposing of part of the business, whether through a carve-out of certain business units or through the sale of existing entities. • You want to reposition your portfolio focus on core businesses or return value to your shareholders. • You’re starting to feel pressure from financiers as a result of deteriorating financial ratios. • You would like to anticipate the issues that a financial due diligence performed by a potential acquirer would identify without sharing these issues with the acquirer in advance. • You are a private equity house and you want to realise your capital gains through an exit. Your challenges • If you’re buying a business, our teams give you greater certainty over the nature of the business and the characteristics of its cash flow. This way, you’ll make better pricing decisions and more easily determine the level of gearing the structure will support. • We reduce disruption to the business by making the sale process more controlled. • We add credibility to the facts, figures and information provided in the information memorandum. • Our teams remove the need for a buyer to have substantial access to do its own due diligence work. Instead you can rely on the vendor due diligence report with a duty of care. • Our vendor assistance specialists make sure you’re the one in control of the pace of progress throughout the sale process. • We identify value-critical issues, so you can ‘regroup and fix’ without the glare of publicity. • We ensure the rapid execution of the divestment from the point of announcement, reducing the business disruption and accelerating the transfer to the new owners. • We reduce the risk of uncertainty for finance buyers, potentially justifying better offers. How PwC can help you

6 Growing your business through M&A Valuations Whether you are buying or selling a business, one of your first steps will be to evaluate exactly how much that business is worth. • Valuing all or part of your business requires input from a variety of specialist advisers who understand the value drivers in your industry sector together with your broader strategic aims. • If you operate internationally, this means understanding value drivers in different countries. By applying a common methodology across all countries, you get a more reliable view of the value of an international business. • In the event of a dispute, an independent valuation is likely to help resolve issues swiftly. • You want to increase the value of your company by acquiring or merging with a business that offers a good fit. • You need to dispose of an asset or division as part of a reorganisation or change in strategic direction. • You’ve made an initial valuation based on data available to you, but wish to validate and confirm your assumptions. • After the acquisition, you want to grant options to the executives. • You require a pre-purchase price allocation (pre-PPA) to assess the impact of a deal on your earnings per share or a PPA for IFRS purposes. • You want to assess the purchase price that management must invest alongside the private equity house. • You’ve paid the overall purchase price, but because of tax structuring you also need to know the value of the companies on an entity basis. • You are looking to acquire or sell real estate assets. • Our valuation specialists will give you an in-depth understanding of the value of each business or asset in a transaction. • We’ll produce independent value and fairness opinions for regulatory purposes, dispute resolution and related-parties transactions. • We’ll determine the fair market value in intercompany transactions and tax structurings. • We’ll identify strategies to maximise shareholder value by setting up shareholder value management processes and we’ll support you in making complex capital investment decisions (e.g. decision tree analysis, real options). • We’ll perform pre-PPA and impairment tests as independent advisers in relation to local or international accounting standards. • In the case of a hostile bid, our valuation teams can prepare a robust defence by analysing the assumptions made by the bidder to build a case against them. • We perform valuations on of any type of real estate property (e.g. office, retail, residential, warehouse). You’ll benefit from our extensive experience in financial modelling, in-depth knowledge of the local market and our global real estate network. Your challenges How PwC can help you

7Growing your business through M&A Commercial due diligence When a corporate or a private equity house wants to acquire another company, it needs to thoroughly understand that company’s current and projected performance. We provide commercial due diligence reporting, which offers you a comprehensive review of the company’s business plan in the context of projected market conditions and its industry and competition. As a result, we identify potential upsides and downsides in the projections and provide you with key insights to help you assess the market environment. By working alongside our financial due diligence teams, we offer you a more advanced and integrated service. Our conclusions are based on well- researched, integrated views of all aspects of the transaction. You are considering acquiring a company and: • are experiencing market or competitive uncertainty in areas such as new technologies, customers, trends, legislation, powerful buyers or a new geographic market. You need to know how these issues might impact the current and future value of the company. • the revenue/EBIT projections appear to be very aggressive (relative to historic performance). So you need to test or validate the feasibility of realising these projections. • a significant proportion of the revenue/EBIT projections appear to be based on the success of new products, customers and/or markets. You need to test or validate the reasonableness of these assumptions. Your challenges • You’ll benefit from the full PwC network at the most critical stage in the process, so you’ll be able to take more informed decisions about which route you wish to take. • You’ll be able to rapidly diagnose – and subsequently focus on – key commercial deal issues, so you can be sure that you’ve received expert advice regarding recent developments in your chosen sector. • Our commercial due diligence specialists will examine the external market trends and their impact on the target’s ability to achieve forecast results. We’ll also assess the market size and segmentation, as well as growth potential. • We’ll analyse key competitors and their market shares to establish whether the target has defined a niche to exploit its strengths and advantages. • Our team compares the external analysis with an assessment of the target’s competitive positioning by: –– evaluating the target’s strategy –– examining growth plans –– interviewing customers to obtain their views –– assessing how sales and marketing turn strategy into action How PwC can help you

8 Growing your business through M&A “Always keep an eye open”

9Growing your business through M&A Synergy analysis and validation Bolt-on acquisitions generating revenue and cost synergies are becoming an increasing focus of both corporate and private equity M&A activity because they provide a potential buyer with a significant advantage over other buyers. Synergy forecasts provide the backbone of the integration plan. • Synergies may underpin the purchase price you are prepared to pay. • There are likely to be significant one-off costs and implementation risks from executing the synergies. Your challenges • Given the importance of synergies in supporting the valuation of a business, we conduct a detailed review of the synergy proposals underpinning the deal. The focus is on achievability, cost to implementation and timing of delivery. • Our team assesses all aspects of synergy delivery including key risks, interdependencies and the probability of their successful achievement. • Working with your management, we’ll scope out an implementation plan that includes a forecast of the actions, costs and profit impact in the post-completion months. How PwC can help you

10 Growing your business through M&A Financial due diligence (buy side) Any organisation considering a deal needs to test all the assumptions it is making about that deal. Financial due diligence is about providing you with peace of mind as a corporate or financial buyer, by analysing and validating all the financial, commercial, operational and strategic assumptions being made. Using past trading experience, it forms a view of the future and makes sure there are no ‘black holes’ through services that include: • synergy validation • maintainable earnings and future cash flow assessments • the determination of a normalised working capital and indebtedness position. The scope of our offered services ranges from performing initial no-access reviews to data room reviews and full access due diligence assignments. We can also reconstruct entire sets of financial statements from primary documents. • You want to strengthen your core business by acquiring a company selling rival products that are almost identical in function or performance to your own. • You need to build on your existing activities by purchasing a company that sells or manufactures complementary products. • You want to purchase a company to gain access to its existing products in new markets, or to increase your customer base. • You need to expand your company’s current portfolio of products and services by acquiring new ones – potentially to provide a hedge against movement in your markets. • You want to spread your market risk by purchasing a company providing similar products or services in another country. • By enhancing your understanding of the target business, we’ll increase the likelihood that the deal will achieve its objectives. • We’ll support you in identifying critical success factors that will improve your understanding of all the relevant issues, so you can make more informed decisions. • Our analysis will highlight strengths that can be built upon and weaknesses that need resolving. • Our teams can challenge (deal breakers) or validate the target’s historic financials and forecasts. • We can identify the real sources of profit and cash flow, assess their sustainability and underlying free cash, and confirm the value drivers. • We can define cost savings and revenue enhancements by focusing on the available synergies and quantifying what is achievable. • Our teams can assess projections by reviewing the feasibility of the business plan and prospects. • You’ll get input on how to translate the due diligence findings in reps and warranties and/or price adjustments.  Your challenges How PwC can help you

11Growing your business through M&A “A target is not always what it seems”

12 Growing your business through M&A Tax due diligence Acquiring a business, disposing of a non-core business or completing a merger means managing the tax risk through a corporate tax, VAT and social security tax due diligence. But getting these tax due diligences right requires in-depth industry knowledge and specific expertise of the tax issues inherent to your sector. • Your organisation is looking to dispose of or acquire a company or asset. • You need a tax due diligence carried out in relation to a deal. • We provide you with corporate tax, social security and VAT due diligence, focusing on risks (including quantifications) as well as opportunities. • Our international network of dedicated M&A tax specialists lets you carry out a global tax due diligence quickly and efficiently. • Our experts advise you on how to translate the tax and social security due diligence findings in reps and warranties and/or price adjustments. • Our tax experts work closely together with industry specialists, so they’re familiar with the inherent tax issues of your sector. Your challenges How PwC can help you

13Growing your business through M&A Operational due diligence To maintain ‘business as usual’, you need your operations to run smoothly. By improving your operational efficiency, you can enhance your enterprise’s value. Operational due diligence helps you better understand the processes on which the target depends. Our team can examine and evaluate operational performance related to a potential investment and determine the financial impact. • You want to validate the vendor- assumed operational improvements in projections. • You’re seeking a potential up-side that will give you an advantage over other buyers. Your challenges • You’ll get a coherent overview of the target’s entire operations, from supply chain and logistics to manufacturing and commercial activities. • We review management structures and controls to provide an assessment of operational effectiveness and to benchmark the cost base of a business with similar businesses worldwide. • Working with your management, we find and quantify opportunities for operational improvement and turn them into action plans. How PwC can help you

14 Growing your business through M&A IT due diligence In your business environment today, you heavy rely on information technology (IT) for business operations, management information and financial reporting. So IT quickly becomes a priority item in the field of transactions. IT is often amongst the largest capital and operational expenditure items, so business owners always need to be finding better ways of deriving value and leverage from IT assets. • Purchasers need confidence that the IT assets are up to the task of supporting the business. • Purchasers should have a clear view on any IT investment required to maintain the EBIT of the target business and should factor these costs into their calculations and negotiations. • Vendors need to secure the best possible sale price. Identifying and then mitigating or addressing IT issues related to the transaction reduces purchaser risk, which supports a greater sale price. • Vendors and purchasers both need to minimise the impact of the sale and transition process on business operations. • You plan on acquiring a business that relies heavily on IT in its manufacturing, distribution and/or administration. You would like to assess the IT’s robustness in terms of security, efficiency and ability to support the business for future growth. • As a corporate buyer, or in a built-on strategy for private equity, you would like clarification of the IT integration costs, capital expenditure and potential synergies. • As vendor or acquirer, you are about to dispose of or acquire a carve-out entity. You are concerned about the IT carve-out impact in terms of EBIT and capital expenditure. Your challenges • We provide buyers with insight into the cost and impact of system-related issues that are relevant to the transaction being considered. • We identify opportunities to improve business performance through enhanced IT enablement and cost reduction. • We provide purchasers with options and strategies for managing the IT-related aspects of a transaction, to avoid disruption to business operations and reduce risk. • We identify IT systems options (and the capital required) for achieving post-deal strategies that are considered during the transaction. • We give purchasers greater certainty that the IT systems supporting the target business are fit for purpose and identify the resources that are critical to continued business-as-usual operations. How PwC can help you

15Growing your business through M&A Legal due diligence, legal deal structuring and documentation During an M&A process, legal considerations are as important as financial and tax considerations to the success of your transaction. Your management will probably want to get a full assessment of the possible legal risks related to the corporate status, assets, contracts, securities, intellectual property and employment of personnel of the target company. Further, a thorough legal analysis and inventory of the existing employment conditions can be useful. This will help you define the HR legal impact of the proposed deal and anticipate possible burdens to any post-deal harmonisation of employment conditions. If you want to ensure a smooth transaction, you’ll need a clear understanding of the content and timing of the information and consultation obligations towards employees and/or their representatives. You also need to make sure the complex corporate legal documentation is done properly during the implementation of the ideal transaction structure. We can be at your side to help you avoid legal pitfalls by tackling them early on at the negotiation table with the aid of a legal expert. And we’ll help you draft transaction contracts and related documents with the guidance of a business-minded lawyer. • You are contemplating an M&A transaction (e.g. selling or acquiring a Belgian company or business (division), entering into a joint venture, acquiring a minority/majority interest or forming a strategic alliance). • You are considering reorganising your internal group organisation or business model and wish to streamline it from a legal viewpoint. • You wish to assess the material legal risks of an M&A transaction or internal restructuring. • You need legal expertise at the negotiation table and for the drafting of the transactional or restructuring documentation, duly aligning both the financial and tax considerations. Your challenges • We’ll support you in the contractual domain for the full transaction cycle, from negotiations to drafting the letter of intent, confidentiality and exclusivity agreements, the share purchase agreement (SPA) and the representations and warranties. • We can perform a full legal due diligence assessing the main risks and providing solutions to reduce them. • Our teams can advise you on the legal aspects of the deal structuring and handle its legal implementation, including carve-outs, (de)mergers, cash extraction mechanisms (e.g. ‘equity strip’). • We’ll figure out the impact of existing employment conditions on the potential transaction. We can also advise with respect to any information and consultation obligations towards the employees and/or their representatives. • We can organise the closing of the deal and give advice during the post- deal phase (e.g. on enforcement of indemnities for breach of representations and warranties or price adjustment mechanisms). • We’ll also be there throughout the negotiations, working to harmonise the post-deal employment conditions and the drafting of collective bargaining agreements. How PwC can help you

16 Growing your business through M&A Human resources transactions services HR considerations in today’s M&A environment During a transactions process, companies typically focus on the financial and legal aspects. But often, your success will depend on how you deal with people issues and cultural integration. Adequately evaluating the impact of human resources on a potential transaction is crucial to assessing the viability of a deal. But the process can get complex when you begin tackling issues like: • compensation and benefit plans –– retirement plan obligations –– employment contracts and agreements –– severance and retention –– compliance and regulatory issues • cultural considerations • transition and integration planning. An HR due diligence will help you determine a post-deal HR strategy that is right for your business. • Assessing employee costs Employees are often the biggest cost for businesses. So, have you analysed whether your employee costs are aligned to market practices? Do varying bonuses, changing employee profiles, new legislation or works council pressures materially impact these costs? • Keeping key talent Who is business critical? How much might it cost to incentivise them to stay? What are the costs of leavers in terms of share plans, accelerated bonuses or changes in control payments paid to management and other key employees? • Assessing industrial relations impact Have you considered the state of relationships with the employee representative groups? What would be the financial impact of an industrial action? • Assessing organisational barriers Have you considered the impact that diverse organisational structures between the businesses may have on costs and productivity? What factors may impact the integration of organisational structures and the transition to a new operational model? How will these factors impact integration on ‘day one’ and post-deal? • Assessing regulatory barriers Have you considered the financial and reputational implications of any non-compliance with employment and social security tax legislation? Have you determined any regulatory barriers that may impact the full effectiveness of the transaction? • Integration and harmonisation of benefit plans Integrating benefit plans within existing plans, cleaning up of historical legacies and the ensuing harmonisation of the benefit levels can be complex exercises. Do you know where to begin? Your challenges

17Growing your business through M&A PwC’s Transaction Services Human Resources professionals can help clients evaluate and address the impacts of human resource issues on their transactions. Specifically, we can support you in: • assessing and identifying employee-related issues from cost, risk, employee turnover and regulatory perspectives • analysing all personnel costs (forecasted and historical) • analysing any redundancy programme regarding severance provisions and employee dismissal cost projections, including an overview of labour terms and conditions (e.g. collective labour agreements and social plans) • analysing executive and senior management employment agreements and remuneration packages, including equity based compensation programmes to identify change-in-control/ transaction-related costs, as well as the impact of retention incentives and severance terms • identifying which local employment legislation will impact your integration and helping you plan the best way to deal with any regulatory barriers. This includes a review and analysis of current relationships with unions and work councils, as well as developing an effective strategy that will anticipate and manage the co-decision and consultation requirements from employee representatives • performing workforce assessments and benchmarking absence, turnover and span of control • reviewing benefit plan designs in light of the buyer’s objectives and identifying compliant potential for change • developing strategies to limit exposures on the balance sheet and to reduce liability (e.g. close defined benefit schemes, jubilee premiums and post- retirement medical plan). How PwC can help you

18 Growing your business through M&A Business restructuring services Stability for stakeholders in a changing business environment Today, you’re business is competing in a global marketplace, so you’re facing financial challenges you’ve never experienced before. PwC Business Restructuring Services provides hands-on financial, operational and strategic restructuring options to make healthy companies stronger and to get struggling businesses back in the game. Business restructuring professionals deliver tangible results to all stakeholders. Our experienced professionals offer a full range of advisory services to companies, creditors, and equity sponsors. • A lack of growth, profitability or reduced market share. • A pending refinance or breach of covenants/terms on existing facilities. • Increased pressure on cash resources or a liquidity shortfall. • Threatened/actual credit rating downgrade. • A lack of flexibility from over- leveraging. • A capital structure that prohibits future growth opportunities • Current debt trading at ‘distressed’ levels. • A mounting pension deficit. • Lack of common ground with financial providers. • As a creditor, you are seeking an independent assessment of a client. Your challenges • We can help preserve value in your business and keep control management’s hands. • We provide clarity on your business’s current financial and operating status and the range of options available in the short and longer terms. • We rebuild trust between your business and its financial stakeholders. • Our team can help you to find structural refinancing solutions, beyond the classical ‘amend and extent’ and ‘covenant reset’. • We develop solutions in partnership with creditors and debtors using our unrivalled experience in working through crises in which objectives diverge and company/stakeholder relationships are under pressure. • We help lenders and creditors maximise and realise value. How PwC can help you

19Growing your business through M&A Tax structuring If you are acquiring a business, disposing of a non-core business or entering into a merger, you need to make sure that future net cash flows are optimised through tax structuring. Tax structuring sooner rather than later can add significant value to any transaction. It is essential to minimise the after tax acquisition and financing cost, including both the actual transaction tax costs and the long-term sustainable tax rate following the transaction. • You require tax planning to ensure tax-efficient debt servicing and repayment. • You need to dovetail your tax planning to accounting and regulatory requirements. • You need to model tax planning scenarios for a deal. • You want to float on the stock market (IPO). • You’re involved in a public- private initiative. • You’re contemplating refinancing a securitisation. • You want to reorganise your group structure. Your challenges • We provide rapid diagnosis of the transaction objective and principal issues that will ultimately determine the appropriate tax structure and the route to be followed. • Our teams will find feasible alternative routes to achieving your objective, whilst heeding accounting, tax, legal and shareholder considerations. This starts with a feasibility review, followed by a detailed analysis to confirm the preferred solution. After that, we’ll support you in the implementation stage at every step of the way. • Our international tax network allows us to determine the best location for an appropriate acquisition vehicle. • We ensure maximum tax relief for acquisition finance using hybrid and debt push-down structures. • Our tax experts plan for tax-efficient debt servicing and repayment. • Our teams make sure potential withholding tax leakages are minimised. • We assist you with cash repatriation and modelling. • We can minimise the tax costs of the transaction through VAT optimisation and VAT grouping. How PwC can help you

20 Growing your business through M&A Management participations Aligning portfolio company executives’ and fund managers’ financial interests with those of investors The challenge in designing incentive arrangements (i.e. ‘sweet equity’, ‘carried interest’ and ‘co-investment’) lies in having them support successful behaviour from portfolio company executives and fund managers at a cost that is acceptable to investors. Incentive arrangements need to be tax-structured effectively, and their financial implications should be understood and agreed upon by all stakeholders from the outset. In this respect, appropriate financial valuation and reward models have proved to be solid, convincing tools for private equity houses and managers. Also, tax structuring of incentive arrangements has become increasingly important. In countries where the private equity industry is a driving sector of the economy, there has been and still is a continual debate on whether and under what conditions, gains/income arising from such incentive arrangements should qualify for favourable tax treatment as capital gains/investment income or be subject to a higher tax charge as ordinary income. At this time, in most jurisdictions, there is a clear trend to tax income and gains arising from private equity industry incentive arrangements as ordinary income. Although, in some jurisdictions, like Belgium, favourable tax treatment may still apply where appropriate tax and legal structuring of those incentives is implemented. Tailor-made tax structuring has thus now become critical. • You are a private equity house and you need to motivate the management of a target you’re considering acquiring and to convince them to align their financial interests with those of investors. • You are a private equity house and you need clarity about the most recent tax and legal structuring of carried interests and co-investment for your fund managers in Belgium or abroad. • You are a manager in a company that a private equity house is considering acquiring and you need comfort about the financial and tax implications of incentive arrangements offered to you and you want to know if they are in line with market practices. Your challenges Our Global Transactions Executive Reward Team has developed a unique practice that can guide you in: • designing incentive arrangements and supporting private equity houses and portfolio companies’ management in understanding and managing the financial implications of their incentive arrangements by means of effective valuation modelling • providing proven flexible, tax-effective and legal structuring for incentive arrangements • designing, drafting and implementing incentive arrangements in compliance with applicable legislations. How PwC can help you

21Growing your business through M&A “As an acquirer, you will fly higher”

22 Growing your business through M&A Direct and indirect tax modelling Companies of all sizes increasingly acknowledge the need for effective direct and indirect tax structuring in good financial management. Proper tax structuring will let you: • decrease your effective tax rate • maximise the use of available tax assets • optimise the existing leverage • improve cash flow • reduce the compliance cost. But often tax (re)structuring decisions are taken based on broad assumptions and high-level, short-term projections of financial and tax figures. These don’t take into account the variety of factors affecting your group’s direct and indirect tax position, which can make it hard to understand the true financial and tax impact. Our team will help you measure this impact, taking into account your legal, operational, commercial and cash flow requirements. It will give you a better understanding of the tax impact of maintaining your current group structure compared to alternative scenarios and provide you with a fair estimation of the tax impact and opportunities of your business plan. So you’ll be able to make more informed decisions about business restructuring scenarios. • You are determining a bid price in an acquisition process, but your financial model lacks tax input. You’re uncertain which target entity can absorb (bank) debt. • You want to reallocate the existing bank and intercompany debt in your group to optimise the tax benefits linked to the existing leverage and to maximise the use of existing tax assets. • Your current group structure is not tax-efficient, but you’re not sure which reorganisation scenario will result in the most substantial decrease in consolidated tax rates. • You are not certain how to value your deferred tax assets because you’re uncertain when you’ll be able to use them. • You want to understand the impact of VAT on the cash position of your company and the various influencing factors. • You generally consider corporate income tax and VAT a compliance obligation resulting in a net payable/recoverable position (debit or credit position), but you don’t understand how your day-to-day operations impact on your cash position. • You have a complex supply chain with multiple products, countries, legal entities or VAT registrations. • Direct tax and VAT represent a substantial and real cost/cash-out to your business. Your challenges

23Growing your business through M&A • During an acquisition, we can complete your business plan with tax input and model potential scenarios to find the most optimised debt allocation and funding requirements. This takes into account country-specific rules and regulations. • We understand your legal, commercial and cash constraints, and we can make sure you’re equipped to better assess the impact of modifying your debt allocations or to determine the most suitable reorganisation scenario. • Building a tax model based on your business model, we’ll give you a fair estimation of future stand-alone and consolidated tax liabilities that can be used by management for budgeting, forecasting, cash-planning and cost-cutting purposes. • The tax model we design will demonstrate when and how existing deferred tax assets will be used, so you can value them in view of IFRS and US GAAP requirements. • We’ll steer the way toward improving your working capital by fine-tuning the various factors and levels affecting your VAT cash position. This means looking at: the moment when invoices are raised or received, payment and collection terms, VAT filing periodicity and submission dates, VAT payment and VAT refund terms, and the VAT treatment of the flows. How PwC can help you

24 Growing your business through M&A VAT optimisation On average, VAT on M&A deal fees for transactions such as acquisitions, sales and refinancing stands at 20%. In a non-optimised structure, much of this VAT will be non-deductible and represent a cost for the acquirer. But with the right guidance on appropriate structuring, you may be able to make a large part of this VAT deductible. • You’re contemplating an M&A transaction that is generating high deal fees. • You are about to acquire a company and have not yet thought about your future VAT structure and the recovery of VAT on deal fees. • You are contemplating to carve-out part of your business. Your challenges • Our VAT team identifies the most VAT efficient cost structure. • We can obtain the lowest VAT rate for various types of services. • We optimise the VAT registration process of Newco(s). • Our VAT experts design a VAT-grouping system that fits your needs. • We streamline the process of incoming invoices for transaction costs. • We design a carve-out structure that minimises the VAT costs. How PwC can help you

25Growing your business through M&A Post-deal services In many ways, a deal only really starts at its closing, when it has to begin to realise the benefits and value it was designed to deliver. A few facts remain about making deals successful: • A transaction is a significant change in a business, and it requires careful management if the flow of anticipated benefits is to be turned on quickly. • Deals often fail to deliver forecasted value, frequently due to a lack of integration between the business and its newly acquired asset. • Delivering the business plan used to justify the acquisition requires considerable resources. • You’ll have a greater chance of succeeding if you have someone with relevant industry experience and the tools you need to guide you through the post-deal process. • You’re integrating an acquisition and you are concerned that it is consuming valuable time and resources, detracting from the focus on the core business. You want to peg down why it’s slow to start creating the value projected for it. • Competition for talent is keen in your business and attracting, motivating and retaining employees after a transaction is proving difficult. • You need a clear picture of how to integrate the increasingly complex employee benefits and compensation programmes. • Your deal is not delivering the potential value forecast when it was originally put together. Your challenges • Synergy reviews, performed together with your team during the due diligence phase, provide you with a coherent overview of the business’s operations, the potential offered by operational synergies and the associated risks, and the plan and costs associated with realising those synergies. • We can install an Integration Management office to ensure neutrality and standard communication to all stakeholders during the entire implementation phase. • We address the immediate concerns of the acquirer over the first 100 days from acquisition and produce detailed action plans to deliver value from the deal. • We carry out post-deal reviews after six to 12 months to assess whether objectives are being met and, if not, how to get them back on track. • Our broad knowledge of HR issues lets us give practical advice on employee management. We’ll help you navigate the wide variety of employee programmes used and choose the best ones to achieve all potential synergies. How PwC can help you

26 Growing your business through M&A Corporate simplification When your operating model is too complex, it adds unnecessary costs to your business. These include high compliance costs, duplication of activities and back-office functions, and a significant administrative burden. In the end, your business is less valuable than it could be. Corporate simplification helps reduce the complexity of corporate structures, which, at the same time, simplifies operations. • Your corporate structure has a large number of companies due to past acquisitions and expansions. • Complex back-office structures and duplication of activities are embedded in your structure. • Your organisation has a high internal ‘cost of doing business’, e.g. intercompany transactions. • Decision-making is slow due to complex reporting channels. Your challenges With us, you’ll be able to: • set up a flexible organisation with a common corporate culture and approach across multiple regions • simplify your group structure by reducing the number of entities (eliminating those companies that add the least value) and cutting related compliance costs • identify regional synergies in areas such as procurement and back-office functions • align your business model to a flexible legal structure in a tax-efficient way • improve business control and compliance • achieve substantial fiscal and operational cost benefits and optimise your effective tax rate • free up management time spent dealing with corporate governance issues. How PwC can help you

27Growing your business through M&A Public-private partnerships Funding for infrastructure projects is a complex area, and there are specific challenges involved in creating the appropriate finance structures to manage risk effectively. • Project finance requires multidisciplinary teams. Economists, engineers, accountants and finance specialists all need to work together to ensure that a project achieves its funding objectives. • The long-term nature of project funding demands specialist knowledge of the many different institutions that offer financing in the sector, both locally and internationally. You’re looking to participate in a public-private partnership (PPP), whether you’re from the private sector bidding for a government-led project or from the public sector aiming to create an effective partnership. Your challenges • We have advised on more PPPs than any other professional services organisation and have specialist knowledge of deals in all sectors including transport, housing, education, health, defence, water and waste. • Our experience working with both governments and private sector bidders is extensive. • Public authorities receive value for money from our management of competitive tender processes. • We help the public sector develop the right approach to procurement and execute the project up to financial close. • We assist private sector investors to structure the deal, arrange the financing and negotiate through to financial close. How PwC can help you

28 Growing your business through M&A Compliance in a transactions environment In today’s world, the regulatory and compliance demands on complex businesses are many and varied. Your management resources are limited and the need for accurate accounting and tax records that comply with the multitude of rules and regulations applied in different jurisdictions by different authorities has never been greater. With our help, you’ll be able to respond to these challenges and focus in on the areas of your business that are your key to profitable growth. • You’re considering selling your company. • You want to ensure confidentiality during the bid phase. • Your Finance and Administration team can’t cope with the extra work during the acquisition period. • You want to implement the merger with the target. • You’re facing complex deferred tax calculations. • You want clarification and control of the accounting and tax filings of the target group upon acquisition. • You want to align your existing reporting systems with the target’s systems. • The target’s management is having difficulty implementing your internal management reporting requirements. • The acquisition Special Purpose Vehicles (SPV) structure poses very specific, complex accounting and tax issues. Your challenges • We’ll guide you in compiling relevant accounting and tax documents for setting up the data room. • We can temporarily domicile your SPV company with us. • Our pool of accounting experts can assist you with the project or take care of your day-to-day administration. • We can provide proper accounting and documentation of opening balances. • We’ll advise you on IFRS and US GAAP related tax accounting matters. • Our compliance experts can help you coordinate your (cross-border) accounting and tax compliance. • We have specialists who can perform a diagnostic analysis of your ERP and assist with the integration of various systems and processes. • We’ll assist you in streamlining your processes and reporting, and provide special training. • We’ll address your specific SPV accounting and tax compliance concerns. How PwC can help you

29Growing your business through M&A Contacts Jan Muyldermans Lead Transactions Partner Tel: +32 2 710 74 23 jan.muyldermans@pwc.be Hugues Lamon Partner Tel: +32 2 710 74 05 hugues.lamon@pwc.be Nancy De Beule Partner Tel: +32 3 259 31 25 nancy.de.beule@pwc.be Lieven Adams Partner Tel: +32 2 710 40 75 lieven.adams@pwc.be Michael De Roover Partner Tel: +32 2 710 73 01 michael.de.roover@pwc.be Ann Smolders Partner Tel: +32 2 710 41 73 ann.smolders@pwc.be Philippe Estas Partner Tel: +32 2 710 40 41 philippe.estas@pwc.be

© 2013 PwC Belgium. All rights reserved. PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services.Tell us what matters to you and find out more by visiting us at www.pwc.com. In this document, PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. “Always keep your feet on the ground”

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