Page 22 - SONEPAR 2021 - AcquisitionBook

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PHASE 3: LETTER OF INTENT
Submit the documents to the INVESTMENT COMMITTEE
Once the INVESTMENT COMMITTEE has given its first GO, the project team shall focus its efforts on drafting and executing a non-binding LETTER OF INTENT (“LOI”) and conducting robust DUE DILIGENCE to confirm SONEPAR’s interest for the target.
3.1 SUBMITTHEDOCUMENTSTOTHEINVESTMENTCOMMITTEE
The BUSINESS CASE and the ACQUISITION SHEET shall be completed and submitted, with the Regional President’s prior review and approval, to the HQ M&A team for further review.
3.2 ENGAGE EXTERNAL ADVISORS
Once satisfied, the HQ M&A team will forward it to the INVESTMENT COMMITTEE for a first “GO” or “NO GO” decision prior to the issuance of a LOI and the beginning of the formal DUE DILIGENCE process.
EXTERNAL LEGAL COUNSELS
An experienced law firm shall be selected by the Regional Legal Counsel, with prior consultation of HQ Legal team, usually once a first “GO” decision has been issued by the INVESTMENT COMMIT TEE .
The law firm will be in charge of:
➜ drafting the LOI on the basis of the GROUP template, in those cases where it cannot be handled internally by the Regional or Country in-house lawyer;
➜ conducting the legal & compliance DUE DILIGENCE;
➜ verifying whether any regulatory filings (e.g. merger and foreign
investment controls) must be made prior to or after CLOSING;
➜ drafting the SPA and all ancillary documents (resolutions, powers of attorney, ESCROW agreements, guarantees, non- competes, etc.) pursuant to the Country or Regional Legal team’s instructions.
3.3 DRAFT A LOI
The LOI must be issued before the DUE DILIGENCE process. It sets out the main terms and conditions of the proposed transaction and usually contains an exclusivity undertaking under which the seller agrees not to negotiate with other potential purchaser(s).
Although the LOI is normally non-binding, it represents a significant step and sends an important signal to the seller.
3.3.1 TYPES OF LOI
Several templates are available and shall be used and adapted with SONEPAR’s legal advisors when needed:
➜ INDICATIVE OFFER in case of transaction with a bidding process as in section 3.3.2. (Appendix 7);
➜ simplified LOI for a SHARE DEAL (Appendix 8);
➜ simplified LOI for an ASSET DEAL (Appendix 9).
FINANCIAL AND TAX ADVISORS
External financial and tax advisors shall be selected at local level, with prior consultation of GROUP CFO and VP Tax. They will be in charge of:
➜ ➜ ➜
performing the financial and tax DUE DILIGENCE;
proposing and validating the final transaction structure;
reviewing the SPA concerning the price mechanism, deal structure and financial definitions taking into account the DUE DILIGENCE findings.
The draft LOI must always be prepared by SONEPAR as the purchaser and must be reviewed and vetted by the HQ M&A and Legal teams before signature.
20 SONEPAR - ACQUISITION MANUAL - 2021 - FOR INTERNAL USE ONLY
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LOIs must be drafted in English or, if not possible, in both local and English languages. In most cases, the access to information at this stage is limited and a simplified LOI can be enough. With a very detailed LOI, there could be some risks that negotiations will stall over points of unnecessary details (which should be addressed at a later stage of the process).