Page 46 - SONEPAR 2021 - AcquisitionBook

APPENDIX – GLOSSARY
INFORMATION BOOK (or INFORMATION MEMORANDUM): the INFORMATION BOOK is a document that contains key information about the target and is often provided to the purchaser by the seller in case of acquisition processes through brokers.
INVESTMENT COMMITTEE: is composed of SONEPAR Chief Executive Officer, Chief Financial Officer, General Counsel and M&A Director.
LOCKED BOX: a price mechanism in which the final price of the shares is determined based on a historical accounting situation before the completion date. The price is calculated as the ENTERPRISE VALUE minus historical NET DEBT and adjusted for the WORKING CAPITAL surplus or shortfall at that historical date. In addition, it is contractually agreed that there cannot be any cash flowing out of the target company in the form of the payment of dividends or management fees.
LOI: means Letter of Intent, also sometimes called MOU.
NET (FINANCIAL) DEBT: the sum of all interest-bearing financial debts (short term and long term in broad sense) minus the cash at bank and in hand and the value of marketable securities. Financial debts include loans and associated liabilities (including interest that is current but not yet payable), bills of exchange, repayable subsidies, pensions and other long-term commitments to staff, commissions giving rise to cash outflows within the foreseeable future, off-balance sheet commitments that can be considered equivalent to debt, and certain leasing debts. The book value of the minority interests may be used if the minority interests are not material; otherwise, they should be valued at market value (separate valuation exercise).
OPCO: means any operational legal entity belonging to the SONEPAR GROUP.
PPA (PURCHASE PRICE ALLOCATION): process implemented by the GROUP which assumes that the main identifiable intangible assets not recognized in the balance sheet of the acquired entity are:
➜ the distribution network (with a useful life considered indefinite,
meaning that this asset is not amortized);
➜ the customer relationship (amortized over a 5 year-period).
PROCESS LETTER: a process letter accompanies the confidential INFORMATION MEMORANDUM in an M&A auction. It typically provides information on the M&A auction schedule, instructions, and contact information for all future communication, as well as any terms that the bidders must include if they make an offer.
PUT OPTION: contractual right granted by the purchaser to the seller to sell at a specified price a specific number of shares by a certain date.
REPRESENTATIONS & WARRANTIES (also called REPS & WARRANTIES): a statement of factual matters included in a SPA whereby a party represents and states to the other party that a given state of facts is true and correct as of a given time.
RETAINER: a fee paid to a lawyer or professional adviser for advice or services or for a claim on services when needed.
ROCE (RETURN ON CAPITAL EMPLOYED):
➜ ROCE before Acquisition = year EBIT/end of period capital employed;
➜ ROCE after Acquisition = year EBIT/(end of period capital employed + GOODWILL);
➜ ROCE after Acquisition with PPA = (year EBIT – PPA depreciation)/(end of period capital employed + GOODWILL).
SHA (SHAREHOLDERS’ AGREEMENT): an arrangement among shareholders that describes how a company should be operated and outlines shareholders’ rights and obligations. The agreement also includes information on the management of the company and privileges and protection of shareholders.
SPA (SALES & PURCHASE AGREEMENT): contract signed between the acquiring and selling parties (and sometimes also the target company) containing the terms of the M&A transaction.
SWOT: means a Strength / Weakness / Opportunities / Threats analysis.
SONEPAR or GROUP: means the GROUP of legal entities having SONEPAR SAS as its ultimate parent company.
SONEPAR ACQUISITION BASE: the acquisition database including updated information on all acquisitions made or considered by the GROUP. It is an internal, secured communication tool between SONEPAR managers in charge of acquisitions.
TAIL PERIOD: is the time period that begins after the engagement letter has ended and no acquisition has been completed. During the TAIL PERIOD, the buyer must still pay the success fee if it completes a transaction with a party that had been identified by the adviser.
WACC (WEIGHTED AVERAGE COST OF CAPITAL): a calculation of a company’s cost of capital in which each category of capital is proportionately weighted. All sources of capital, including common stock, preferred stock, bonds, and any other long-term debt, are included in a WACC calculation.
WORKING CAPITAL: the sum of the trade receivables, trade payables, inventories and other current assets and liabilities necessary for the day-to-day operation of the target company.
44 SONEPAR - ACQUISITION MANUAL - 2021 - FOR INTERNAL USE ONLY
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