Page 9 - SONEPAR 2021 - AcquisitionBook

PHASE 1:
PRSTERLIAMTIENGAICRY ANPHALAYSSEIS
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
Gather basic information
1.3 CONSIDER HIRING A M&A ADVISER
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The identification of potential target legal entities may be done by hiring an outside M&A adviser or through internal means. In the first case, a financial advisor engagement letter (often called “mandate”) will be entered into between the adviser and the SONEPAR legal entity considering acquisition opportunities. This is an important document which must systematically be reviewed by the HQ M&A and Legal teams.
In particular, the following issues must be considered and included in such mandate:
➜ state precisely the services that the adviser will provide. In particular, will the adviser merely identify target companies or will it also assist with the coordination of the acquisition process, the handling of the negotiations, the determination of the best structure and the valuation of the target legal entity?
➜ try to keep the RETAINER, if any, as low as possible and not open- ended, especially if payable on a periodic basis (e.g. monthly);
➜ seek a transaction fee structure that incentivizes the adviser to secure favorable financial terms;
➜ make sure the success fee is due only when the deal is signed and closed;
➜ try to keep the TAIL PERIOD as short as possible (maximum 12 months);
➜ no TAIL PERIOD shall apply in case the engagement letter is terminated because of the adviser’s breach or negligence;
➜ cap or specify the expenses that the adviser may claim reimbursement for and, as far as possible, ensure that the adviser obtains prior written approval for all expenses to be incurred;
➜ insert confidentiality, exclusivity and conflict of interest provisions;
➜ comply with any applicable laws and dispute resolution clauses.
In most cases, the identification and approach of the targets are done internally. The HUNTER who approaches the target knows how to sell SONEPAR and how the acquisition process works so he can explain it clearly to the sellers. In some countries, this role will be a full-time job undertaken by Business Development Managers or M&A Directors. Some Senior Managers can also play this role, during strategic periods.
1.4 GATHER BASIC INFORMATION 1.4.1 EXTERNAL INFORMATION
➜ Image & business integrity:
• from customers: service level, price, product range;
• from suppliers: image, potential synergies;
• geographical coverage (market shares, branch complementarity or overlap, logistics-related synergies);
• internal management (leadership, competences, integrity);
• digital reputation (publications, social networks, comments, etc.).
1.4.2 PRE-STRATEGIC VALUATION
At this first stage, a pre-strategic valuation can be prepared based on a SWOT to identify the performance, value and merits of the potential target. It can be done through:
➜ a development aspect (present and future impact, comparison with other targets, etc.);
➜ if appropriate, an assessment of the country’s opportunities and risks (for entering into new countries);
➜ Finance:
• accounting books (profitability, key ratios);
• banks (solvency);
• credit insurance companies (creditworthiness); • auditors (opinions, reliability);
• trade registers.
➜ an assessment of the different types of synergies identified (see section 2 – 2.3.2 for a description of the potential synergies);
➜ an analysis of the integration requirements (restructuring costs, size of target, etc.).
SONEPAR - ACQUISITION MANUAL - 2021 - FOR INTERNAL USE ONLY
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