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1GRUBISIC & Partners M&A - Capital raising - Valuation - Due diligence - Financial advisory

GRUBISIC & PartnersCORPORATE FINANCE

FINANCIAL ADVISORY SERVICES WITH SPECIAL EMPHASIS ON ...(i) Sale of Companies and Asset Disposals (ii) Capital Raising (iii) Acquisition of Companies

Including Financial, Tax and Legal Due Diligence (iv) Valuation (v) Financial Analysis and Restructuring (vi) Evaluation of Strategic Options


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It’s not about being smarterthan the rest – it’s about beingmore disciplined



Content

GRUBISIC & Partners – Scope of Services 4

Membership in Globalscope 5

Financial Analysis and Valuation 6

Company Sale or Recapitalization 12

Acquisition and Due Diligence of Target Company 17

Financial Restructuring 25

Evaluation of Strategic Options 27

Selected Clients 31

Team 33

Contacts 38



Snapshot of GRUBISIC & Partners

Sale of Business

Project management and financial advisory in sale process including:i. Transaction structuringii. Preparation of teaser and information

memorandum for investorsiii. Valuation of businessiv. Identification and communication with

potential investors v. Analysis of non-binding offers (term sheets)vi. Organization of due diligencevii. Advisory during negotiation phaseviii. Assistance in fulfillment of conditions

precedentix. Transaction closing

Acquisition of Business

Project management and financial advisory in acquisition process including:i. Identification of appropriate targetsii. Analysis of targets and initial valuationiii. Structuring and preparation of term sheet

(non-binding bid)iv. Performing financial and tax due diligencev. Coordinating work of other advisors on

transactionvi. Preparation of final valuationvii. Advisory during post due diligence

negotiation

Capital Raising

Raising debt or equity capital for expansion or restructuring purposes. Indicative order of capital sources from cheaper to more expensive:i. Bondsii. Collateralized loansiii. Non-collateralized loansiv. Subordinated debtv. Convertible debtvi. Preferred sharesvii. Ordinary shares

Valuation

Some of the reasons for valuation include preparation for recapitalization or sale, exit of one of the partners from ownership, pledging shares as collaterals, etc.

Fundamental valuation method is based on discounted future cash flows (DCF method) requiring detailed projections of income statement, balance sheet and cash flow

Methods used to check soundness of results received from DFC method most often include valuation based on trading multiples and transaction multiples

Financial and Tax Due Diligence

Detailed analysis of revenue and costs Detailed analysis of assets (receivables,

inventory, long term tangible and intangible assets)

Detailed analysis of liabilities (suppliers, state, creditors, other liabilities)

Determination of profit margins per product and service categories, seasonality, anomalies and normalization of operating profit

Analysis of cash flow Quality of accounting practices Identification of tax risks

Financial Restructuring

Preparation of detailed financial model with business projections in different scenarios

Identification of areas and measures for cost optimization, treatment of non-operating assets and other measures needed to improve company’s cash flow

Presenting restructuring plan to creditors and debt restructuring

Bringing investors to perform recapitalization and/or refinancing of existing liabilities

Evaluation of Strategic Options

Entrance of strategic or financial investor Sale of a company or acquisition of other

businesses Choosing financing structure Debt restructuring / refinancing Merging companies or spinning off parts of

existing business Transfer of ownership Treatment of non-operating assets Investment decisions and change in product

and service portfolio Modelling and simulation of scenarios

1 2 3

4 5 6 7

Selected Facts

Deep knowledge of corporate finance

90 completed engagements

Experience in 40 different industries,

sectors or niches

Member of Globalscope

International M&A Advisors

53 partner firms in 42 countries on 6

continents

Structured approach in execution of

projects and transactions

International academic and professional experience

Entrepreneurial spirit

In 2016 Globalscopemembers closed 120 transactions worth

EUR 2.2 bn



Membership in Globalscope53 Partner Firms in 42 Countries

GRUBISIC & Partners is a member of one of the leading international associations of M&A advisors – Globalscope International M&A Advisors.

Globalscope is on of the 4 leading global associations of independent firms specialized for mergers & acquisitions

As of April 2017, Globalscope counts 53 member firms allowing maximum utilization of local contacts and know-how of each respective member in its domestic market

Membership in Globalscope brings the following benefits for GRUBISIC & Partners and our clients:i. Easy identification and access to relevant strategic investors ii. Utilization of global network with strong local presence and

reach of partner firms in their respective home markets resulting in strong synergies

iii. Unique knowledge and expertise of all partners often coming from Big 4 firms, investment banks and private equity funds, thus assuring that there is no transaction type or industry where member firms do not possess adequate experience

In 2016 Globalscope members completed 120 transactions worth EUR 2.2 bn.

Globalscope

Allegiance Capital CorpBrooks HoughtonGreif & CoMelCap PartnersParamax Corporation

Fieldstone Africa

Ficus Capital

Ficus Capital

Allegiance Capital Corp

Insignia Financial Advisors

USA

Canada

Mexico

Panama

Argentina

Uruguay

Belgium

Armenia

Croatia

Czech Rep.

Denmark

Finland

Germany

Greece

Hungary

Israel

Africa, South and North America Europe

Common Grounds CF

EV Consulting

Dansk Mechant Capital

Summa Capital

Grubišić & Partneri

Venture Investors CF

Atout CapitalCMW Corporate Finance

France

GeorgiaAlliance Group Capital

CatCapCCI ManagementTransfer Partners Group

First Athens CF

Heal Partners

Portfofino Investments

Italy

Luxemb.

Benedetti & AssociatesPalladio Corp. Finance

Tenzing Partners

Netherlands DEX International M&AStrategique

NorwayImpello Management

Poland

Portugal

Russia

Spain

Augeo VenturesAventis Capital

Bluemint Capital

RB Partners

NEXT Corp. Finance

Sweden

Switzerland

Jarl Securities

IFBCInternational Scope

Ukraine Capital Times

UKCorbet KeelingSilverpeak

Australia

China

India

Indonesia

Terrain CapitalTomkins Turner

Bejing HRS Consulting

MAPE Advisory GroupRCS Advisors

NaXel iPartners

Japan

Singapore

Kaede Financial Advisory

Stirling Coleman

S. Korea H-Partners Korea

Vietnam Nexus Group

Asia / Pacific

Brasil Guarita & Associados

RSA

Osprey Capital PartnersRomania First SE Investment

Partners



Financial Analyis and Company Valuation



Activity and Liquidity

Profitability

Returns

Activity indicators (asset turnover, inventory turnover in days, collection period in days, and payment period in days) Special attention is paid to collection period from particular customers given profitability of existing business relation, seasonality of receivables, degree of their collectability and aging structure. Inventory is analyzed on product category level focusing on relationship between category profitability and inventory turnover, while at suppliers level the relationship between purchase levels from particular suppliers, purchasing terms (including payment period in days) is analyzed.

Liquidity indicators (current ratio, quick ratio, and cash ratio).

Profitability indicators down to gross profit level (gross profit margin). Special attention is paid to identification of relevant product and service categories and pertinent sales structure based on those categories. In addition, cost of goods sold (COGS) is calculated for all categories in order to get full understanding of gross profit margin levels and trends on product/service category level. Same analysis is applied to customer level (or group of customers), sales channels, and geographical territories. Finally, an analysis of each category’s, customer’s, sales channel’s and geography’s contribution to overall gross profit will be performed.

Profitability down to EBITDA level (EBITDA margin). A detailed analysis of fixed operating expenses (OPEX) will be done including grouping of expenses into adequate categories allowing for better understanding of types of costs being incurred, their level and share of total costs, and finally their impact on EBITDA.

Normalization of EBITDA and profit margins. Analysis of OPEX may result in a need for reclassification of part of those costs into COGS in order to get better assessment of real gross profit and gross profit margins. Furthermore, all one-time and non-recurring revenues and costs will be reassessed including their impact on calculated EBITDA, and finally the influence of other operating revenue (other than sales) on EBITDA, such as revenue from asset disposals, rent, reversed warranty provisions, etc. will be studied in order to determine normalized EBITDA related to and stemming only from core operating activities.

Profitability below EBITDA level (EBIT and net income). Depreciation policy, structure of financing costs and effective income tax rate will be analyzed.

Du Pont analysis. Return on assets (ROA), return on invested capital (ROIC) and return on equity (ROE) will be decomposed into relevant elements providing for better understanding of element’s contribution to an indicator (e.g. ROE will be looked at as a product of asset turnover x net profit margin x equity multiplier, and as sum of ROIC + ((ROIC –cost of debt) x D/E). Such approach allows for identification of areas offering possibility for improvement in ROA, and especially and more important in ROIC and ROE.

Financial Analysis and Company ValuationAnalysis on Corporate, Profit Center or Cost Center Level (1/2)



Operating and Financial Leverage

Net Working Capital (NWC)

Long Term Assets and CAPEX

Indebtedness indicators will be systematically rated (capital structure as measured by debt to equity (D/E) ratio, level of net debt, ratio of net debt to EBITDA, ratio of net debt to cash flow, and coverage indicators).

Operating and financial leverage. Calculation of degree of operating leverage (DOL) and degree of financial leverage (DFL) will be performed. DOL tests the influence of fixed operating costs on operating profit by measuring percentage change in operating profit for 1% change in revenue, whereas DFL tests the influence of fixed financing costs on net income by measuring percentage change in net income for 1% change in operating profit.

Net working capital. Special attention will be paid to operating and cash cycles in days, the extent to which changes in the amount of NWC influenced operating cash flow, and the level of investment in NWC needed to generate 1 unit of EBITDA. In addition, it will be tested to which magnitude would changes in collection period, inventory turnover in days and payment period of suppliers impact NWC and subsequently operating cash flow.

Structure of long term assets and capital expenses (CAPEX). Structure and utilization rate of long term assets will be analyzed together with historical CAPEX and assessment of a need for future CAPEX.

Identification of non-operating assets. Intention is to determine which parts of assets are operating i.e. contributing to operating cash flow, and whether non-operating assets can be put to a better use or sold.

Cash Flow

Structure of cash flow (operating, investing, financing and free cash flow). The emphasis will be on identifying and understanding the structure of operating cash flow in order to determine which part of it comes from basic operating profitability (EBITDA – corporate income tax) in comparison with changes in NWC. Furthermore, as for the free cash flow, focus is on comprehending its sufficiency to service principal and interest payments to creditors, and/or to provide for potential dividends or share repurchases from shareholders.

Financial Analysis and Company ValuationAnalysis on Corporate, Profit Center or Cost Center Level (2/2)



Forecast ofRevenue and EBITDA

Forecast of Net Working Capital

Forecast of Long Term Assets

Projection of gross profit for all product categories (quantities, selling prices, gross profit margin) including reasonably detailed articulation of all pertinent assumptions. Projection will be done and presented in a manner fully comparable with historical results.

Projection of operating costs (employee costs, rent, marketing, travel, energy, vehicles, memberships, banking services, insurance, intellectual services, maintenance, telephone, Internet, IT, representation, other operating expenses) for each profit and cost center.

Projection of accounts receivable based on assumption regarding average collection period in days.

Projection of inventory by product category based on assumption regarding average inventory turnover in days.

Projection of accounts payable based on assumption regarding average payment period in days.

Projection of other current assets (loans given, advanced payments for goods, short term loans given to third parties, receivables from employees, etc.).

Projection of other current liabilities (VAT and other tax obligations, liabilities towards employees, advances received, etc.).

Calculation of total anticipated investment in (or reduction of) net working capital during forecasted period.

Projection of CAPEX and asset disposals for each major category of long term assets (land, buildings, equipment, machinery, software and other intangibles, vehicles, etc.).

Projection of asset disposals (sale of parts of the business, sale of non-operating assets, etc.).

Projection of depreciation

Projection of other long term assets (loans given to third parties, shares in other companies, deposits and various guarantee payments, deferred tax assets, etc.).

Forecast of Short and Long Term Debt and Interest Payments

Projection of short and long term debt based on existing repayment schedules and assumptions regarding issuances of new debt and/or restructuring of existing debt (refinancing, converting short term debt into long term debt, rescheduling of principal repayments, lengthening maturity, converting debt to equity, etc.)

Projection of interest costs based on existing repayment schedules adjusted for anticipated modifications of debt facilities as a result of debt restructuring or issuance of additional debt.

Financial Analysis and Company ValuationDetailed Financial Projections (1/2)



Forecast of Other Long Term Liabilities

and Equity

Sensitivity and Scenario Analysis

Forecast of Cash Flows and Need For External Financing

Projections of other long term liabilities (warranties, deferred revenue, deferred tax liabilities, pension liabilities, etc.).

Projections of equity based on anticipated future earnings, dividend payouts, value adjustments of assets directly impacting equity, and potential recapitalizations.

Sensitivity analysis. Identification of key drivers of income statement and balance sheet with quantified effects of changing inputs on forecasted financial statements with special emphasis on forecasted free cash flow.

Scenario analysis. Identification of realistic and pessimistic scenario with quantified effects on forecasted financial statements and company’s cash flow.

Projection of operating, investing and financing cash flow.

Projection of free cash flow and funds available to investors for repayment of principal, interest and dividend.

Projection of potential cash gap and need for external funding (timing and magnitude).

Financial Analysis and Company ValuationDetailed Financial Projections (2/2)



Financial Model

Business Valuation

Evaluation of Strategic Options and Improvement

Measures

Creation of detailed financial model using previously addressed elements with forecast of income statement, balance sheet, operating, investing, financing and free cash flow. Same format is used for presentation of expected and historical figures in order to retain comparability.

Determination of adequate discount rate (weighted average cost of capital).

Determination of anticipated long term capital structure (share of debt vs share of equity in total invested capital).

Calculation of terminal value using 3 different methods: (i) EBITDA multiple, (ii) perpetuity model (iii) constant growth (Gordon) model.

Sensitivity analysis of estimated valuation on changes in discount rate and assumptions related to terminal value.

Final valuation expressed in relative terms as a multiple of selected financial parameter (sales, EBITDA, net income, etc.) achieved in last fiscal year or its forecast for the current year.

Merger of companies from the group

Carve-outs and spin offs of assets

Transfer of shares in portfolio companies to a new firm

Sale of companies or assets from the group

Acquisition of companies or assets outside of the group

Search for strategic partner(s)

Change and/or strengthening of management

Acquisition of shares from existing shareholders by other shareholders or by management through MBO/LBO

Squeeze out of minority shareholders

Measures directed to improvement of gross profit and EBITDA

Debt restructuring

Implementation of adequate financial controlling and reporting system

Financial Analysis and Company ValuationEnterprise and Equity Value Including Evaluation of Strategic Options



Company Sale or Recapitalization by Strategic or Financial Investor



Transaction Preparation

Preparation of Information

Memorandum

Meetings with management and agreement on indicative transaction timeline

Defining transaction structure

Creating list of potential investors

Preparing initial transaction documents for investors

Teaser Non-Disclosure Agreement (NDA)

Estimate of valuation range

Information Memorandum is a document with detailed information about the company and envisaged transaction, which includes among other things:

Overview of the market (size, trends, potential growth), market shares, description of competitors, barriers to market entry of new competitors, etc.

Overview of products and services, manufacturing sites and facilities, sales and distribution channels, customer structure, etc.

Management and SWOT analysis Key investment highlights (why it makes sense to acquire ownership in the company) Historical financial statements, analysis of revenue, expenses, assets and liabilities Business plan and financial projections Other data, information and analysis relevant to the transaction

Initial Contact and Continued

Communication with Potential Investors

Establishing of initial contact with investors (by sending teaser)

Signing of confidentiality agreement upon receiving feedback and request for additional information

Distribution of information memorandum to interested investors

Maintaining constant communication with investors and responding to inquiries

Organizing meeting and conference calls with company’s management

Updating information memorandum as needed

Company Sale or RecapitalizationTransaction Planning, Preparation of Information Memorandum and List of Potential Investors


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Negotiating Term Sheet

Non-binding offers come in the form of Memorandum of Understanding, Letters of Intent or Term Sheet, before the start of due diligence, which depending on the type of investor and type of transaction usually includes:

Transaction structure

Period of exclusivity in negotiating and executing due diligence

Valuation range and assumptions upon which it is determined

Anticipated duration of the process and treatment of costs incurred during the process

Structure, dynamics and form of payment (cash, shares, assets, retained part of the purchase price for warranties, earn out, etc.)

Representations and warranties to be provided by seller (or vice versa)

Requirements for additional funding (capital increase) in the period after the entry of investor

The rights of the buyer and seller in the event of the sale of shares by one party (e.g., drag-along rights, tag-along rights, etc.)

Lock-up period

Treatment of business relationships between the company and related parties

Conditions precedent for closing

The basic outline of the Shareholders' Agreement

Buyer and seller representation in management and supervisory board

Exit strategy for the founder and/or investor (initial public offering on the stock market, selling to a strategic buyer or financial investor, etc.)

Other elements of the non-binding offer that are essential for the implementation of the specific transaction

Organizing and Following Execution

of Due Diligence

Organization and coordination of due diligence performed by investors including:

Collecting documentation for due diligence

Preparation of data room in which the potential buyer as part of due diligence will have access to relevant legal, technical, commercial and financial documents

Coordinating and monitoring the process of due diligence

Preparation of materials and management for meetings with interested investors during due diligence

Answering additional questions and distribution of additional documents to interested investors at the end of due diligence

Company Sale or RecapitalizationNegotiating Key Terms and Conditions of Transaction (Term Sheet) and Preparation for Due Diligence



Final negotiations and Transaction

Agreements

Consulting in final negotiations usually includes:

Advising on Share purchase agreement (SPA)

Advising on Shareholder agreement (SHA)

Defining final set of seller’s representations and warranties

Treatment of certain items arising from due diligence

Negotiating final valuation and earn out (if any)

Advising on contracts with management in case existing owners who are at the same time managers remain in the ownership structure

Other elements essential for transaction closing

Company Sale or RecapitalizationRepresentations and Warranties, Treatment of Problematic Items From Due Diligence, Final Valuation, SPA and SHA



1-2week

Week 3-4week

5-6week

7-8week

9-10week

11-12week

13-14week

15-16week

17-18week

19-20week

21-22week

23-24week

Data gathering for information memorandum

Creation of long list of potential investors

Creation of teaser Building up financial model

with historical data Creating initial views of the

optimal transaction structure

Transaction Preparation

Forecasting income statement, balance sheet and cash flow

Valuation using discounted cash flow method

Producing information memorandum containing: transaction rationale; overview of products and services; description of production and warehousing facilities; description of sales channels; market analysis; competitors overview; management and organization; SWOT analysis; analysis of historical revenue, costs, assets, liabilities, and cash flow; business plan with elaborated assumptions; other elements as deemed relevant for particular business, industry or transaction itself

Valuation and Information Memorandum

Establishing initial contact (delivery of teaser)

Receiving investors’ feedback including requests for more detailed information

Signing of NDAs Distribution of information

memorandum on selective basis

Maintaining communication with investors, organizing conference calls and visits to company’s premises and facilities

Receiving and evaluating non-binding offers

Approaching Investors

Transaction structure Exclusivity period Due diligence requirements Valuation range Anticipated duration of the

process and treatment of costs Payment (structure, dynamics

and methods) Follow-on financing

subsequent to initial investment

Drag-along and tag-along rights Lock-up period Reps and warranties Management issues Relationship with related

parties Call and put options Conditions precedent Exit strategy Other elements of transaction

as deemed relevant

Negotiating Key Terms of Transaction

Data gathering for due diligence and formation of data room containing financial, tax, legal, commercial, technical and other documents about the company

Coordination and supervision of due diligence process

Update of information and provision of additional items as requested by investors

Preparation of materials and management for investor meetings

Additional clarifications and answers to investors’ inquiries following due diligence

Finding solutions and adequate means of treating problematic items emerged during due diligence

Creation of initial drafts of key agreements (SPA, SHA, management agreements, agreements with related parties, etc.)

Due Diligence

Detailed layout of all agreements

Reps and warranties in case of risky events occur

Final agreement on valuation and earn out

Agreement with management in case existing owner should remain in company’s management

Defining final set of conditions precedent

Signing of documents Approval by relevant bodies

(regulatory agency, board of directors of buyer and /or seller, etc.)

Closing of transaction upon fulfillment of all conditions precedent

Final Negotiations and Closing

Company Sale or RecapitalizationIndicative Transaction Timeline



Acquisition of Target Company



Information Gathering About

Target and Stakeholders’ Expectations

Gathering all available data and information about the Target (financial data, operating data, full list of shareholders, news, rumors, on and off the record conversations, etc.)

Depending on circumstances and appropriateness – communicating directly and indirectly to Target’s management, relevant people in the supervisory board, major creditors (banks) and other stakeholders involved in order to completely understand their view of an ideal transaction.

Identifying key factors for success of the bid based on expectations of the stakeholders.

Overview of the local regulatory environment influencing the acquisition.

Talking to the seller’s advisors (if any), procurement of information memorandum and / or vendor due diligence, and transaction process letter if such documents have been prepared.

Acquisition of Target CompanyInformation Gathering, Initial Analysis, Creating Term Sheet and Negotiating Key Elements of Transaction

Help in defining and negotiating initial transaction structure and basic transaction terms (term sheet) from commercial, tax and legal point of view, including but not limited to the following aspects:

Pure share deal or partially asset deal and treatment of associated businesses and companies

Exclusivity period for the buyer

Valuation and targeted net working capital at closing

Due diligence requirements

Payment mechanism (earn out and its variables, deferred payment portion of the purchase price depending on the seller’s and buyer’s expectations)

Treatment of non-core assets, intercompany and shareholder loans

Determination of the conditions precedent (CPs) that need to be fulfilled as prerequisite for closing

Drag-along and tag-along rights, including rights of first refusal and lock-up periods in case existing shareholders stay in the ownership structure

Conditions under which the buyer will provide additional financing in the form of equity (if further capital increases are needed)

Call and put options for any of the parties

Treatment of existing management

Representation and warranties of the seller

Non-compete clause

Escrow account and other aspects of the deal necessary to address particularities of envisaged transaction

Creating and Negotiating Term

Sheet



Creating a list of financial, tax, legal, commercial, and technical documents, data and information about Target to be placed and made available in data room

Suggestions to seller as to how to set up data room

Depending on transaction type and actual need, GRUBISIC & Partners may engage third party support in case Target operates in more than one country

Final Valuation of Target Company

Projection of income statement.

Projection of balance sheet.

Projection of cash flow.

Valuation

Defining earn out (if any) and/or deferred portion of the payment price.

Preparation for Due Diligence

Conducting of financial analysis.

Conducting of tax analysis.

Conducting of legal analysis.

Communication of important findings during the process of due diligence as ˝early warning˝ signals of issues to be dealt with.

Coordination of work of all parties involved from buyer’s side in due diligence process.

Preparation of final list of material risks identified within due diligence.

Developing proposals of solutions and ways of dealing with problematic items stemming from due diligence

Conducting Due Diligence

Due diligence follows the signing of term sheet.

More details on each segment of due diligence is presented in subsequent slides.

Taking into account results of due diligence.

Acquisition of Target CompanyPreparation and Conducting of Due Diligence and Final Valuation of the Target



Financial Analysis of Target

Performing financial due diligence of the Target with structured overview of trends, interpretation of values and implications of historical results with special emphasis on:

Quantities, revenue and implied average selling prices with related cost of goods sold and gross profit margin analysis by (i) product and service category (ii) by customer or group of customers, (iii) by geography

Headcount and salary costs by employee and department

Analysis of other operating expenses (rent, marketing, travel, energy, vehicles, memberships, banking services, insurance, intellectual services, maintenance, telephone, Internet, IT, representation, other operating expenses)

Normalization of EBITDA by identification of non-recurring and non-core revenues and expenses, non-expensed bad debts, intra-group management fees, additional costs needed for business to function as independent entity (if there are shared functions within the group), etc.

Receivables by customer including aging structure, degree of collectability, and average collection period in days

Inventory structure by product category, inventory turnover in days by product category and degree of obsoleteness of inventory

Purchase volumes by supplier, accounts payable by supplier and average payment period in days

Operating and cash cycle

Analysis of other current assets (loans given, advanced payments for goods, short term loans given to third parties, receivables from employees, etc.) and other current liabilities (VAT and other tax obligations, liabilities towards employees, advances received, etc.)

Analysis of net working capital

Analysis of long term depreciable assets and historical capital expenditures (CAPEX) including assessment of future needs for CAPEX (property, plant, equipment, intangibles)

Analysis of other long term assets (land, shares in other companies, deposits and various guarantee payments, deferred tax assets, etc.)

Identification of non-operating assets and degree of its marketability at fair value

Structure of short and long term debt by creditor including repayment schedules for outstanding loans and financial leases, analysis of leverage ratios such as net debt to EBITDA, debt to equity, debt to cash flow including identification of a need for refinancing and/or restructuring of existing debt

Analysis of other long term liabilities (warranties, deferred tax liabilities, pension liabilities, etc.)

Calculation and analysis of operating, investing, financing and free cash flow

Acquisition of Target CompanyConducting Financial Due Diligence

including written report



Tax Analysis of Target

General

Minutes, resolutions and other documents issued by Tax Authority related to tax inspection

Individual and cumulative review of the obligations / receivables of the tax payer from the Tax Authority at each year end

Balance sheet at each year end

All business agreements of the company

Corporate income tax (CIT)

Annual CIT returns with corresponding addendums

Overview of tax losses that are submitted to Tax Authority

Depreciation calculations at each year end

Specification of non-deductible expenses stated in the CIT return

Overview of goods, services and payments given to owners, co-owners and their family members for private use (by type of payment costs, for example - means of transport, low interest on loans, reimbursement expenses, etc.)

Overview of deferred tax liabilities and assets at each year end

Overview of value adjusted and written off receivables which were subsequently paid

Overview and calculations of gifts and donations

Analysis of representation expenses, advertising costs, costs of official vehicles, costs of transactions between related parties, donations and value adjustments / write-offs

Analysis of liabilities towards foreign suppliers

Used tax reliefs / aid in relation with reduction of CIT base

Analysis of transactions between the company and parties who are in any mode related with the company

Agreements with related parties, including agreements for loans concluded between related parties

Calculation of interest on loans incurred between related parties

Withholding tax (WHT)

Calculations of withholding tax for fee payments to foreign recipients and proofs of paid WHT

Certificates of residence and confirmations regarding tax exemption for withholding tax (if Double Treat Agreement is on force)

Analysis of WHT liabilities and WHT costs

Acquisition of Target CompanyConducting Tax Due Diligence




Tax Analysis of Target (Cont.)

Value added tax (VAT)

Annual VAT returns

Monthly VAT returns

Deviations between monthly VAT returns and annual VAT return

Calculations of VAT for self-consumption and deliveries free of charge (deliveries to the owners, employees, benefit in kind etc.)

VAT books of outgoing and incoming invoices

Personal income tax (PIT)

Analysis of employment agreements

Salary calculations / payment lists

Monthly salary recapitulations

Analysis of management agreements, service agreements, and author agreements

Benefits in kind – review of goods and services provided to employees and other private persons for car used

Review of other remuneration provided to employees (e.g. Christmas allowances, vacation allowances, transportation to and from place of work) and their treatment with PIT and obligatory contributions

Review of paid severance payments

Review of travel orders with all addendums

Monthly and annual forms that need to be submitted to the authorized institutions related to income payment

Other taxes

Contracts regarding real estate acquisition, real estate tax resolutions related to payment of real estate tax, proofs for real estate tax payment

Overview of other relevant taxes and contributions

Acquisition of Target CompanyConducting Tax Due Diligence (Cont.)




Legal Analysis of Target

Statutory issues

Founding and organization, privatization and similar issues

Investments into company in form of contributing real estate and equipment

Decisions of general assembly, supervisory board, and management board

Assets

Ownership and occupancy of real estate and other assets including mortgages and pledges over assets

Possession and validity of appropriate permits and licenses

Issues related to maritime and public goods

Concessions and approvals of relevant bodies

Intellectual property, rights and non-tangible assets

Court proceedings

Current status and likely outcome

Contracts and legal relations

Rents

Insurance

Loans

Suppliers

Employees

Customers

Other agreements and contracts

Labor related issues

Management contracts and work regulations

Collective agreements

Other relevant issues

Environment and customer protection

Competition law and regulation

Subsidies, etc.

Acquisition of Target CompanyConducting Legal Due Diligence




Final valuation and structuring

Recommendation of adequate treatment of problematic items found in due diligence

Recommendation of price adjustments (amounts and mechanics – if any)

Implied valuation by DCF

Defining conditions precedent for closing

Defining final transaction structure from financial, tax and legal point of view

Signing, Pre-closing and Closing

Defining and organizing signing proceedings

During the period between signing and closing, assisting in fulfilling conditions precedent on buyer’s side and validation of fulfillment of conditions precedent by the Target firm and / or the seller(s)

Organizing closing proceedings

Final Structuring and Valuation

Drafting of Transaction Documents (TD)

Share Purchase Agreement (SPA)

Shareholder Agreement (SHA)

Share Transfer Agreement (STA)

Management Agreements (MA)

Escrow Agreement (EA)

Supply Agreement (SA) or other agreements regulating provision of goods and services between related parties

Documents for regulators

Financial, tax and legal support in negotiations of final terms within TD

Net working capital, contingent liabilities and other adjustments to the final price, payment mechanism

Representations and warranties, applicable law, non-compete clause, agreements with related companies, management agreements, etc

Escrow account, earn out, further financing, and other elements of the acquisition given the circumstances

Conditions precedent and closing proceedings

Preparation of Transaction

Documents and Negotiation of Final

Terms

Acquisition of Target CompanyFinal Structuring, Valution, Preparation of Transaction Documents and Execution of Conditions Precedent



Financial Restructuring



Activity, liquidity, operating and financial leverage, return on invested capital

Profitability on product level

Historical net working capital, long term assets and CAPEX

Operating, investing, financing and free cash flow

Forecast of sales revenue and EBITDA

Forecast of investment in net working capital and long term assets

Forecast of debt and interest cost

Forecast of free cash flow and cash gap (determining a need for external financing)

Sensitivity and scenario analysis

Detailed Financial Analysis and Forecast

of Future Performance

Presentation of detailed plan to financial institutions with elaboration of major assumptions and explanation of internally undertaken measures aimed at adjusting to new conditions

Break down of concrete proposals to financial institutions or other creditors with the purpose of:

Refinancing of existing loans / leases

Adjustment in maturity schedules of existing debt

Adjustment in interest rates

Obtaining a grace period

Entering into sale and lease back arrangement

Replacement of existing creditor with a new one or raising additional debt

Update and modification of financial model and business plan according to creditors’ requirements as part of the negotiating process

Restructuring of Existing (Credit)

Liabilities

Financial RestructuringDetailed Financial Analysis and Active Help in Implementation of Measures Aimed at Improving Cash Flow and Debt Restructuring

Determining optimal product mix based on analysis of actual profitability and assessment of future perspective

Identification of measures and areas for optimization of operating expenses

Determining ways of more efficient utilization and treatment of non-operating assets

Defining measures for improvement of working capital management

Help in evaluation of profitability of investment projects

Creating list of concrete action points and responsibilities on individual level and assistance in implementation

Identification of Measures for

Improving Cash Flow*

*depending on client needs GRUBISIC & Partners can take the role of finance director during implementation of measures



Evaluation of Strategic Options



Entrance of strategic or financial investor in company's ownership structure

Do we need capital for expansion?

Is there a synergy potential between our company and investor's company (new markets, reduced costs, know-how sharing, etc.)?

Is public offering of shares feasible and acceptable way of financing?

Which risks are we exposed to in case we remain independent?

What is the value of our company?

Entrance of Strategic or Financial Investor

in Ownership Structure

Acquisition of other businesses

What is the main reason for potential acquisition of target company and is this reason valid?

Are we interested in whole or part of the target company's operations?

Are there any synergies between us and target company?

Is target business undergoing structured sale process run by investment bankers and are there other interested buyers?

What would be reasonable valuation of the target company?

How are we going to finance transaction?

How do we plan to integrate operations of two businesses after acquisition?

Is there a natural buyer of target company in case we subsequently decide to sell it?

Acquisition of Other Businesses

Evaluation of Strategic OptionsEntrance of Strategic or Financial Investor in Ownership Structure, Sale of a Company or Acquisition of Other Businesses

Sale of a company

Do we have a successor within the family who will run the business (in case we deal with family owned and managed company)?

Have we reached maximum in independent growth and development of our business?

Do we have adequate financial strength and management able to further improve our business?

Is consolidation and mergers in our industry inevitable way of maintaining or improving profitability?

Is management capable and willing to take over the company from existing owners?

Which risks are we exposed to if we don't sell the company?

What is the value of our company?

Sale of a Company



Choosing financing structure (debt vs equity)

Do we have a need for external financing?

Is external financing needed for restructuring purposes or for fueling further growth of a company?

Are we overleveraged from static point of view (net debt/EBITDA, debt-to-equity ratio) or dynamic point of view (projected free cash flow of a company in relation to repayment schedules of existing debt obligations)?

Do we have access to additional debt and under which conditions?

What is company's degree of operating and financial leverage prior to and after additional external financing?

Are we ready for entrance of strategic or financial investor in ownership structure through recapitalization process?

Is public offering of shares feasible and acceptable option of financing?

What is the value of our business and which ownership stake should new owner have after recapitalization?

Choosing Financing Structure

Merging companies from the same group into a single legal entity or spinning of part of existing business into separate legal entity

Would merging companies into single legal entity enable cost savings or improve certain processes leading to better efficiency and ultimately improved profitability?

Would merging reduce amount of administration and facilitate management with focus on better results of the whole group instead of each particular company (currently operating as independent legal entities)?

Would parts of the system become more flexible and competitive if carved out and run as separate / independent businesses?

Are certain parts of the system considered as non-core business and should be carved out and prepared for sale?

Merging Companies From the Group or

Spinning Off Parts of the Business

Evaluation of Strategic OptionsChoosing Financing Structure (debt vs equity), Debt Restructuring, Merging Companies or Spinning Off Parts of the Business

Debt restructuring / refinancing

Are maturities of existing debt obligations aligned with projections of free cash flow available for debt service?

Do we have alternatives in terms of access to debt and under which conditions?

Are existing creditors able to provide additional debt financing?

Is debt restructuring prerequisite for entrance of strategic or financial investor in ownership structure?

Is company in situation where part of debt obligations has to be converted to equity?

Debt Restructuring



Transfer of ownership between related companies and/or private individuals

Would transfer of ownership between companies create tax savings or other form of more desirable ownership structure?

Should ownership in a number of companies be replaced with ownership in a holding company?

Is for given purpose better to have ownership being held by private individual or a company?

Transfer of Ownership Between Companies or Private

Individuals

Investments in production or distribution facilities including enlargement or change in product and service portfolio

What are expected implications of anticipated investment decision on company's future free cash flow?

How would investment be financed and under which conditions?

Is planned investment generating positive NPV?

What is expected rate of return (IRR)?

What if we decide not to invest or postpone investment decision?

To which extent would new product cannibalize existing product portfolio?

How does a company's projected free cash flow look if we don't change existing product and service portfolio?

Investments in Long Term Assets and

Change of Product Porftolio

Evaluation of Strategic OptionsTransfer of Ownership, Treatment of Non-Operating Assets, Investment Decisions and Scenario Modelling

Treatment of non-operating assets

Which parts our assets are considered non-operating and can they be put into operations?

To which extent are non-operating assets liquid?

Are non-operating assets potentially useful for purposes complementary to company's core business?

Should non-operating assets be carved out into separate legal entity?

What would be the tax implications of a sale or carve out of non-operating assets?

Treatment of Non-Operating Assets

Modelling and simulation of different scenarios of business development with quantified effects on company's projected income statement, balance sheet and cash flow

Which variables from strategic financial plan have greatest impact on company's forecasted income statement, balance sheet and cash flow?

Which scenario indicates a need for recapitalization or other means of external financing?

Which scenario contains real options i.e. possibility of subsequent decisions about individual actions depending on future developments (e.g. additional investments if thing go well or possibility to swiftly abandon production if things don't develop in desired way)

Modelling and Simulation of

Scenarios



Selected Clients



Selected Clients

FORTIUS d.o.o.Za posredovanje u osiguranju

http://www.dok-ing.hr/






Team Members and Contacts



ExperienceAndrej started his career in 2002 in USA as a finance analyst in Sodexho Inc. In 2003 he joined Hrvatski Telekom as an assistant in the office ofChief Financal Officer where he was in charge of treasury and corporate finance, after which he moved to strategy department managingstrategic planning for all member companies of T-HT Group. In 2007 Andrej co-founded fund management company Platinum Invest where hewas a board member until 2008 when he sold his equity stake and became head of corporate finance within Erste Group in charge of Croatianmarket with focus on M&A projects, recapitalizations and financial restructuring. At the beginning of 2010 he started a corporate finance firm– GRUBISIC & Partners Corporate Finance focusing on mergers and acquisitions, capital raising, valuations, due diligence and financialrestructuring. Since its inception the firm has completed over 90 different assignments. Andrej is responsible for business origination,conceptual setup of project engagements, supervision and quality control, client advisory and assurance of fulfillment of all preconditions fordeal closing. Since 2004 Andrej has been a professor of finance at undergraduate and MBA program at Zagreb School of Economics andManagement, and starting from 2016 he will be visiting professor of finance at Toulouse Business School in France. Andrej is co-founder ofCroatian chapter of Turnaround Management Association (TMA) and member of its board of directors.

Education Strategic financial analysis for business evaluation – Harvard Business School, Cambridge, USA, 2014 (executive education program) Doctorate in Business Administration with emphasis in Finance – Business School Lausanne, Switzerland, 2007 Masters in Finance – Webster University, St. Louis, USA, 2003 B.S. in Finance – University of Zagreb, Croatia, 2001 Candidate for 2nd level of the CFA program

Team Members (1/4)

ExperienceTomislav has started his career as financial analyst in New York in 1994 at investment bank Schroder & Co. In 1998 he became chief investment officer at venture capital fund SEAF, which among other investments had acquired Iskon Internet (first ISP provider in Croatia). Following the acquisition Tomislav became chief financial officer at Iskon. In 2006 he joined a brokerage house, Ilirika vrijednosni papiri, as head of research and analysis department. At the beginning of 2011 he joined GRUBISIC & Partners as partner. Clients with whom Tomislav has been actively involved include Kupi me, Bilić Erić, Monile (Galileo), Iverpan, Lider, Wulf Sport (Shoe-be-do), Smoking, Special Hospital Sveta Katarina, Mick, Ljekarne Pablo (JGL), iRačun, E-Vision, Makro mikro, EPTA, Bomark, Tisak and Končar D&ST. Since mid 2015 Tomislav is responsible for daily operations of the office and communication with financial and strategic investors from around the globe, including relationship with other members of Globalscope.

Education MBA in International Finance — Fordham University, New York, USA, 1993 B.S. in Finance - Fordham University, New York, USA, 1988 Candidate for 3rd level of the CFA program

Andrej GrubišićPartner

Tomislav ŽicPartner



ExperienceDarijo has joined GRUBISIC & Partners in 2013 as an analyst. He has worked on projects involving financial modeling, preparation of transactiondocuments for investors (teasers and information memorandums), capital raising, market and competition analysis, valuation, and financialrestructuring. Clients with whom Darijo has actively worked with include Macola, Velekem, Zagorka, Montcogim, NCP Shipyard, Pisinium, PršutVoštane, Đakovačka vina, Kutjevo, GP Komunalac, KC plin, Eko papir, Shipyard Brodotrogir, Marina Trogir, Zephyr, Končar D&ST, Hospitalija,Sanolabor, Požgaj, Infonet, Tehnozavod and Vila Rosina.

Education B.S. In Business Economics – Zagreb School of Economics and Management, Zagreb, Croatia, 2014 (including semesters spent on Higher

School of Economics in Moscow and London School of Economics) Candidate for 2nd level of the CFA program

Other Dean’s award during all years at ZSEM (among top 5% of students) Fluent in English and conversational knowledge of Russian and German

Darijo KrešićAssociate Director

Teo ŠirolaAssociate Director

ExperienceTeo has joined GRUBISIC & Partners in 2013 as an analyst. He has worked on projects involving financial modeling, preparation of transactiondocuments for investors (teasers and information memorandums), capital raising, market and competition analysis, valuation, financialrestructuring and implementation of controlling and reporting system. Clients with whom Teo has actively worked with include Dona, GP Krk,Macola, Golf & Country Club Zagreb, DOK-ING, Whitefield energy, Pergament, Conty plus, Planet obuća, Lavčević group, In Tech, iRačun,Almos, Sedam IT, Galileo,Toni, MICK and Iverpan.

Education B.S. In Business Economics – Zagreb School of Economics and Management, Zagreb, Croatia, 2014 (including one year spent at ESSEC

Business School in Paris) Candidate for 2nd level of the CFA program

Other Dean’s award during all years at ZSEM (best student in generation) Fluent in English and conversational knowledge of German and French Member of MENSA

Team Members (2/4)



Marko Maurović, CFAAssociate

ExperienceMarko has joined GRUBISIC & Partners in 2015 as an analyst. He has worked on projects involving financial modeling, preparation oftransaction documents for investors (teasers and information memorandums), market and competition analysis, valuation, and financialrestructuring. Clients with whom Marko has actively worked with include MGK Pack, Model Pakiranja, Algoritam, Elanija (Vila Rosina), Tisak,Kompas, windpark Oštra Stina, Mucić&Co, Hotel Katarina and MICK. Prior to joining GRUBISIC & Partners, Marko has worked as broker inPartner banka and investment advisor and portfolio manager at Aktiv brokeri.

Education Completed CFA program, CFA Institute, Charlottesville, USA Licensed broker and investment advisor B.S. in History – University of Zagreb, Croatia, 2007

Other Fluent in English

Team Members (3/4)

Marko KlipićAnalyst

ExperienceMarko has joined GRUBISIC & Partners in June 2017 as an analyst. Prior to joining GRUBISIC & Partners, Marko has worked as an intern atZagrebačka banka in the corporate banking division and Credos brokerage house.

Education Masters in Finance - Nova School of Business and Education, Lisbon, Portugal (expected date of graduation 01/2018) B.S. in Business Economics – Zagreb School of Economics and Management, Zagreb, Croatia, 2016 (including semesters spent at University

of Barcelona, Frankfurt School of Finance and Management and Harvard University)

Other Dean’s award during three years at ZSEM (among top 5% of students). Fluent in English and conversational knowledge of German.



Team Members (4/4)Neven Cvitaš

AnalystExperienceNeven has joined GRUBISIC & Partners in June 2017 as an analyst. Prior to joining G&P Neven has worked as accounting specialist at Infokorp,audit assistant at Baum Revizija and assistant director for education and operations at Croatian American Society

Education MBA in Banking and Finance – Zagreb School of Economics and Management, Zagreb, Croatia, 2016 BA in English Language and Information Science – University of Zagreb, Croatia, 2005

Other Fluent in English Member of Croatian American Society 2015 Credit Suisse HOLT Champion – annual challenge in company valuation Candidate for 1st level of the CFA program

Luka PopovAssociate

ExperienceLuka has joined GRUBISIC & Partners in late 2016 as an associate. His deep knowledge of mathematics and physics helps G&P team to fullyexploit possibilities of financial modelling and business analysis from rigorous and systematic quantitative angle. Prior to joining GRUBISIC &Partners, Luka has worked for 8 years as research associate and senior teaching assistant at Faculty of Science at University of Zagreb.

Education Ph.D. in Physics - University of Zagreb, Faculty of Science, Croatia, 2013 Masters in Physics - University of Zagreb, Faculty of Science, Croatia, 2007

Other Claritas® Investment Certificate, CFA Institute, 2014 Published articles in physics related journals Fluent in English and conversational knowledge of Latin, Polish and Italian Running his own blog at www.katkapital.com Vice president of Vigilare foundation



Andrej Grubišić, Partner

Grubišić i partneri d.o.o.

Tel: +385 1 7987 120

Fax: +385 1 7987 125

Mob: +385 98 458 610

Email: [email protected]

Tomislav Žic, Partner


Tel: +385 1 7987 120

Fax: +385 1 7987 125

Mob: +385 91 585 7433


Darijo Krešić, Associate Director


Tel: +385 1 7987 120

Fax: +385 1 7987 125

Mob: +385 95 579 1566


Teo Širola, Associate Director


Tel: +385 1 7987 120

Fax: +385 1 7987 125

Mob: +385 99 701 1144


Marko Maurović, Associate


Tel: +385 1 7987 120

Fax: +385 1 7987 125

Mob: +385 98 622 615


Neven Cvitaš, Analyst


Tel: +385 1 7987 120

Fax: +385 1 7987 125

Mob: +385 95 820 7380


GRUBIŠIĆ I PARTNERI D.O.O.

ZADARSKA 80

OLIMP CENTAR, 4th FLOOR

10000 ZAGREB

Contacts

Luka Popov, Associate


Tel: +385 1 7987 120

Fax: +385 1 7987 125

Mob: +385 98 202 275


Marko Klipić, Analyst


Tel: +385 1 7987 120

Fax: +385 1 7987 125

Mob: +385 91 2521 276
