Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In

8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In

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INVESTMENT BANKING

Since1999

Cultural Challenges in Cross-Boarder M&A

Case Study: German Acquisition in Turkey

PMLG Second Annual Corporate Law Forum 2008

Stefan C. Heilmann, Managing Director, IEG Investment Banking

London, 24th April 2008


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INVESTMENT BANKING

Since1999

PMLG Second Annual Corporate Law Forum London, 2008 Page 2

Frankfurt, London, New York

Introduction: Stefan Heilmann

1989 1994 1995 1999 2000 2003 2004 2005 2006 2008

SubjectiveSuccessAssessment

High

Low

INVESTMENTBANKING

Since1999

Time

Turkey,India

Buenos AiresSo Paulo

Johannesburg

Milano,Madrid

Shanghai

Cologne

Paris

Munich

Berlin


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INVESTMENT BANKING

Since1999


Introduction: IEG Investment Banking

Founded in 1999

No. 1 Investment Bankinghouse for SME businesses inGermany (Top 20 in Europe)

3 Business Sectors: CorporateFinance; Institutional Placements;

Principal Investments

92 experienced professionals(thereof 22 in Berlin)

No bank licence

Africa

Africa

Asia

Asia

Europe

Europe South America

South America

Berlin, Germany IEG Headquarters

Amsterdam, Netherlands IEG Partner Office

Milan, Italy IEG JV-Office

Madrid, Spain IEG Partner Office

Shanghai, China IEG Branch Office

Mumbai, India IEG Partner Office

Johannesburg, South Africa

IEG Partner Office Buenos Aires, Argentina

IEG Partner Office

Sao Paulo, Brazil

IEG Partner Office

Istanbul, Turkey IEG JV-Office

Snapshot of the Company


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INVESTMENT BANKING

Since1999


Thomson Financial M&A Ranking 2007

Any German Involvement Announced (MM6b)

Based on Value

IEG - Investment Banking 381,4 1 3,6%

Deutsche Bank AG 367,1 2 3,5%

Lazard 283,1 3 2,7%

Deloitte & Touche 279,9 4 2,6%

PricewaterhouseCoopers 216,4 5 2,0%

Merrill Lynch 161,9 6 1,5%Lincoln International 156,4 7 1,5%

UBS 154,3 8 1,5%

Freitag & Co 138,1 9 1,3%

Commerzbank AG 136,5 10 1,3%

Drueker & Co GmbH & Co KG 134,0 11 1,3%

Rothschild 111,9 12 1,1%

M&A International 101,2 13 1,0%

Global M&A 100,0 14 0,9%

Norddeutsche Landesbank Giro 98,9 15 0,9%

Green, Manning & Bunch 98,9 16 0,9%

equinet AG 95,5 17 0,9%

ING 91,9 18 0,9%

Ernst & Young 89,0 19 0,8%

Regions Financial Corp 85,4 10 0,8%

Undisclosed Values & Values up to US$ 100m

1/1/2007 - 12/31/2007

Rank Value

(USD m )

Market Share

(%)Financial Advisor Rank

*

Any European Involvement Announced (MM3b)

Based on Value

Rothschild 2900,4 1 2,89%

KPMG Corporate Finance 2594,1 2 2,59%

Deloitte & Touche 2387,6 3 2,38%

PricewaterhouseCoopers 1751,7 4 1,75%

Ernst & Young LLP 1606,7 5 1,60%

Lazard 1506,6 6 1,50%UBS 1373,5 7 1,37%

ABN AMRO 1154,5 8 1,15%

M&A International 1056,4 9 1,05%

Grant Thornton LLP 924,0 10 0,92%

Close Brothers Ltd 875,2 11 0,87%

BNP Paribas SA 742,5 12 0,74%

BDO Stoy Hayward 733,6 13 0,73%

Deutsche Bank AG 731,0 14 0,73%

JP Morgan 644,8 15 0,64%

IEG - Investment Banking 642,8 16 0,64%

Citi 641,1 17 0,64%

Societe Generale 627,1 18 0,63%

ING 520,9 19 0,52%

Merrill Lynch 511,7 20 0,51%

Undisclosed Values & Values up to US$ 100m

1/1/2007 - 12/31/2007

Rank Value

(USD m )

Market Share

(%)Financial Advisor Rank

**

Source: Thomson Financial, Mid-Market M&A Review January 2008*Includes undisclosed transaction value; **Includes undisclosed transaction value of IEG European Offices

IEG is Market Leader for SMEs


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INVESTMENT BANKING

Since1999


The Case Study Key Data

Bidder Target Seller

German outdoor advertiser& street furniture company

SME business and majoritystake owned by founder

> 150 m LFY sales

Profitable

Outdoor advertising pioneerin Turkey with a concessionagreement for Istanbul

Turkish outdoor advertiser& street furniture company

SME business & privatelyowned and managed by

founders

< 10 m LFY sales

Very profitable

Market leader in theAegean (Izmir, Bodrum,Marmaris, etc.)

Concession agreement

with 50 communities

Legally:Founding family from Izmir

Economically:4 unknown Turkish

families (50%) plusfounding family (


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INVESTMENT BANKING

Since1999


Illustrative Acquisition- and Financing Process

Market Due DiligenceTurkey

Readiness Analysis forBidder

Germany

Acquisition ExecutionTurkey

Financing ExecutionTurkey

Integration Execution

Turkey

Pre-Transaction Transaction Post-Transaction

A Process of Dynamic Challenges for all Participants

Source: IEG Copyright, 2008

Kick-

offGo Closing

FAILURE = Transaction + without Pre-Transaction + without Post-Transaction


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INVESTMENT BANKING

Since1999


Pre-Transaction Challenges

IEGs 6 instructions for the Turkish M&A Market

1. Know thy own strengths and weaknesses!

2. Know thy Turkish target market!

3. Know thy Turkish partner (=target company)!

4. Know thy true value of the Turkish target company!

5. Know thy own products and services!

6. Know thy rationale for the transaction in Turkey!


Market due diligence

Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing

P re- Tr an sa ct io n T ra ns ac ti on P os t- Tr an sa ct io n


Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing



Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing



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INVESTMENT BANKING

Since1999


Transaction Challenges (Part I)


Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing



Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing



Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing


General Deal Killers:

Price + valuation Terms and conditions Risk allocation Third party impact

Negotiation +relationship management

(politics, society, owners,employees, management)

Linguistic barriers(Spoken and written

communication)

Cultural Barriers(Rules, emotions, believe,

traditions, etc.)

Conflict arbitrage,corporate governance +

management

governance

Transaction structure +due diligence

Bribery + corruption

Legal challenges(e.g. tax- + corporate

law, closing)

Political + regulatorybarriers

Coordination + Communication + Anticipation = NO SURPRISES


Key Challenges During the Acquisition Process


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INVESTMENT BANKING

Since1999


Excursion: Transaction Due Diligence

Core Problems of Due Diligence IEG-Due Diligence-Matrix

Overvaluation of inventories (semi-finished goods)

Insufficient inventory of all assets

(street furniture)

Taxes

No management information systems

Insufficient financial documentation

Transactions with company relatedpersons (adjustment of EBITDA)

Recoverability of receivables Off-balance Sheet payment

Ignore

and

Assess

Purchaseprice adaption

(or terms)

Purchasecontract

adaption(guarantees,

escrow, liability,etc.)

Walk

or

Run away

Cost

Risk

Challenges & Consequences of Due DiligenceMarket due diligence

Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing



Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing



Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing



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INVESTMENT BANKING

Since1999


Transaction Challenges (Part II)

Key Challenges for Local Debt Financing (Acquisition Financing)

General Barriers Recourse-Categorisation

Documentation (variety of requests)

Key contact (seniority)

Pricing (refinancing)

Duration (long term = short term)

USD vs. TRY (only a bet)

Timing (2-3 months)

Language (Turkish, Turkish, etc.)

Non-Recourse

- Deniz

- YapiKredi

Partial-Recourse

- Garanti

Full-Recourse

- HSBC

Conflict of interest

- Akbank

No term sheet presentation- Deutsche Bank

- ABN Amro


Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing



Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing



Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

Turkey

Kick-off

Go Closing



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INVESTMENT BANKING

Since1999


Post-Transaction Challenges

IntegrationNetwork

CulturalUnderstanding

Patience

Communication

& LinguisticSkills

ManagementResources

Capital

Key Challenges for the Post-Closing IntegrationMarket due diligence

Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

TurkeyKick-

offGo Closing

P re -T ra ns ac ti on T ra ns ac ti on P os t- Tr an sa ct io n


Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

TurkeyKick-

offGo Closing



Turkey

Readiness analysis

Bidder

Germany

Acquisition

Turkey

Financing

Turkey

Integration

TurkeyKick-

offGo Closing



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INVESTMENT BANKING

Since1999


Appendix I: Selected Transactions


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INVESTMENT BANKING

Since1999


Appendix I: Selected Transactions (contd)


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INVESTMENT BANKING

Since1999


Appendix I: Selected Transactions (contd)


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INVESTMENT BANKING

Since1999


Appendix II: Key Contacts

Stefan C. Heilmann, Managing Director Tel +49 30 303016-30Fax +49 30 303016-38

Skype: s.heilmannEmail: [email protected]

Giorgia Ferrero, Assistant Tel +49 30 303016-30Fax +49 30 303016-36

Skype: g.ferreroEmail: [email protected]

IEG (Deutschland) GmbH

Knesebeckstr. 59-61

D-10719 Berlin

www.ieg-banking.com

Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In

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