Strategic Due Diligence Enhancing Decision-Making in ...oilandgasconference.org/presentations/Robert...
Transcript of Strategic Due Diligence Enhancing Decision-Making in ...oilandgasconference.org/presentations/Robert...
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ROBERT L. SHERRILL
ROBERT L. ATC
Strategic Due Diligence Enhancing Decision-Making in Mergers &
Acquisitions
Robert L. Sherrill, Sage ATC
NOVEMBER 28 - 29, 2017 | HOUSTON, TEXAS
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Strategic Due Diligence Enhancing Decision-Making in Mergers &
Acquisitions OGENV November, 2017
Presenter: Robert L. Sherrill
They seemed to be getting closer
to a deal!
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Levels of Due Diligence
What are the “Levels” of Due Diligence?
1. Phase I Environmental Site Assessment
2. Phase II Environmental Site Assessment
3. STRATEGIC ASSESSMENT DUE DILIGENCE
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Phase II ESA
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Strategic Due Diligence
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Purchase Sale
Agreement (PSA) Share Purchase Agreement (SPA)
Asset Purchase Agreement (APA)
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Strategic Due Diligence
July 30, 2002
HR 3763, Pub L No. 107-204, 116 Statute 745
Sarbanes-Oxley Act of 2002
SOX ACT
SOX
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Security Exchange Commission Environmental
Reporting
• 1971 – SEC Release No. 5170
• 1975 – SEC Regulation S-K
• 1995 – SEC Staff Accounting Bulletin No. 92
• 1999 – SEC Interpretive Release No. 16,223
• 2002 – Sarbanes-Oxley Act
• 2008 – Federal Accounting Standard Bulletin #5
• 2013 – FASB 5 replaced by Accounting Standard
Codification Rule No. 450
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Strategic Due Diligence
What’s A Liability?
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Strategic Due Diligence
What’s A Liability?
Liability (in a nut shell)….is a function of a condition’s monetary impact (Materiality)
and the likelihood it has occured (Uncertainty) or can occur (Probability).
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Strategic Due Diligence
Recognition
Identification of contingent Liabilities
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Strategic Due Diligence
Uncertainty
Probability that a future event (or nonevent) will confirm that a material liability has been incurred
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Strategic Due Diligence
Materiality
$?$?$?$?$?$?$?$? To be Material, EPA/State Laws say it has to exceed some standard. Under SOX, ASC 450 Law says it just has to exist (or could)
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Strategic Due Diligence
Probability
1. Existing condition or set of circumstances which involve uncertainty as to a possible loss, and
2. Future event or nonevent will ultimately resolve the uncertainty
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Liability is a function of a condition’s monetary impact (Materiality) and the likelihood it has occurred (Uncertainty) or can occur (Probability).
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Strategic Due Diligence Process
Results and Work
Product to be
Expected Depending on Asset
Types, Sizes, Locations,
and the Quality of the
Seller’s Records, Resulting Work Product will vary.
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Anatomy of the Strategic Due Diligence Process
Buyer Strategic Due Diligence
I. Pre-M&A Stuff Execute LOI
II. M&A Stuff
III. Negotiations Execute the PSA
IV. Post-M&A Stuff
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Strategic Due Diligence Process – Big Picture Sherrill, 2016
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Anatomy of the Strategic Due Diligence Process
Seller Strategic Due Diligence
I. Pre-Sale Announcement
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Anatomy of the Strategic Due Diligence Process
Seller Strategic Due Diligence
II. M&A Protections
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Enhanced Decision-Making
M&A Strategic Due Diligence
CLOSING THOUGHT - A Strategic Due Diligence must be planned and executed around the conditions of the M&A and the assets. Properly performed, a Strategic Due Diligence will allow for development and evaluation of the boundary conditions of the representations and warranties and ultimately facilitate a consensus on the final price and retention issues, and ALWAYS REMEMBER……………………..
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Enhanced Decision-Making
M&A Strategic Due Diligence
Robert L. Sherrill Sage ATC [email protected] 512/470-8710