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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
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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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
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 3
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
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 4
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
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 5
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 (
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 6
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
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 7
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!
Source: IEG Copyright, 2008
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
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
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
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 8
Transaction Challenges (Part I)
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
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
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
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
Source: IEG Copyright, 2008
Key Challenges During the Acquisition Process
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 9
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
P re- Tr an sa ct io n T ra ns ac ti on P os t- Tr an sa ct io n
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
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
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 10
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
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
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
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
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 11
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
Market 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
Market 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
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 12
Appendix I: Selected Transactions
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 13
Appendix I: Selected Transactions (contd)
8/14/2019 Cultural Challenges in Cross-Boarder M&a Case Study: German Acquisition In
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 14
Appendix I: Selected Transactions (contd)
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INVESTMENT BANKING
Since1999
PMLG Second Annual Corporate Law Forum London, 2008 Page 15
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