a simple introduction into mergers and acquisitions , while giving some attention to the Qatari regulations on mergers and acquisitions.

1. MERGERS AND
ACQUISITIONS
An introduction
Ahmed al-saad
ahmed al-saad

2. What are
mergers
and
acquisitions
?
• Two ways to grow your business either
organic growth or acquisition based
growth
• Mergers and acquisitions are methods
used by corporate entities to grow their
respective core business or get in to
new lines of business.
ahmed al-saad

3. Mergers?! o a transaction where by two firms agree to
integrate their operations on a relatively co-
equal basis ? Co-equal Really ?
o The combining of two or more companies,
generally by offering the stockholders of one
company securities in the acquiring company
in exchange for the surrender of their stock
ahmed al-saad

4. acquisitions
?!
• A transaction where one firms buys another
firm with the intent of more effectively using
a core competence by making the acquired
firm a subsidiary within its portfolio of
business
• It also known as a takeover or a buyout
• It is the buying of one company by another
ahmed al-saad

5. Why do a
merger or
an
acquisition?
• To Maximise Shareholders Wealth
• Entry to new markets internationally
• To enhance manufacturing base
• To buy out competitors
• To buy patents or technology
• For tax purposes
• For monopoly and market dominance
• For valuation purposes
ahmed al-saad

6. Types of
mergers
and
acquisitions
:
• Horizontal , when a company buys another company in
the exact same service or industry!mmmm?
ThinkQatari airways and Etihad!
• Vertical, when a company buys another company in the
same industry or service but in a different position in
the value chain! (Dolce and gabbana buys textile
factory? BMW buys spare part manufacturer! Leather
producer! Qatar airways buys catering company!
• Product Extension (concentric) a company buys
another company in a related industry! Ex.dell buys
EMC storage? Synergy
• Unrelated or conglomerate company buys another
company that is in completely different industry or
service Chinese companies making beer buying tech
companies? Really?
• Reverse takeover when the subsidiary buys the parent
company
ahmed al-saad

7. Time line
for an
acquisition?
• 1-NDA
• 2-Due Diligence
• 3-LOI
• 4- (Offer Document) Draft SPA
• 5-Negotiations
• 6-Financing
• 7-conditions precedent
• 8-completion
ahmed al-saad

8. Case
scenario
• So lets put the time line to the test?
• HBKU take over QU ??? How?Why?
HBKU 98% QU
ahmed al-saad

9. NDA • The non disclosure agreement is an agreement that is
signed by both parties to a proposed transaction
whereby both parties take a legal comittment not to
disclose information they have obtained through the
currrent negotiations to any third party withoput the
prior written approval of the second party
• Exception to non disclosure: when a company is
required by law ,regulation or court order to give
certain infomration.
ahmed al-saad

10. Due
Diligence
• What's that? its the process of gathering relevant
information about a certain company
• example (when you get married in Qatar the girls
family are actually performing due diligence on you)
• Target companies should prepare data rooms (now a
days its mostly virtual)
• What documents are usually required? And some key
points: (see annex)
• 1- company's constitutional documents including:
articles of association, human resource manuals,
audited accounts for the last 5 years, salary
compensation schemes if any, legal disputes and court
causing if any, corporate governance structure,
corporate structutre,share ownership structure, board
structure
ahmed al-saad

11. LOI • what is it? It’s a letter that should highlight and
roadmap the entire process of a proposed merger or
acquisition
• as a way to clarify which key points of a deal need to be
negotiated
• to protect all parties involved in a deal
• (must be sure to keep it non-binding so either party can
walk if there is (skeleton in the closet)
• Watch out for good faith obligations (word of honor)
ahmed al-saad

12. Offer document spa
or ape
• The offer document is putting the offer of the buyer in
writing format for the seller to consider it can take
form of spa or apa or other forms
• The offer document in general should have the
following section:
• 1-excution provisions
• 2-representations and warranties
• 3-covenants
• 4-indimnification
• 5-termination
• 6-break up fees
• 7- conditions to closing
ahmed al-saad

13. 1-Execution
provisions
• Execution provisions provide for the transfer by the
seller of the assets or stock of the target to the acquirer
in exchange for the purchase consideration.The
consideration may take a number of forms, including
cash, stock (common or preferred), deferred
compensation etc..
ahmed al-saad

14. 2-
Representations
and waranties
• Representations and warranties serve three principal
purposes:
• They must be true and accurate at both signing and
closing; otherwise, the buyer may be able to delay
closing or terminate the deal
• Breaches of reps and warranties form the basis
for indemnification claims
• They support the due diligence process and the
determination of purchase price adjustments
ahmed al-saad

15. 3-
Covenants
• Covenants regulate the actions that buyers and sellers
are allowed to take between signing and closing.They
also form the basis for closing conditions and
indemnification. Basically, breaking a covenant implies
that a condition to closing has been violated, and the
party not in breach will be able to claim
indemnification from the other party, or possibly
terminate.
ahmed al-saad

16. 4-Indmnification • what's an indemnification? It’s a fancy word for
remedy ! Or t3oi6 Indemnification typically involves a
payment from the seller to the buyer to compensate
the buyer for losses incurred due to such breaches. In
most cases, there is a materiality threshold for such
breaches. An acquirer will only be indemnified for
breaches of reps and warranties for the "survival
period", which is usually until closing or a defined
period of time thereafter (but usually no longer than
one or two years, except in the case of tax and
environmental reps, which are typically longer).
ahmed al-saad

17. 5-Termination
• Termination clauses describe the situations in which a
seller or buyer has the right to terminate the deal.
Termination rights are invoked when one or more of
the conditions to the transaction are not and cannot be
fulfilled. In order to further limit the uncertainty
regarding such a situation, a termination date is usually
specified as well.
ahmed al-saad

18. 6-Break up fees • What's that? Basically break up fees are a remedy if
either the buyer or seller went back on the agreement
and decided not to sign the spa or apa.
• Why do you want a break up fee? As a buyer or seller?
• When will the buyer or seller accept?
ahmed al-saad

19. 7-Conditions to
closing
• Conditions to closing provide an acquirer with
protection against not getting what it is paying for and
create certainty for the seller. Basically, they regulate
the steps that enable the two parties to close a
transaction. they also regulate the "bring down" of
reps and warranties (i.e. confirming that all reps and
warranties are still true and accurate at the time of and
as a condition to closing).
ahmed al-saad

20. negotiations • In this stage the a target company (seller) will be trying
to get the best deal of there advantage the buyer will
also try to get the better deal for him
• This process entails negotiating
price,valuations,employee terminations, core business
etc.…
ahmed al-saad

21. Financing? • Some times a friendly target of a take over will ask the
acquiring party for a bank guarantee to make sure that the
acquirer is actually financially capable of closing the
transaction.
• In some cases the the acquiring company might be cash
rich and does not mind spending some of it cash reserves
on buying a target company so it wont need financing !!!
• How can the acquirer secure bank loans? Just like a person
through mortgage or pledging of assists
• The acquiring company will mostly sign ndas with a couple
of banks and show them financial results etc..To convince
the banks to give them a letter of financial guarantee.
• This letter can be from one bank if the deal value is small
or from multiple banks in case the value was high.
ahmed al-saad

22. Public deals
vs private
deals?
• In public deals the following mostly happens:
• 1- notification threshold
• 2-duty to inform stock markets
• 3-Stating acquisitions % and keep updating the stock
market and regulator about % increases . (under some
jurisdictions mandatory to
• 4-Minority rights (squeeze outs)
• 5-Public offer ( for all the shares including minority
shareholders)
• Private deals : mostly different
ahmed al-saad

23. Tax considerations • Who pays tax on gain?
• Tax structuring issues? (use holding companies or
direct purchases?)
• Net operating loss going forward
• Cross border considerations?
• Jurisdiction position on tax?
ahmed al-saad

24. Qatari law on
Acquisitions
• Law number (8) of 2012
• Any interesting take over cases going on the market?
Has there ever been a local Q.S.C merger or
acquisition?
• Almeera declaring its intention to the stock market
spinys(Qatar) almeera acquisition of giant , (qatari
investors) and the current hostile take over bid
,alkhaliji-alahli bank-international bank of qatar
merger,ooredoo 95% acquisition of alwatanya kuwait
aka ooredoo kuwait
• Minorities?
ahmed al-saad

25. Post merger
integration
• GE method?
• Full: All functional areas (operations, marketing, finance, human
resources, etc.) will be merged into one new company.The new
company will use the "best practices" between the two
companies.
• Moderate: Certain key functions or processes (such as
production) will be merged together. Strategic decisions will be
centralized within one company, but day to day operating
decisions will remain autonomous.
• Minimal: Only selected personnel will be merged together in
order to reduce redundancies. Both strategic and operating
decisions will remain decentralized and autonomous.
• If post merger integration is successful, then we should generate
synergy values. However, before we embark on a formal merger
and acquisition program, perhaps we need to understand the
realities of mergers and acquisitions.
ahmed al-saad

26. Annex • NDA
• Letter of intent (letter of expression of intent)
• Template spa
• Due diligence checklist
ahmed al-saad

27. Asset Acquisition:
Acquiring purchases all or substantially all assets of Target
Acquiring corp.
shareholder
A
shareholder
B
shareholder
C
shareholder
D
Board of
Directors
 Board and shareholder approval ofTarget
 Board (and maybe shareholder) approval of Acquiring
 assets ofTarget sold for $$$
Target corp.
Board of
Directors
$$$
assets
Lender
$$$
ahmed al-saad

28. Asset Acquisition:
Acquiring purchases all or substantially all assets of Target
Acquiring corp.
shareholder
A
shareholder
B shareholder
C
shareholder
D
Board of
Directors
Alternate:
 use Newco subsidiary to acquire assets ofTarget
Target corp.
Board of
Directors
$$$
assets
Newco
ahmed al-saad

29. Stock Purchase: Target becomes subsidiary of Acquiring
Acquiring corp.
shareholder
A
shareholder
B
shareholder
C
shareholder
D
Board of
Directors
Step #1:
 Acquiring buys stock ofTarget from shareholders
Target corp.
Board of
Directors
$$$
stock
ahmed al-saad

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