Hyatt Regency Santa Clara | November 7, 2019

Do or Do Not – There is no Try! Post-Acquisition Integration Planning to Seal the Cross-Border Deal

Agenda

1 The Rise of Cross-Border

Transactions

2 What it Means to Integrate

(or Not)

3 The Integration Awakens

4 Attack of the Integration Diligence

5 A New Hope: the Cross-Functional

Project Team

6 The Global Markets and Local

Regulations Strike Back?

Speakers

Senior Corporate Counsel

for Corporate Operations

and M&A, Legal at

Autodesk

Amanda Riley

Privacy Associate

+1 415 984 3842

helena.engfeldt

@bakermckenzie.com

Helena Engfeldt

Employment Partner

+1 415 591 3248

benjamin.ho

@bakermckenzie.com

Benjamin Ho

Corporate and Securities

Partner

+1 415 984 3886

veronika.nemeth

@bakermckenzie.com

Veronika Nemeth

Tax Partner

+1 415 984 3832

adam.obrien

@bakermckenzie.com

Adam O'Brien

1

The Rise of Cross-Border Transactions

Cross-Border TransactionsToday, nearly all transactions are cross-border

A "cross-border," "multi-jurisdictional"

or "international" transaction is any

transaction involving two or more

countries

Cross-border transactions are not

limited to transactions between parties

that are headquartered in different

jurisdictions

Any transaction that involves key

personnel, assets, markets, contracts

and/or relationships in more than one

country is cross-border

Cross Border IntegrationIt seems simple……but it's not

Parent

Company A

Parent

Company B

Parent Company A

acquires

Parent Company B

Parent

Company A

Parent

Company B

Multiple (and often duplicative) subsidiaries

now need to be integrated

Be Mindful of Foreign Complexities

2

What it Means to Integrate (or Not)

Ownership Structure Immediately After Stock Acquisition

Buyer

(Delaware)

Other B

Subsidiaries

B Subsidiary

(GmbH)Target

(Delaware)

T Subsidiary

(GmbH)Other T

Subsidiaries

Why Integrate?

Eliminate expenses from

duplicative entities

Reduce overall corporate

administrative burden and

complexity

Consolidate operations in

one premise

Cost Savings

Simplify payroll administration

Manage employees as one

group

Simplify purchasing and

invoicing

Sell full product range to

customers through one entity

Streamline Operations

Unwind unsustainable tax

structures that the target

may have in place

Mitigate transfer pricing

risks

Take advantage of existing

tax attributes

Tax Benefits

Integrate to What Extent?

Vet local issues and

timeline

"Fast and furious" approach

can backfire

Implement interim operating

rules

Full integration on "big

bang" date

Integrate employees, soon

after Day 1

Allow target to operate

under its own business

model for a period of time

Partial or phased

integration

Antitrust conditions may

require it

Operate as standalone

business (e.g., non-tech

acquires tech)

May subsequently end up

integrating

Limited or no integration

3

The Integration Awakens

M&A Transaction TimelineMake integration planning part of your M&A process

Merger negotiations 1

11

2

3

4

5

6

8

9

10

7

Due diligence

Definitive agreement

Transaction announced

Integration team and goals identified

"Straw man" integration plan

Closing

Refine and finalize integration plan

Implementation of integration

Completion

Parallel integration diligence should be

conducted

Integration issues should be analyzed

during merger negotiations

Integration plan should be well

advanced by the time of closingPreliminary information gathering

M&A and Integration Diligence in Parallel

Signing Closing

Establish process for

integration team to

leverage deal team

diligence

Clean up corporate

maintenance and

compliance issues

Consult with antitrust adviser to ensure integration

planning does not run afoul of antitrust laws, such

as gun jumping or exchange of confidential

information

"Parallel diligence" is beginning before signing when there is reasonable deal certainty.

Integration diligence findings are captured for use in the integration process and are also

fed back in real time to the deal team as they could impact deal value.

4

Attack of the Integration Diligence

Integration Due Diligence

Corporate org chart

Entity data sheets

Share certificates

Corporate registers

D&O information

Minority ownership

Corp Sec providers

Issues:

Lost share certificates

Long departed D&Os

Corporate

Any prior restructuring

to address international

tax developments?

Transfer pricing studies

Existence of audits

Existence of NOLs

Tax credits or holidays

Prior year tax returns

Status of stat accounts

Issues:

Delinquent statutory

accounts

Tax & Financial

No. of employees by

entity, location and

function

Part time, contractors,

secondees

WCs, unions and

employee reps

Immigration status

Salary and benefits

Data privacy/GDPR

Issues:

France - Loi Hamon

issues

UK - defined benefit

pension arrangements

Employment

FA registers and

balance sheets

Customer and vendor

contracts

Regulatory licenses

Real estate

Intellectual Property

Information technology

Data protection

Data privacy

Issues:

Restrictive covenants

in licenses or contracts

Commercial

Data Privacy Diligence Tips

Contractual reps and

warranties

Review prior versions of

public facing privacy policies

Review current privacy

notices including localized

versions

Consider whether to require

target to update privacy

notice before deal closing

How to legitimize any

international data transfers

5

A New Hope: the Cross-Functional Project Team

Working TogetherBuild a dedicated team representing each internal function

Functional teams should

provide input to the

integration plan while it is

being developed

Business objectives

may need to be

weighed against tax or

legal considerations

Identify issues within each

function that could

significantly impact the

timing or cost of the

integration

Build an effective PMO

and ensure regular

communications

Weighing Cross-Functional Inputs

Management

Derive maximum value

Share price performance

Cost efficient and timely execution

Minimize disruption to business

HR

Reduction in workforce?

Changing terms and conditions?

Salary and benefits

Retain talent

Tax

Optimize tax planning opportunities

Tax efficient combinations

Preserve tax attributes

Trading model review

Real Estate

Opportunity to combine facilities

Reduce overhead

Leases: terminate, share or sub-

lease

Finance and Treasury

Reporting information for combined

organization

Accounts and consolidation for local

integration

Cure delinquent filings

Marketing & IP

Brand and culture

Name changes

Message to customers and market

Impact on IP ownership & licensing

Legal

Implementation of local integrations

D&O and name changes

Customer and interco agreements

Compliance

Operations and Commercial

Key contracts and customers

Single operating company in each

jurisdiction?

Invoices and systems

Will any services be outsourced?

IT

Compatibility of IT systems to be

integrated

Corporate Implementation

Asset sale & dissolution

Share transfer & merger

Local Integration Methods

Other

SubsidiariesBuyer Subsidiary

TargetCo

(Delaware)

Target Subsidiary Other

Subsidiaries

Buyer

(Delaware)

US & International Tax Considerations

For U.S.-based multinationals, all integration transactions need to be considered from a

U.S. and non-U.S. tax perspective

Ensure that integration addresses recent international tax developments, including:

Rules that require tax structures to align with business substance

U.S. tax reform

Consider exit taxes if supply chain integration requires moving entrepreneurial

functions cross-border

Identify as early as possible whether tax rulings or clearances will be required in

connection with integration

Employment & Benefits Key Issues

Transfer methods may include:

Automatic transfer

Termination & re-hire

Tripartite agreement

No change of employer

Pension issues tend to dominate (e.g., funding and liability allocation)

If automatic transfer, employee benefit entitlements remain

One of the most taxing and time-consuming stages involves informing and/or consulting

with works councils, employee representatives and unions

Impact of the Workforce

Consider timing of termination of

employees and putting

incentives in place for

employees to help with the

integration

Identify in which jurisdictions

works councils, unions and

employee representative bodies

exist in order to plan consultation

at an early stage in the process

Consider ability to harmonize on

a country by country basis and

whether to introduce in stages

Maintaining Institutional

Knowledge

It is important to try to retain the

knowledge base of the target

company to enable an integration

to proceed smoothly

Unions and Employee

Representatives

Be mindful of unions and

employee representative bodies

that can wield significant influence

Challenges to

Harmonization of Benefits

The harmonization of benefits can

cause problems and in some

countries certain detrimental

changes to terms and conditions

may not be made, even with

employee consent

Data PrivacyProactively address compliance issues

Legitimize any

international data

transfers

Obtain consent from

data subjects to send

marketing emails

Update/put in place

internal privacy law

policies, protocols and

agreements

Update all privacy

notices to employees,

customers, etc. (now

includes California)

Privacy law and relevance of integration plan

Share vs asset

transfersTypes of data and its place

in new structure

6

Global Markets and Local Regulations Strike Back?

Global Transactions Forecast

Our global transactions forecast predicts that global M&A volumes will decline from USD

2.9 trillion in 2019 to USD 2.1 trillion in 2020.

The US deal market has held firm despite the odds, but we predict a short term

deceleration in 2020 due to the economy slowing down and a possible equity market

correction. What's more, the geopolitical environment is increasingly challenging and

political uncertainty will be elevated due to the upcoming presidential elections.

Ultimately, the appetite for deal making should return from 2021 onward, providing the

foundation for a gradual recovery in M&A volumes. Acquisitions will remain an

important growth strategy for corporations in all major industries, driven in

particular by the need to defend against technological disruption.

The Expanding Privacy Landscape Brazil, California, India

Brazil's General Data

Protection Law –

August 2020

The California

Consumer Privacy Act –

January 1, 2020

India privacy bill –

pending but some

version likely to go

into effect

Ongoing Global Tax Developments

The OECD is working on a comprehensive framework for addressing the taxation of the

digital economy

In the meantime, many countries are considering unilateral initiatives aimed at taxing

digital services such as online advertising and online marketplaces (and France has

already enacted a "digital services tax")

European jurisdictions continue to implement new rules under the EU's Anti-Tax

Avoidance Directive

Uncertainty regarding longevity of certain U.S. tax reform rules

The Last Word: Top Integration Tips

Make integration planning part of your M&A process

Make compliance part of the integration process

Identify and plan around local complexities

Develop a realistic integration plan based on key objectives

Break down silos and involve key constituents

Questions

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