The Latest Interpretation of General Due Diligence Speaker

The Latest Interpretation of General Due Diligence Speaker : Avv. Marco Mazzeschi 2018 China Enterprises Going Global Risk Conference Zhuhai , China | 20. 03. 2018 Organized by Jiang Tai Global Assistance Alliance

SPEAKER 1. 2018 Who’s Who Legal : Marco Mazzeschi "is everyone's favorite Italian lawyer – He is fantastically knowledgeable and dynamic. " He is the most highly recommended immigration lawyer in Italy in this year’s research Avv. Marco Mazzeschi 2. Admitted to the Milan Bar Association (1988) Fonder of MAZZESCHI S. R. L. 3. Member of American Immigration Lawyers Association (AILA) 4. Member of International Bar Association (IBA) 5. Member of editorial board of the journal “Asian Business Research” 2

INDEX 1. What is a Due Diligence and why is it important 2. Main goals of a Due Diligence 3. Tips for legal due diligence 4. Things to avoid 5. Case Studies

Would you buy a used car without checking if the engine works?

Why buy or invest in a company. . . without checking its accounts, liabilities and possible losses?

1. What is a Due diligence and why is it important The process of evaluating a business situation from all aspects before making a decision. It is performed to protect both parties, but mainly the purchaser: Understand financial situations finding potential liabilities Evaluate hidden risks Prevent unexpected losses

2. Main goals of a Due Diligence Evaluate Value: To evaluate if the TC business can be a value for the Buyer and can be integrated in the Buyer’s operations Evaluate Value Discover Losses Due Diligence Save Costs: To discover if acquisition of TC can generate cost savings opportunities Save Costs Avoid Risks Discover Losses: To discover what are the possible hidden liabilities and/or losses that the TC could Avoid suffer Risks: after the To avoid any acquisition other risks that Purchaser can have in purchasing TC

3. Tips for Legal Due Diligence 01 02 STUDY Set your goals Study company business, have a clear ideas of your goals. Do not disperse your energies 03 04 INTEGRATION CHECK LIST LOCALS KNWOLEDGE Appoint local experts. Agree A Clear Scope. After Closing Use local experts Draft a detailed Plan Be ready in and use them wisely. They know local laws and customs questionnaire with each professional adviser at the outset advance with a clear plan on how to manage the Company

4. Things to avoid Don’t scrimp Don’t forget the hot topics To save money, you could be tempted to forgo legal due diligence and rely on warranties and indemnities: don’t do it! Do not focus only on assets and business operations, also legal, tax and other areas can cause heavy losses to the TC Don’t leave your advisers in the dark Do not underestimate cultural differences Make sure the counsels you select talk each other and appoint someone of your Team to coordinate their work You must be ready to take control of the TC immediately after acquisition but respect and understand local culture

5. Case Study 1 TCL $ 560 Million acquisition of Thomson TCL refused to hire M&A experts and did not conduct any DD. After acquisition, TCL: • Realized that Thomson products were old and tired and that Thomson had suffered a $ 100 Million losses the previous year • Did not have to assimilate Thomson’s people and did not have Chinese managers with adequate international experience. In the 2 years after acquisition Thomson accumulated $ 680 Million of losses and the third year TCL closed its European operations

5. Case Study 2 CITIC Pacific investment in Australian iron ore mines CITIC Pacific, a subsidiary of the CITIC Group, purchased for 4. 2 Billion AUSD the extraction rights in a mining area in Australia. CITIC did not carry an extensive DD and several factors resulted in a substantial increase of costs and investments after Closing. CITIC did not take into account: • • Labor issues caused by cultural differences between Chinese and local workers High labor costs that CITIC could not bypass by using Chinese workforce (visa restrictions on foreign workers) Costs deriving from mandatory environmental protection Australian government increased mining taxes by 40%

5. Case Study 3 Qianjian Motors acquires Benelli Motorcycles Qianjiang Motors acquired Benelli Motorcycles, an Italian manufacturer of motorcycles from bankruptcy. Only the sales director, the part quality manager, and the managing director were transferred from China to Italy. Several postmerger integration issues including national cultural differences with respect to attitudes, lifestyles, and approaches to business management emerged. The accounting and management information systems of the two companies did not go through post-merger integration either. Acquisition failed and Qianjiang sold business with losses.

MAZZESCHI S. R. L. The leading immigration service provider in Italy Avv. Marco Mazzeschi mm@mazzeschi. it +39 0057926921 www. mazzeschi. it