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Acquisition Process

Step 1: Introductions
Direct Contact
Business owners often contact us directly to determine if we are interested in
acquiring their company or partnering with them to invest in and help grow their
business. To see if PREMO VENTURES might be a good fit for you, please see
our Acquisition Criteria section.
Intermediary
In other cases, intermediaries, including business brokers, investment bankers,
commercial bankers, accountants, etc. introduce business owners to PREMO
VENTURES. Frequently, the intermediary has been engaged by the business
owner. Intermediaries can help owners reach a larger pool of buyers, guide
owners through the sale process and assist owners in identifying qualified
transaction advisors (such as attorneys).
PREMO VENTURES has acquired companies where intermediaries were involved
and those where they were not. Choosing an intermediaryor notis a
personal decision. We have established lasting relationships with intermediaries
in our region and would be happy to make introductions to them.
Of the 100 or so companies we are introduced to each year, approximately 25%
proceed to Step 2.

Step 2: Preliminary Review

Preliminary Review
Once we have determined that your business meets our investment criteria, and
you have determined that PREMO VENTURES is a legitimate buyer, we typically
exchange a Confidentiality Agreement, so you can share the following
information with us:

Summary of the needs of the business owner (retirement exit, distressed

situation, growth capital, etc)

3 to 5 years of financial results (P&L and balance sheet)

Review of annual Owners Benefits

Summary of top customers

Other information that is particularly relevant based on the type of business (for
example, annual capital expenditures in a capital-intensive business)

After reviewing this information and a follow-up telephone conversations, we

will either confirm our interest and discuss next steps or politely decline. If we
move ahead, PREMO VENTURES will typically issue a term sheet and arrange an
on-site visit.
Of the 100 or so companies that we are introduced to each year, approximately 10%
proceed to Step 3.

Step 3: From Term Sheet to LOI

Post Visit
After a successful visit, the process becomes more involved and more formal.
Additional information is exchanged, and another site visit may take place. As
PREMO VENTURES continues to learn about your business, and you learn more
about us, further discussions regarding company valuation and transaction
structure occur. The term sheet from Step 2 may be revised multiple times
during this stage and, eventually, lead to a formal Letter of Intent.
Letter of Intent
A Letter of Intent, or LOI, is a formal, written document indicating the terms a
buyer is offering a seller in a proposed acquisition or investment. An LOI states a
serious intent, by both parties, to carry out the proposed transaction. PREMO
VENTURES is very selective about issuing LOIs because they indicate that we will
be dedicating substantial resources to acquiring your business under the terms
outlined in the LOI.
Less than 5% of the companies we review result in a Letter of Intent and proceed to
Step 4.

Step 4: From Letter of Intent to Closing

Due Diligence
Due diligence is a rigorous 30-day review of the business and includes a detailed
analysis of accounting history and practices, operating practices, customer and
supplier references, management references and market reviews. The due
diligence process is managed by a PREMO VENTURES and we also often partner
with the assistance of third party advisors such as accounting firms to develop
an appropriate Quality of Earnings or similar report.
Financing
PREMO VENTURES has the committed capital required to complete acquisitions
and in certain cases may use some form of debt financing to supplement our
equity capital. The debt financing process includes identifying lenders interested
in partnering with PREMO VENTURES to complete the acquisition. We also
maintain strong strategic relationships with preferred financial lenders that we
partner with to complete acquisitions.
Closing
The final step in the acquisition process is the legal documentation and funding
step. Upon completion of the legal process, the acquisition funds are wired to
the seller and the acquisition is complete. When the deal is finally done, we can
celebrate the beginning of our mutually beneficial and profitable future together

Steps in a Merger
There are three major steps in a merger transaction: planning, resolution, implementation.
1. Planning, which is the most complex part of the merger process, entails the analysis, the action
plan, and the negotiations between the parties involved. The planning stage may last any length of
time, but once it is complete, the merger process is well on the way.
More in detail, the planning stage also includes:

signing of the letter of intent which starts off the negotiations;

the appointing of advisors who play the role of consultants, examining the strengths,
weaknesses, opportunities, and threats of the merger;

detailing the timetable (deadline), conditions (share exchange ratio), and type of
transaction (merger by integration or through the formation of a new company);

expert report on the consistency of the share exchange ratio, for all of the companies involved.

2. The resolution is simply management's approval first, then by the shareholders involved in the
merger plan.
The resolution stage also includes:

the Board of Directors calling an extraordinary shareholders meeting whose item on the
agenda is the merger proposal;

the extraordinary shareholders meeting being called to pass a resolution on the item on the
agenda;

any opposition to the merger by creditors and bondholders within 60 days of the resolution;
green light from the Italian Antitrust Authority, that evaluates the impact of the merger and
imposes any obligations as a prerequisite for approving the merger.

3. Implementation is the final stage of the merger process, including enrolment of the merger deed in
the Company Register.
Normally medium-sized/big mergers require one year from the start-up of negotiations to the closing
of the transaction. This is because, in addition to the time needed technically, there are problems
relating to the share exchange ratio between the merging companies which is rarely accepted by the
parties without drawn-out negotiations.
During the merger process, share prices will adjust to the share exchange ratio. On the effective date
of the merger, financial intermediaries will enter the new shares with the new quantities in the
dossiers. The shareholders may trade without constraint the new shares and benefit from all rights
(dividends, voting rights).

What is a 'Strategic Alliance'

A strategic alliance is an arrangement between two companies that have decided to
share resources to undertake a specific, mutually beneficial project. A strategic alliance
is less involved and less permanent than a joint venture, in which two companies
typically pool resources to create a separate business entity. In a strategic alliance, each
company maintains its autonomy while gaining a new opportunity. A strategic alliance
could help a company develop a more effective process, expand into a new market or
develop an advantage over a competitor, among other possibilities.

For example, an oil and natural gas company might form a strategic alliance with a
research laboratory to develop more commercially viable recovery processes. A
clothing retailer might form a strategic alliance with a single clothing
manufacturer to ensure consistent quality and sizing. A major website could form
a strategic alliance with an analytics company to improve its marketing efforts.

Concept of Strategic Alliances:

Strategic alliances are cooperative arrangements between organizations
belonging to same country or different parts of the world or different ends of
the supply chain which are more than the deal. These alliances represent
connection between otherwise independent organizations that can take
many forms and contain the potential for additional collaboration.
They are, in fact, mutual agreements to continue to get together to avail of
streams of opportunities.
Although a strategic alliance is most commonly described as a partnership
or a joint venture, the term could cover a broad spectrum of business
relationships that may include anything from simple cost sharing
arrangements to a fully integrated merger of two companies.
Sometimes, a strategic alliance can represent an effort to roll up a
number of separate business entities into a single legal entity having
integrated management, economies of scale and other characteristics that
translate into more economic clout.
The principal goal of strategic alliance is to minimize risk while maximizing
leverage and profits and for that purpose to find where one or the other
company has limitations. In a successful alliance, partners gain access to
specific strengths such as sale of technology, finance, distribution, etc. that
they do not possess themselves.

Thus, alliances are formed for joint marketing, joint sales or distribution,
joint production, design collaboration, technology licensing and research
and development.

What is a 'Joint Venture - JV'

A joint venture (JV) is a business arrangement in which two or more parties
agree to pool their resources for the purpose of accomplishing a specific task.
This task can be a new project or any other business activity. In a joint venture
(JV), each of the participants is responsible for profits, losses and costs
associated with it. However, the venture is its own entity, separate and apart
from the participants' other business interests.

Although JVs represent a great way to pool capital and expertise and reduce the
exposure of risk to all involved, they do present some unique challenges as well. For
instance, if party A comes up with an idea that allows the JV to flourish, what cut of the
profits does party A get? Does the party simply receive a cut based on the original
investment pool or is there recognition of the party's contribution above and beyond the
initial stake? For this and other reasons, it is estimated that nearly half of all JVs last less
than four years and end in animosity.

What are the Advantages of forming a Joint Venture?

Provide companies with the opportunity to gain new capacity and

expertise

Allow companies to enter related businesses or new geographic markets

or gain new technological knowledge

access to greater resources, including specialised staff and technology

sharing of risks with a venture partner

Joint ventures can be flexible. For example, a joint venture can have a
limited life span and only cover part of what you do, thus limiting both your
commitment and the business' exposure.

In the era of divestiture and consolidation, JVs offer a creative way for
companies to exit from non-core businesses.

Companies can gradually separate a business from the rest of the

organisation, and eventually, sell it to the other parent company. Roughly
80% of all joint ventures end in a sale by one partner to the other.

The Disadvantages of Joint Ventures

It takes time and effort to build the right relationship and partnering with
another business can be challenging. Problems are likely to arise if:

The objectives of the venture are not 100 per cent clear and
communicated to everyone involved.

There is an imbalance in levels of expertise, investment or assets brought

into the venture by the different partners.

Different cultures and management styles result in poor integration and

co-operation.

The partners don't provide enough leadership and support in the early
stages.

Success in a joint venture depends on thorough research and analysis of

the objectives.