Creating transformation and value through restructuring
Panel Moderator James Deiotte Tax Leader EY Africa Panel Grant Pattison Michael Dorn Robert Appelbaum CEO and Executive Chairman NRG Renew Africa Johannesburg, SA Managing Director AlixPartners, Munich Germany Partner Webber Wenzel Johannesburg, SA Mwendamo Isaac Mazaba Chief Financial Officer Liquid Telecom Lusaka Zambia Clifford Sacks Partner and Africa Leader Strategic Transactional Advisory Services Eric Nguessan Partner and Tax Leader Côte d'ivoire Juan Santambrogio Restructuring Specialist EY s Restructuring Practice Atlanta, Georgia, USA Page 2
Asking the right questions In 2013, we focused on how Boards were responding to tax matters, especially concerning reputation and brand. In 2014, we focused on key drivers that support strong entrepreneurial ecosystems. The impact of regulations, taxes and funding sources, including the Johannesburg Stock Exchange, were highlighted. Today, we focus on why capital may not flow into Africa more swiftly; Are upside opportunities undervalued? Are downside risks overestimated? Page 3
Why is this conversation important?
Expand funding for a strong entrepreneurial ecosystem Sources of funding business enterprises Revenues Entrepreneur, friends of family Government grants (e.g., R&D) & SME purchasing focus Incubator or accelerators Seed or early stage VC Crowdfunding Angel investors Government export schemes & grants Corporate accelerator / supplier development Formal VC & growth capital Speciality bank loans and guarantees Public stock market Private equity Pre-seed Seed Start-up Emerging Development stage Rapid-growth Expansion or market leader Focus in 2014 Focus in 2015 Page 5
Life cycle for all enterprises Page 6
Realities of a business life cycle Page 7
The leverage pendulum and control Page 8
What exactly is a restructuring?
What exactly is a restructuring?. Page 10
Are taxes important when everyone has lost investment value?
Focus on taxes Enterprise Owners Lenders Attributes Debt forgiveness Intercompany/cross-border structures Loss realized and recognized Characterization Impairment and partial loss versus complete loss Bad debts timing and characterization Receipt of equity in lieu of debt Vendor impact and indirect taxes Page 12
What does it take to achieve real transformation?
Steps to transformation and restructuring Create clarity around why to restructure Design a plan that accomplishes the restructuring Assemble experienced advisors Market the plan to key stakeholders Execute the plan Page 14
Building toward a successful outcome Page 15
Stakeholders Page 16
Assembling teams supporting management and legal counsel Page 17
Building toward a successful outcome Sometimes you have to hit rock bottom before you can rise again He has been given 18 months If I don t get the balance sheet issues resolved, I can t do anything else We don t have a choice. These choices have been made for us, a long time ago. The world allows you to clear the slate. But we don t do it without cost. Page 18
EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. 2015 EYGM Limited. All Rights Reserved. EYG no. DL1435 This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com