Exclusive Networks // Sustainability Report 2022
Risks and opportunities Risk factors
Risk related to acquisitions & integrations
Criticality level: ■ ■ ■
Description
Risk management
The Group has a dedicated M&A department which is responsible for (i) analysing opportunities in terms of strategic rationale, value creation and risks for the Group; (ii) fulfilling the opportunities approved by the respective management bodies (Executive Committee and Board of Directors); and (iii) coordinating the integration within the Group. The Group has a formal and centralised process for its acquisitions and integrations. This process is spearheaded by Executive Management, with contributions mainly from the M&A, Finance, Legal and Human Resources Departments. This process includes in particular: preliminary audits of each target in as many areas as possible depending on the target, carried out by a multidisciplinary internal team (experts in the area audited) and external advisers who review all the elements provided to them by the target. Management sessions with the target’s management are also organised to ensure that the target’s business and identified risks are properly understood; the creation of dedicated committees with the corresponding contacts by level and department at a frequency adapted to the phase of the acquisition project; the usual legal protections in acquisition contracts, in particular asset and liability guarantees; the Executive Committee examines all acquisition opportunities (rationale, business plan, value creation, risks etc.). These opportunities are regularly presented to the Board of Directors;
As part of its development strategy, the Group has made 18 acquisitions since its inception, including two in 2021. These acquisitions are one of the Group’s strategic pillars that have enabled it to strengthen its strategy towards emerging vendors and its geographical presence. For example, the acquisition of Ignition Technology has enabled the Group to offer a targeted proposition to emerging security vendors while the acquisitions of Veracomp in 2020 and Networks Unlimited in 2021 have enabled the Group to expand into Central and Eastern Europe and Sub-Saharan Africa. The main risks associated with these acquisitions relate to: due diligence that is sometimes incomplete due to difficulties in gathering certain targeted information and/or the unavailability of such information. Furthermore, the Group cannot guarantee that the documents and information examined during these audits are complete, appropriate or accurate. In particular, it is difficult to guarantee that this due diligence has made it possible to identify all the risks related to possible litigation of the acquired companies, or to possible breaches of applicable anti-corruption regulations; over- or under-estimated financial valuations of certain assets, which lead to the recognition of accounting discrepancies. Despite an in-depth analysis of each target, their valuation and the assumptions concerning them were sometimes found to be inaccurate and their actual performance different from the results initially expected; human risks related to the integration of employees of acquired companies and their adaptation to the human resources policy and working environment of a large group;
…/…
09
Exclusive Networks
Sustainability Report 2022
Made with FlippingBook. PDF to flipbook with ease