Benefits of Making Business in Egypt | Buy & Sell Business

1. BENEFITS OF MAKING BUSINESS IN EGYPT WWW.MERGERSCORP.COM

2. At MergersCorp M&A International we help our clients confidentially buy and sell privately held businesses, aligning the interests of all parties for mutual success and satisfaction. It is our goal to make the process of either buying a new business or selling your current business as smooth and efficient as possible. We know how important confidentiality is to our sellers and we treat it with the utmost importance. WWW.MERGERSCORP.COM

3. BENEFITS OF MAKING BUSINESS IN EGYPT WWW.MERGERSCORP.COM

4. Country Overview Destination Egypt, a transcontinental country situated in northeastern Africa and on the Sinai Peninsula in Western Asia (Middle East). The country has a coastline at the Mediterranean Sea in north, and the Gulf of Suez and the Red Sea in east. It is bordered by Libya in west, the Palestinian territory (Gaza Strip) and Israel in north east, and Sudan in south. Egypt shares maritime borders with Cyprus, Greece, Jordan, Saudi Arabia, and Turkey. Modern Egypt became independent in 1922. From 1958 until 1961 Egypt was united with Syria as the United Arab Republic. Egypt has a population of approximately 92.4 million inhabitants (2017). Capital and largest city is Cairo. Spoken language are modern Standard Arabic, colloquial language is the Egyptian-Arabic dialect. Egypt is a country with a predominantly Muslim population, about 87% of Egyptians are Sunni Muslim. Islam religion controls many aspects of social life and is endorsed by law.

5. Executive Summary Egypt has a population of over 84 million with the vast majority of Egyptians living in 40,000 square kilometres (less than 4% of the total land area) along the banks of the River Nile, where the only arable land is found. The vast majority of the remaining land is made up of sparsely inhabited, arid desert. Egypt's capital is Cairo, in the north of the country, which has a population of approximately 12 million. Alexandria is the second largest city, with a population of over 4 million. Egypt is one of the oldest civilizations of the world, established over 5,000 years ago. Based around the River Nile, whose annual flood was central to the country's prosperity, various civilizations flourished. The Pharaohs reigned intermediately both in Memphis in the north and Thebes in the south, bringing a culture that has continued to fascinate and inspire people the world over with features such as the pyramids, hieroglyphics and numerous awe inspiring temples and artefacts.

6. Introduction – Doing business in Egypt Egypt, commonly known as “The Motherland of the World”, “Land of Civilisations” and “The Greatest Power in Human History”, is reputed worldwide for its distinct 7,000-year-old record of civilisation and immense wealth of knowledge. This has made Egypt a master and pioneer of science, arts, culture, architecture as well as almost all fields of human knowledge. Egypt’s economy is the most varied of the Middle East economies, where sectors of tourism, agriculture, industry and service contribute at almost equal rates in the national production. Consequently, Egypt’s economy is picking up development at increasing rates, based on a climate luring investments represented in proper legislation, convenient policy, internal stability, and trade and market liberalisation. Egypt possesses an industrial wealth, which is constantly enhanced by the government efforts. Three new factories are set up daily and 75 industrial zones spread throughout the country with 20,000 factories according to recent statistics, and scores of thousands of workshops that produce manufactured products using highly sophisticated technologies.

7. Conducting business in Egypt The main types of entities that can be established or acquired by foreign investors in Egypt are: • Representative offices; • Branch offices; • Joint stock companies; and • Limited liability companies. All of above legal entities are subject to the Companies law 159 of 1981 (the “Companies Law”), which is the general law of application. The Companies Law prescribes all corporate governance rules and regulations, regulates management and control issues and fiduciary duty and fiscal policies, together with operation of the company’s corporate requirements such as board of director’s meetings, ordinary general meetings and extraordinary general meetings .

8. Taxation in Egypt Corporate Profits Tax Egyptian-resident corporates are subject to corporate profits tax on their worldwide profits. Non-resident companies are only taxed on their Egyptian-source income. CIT is imposed on the companies that are considered to be tax residents in Egypt, on all profits and income realised in Egypt and abroad. ... The CIT rate is 22.5% (flat rate) for corporate bodies, partnerships and PEs. A business is determined as tax resident if it is established under Egyptian law, it has its head office and management located in Egypt or the Egyptian state or any public legal body owns more than 50 per cent of its capital. The income tax rate applicable to the annual taxable profit of legal entities was reduced from 25 percent to 22.5 per cent in 2015. In order to enhance economic performance and restore growth, the government has introduced a broad fiscal reform program. Firstly, the Value Added Tax (VAT) system was introduced as a replacement for the General Sales Tax Law, along with an updated version of the Investment Law. Egyptian Companies Law was also amended in order to attract new investments to Egypt, and this was supported by lower customs duties, removal of exchange control restrictions and the floating of the Egyptian pound (EGP).

9. Trade Egypt is the 62nd largest export economy in the world and the 72nd most complex economy according to the Economic Complexity Index (ECI). In 2017, Egypt exported $30.1B and imported $64.1B, resulting in a negative trade balance of $34B. In 2017 the GDP of Egypt was $235B and its GDP per capita was $11.6k. The top exports of Egypt are Crude Petroleum($4.69B), Gold ($2.78B), Nitrogenous Fertilizers($1.15B), Refined Petroleum ($902M) and Insulated Wire ($892M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Wheat ($4.17B), Petroleum Gas($3.59B), Refined Petroleum ($3.26B), Semi-Finished Iron ($1.97B) and Crude Petroleum ($1.62B). The top export destinations of Egypt are the United Arab Emirates ($2.69B), Italy ($2.02B), Turkey ($1.98B), the United States ($1.69B) and Germany ($1.51B). The top import origins are China ($8.07B), Russia ($5.84B), Germany($3.45B), the United States ($3.38B) and Italy($3.19B).

10. Banking in Egypt Credit Agricole Established in 1977, Credit Agricole provides retail, corporate, and investment banking services. The bank operates through various segments: Investment, Retail, and Asset and Liability Management. Based in Cairo, it is a subsidiary of the Crédit Agricole Group. It employs around 2,340 people and oversees 79 branches.As of 2016, total assets of the bank were US$2.62 billion and net profit was US$101.20 million. HSBC Bank Egypt Incorporated in 1982, HSBC Bank Egypt is a subsidiary of HSBC Holdings Plc. In 2001, it changed its name to HSBC Bank Egypt S.A.E. from Egyptian British Bank. The bank conducts its operations through Small, Medium. and Large Enterprises, Investment, Individuals, and Other Activities segments. It manages 60 branches and seven small units. Based in Cairo, it employs around 1,800 staff.As of 2016, total assets of the HSBC Group amounted to US$857 billion. In 2017, net profit of HSBC Bank Egypt was US$305 million.

11. Our M&A Process NEGOTIATION & CLOSE POST MERGER INTEGRATION (PMI) INTEGRATION (PMI) POST MERGER TARGET APPRAISAL APPROACH DUE DILIGENCE Key Areas  Target & market analysis;  Initial assessment of synergies & value drivers;  Indicative valuation;  Go or No-Go decision;  Preparation of transaction documents (NDA – Non- disclosure Agreement/LOI- Letter of Intent);  Select Transaction team;  Appoint advisors;  Consider funding ability.  Initial approach letter;  Signing of NDA;  Prepare & share initial information requests;  Formulation of LOI (Letter of Intent) & possible negotiations;  Initial meeting and Q&A;  Circulate information on the Target to the Transaction team.  Set scope of due diligence;  Set up VDR (virtual data room);  Coordinating of due diligence, further meetings and Q&A sessions;  Consider points relevant to the Post-Merger (PMI) phase;  Revisit indicative valuation & prepare detailed valuation based on due diligence findings;  SPA negotiations with the seller;  Development of final structure (share/asset deal) and final valuation;  Approvals;  Signing of SPA & Close.  Consider the extent of integration;  Development of 100 Day PMI Plan;  Consider short & long term objectives;  Estimate requirements to capture synergies;  Determine resource needs & optimal allocation. Parties Involved  CFO;  Head of M&A;  Accountants;  Corporate finance advisors;  Consultants.  Senior management;  CEO, CFO, CTO;  Strategy director;  Head of M&A;  Head of Business Development;  Consultants.  Company general counsel;  Lawyers;  Senior management.  Company general counsel;  Lawyers;  Senior management/HR. 11 © Midaxo 2018 www.midaxo.com

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13. MergersCorp.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Member firms of the MergersCorp network of independent firms are affiliated with MergersCorp International. MergersCorp International provides no client services. No member firm has any authority to obligate or bind MergersCorp International or any other member firm vis-à-vis third parties, nor does MergersCorp International have any such authority to obligate or bind any member firm. Copyright © 2020 MergersCorp International. All rights reserved. 13 © Midaxo 2018 www.midaxo.com