Benefits of Making Business in Hungary | Buy & Sell Business

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

4. Country Overview One of Europe's smaller nations, Hungary is a landlocked country in the Carpathian Basin. It borders Austria, Croatia, Romania, Serbia, Slovakia, Slovenia, and the Ukraine. Mostly a flat country of rolling hills and plains, the majority of Hungary's land area lies below 200m. There are low mountains in the north on the border with Slovakia. Kékes, at 1,014m above sea level, is the highest peak in the country. Much of Hungary's land is fertile and suitable for arable farming. The country is naturally divided into three large regions by the rivers Danube and Tisza: the Great Hungarian Plain (Alföld) to the east of the Danube; a hilly region west of the Danube known as Transdanubia and the North Hungarian Mountains.

5. Executive Summary Hungary claims no official religion and guarantees religious freedom. More than one-third of the people are Roman Catholic, most of them living in the western and northern parts of the country. Hungary has made the transition from a centrally planned economy to a market economy, with a per capita income nearly two-thirds that of the European Union (EU) average. The private sector accounts for more than 80% of gross domestic product (GDP). Hungary has diverse attractions that attract many visitors each year. Budapest is a beautiful, lively, cosmopolitan city home to 2,000-year-old Roman ruins and 400-year-old Turkish remains.

6. Introduction – Doing business in Hungary Ease of Doing Business in Hungary averaged 47.08 from 2008 until 2019, reaching an all time high of 54 in 2013 and a record low of 40 in 2014. One of the competitive advantages Hungary has compared to other countries in the region is the government’s strong commitment to streamlining business processes and to increasing the competitiveness of both SMEs and large enterprises through a wide range of available incentives. Hungary is situated in the heart of Europe, which makes the country optimal for manufacturing, services and logistics. Hungary is the ideal base for investors who are planning cross- border business developments.

7. Conducting business in Hungary Beside the favorable business climate and availability of various incentives, Hungary is an ideal place for doing business for a series of other reasons: • ideal geographical position in the centre of Europe for manufacturing, services and logistics • excellent infrastructure, ready-made industrial sites, offices and science parks • good balance of labour costs and quality • governmental and municipal incentives (cash subsidy, tax allowance) • investment friendly economic policy • competitive tax system • financial and fiscal stability

8. Taxation in Hungary Among the total tax income the ratio of local taxes is solely 5% while the EU average is 30%. Income tax in Hungary is levied at a flat rate of 15%. Employment income is subject to social security contributions for the employer at a flat rate of 17,5%.. Capital gains are taxed at a flat rate of 15%. In Hungary flat rate personal income tax applies: 15%. The following contributions are generally payable: The total tax burden (tax + contribution) in case of normal salary is 33.5%, so the general level of net salary is 66.5% of gross salary.

9. Trade Hungary is the 35th largest export economy in the world and the 15th most complex economy according to the Economic Complexity Index (ECI). In 2017, Hungary exported $107B and imported $97.1B, resulting in a positive trade balance of $10.3B. In 2017 the GDP of Hungary was $139B and its GDP per capita was $28.1k. The top exports of Hungary are Cars ($11B), Vehicle Parts ($6.44B), Spark-Ignition Engines ($3.63B), Packaged Medicaments ($3.32B) and Video Displays ($2.83B), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Vehicle Parts ($5.02B), Cars ($3.42B), Packaged Medicaments ($2.72B), Integrated Circuits ($2.66B) and Engine Parts ($2.28B).

10. Banking in Hungary The Magyar Nemzeti Bank is the central bank of Hungary. .It was established on 24 June, 1924. The MNB is a member of the European System of Central Banks. Its principal aim is price stability, but it is also responsible for issuing the national currency, the forint, controlling the money in circulation, setting the Central Bank base rate, publishing official exchange rates, and managing the foreign-exchange reserves and gold to influence exchange rates. Some popular and reliable major banks to consider are: OTP Bank, K&H Bank, Erste, and CIB Bank. All of these banks have secure ATMs in addition to walk-in branches all across Hungary.

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