Benefits of Making Business in Saudi Arabia | Buy & Sell Business

1. BENEFITS OF MAKING BUSINESS IN SAUDI ARABIA 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 SAUDI ARABIA WWW.MERGERSCORP.COM

4. Country Overview The Kingdom of Saudi Arabia is one of the main players in the Arab world. Its stature is built on its prestige as the custodian of the birthplace of Islam, and its status as an one of the world's largest oil producers. Its importance as an oil exporter has made economic interdependence with the West - where the main consumer demand is found - a necessity. This, in turn, has led to strong political and military relationships that at times have been a source of awkwardness for both sides. It stands out for its espousal of a puritan version of Sunni Islam, including harsh punishments such as public beheadings, and its restrictions on the rights of women. The rise of Crown Prince Mohammed bin Salman as de-facto ruler in 2017 has seen moves towards liberalising some laws and diversifying the economy, accompanied by growing regional rivalry with Iran.

5. Executive Summary Saudi Arabia, officially the Kingdom of Saudi Arabia, a desert country and an Arab Muslim State situated in Southwest Asia. Saudi Arabia occupies most of the Arabian Peninsula, bordering the Red Sea in west and the Persian Gulf in east. It is bordered by Iraq, Jordan, Kuwait, Oman, Qatar, United Arab Emirates, and Yemen. The country shares maritime borders with Bahrain, Egypt, Eritrea, Iran and Sudan. Saudi Arabia is the largest state in Western Asia with an area of more than 2 million km², it is almost four times the size of Metropolitan France or somewhat larger than Mexico. The country has a population of 31.7 million inhabitants (2016), capital and largest city is Riyadh, spoken language is Arabic. Saudi Arabia is a country with a predominantly Muslim population, state religion is Wahhabism, the ultraconservative form of Sunni Islam. 85–95% of Saudi Arabian citizens are Sunni Muslims, 10–15% are Shia. The country is home to Mecca, Islam’s holiest city, and the birthplace of the Prophet Muhammad. The Kingdom is ruled by the house of Saud along traditional Islamic lines. Saudi Arabia is the largest oil producer in the Middle East.

6. Introduction – Doing business in Saudi Arabia Major opportunities for trade, business and investment in Saudi Arabia include traditional sectors such as oil and gas, but also transportation, including rail, metro and airport; health, water and wastewater projects, nuclear energy, education, and mining. The UK is the Kingdom’s second largest cumulative investor, with over 200 joint ventures worth an estimated £11.5 billion. More and more UK firms are actively seeking to establish a physical presence in the Kingdom in order to gain a foothold in this high-growth market.

7. Conducting business in Saudi Arabia Corporate law in Saudi Arabia is similar to that in western countries, in that businesses can be run as limited liability operations, private companies or other types of concern. Be prepared to undertake extensive research into the business sector you aim to operate within. You must have a viable business plan, which includes a study of the market conditions, the competition and your forecast results. You must be prepared to find the necessary investment from your own resources or through your bank and preferably by other means than applying locally, particularly if you’re new to the region and without a track record. A credible plan might attract local support, possibly government support. An alternative to starting a new business is to buy a going concern, which is a more straightforward process, as it doesn’t involve lodging capital, obtaining sponsorship or registration; all you have to do is agree a price and transfer the ownership of the business.

8. Taxation in Saudi Arabia There is no personal income tax in Saudi Arabia. A flat income tax rate of 20% is applied to the tax-adjusted profit of resident non-Saudi and non-GCC individuals. Non-residents who do not have a legal registration or a permanent establishment in Saudi Arabia are subject to withholding tax on their income derived from a source in Saudi Arabia. A Saudi resident entity must withhold tax from payments made to such non-residents with respect to income derived from Saudi Arabia. This rule applies regardless of whether the Saudi entity is a taxpayer. The withholding tax rates are: - Management fees are taxed at 20%. - Dividends, interest, rent, payments made for technical and consulting services, payments for air tickets, freight or marine, shipping, international telephone services, and insurance or reinsurance premiums are taxed at 5%. - Royalties, payments made to head office or an affiliated company for services and payments for other services are taxed at 15%

9. Trade Saudi Arabia is the 26th largest export economy in the world and the 29th most complex economy according to the Economic Complexity Index (ECI). In 2017, Saudi Arabia exported $170B and imported $96.2B, resulting in a positive trade balance of $74.2B. In 2017 the GDP of Saudi Arabia was $686B and its GDP per capita was $53.8k. The top exports of Saudi Arabia are Crude Petroleum($110B), Refined Petroleum ($14.1B), Ethylene Polymers ($11B), Acyclic Alcohols ($6.32B) and Propylene Polymers ($4.59B), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Cars ($7.35B), Planes, Helicopters, and/or Spacecraft ($3.2B), Refined Petroleum ($2.83B), Packaged Medicaments ($2.74B) and Broadcasting Equipment ($2.13B). The top export destinations of Saudi Arabia are China ($29.1B), Japan ($25B), India ($19.4B), South Korea($17.7B) and the United States ($17.3B). The top import origins are China ($18.3B), the United States($7.66B), Germany ($7.19B), South Korea ($5.15B) and France ($5.05B).

10. Banking in Saudi Arabia There are 13 domestic banks licensed in Saudi Arabia: The National Commercial Bank (NCB), the Saudi British Bank (SABB), Saudi Investment Bank, Alinma Bank, Banque Saudi Fransi, Riyad Bank, SAMBA Financial Group, Saudi Hollandi Bank, Al Rajhi Bank, Arab National Bank, Bank Al Bilad, and Bank Al Jazira. Riyad Bank is one of the largest financial institutions in the Kingdom of Saudi Arabia and the Middle East, with a strong corporate and retail franchise. Mobilizing its substantial capital base and with decades of expertise to assume a leading role in all areas of Saudi finance, Riyad Bank is a leading financier and arranger of syndicated loans in the oil, petrochemicals and most of the Kingdom’s notable infrastructure projects. The banking industry in the Kingdom of Saudi Arabia (“KSA”) embodies one of the main commercial industries that still has a number of issues requiring clarity for the sector and the following will identify and provide a general overview of some important areas.

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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