Benefits of Making Business in Azerbaijan_ Buy & Sell Business

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

4. Country Overview Azerbaijan, the nation and former Soviet republic, is bounded by the Caspian Sea and Caucasus Mountains, which span Asia and Europe. Its capital, Baku, is famed for its medieval walled Inner City. Within the Inner City lies the Palace of the Shirvanshahs, a royal retreat dating to the 15th century, and the centuries-old stone Maiden Tower, which dominates the city skyline. In the 25 years following its independence, Azerbaijan succeeded in significantly reducing the poverty rate and has directed revenues from its oil and gas production to develop the country’s infrastructure.

5. Executive Summary Historically, the name Azerbaijan refers to a larger region that formed part of Persia (Iran). Azerbaijan is bordered by the Caspian Sea in east, by Iran in south, by Armenia in west, and Georgia and Russia in the north. The Azeri autonomous republic of Nakhchivan forms an enclave within the Republic of Armenia, in a narrow part in west it borders Turkey. Its highest mountain is Bazarduzu Dagi with 4,485 m. Azerbaijan has a population of 9.7 million people (in 2016). Main religion is Islam, Azerbaijan is one of the few countries with a majority Shiite population. With an area of 86,600 km² the country is slightly larger than Austria or slightly smaller than the U.S. state of Maine.Capital and largest city is Baku. Spoken languages are Azeri 90% (official), Russian 2%.

6. Introduction – Doing business in Azerbaijan Azerbaijan has experienced impressive economic growth over the past two decades and foreign investment has been encouraged and welcomed. Expats doing business in Azerbaijan will, therefore, find themselves in a friendly and hospitable business environment. The economy is centred on the country’s oil and gas industry and it is within this sector that most foreigners will find themselves working in Azerbaijan. However, the government has tried to diversify the economy in recent years, and other business opportunities exist within the agricultural, construction, education, communications and tourism sectors.

7. Conducting business in Azerbaijan The modern-day Azerbaijan has managed to up-build relatively sophisticated communication and transportation infrastructure, as well as industrial, agricultural, educational, housing and healthcare sectors, although the oil and gas industry still accounts for the bulk of its exports. Azerbaijan is ranked 34 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Azerbaijan deteriorated to 34 in 2019 from 25 in 2018.

8. Taxation in Azerbaijan Employee residency is relevant to taxation: 'resident' employees in Azerbaijan are taxed on worldwide income, while 'non- residents' are taxed only on income sourced within the country. Income tax: Since 2013, the income tax rate in Azerbaijan has been 25% (and 14% for employees earning less than AZN 2,500).

9. Trade Azerbaijan is the 77th largest export economy in the world and the 84th most complex economy according to the Economic Complexity Index (ECI). In 2017, Azerbaijan exported $14.3B and imported $8.1B, resulting in a positive trade balance of $6.17B. In 2017 the GDP of Azerbaijan was $40.7B and its GDP per capita was $17.4k. The top exports of Azerbaijan are Crude Petroleum ($11.7B), Petroleum Gas ($1.29B), Refined Petroleum ($323M), Acyclic Alcohols ($57.4M) and Raw Aluminium ($56.2M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Cars ($312M), Refined Petroleum ($245M), Wheat ($219M), Packaged Medicaments ($212M) and Broadcasting Equipment ($158M).

10. Banking in Azerbaijan The Central Bank of Azerbaijan is the central bank of Azerbaijan which is charged with regulating the money supply, circulating currency, and regulating the commercial banks of the country. However, the banking system in Azerbaijan is small relative to GDP and ineffective in capital allocating. An estimated $1 billion is held in cash or outside the banking sector. There are approximately 70 foreign and local banks in Azerbaijan. Of the four state-owned banks, only the International Bank of Azerbaijan (IBA) was solvent in 1999. Major commercial banks include Standard Bank, Unibank, Damirbank, AG Bank and others.

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