Benefits of Making Business in Colombia | Buy & Sell Business

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

4. Country Overview Colombia is nicknamed the "gateway to South America" because it sits in the northwestern part of the continent where South America connects with Central and North America. It is the fifth largest country in Latin America and home to the world's second largest population of Spanish-speaking people. Colombia, officially Republic of Colombia, Spanish República de Colombia, country of northwestern South America. Its 1,000 miles (1,600 km) of coast to the north are bathed by the waters of the Caribbean Sea, and its 800 miles (1,300 km) of coast to the west are washed by the Pacific Ocean. The country is bordered by Panama, which divides the two bodies of water, on the northwest, Venezuela and Brazil on the east, and Peru and Ecuador on the south. It is more than twice the size of France and includes the San Andrés y Providencia archipelago, located off the Nicaraguan coast in the Caribbean, some 400 miles (650 km) northwest of the Colombian mainland. The population is largely concentrated in the mountainous interior, where Bogotá, the national capital, is situated on a high plateau in the northern Andes Mountains.

5. Executive Summary Colombia offers a wide range of benefits to companies considering global expansion. It’s rich in natural resources, has a highly qualified workforce, and offers business-friendly legislation towards foreign investment each an important box to check when it comes to choosing a Latin America country for expansion. It has the third best-trained labor force in all of South America, outpacing both Peru and Brazil. Colombia has significant natural resources and its culture reflects the indigenous Indian, Spanish and African origins of its people.But it has also been ravaged by a decades-long violent conflict involving outlawed armed groups, drug cartels and gross violations of human rights, although, since 2002, the country has been making significant progress towards improving security. The fourth largest country in South America and one of the continent's most populous nations, Colombia has substantial oil reserves and is a major producer of gold, silver, emeralds, platinum and coal.It also has a highly stratified society where the traditionally rich families of Spanish descent have benefited from this wealth to a far greater degree than the majority mixed-race population, providing a ready constituency for left-wing insurgents. .

6. Introduction – Doing business in Colombia According to the World Bank's Doing Business sub-national study of 2017 to establish the ease of doing business in the cities of the country, the balance was positive. For the first time in the 4 reports that the World Bank has done on the country, 32 state capitals were taken into account, 30 of which were above the Latin American average with a score of 64.5 in terms of the willingness of their business environment. The exceptions were the cities of Ibague and Santa Marta. For its part, Bogota was ranked as one of the 3 cities with best business environment along with the cities of Manizales and Pereira."Bogota is constantly working to foster a diverse and stable business ecosystem with abundant opportunities to promote the city's development. This has made Bogota a very attractive destination for the emergence of startups, since Bogota is the hub of the sector in the country, as well as for the arrival of foreign companies for the quality of their human talent, to concentrate the financial movement of the country, for its excellent location and for offering a wide variety of outsourcing providers in accounting, real estate and human resources services”.

7. Conducting business in Colombia In Bogota there are 379,705 registered companies, 26% of the companies registered in the country, a number similar to the sum of all the companies registered in the states of Antioquia, Valle del Cauca, Caldas and Risaralda (372,032), making it a great challenge to maintain the facilities to do business by the volume of its economy. That is why it is underlined the importance of Bogota being one of the cities with greater facility to do business in spite of its size. The main suggestion that the World Bank made to Bogota to improve the facilities for doing business was to reduce and simplify the necessary procedures. A simpler and more flexible regulatory environment would positively impact the attraction of foreign investment and the level of labor productivity. Globally, Bogota has been positioning itself as a key actor and in several fields it is in keeping with the main cities of the Organization for Economic Cooperation and Development (OECD). With regard to obtaining construction permits, the time required in Bogota is lower than the average in Latin America and the most important cities in OECD countries, and the number of procedures required is also below average.

8. Taxation in Colombia Colombia corporate tax rate is 33% for FY 2019, it will decrease up to 30% in 2022 in a progressive way (32% for FY 2020 and 31% for FY 2021). This rate is applied upon taxable income. Colombia taxes resident companies on worldwide income. Personal income tax (impuesto de renta) rates in Colombia range from 10%-33% depending on your income. The tax year (año fiscal) in Colombia runs from January to December Using a financial advisor to help you pay your tax at the amount that is required is a good way to keep on top of your taxes. CIT payers are required to pay a minimum amount of income tax, which is determined based on the presumptive income method. Under this method, presumptive taxable income is measured at 0.5% of net equity as of 31 December of the previous year, in accordance with the information provided by the taxpayer on such year’s CIT return. The presumptive tax is however phasing out, as the 0.5% rate will be applied in FY 2020, but as of 2021 the rate will be 0%.The nominal CIT rate is then applied to the greater of regular taxable income (revenue less allowable costs and expenses) or presumptive taxable income (exempting certain business activities).

9. Trade Colombia is the 55th largest export economy in the world and the 53rd most complex economy according to the Economic Complexity Index (ECI). In 2017, Colombia exported $39.1B and imported $44.3B, resulting in a negative trade balance of $5.18B. In 2017 the GDP of Colombia was $314B and its GDP per capita was $14.5k. The top exports of Colombia are Crude Petroleum ($11.1B), Coal Briquettes ($7.63B), Coffee ($2.7B), Refined Petroleum ($2.06B) and Gold ($1.45B), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Refined Petroleum ($2.81B), Broadcasting Equipment ($1.99B), Cars ($1.89B), Packaged Medicaments ($1.2B) and Planes, Helicopters, and/or Spacecraft ($932M). The top export destinations of Colombia are the United States ($11.1B), Panama ($2.58B), China($2.02B), the Netherlands ($1.86B) and Mexico($1.56B). The top import origins are the United States ($11.7B), China ($8.58B), Mexico ($3.47B), Brazil ($2.42B) and Germany ($1.86B).

10. Banking in Colombia Banco de Bogota Founded in 1870, Banco de Bogota was the first of commercial banks in Colombia. The bank operates through Personal, Premium, Small and Medium Enterprises, Microfinance, Official, Social, Corporate, Business, and Institutional segments. It is headquartered in Bogota and employs around 40,000 people. As of 2016, total assets of the bank were US$28.82 billion and net profit was US$343 million. Bancolombia Established in 1945, Bancolombia provides banking products and services to individuals, companies, and the government. The bank is present in Colombia, Latin America, and the Caribbean region. With around 32,000 employees, it is based in Medellin.The bank conducts its operations through nine segments, including Banking Colombia, Banking Panama, Banking El Salvador, Banking Guatemala, Trust, Investment Banking, Brokerage, Offshore, and Others. It operates 1,274 branches, 5,418 ATMs, and around 226 kiosks.As of 2016, the bank’s total assets amounted to US$65.40 billion and net profit reached US$1.03 billion.

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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