Benefits of Making Business in Latvia | Buy & Sell Business

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

4. Country Overview Latvia is one of the three Baltic States, the others being Estonia (to the north) and Lithuania (to the south). Latvia has 531 km of coastline with the Baltic Sea and a total land area of 64,589 sq km. The population is about 2.23m.. Latvia, a country in Northern Europe, is bordered by Estonia to the north, Belarus and Lithuania to the south, the Russian Federation to the east, and the Baltic Sea to the west. Latvia is divided into 110 municipalities and nine cities, with Riga as the capital. The national language is Latvian, and the euro (EUR) has been the national currency since 1 January 2014.The Republic of Latvia was founded on 18 November 1918. For centuries Latvia was primarily an agricultural country, with seafaring, fishing and forestry as other important economic factors.

5. Executive Summary The President is elected for a four-year term by the Saeima, Latvia’s parliament; the current President is Valdis Zatlers, who was elected on May 31, 2007.Like most of the ex-USSR countries, Latvia has had to cope with the privatisation of most of its economy. However, Latvia’s geographical location has helped it remain a key transit point for north-south and east-west trade flows between the USA, the EU, the Far East, Russia and the CIS, making the transit sector one of Latvia’s main industrial sectors. The country joined the WTO in 1999, and the EU in 2004.GDP per head is USD14,400 (2009). The GDP growth rate was -18% in 2009, -4.6% in 2008 and plus 10.3% in 2007.

6. Introduction – Doing business in Latvia The Latvian business Culture is characterised by business communication, business etiquette, business meeting etiquette, internship and student placements, cost of living, work-life- balance and social media guide The Latvian economy is dominated by three main sectors of Services, Industries and Agriculture. The Industrial sector is the second largest employer with 25 % of the labour force working in the sector. The Services sector provides the biggest employment opportunity in Latvia. It employs 60 % of the labour force and contributes 69.9 % of the country’s annual GDP.

7. Conducting business in Latvia • Joint-stock company (AS) • Micro-enterprise • Branch • Representative office. Latvia offers a progressive, western-oriented business environment with a well-educated multilingual workforce, a simple and favourable tax system and an efficient business infrastructure. Latvia has a very open economy. Because of an abundance of natural resources traditional types of craftsmanship, such as woodworking, metalworking and technical manufacturing are well developed in the region. The main forms of business entity used in Latvia are as follows: • Limited-liability company (SIA)

8. Taxation in the Latvia The Taxes and Duties Act, as amended, determines Latvia’s general taxation principles. Specific taxes are assessed according to one of the special tax laws, such as the VAT Act or the Corporate Income Tax Act. If there is a conflict between the general principles and special rules, the latter prevail. Under the Taxes and Duties Act, duties are imposed by either the state or municipalities. Taxes in Latvia fall into three classes: • National taxes • National duties(e.g. registration duty for company registrations) • Local-authority duties There are no local taxes on income, but the revenue from personal income tax is allocated to local authorities. ..

9. Trade Latvia is the 78th largest export economy in the world and the 35th most complex economy according to the Economic Complexity Index (ECI). In 2017, Latvia exported $12.4B and imported $16.4B, resulting in a negative trade balance of $4.03B. In 2017 the GDP of Latvia was $30.3B and its GDP per capita was $28.2k. The top exports of Latvia are Sawn Wood ($696M), Broadcasting Equipment ($532M), Hard Liquor ($501M), Wheat ($423M) and Packaged Medicaments ($418M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Refined Petroleum ($1.03B), Cars ($699M), Broadcasting Equipment ($659M), Packaged Medicaments ($549M) and Petroleum Gas ($456M).

10. Banking in the Latvia In 2018 there were 20 banks operating in Latvia, including 15 credit institutions registered in Latvia, and five branches of banks registered elsewhere in the EU. The Latvian banking sector is dominated by Nordic banking groups, holding 60% of shareholder capital. In January 2019, Luminor Bank began its operations, concluding the merger of Nordea and DNB in the Baltics. Total capital of the Latvian banking sector reached €2.9 billion at the end of 2018. It decreased by €0.3 billion or 10% since the beginning of 2018. It was affected by the licence withdrawal of ABLV Bank AS (the European Central Bank decided to withdraw the credit institution’s licence in July 2018).

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