Deal Analysis Checklist

ACTIVE PIPIELINE MANAGEMENT TOOL

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DUE DILIGENCE LIGHT: COMMERCIAL DUE DILIGENCE Commercial due diligence (CDD) is done during the active pipeline stage leading up to the development of the terms of the deal. The CDD, and a review of the company’s financial performance, are the main inputs to the financial modeling work. The CDD looks at the market to determine the company’s place in the market. It explores the size (supply and demand), the market conditions, the trends, consumers, main competitors, opportunities/threats and, most importantly, the company’s defensible differentiators.

We aim to collect the following as outputs of the CDD: 

A summary of the market. This is done by conducting market research – secondary and primary. The report should include the size, the company’s share, trends, drivers, demand, conditions, opportunities, threats, differentiators and outlook.

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A profiles of the company’s major competitors.

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A list of the company’s top customers and an analysis of those customers including segments, demographics, churn rate, satisfaction, customer acquisition cost.

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A list of the major suppliers and any risks with those supplies if the company scales.

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Identification of any barriers to entry in the marketplace.

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A summary of all complaints or warranty claims on the company (legal actions).

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Copies of long-term sales contracts.

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Agreements with distributors, value-added resellers, and dealers.

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A general understanding of their financial, operational and impact performance benchmarks against which we can evaluate future performance if the company proceeds to an investment.

OUTPUT The final report for the DD Light (CDD) should include: •

High-level baseline/ overview of Company’s operations, including an understanding of their gender-smart “score” per the SEAF Gender Equality Scorecard© evaluation and accompanying Calculation Sheet (or other standardized gender equality or ESG scorecards/frameworks; see the Stage 3: Due Diligence section of the Fund Management Standard Operating Procedure for recommended alternatives).

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Assessment of the Company’s core markets outlook including market size and trends.

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Assessment of the competitive environment in core markets and the Company’s positioning.

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Assessment on the achievability of Company’s financial projections and upside growth potential – including the main financial assumptions (drivers) and the ranges that the analyst thinks those assumptions should have for bull (management), base and bear.

ACTIVE PIPIELINE MANAGEMENT TOOL

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Identification of key commercial risks of the transaction.

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Articulation of alternative exit options for [INV./FUND MANAGER NAME].

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ACTIVITIES STEP 1 – CONDUCT HIGH-LEVEL BASELINE ANALYSIS OF THE TARGET The objective of Step 1 is to provide an overview on the Company’s operations and gendersmart “score”.

Key activities in this step will include the following: 1. Understand Company’s overall business (e.g., mix of business activities, revenue lines, etc) 2. Baseline historical financial performance and key performance indicators (top-line growth, profitability, etc.)

3. High-level baseline/ overview of Company’s operations, including a high-level understanding of their gender-smart “score” (see the Stage 3: Due Diligence section of the IM Playbook for the SEAF Gender Equality Scorecard© & Calculation Sheet).

4. Review organization and governance structures.

STEP 2 – ASSESS CORE MARKET DYNAMICS AND OUTLOOK The objective of Step 2 is to assess the evolution of Company’s markets in the country of operations and growth prospects.

Key activities in this step will include the following: 1.

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Develop a view on markets and segmentation.

Assess key trends and drivers for relevant markets and segments.

Asses current market size, historic/forecasted growth.

Understand regulatory environment and identify potential risks and challenges.

STEP 3 – ANALYZE TARGET’S POSITIONING AND COMPETITIVE LANDSCAPE The objective of Step 3 is to assess the competitive landscape in core markets to identify key players and their competitive advantages, in addition to Company’s positioning to identify Company’s ability to capture market share.

Key activities in this step will include the following: 1. Identify key players in the Company’s core markets.

2. Determine the relative size of each and relative market shares (if available).

3. Highlight key competitors of the Company, identify their positioning (e.g., price, product, quality etc.) and competitive advantages.

4. Identify the Company’s positioning, market share and competitive advantages.

5. Assess nature of Company’s existing operations, (products, pricing strategy, etc.) compared to the market (if available).

6. Define the Company’s ability to capture market share based on its relative strengths, weaknesses, opportunities and threats in the market.

ACTIVE PIPIELINE MANAGEMENT TOOL

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STEP 4 – ASSESS ACHIEVABILITY OF COMPANY’S BUSINESS PLAN AND UPSIDE GROWTH POTENTIAL The objective of Step 4 is to analyze the historical financial sustainability of the Company, assess the achievability of its financial forecasts in light of the market outlook and competitive landscape as well as estimate its upside growth potential.

Key activities in this step will include the following: 1. Analyse the Company’s historical financial indicators (e.g., revenue growth, operating margin, EBITDA margins, net margins), and key performance indicators (e.g., Capacity / Utilization, operating KPIs, growth drivers etc.)

2. Review Company’s business plan and operating model and challenge key assumptions, focusing on key top line items, i.e., expansion, pricing etc.

3. Assess achievability of Company’s key cost-item forecasts based on historical evolution of costs, cost pressures on key items (e.g., HR costs, marketing costs etc.), and effects of increased scale on cost 4. Estimate upside potential based on various growth initiatives.

5. Conduct sensitivity analyses to provide ranges of revenue growth outcomes.

6. Assess the Company’s ability to deliver on project impact KPIs/targets per agreed upon IRIS+ metrics.

STEP 5 – IDENTIFY KEY COMMERCIAL RISKS AND IMPLICATIONS The objective of Step 5 is to synthesize the key commercial risks of the transaction given the market/ competitive assessment and financial forecasts.

Key activities in this step will include the following: 1. Identify the key diverging assumptions based on the assessment of forecast achievability.

2. Update the financial forecasts based on the revised assumptions.

3. Identify key risks that affect financial forecasts (e.g., introduction of new regulations, key issues with the operating model of the Company, lacking management/ org capabilities, etc.).

4. Determine the impact of scenario modeling on financial forecasts (i.e., upside and downside sensitivity analysis based on adjustments to key assumptions).