Building Initial Capital Support for

Franchise Expansion

Structure the Transaction Carefully and Evaluate Funding Options:

Equity Shares

Preference Shares

Debentures

Combination of Debt and Equity

Looking For External Funding - Can PE be a Good Option

Grant of Rights to the PE Investor:

Nomination on Board of Directors

Affirmative Voting Rights and Reserve Matters

Minimum Quorum Requirements

Anti-Dilution and Pre-emptive Rights

Rationalization of Board Nomination; Quorum and Reserved Matters in

case of Dilution by Investor

Undertakings and Covenants of the Promoter Group

Reporting Requirements

Achievement of Milestones agreed under Business Plan

Complex Issues in PE Funding

Exit options available to the Investor:

Public offering

Buy-back of shares

Put options

Strategic sale with ‘drag-along’ rights

Investor mandatory put options

Complex Issues in PE Funding

Transfer of Shares to Third Parties

Lock-in on Transfer of Shares

Right of First Refusal

Co-Sale

Drag Along Rights

Subsequent Sales

Complex Issues in PE Funding

Event of Default and Post Termination Rights:

Put Options at Pre-agreed Exit Price

Call Option at Pre-agreed Discounted Price

Liquidation/winding up of the Company

Complex Issues in PE Funding

Indemnification Rights

Non-Compete

Non Solicitation

Complex Issues in PE Funding

9

What are the right reasons for Acquisitions?

Inorganic growth

Minimize lead period for market penetration

Ability to use pre-existing marketing, distribution and sales channels

Use the workforce, systems, processes and products offering

Acquisitions - The Right Reasons

10

Choosing the Right Partner Brand

Revenue Model

Management Team

Viability of existing business models

Strategy for and commitment to growth

Alignment of interests

Competitive advantage

Purpose of Due Diligence Identify and value assets and business model

Uncover hidden liabilities and risks

Determine level of corporate governance

Acquisitions – What comes before

11

Aspects of Due Diligence Organizational and operational matters

Capital & management structure Board/General meetings Corporate compliances/filings

Compliance with law including corporate, labour, taxation, education, charity

Standard contracts with services providers, employees, vendors Internal policies, including HR policies, privacy policies, data

protection Ownership of/rights to use intellectual property Title to/right to use immovable property including tenure in cases of

lease Litigation

Acquisitions – What comes before

Seema Jhingan, Partner

LexCounsel, Law Offices

C-10, Gulmohar Park,

New Delhi – 110049

Tel: +91-11-41662861

Fax: +91-11-41662862

E-mail: info@lexcounsel.in