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Programma del corso
Le cause e le tipologie di ristrutturazione aziendale (V.libro di testo)
Modalità di gestione le ristrutturazioni
Analisi dei processi relativi alle ristrutturazioni
Strategic Redirection
Merger & Acquisition (M&A)
Major investments
Divestments
2
Enhanced Project Management (EPM)
EPM is a user-friendly, gated process based on best practices;
Broad goal: provide a structured process for managing mega-scale projects;
Key components for capital projects include:
o Phased system covering all vital processes, focused on front-end loading o Assurance reviews to leverage company knowledge o Development support packages to provide best information to decision
makers o End of project reviews to facilitate lessons learned o Structured performance measurement o Continual risk and stakeholder management
Separate processes for capital projects, M&A and divestments, Strategic redirections
4
Marketing
and bid
evaluation
Phases of EPM customized for the four types of projects: capital projects, M&A, divestments, strategic redirections
Feasibility Definition Implementation
Operation Screening Feasibility FEED EPC Start
-up
Divestment
decision
Divestment
strategy
Deal
close Due diligence
Mgmt present Site visit Negotiations Gate
4
Post-
merger
integration
Origination and
screening Business plan Execution
Closing, reg
approvals
Deal
close
Capital
projects
M&A
Divest-
ments
Idea generation
and screening
1
2
3
Gate
1
Gate
2 Gate
3
Gate
1
Gate
3
Gate
2
Gate
1
Gate
2
Gate
4
Gate
3
Diagnostic Design Implementation Strategic
redirection 4 Gate
1
Gate
2
5
Gates are check points where a decision is made to ensure economic and strategic project alignment
Project has met approval criteria
More work required to support
recommendation
Project is attractive but not
immediately
Significant changes would
improve attractiveness
Project is not attractive nor will it
be in the future
Proceed
Rework
Hold
Change
Discontinue
Gate keeper Responsible
for gate
rules
Gate
Development support package
Assurance review feedback
Lessons learned
Support informing decisions before gate Resulting actions after gate
Decision
makers
Overview
Operation Screening Feasibility FEED EPC Start
-up Gate
1
Gate
2
Gate
4
Scope of project management covers all vital processes
Structured project risk assessment
Monitoring and control throughout project
Project objectives agreed early, with participation of all stakeholders
EPM system based on best practices, customized for the Corporate fit
No. of phases/gates
Flexibility1
Focus on sharing
knowledge2
Assurance
requirements3
Emphasis on decision
making4
Elements common to
best practices
included in EPM
Customized elements Benefits
Low High Adapts for case-by-
case situations
Ability to incorporate
system with partner
requirements
Development of skills
across organization
Enhances value
creation
Project governance
Multi-functional teams
Leverages work by
partners and external
entities with Corporate
as decision maker
7
• Expected secured volume
• Capex
• Capex/barrel
• IRR
• Cost
– VOWD
– Estimated total costs
• Schedule
– Physical progress
– Estimated
completion date
• Grow shareholder value
through:
– Secure long term
disposal of national
hydrocarbons
– Investing in high growth
strategic markets
– Enter into economically
viable investment
opportunities in JV
– Integrate into profitable
associated downstream
activities
KPM definition: BD strategic objective and key challenges
Strategic objectives1 Key challenges
• Select few promising opportunities
which maximize national crude long
term disposal while meeting acceptable
level of strategic fit2
• Efficiently perform fit-for-purpose
feasibility analysis to support decision
making and opportunity sanction
• Progress projects through development
phases and deliver a fully operating
asset meeting time, cost and quality
targets
Proposed KPMs
Project specific
Corporate level
9
Disseminating company
wide knowledge
through lessons learned
to
Project personnel
Corporate staff
JV staff and
partners
Formal part of DSP
Administrator regulates
access to knowledge
sharing database
Transforming raw
knowledge into a form
that can be easily shared
via lessons learned
Storing/maintaining
lessons learned in central
database
Administrator must
maintain structure/
organization of lessons
learned in system
By phase
Lessons learned are critical part of knowledge management process Knowledge management process
Codification Application
Feedback
Acquisition of
knowledge Dissemination
Translating learnings to
current context or
project
•Continual improvement
of the system
Identifying lessons
learned on current and
past projects by all levels
of staff
Within Corporate
From JVs, partners
or external
benchmarks
Administrator provides
quality check and control
for lessons learned/
documents in knowledge
sharing system
11
Solid knowledge base of system
Experience with projects very helpful
High level of influence within Corporate
companies
Ability for consensus building
Not an active user of the EPM system
Lead implementation across all Corporate
companies
Ensure adherence by project teams
Verify key components such as DSPs,
assurance reviews and gate reviews are
utilized by teams
Lead on-going training efforts
Focal point for further development
of system
Coordinates with system administrator
EPM process facilitator will lead implementation and training as well as ensure adherence
Role of sponsor/facilitator Recommended characteristics
Corporate Planning or Finance the top candidates
to assume the facilitator role
13
Marketing
and bid
evaluation
Feasibility Definition Implementation
Operation Screening Feasibility FEED EPC Start
-up
Divestment
decision
Divestment
strategy
Deal
close Due diligence
Mgmt present Site visit Negotiations Gate
4
Post- merger
integration
Origination and
screening Business plan Execution
Closing, reg
approvals
Deal
close
Capital
projects
M&A
Divest-
ments
Idea generation
and screening
1
2
3
Gate
1
Gate
2 Gate
3
Gate
1
Gate
3
Gate
2
Gate
1
Gate
2
Gate
4
Gate 3
Diagnostic Design Implementation Strategic
redirection 4 Gate
1
Gate
2
15
Phases of EPM customized for the four types of projects: capital projects, M&A, divestments, strategic redirections
Strategic Redirection adds value to the organization Project “CORE”: a 3-Steps approach
• Interviews
• Surveys
• Analysis:
Review of
Main
Corporate
Processes
• New Organizational charts
• Processes reengineering
• New Performance
Management System
• Improve mngt culture
Phase a
ctivi
ty
Decis
ion
Appro
val • Corporate
1st level • Corp. 1st
level
• Corp.
2nd level
• Close the Gap • Approve final
project
Divestment — overview
• New
Organization
al structure
Diagnostic Design Implementation Gate
1
Gate
2
• Corp. 1st
level
• Corp.
2nd level
• Appointments in the new
organization
• Selection of the new Headquarter
Offices
• New Performance Management
System operative
• Centralization and Shared Services
16
M&A overview M&A process usually completed in condensed timeframe with high level of confidentiality
M&A — overview
Pha
se
activi
ty
• Post
merger
integration
• Deal closing/signing
• Regulatory
approvals
• Due diligence,
final valuation
• Negotiations
• Structure
transaction
• Documentation
• Economic and
technical
evaluation
• Strategic due
diligence
• Strategic fit
• Generate ideas
• Review inbound
opportunities
• CA signed • Initial bid/non-
binding term-sheet • Bid
Ap
pro
val
• Corp. 1st
level • Corp. 1st level
• Shareholder
Board
• Corp. 2nd level
• Corp. 1st level
• Shareholder
Board
De
cis
ion
• Asset strategic;
explore options
• Approve
merger/
acquisition
• Approve final
price and
structure – as
required
Post Merger
Integration Origination and
Screening
Target
Assessment Execution Closing
Deal
close
Gate
1
Gate
2
Gate
3
Deals Opportunities
Screening phase in M&A includes origination activities and target assessment
Phase objective
To identify targets with the best strategic fit
Profile target company/asset
Complete Confidentiality Agreement
Key resource and funding decisions Commit internal and external resources for Target assessment
Decision makers
Corporate Major Project Committee
Cost/Valuation estimates
Preliminary figures based on market value or industry comparables
Phase deliverables
Checklist
Recommended timing
Origination is a continual exercise. Thorough target profiling can take over eight weeks, however actual timeframes are shorter in many cases
M&A — overview
Post Merger-
Integration Origination and
Screening
Target
Assessment Execution Closing
Deal
close
Gate
1
Gate
2
Gate
3
Key questions to answer in screening phase
Business fundamentals
What does the company do? What is the business model?
Is there a key technology or competitive edge?
Strategic rationale for acquisition
Does the company have a strong position a target industry? Which gap in our portfolio does it fill?
How does this deal generate more revenue as a combined entity than as two separate ones? How does it lower costs?
How does this deal strengthen our position against existing and new competitors?
What do you perceive as the key risks of this acquisition?
How would the acquisition impact our other businesses and/or sister k-companies?
Financials
What are the company’s revenues, EBITDA, net income? Their growth rate?
What is the company’s market cap, P/E, stock price development? (For public targets)
What is the preliminary valuation estimate (ballpark number)?
Acquisition information
How do we know this company? Who do we know, and how well?
What is the likelihood of success? Are there other bidders in the game? What is the likely timeline?
Are there any critical items which may cause delay in deal closing (eg, labor laws, local laws, regulatory requirements)?
Who should have access to deal information? How is the confidentiality of all parties and documents retained?
M&A — overview
Strategic fit key criteria during screening phase
Profile of target provides basis of knowledge to team and decision makers
Executive summary Acquisition pros and cons
Fact sheet
Location of facilities, history, ownership structure, organizational structure and breakdown of business units by geography
Products
Market position, sales, historical growth and projections Combined portfolio matrix Key customer segments, competitors and degree of industry rivalry Financial performance
Asset size, market capitalization, stock price performance, revenue, profit, cash flow and growth projections
Core capabilities and potential value of patents/technologies/R&D Profile of management team Potential risks
Lawsuits, pension plans, changing market trends, etc
M&A — overview
High-level profiles also allow acquirer to rank top candidates on key dimensions
= Unattractive = Highly attractive
After high-level profiles are developed, acquirer’s top management must
decide which targets to investigate further
Candidate 1
Candidate 2
Candidate 3
Candidate 4
Candidate 5
Mgmt
Financial
performance Products
Combined
portfolio
Customers
and competition
Core
capabilities Potential
liabilities
= Moderately attractive
M&A — overview
Target Assessment phase focuses on financial valuation and market assessment
Phase objective
Financial evaluation from multiple valuation techniques
Start strategic diligence/market assessment
To establish sound and robust set of assumptions for financial valuation
Initial bid/non-binding term sheet
Key resource and funding decisions
Approve the entire deal (in concept)
Fund internal and external resources for next phase
Decision makers
Major Project Committee
Cost/Valuation estimates
Range based on triangulation of different valuation techniques (DCF, recent transaction multiples, publicly traded comparables)
Phase deliverables
Checklist
M&A — overview
Post Merger-
Integration Origination and
Screening Target
Assessment Execution Closing
Deal
close
Gate
1
Gate
2
Gate
3
• Result depends on quality of assumptions – Cash flows – Discount rate – Terminal value
• Lack of company specific data for inputs
• Complexity
• No company completely comparable to another
• Transaction prices not often applicable – Prices reflect value-creation through synergies – Acquisition price is company specific
• Usually provides wide range of values
• No company completely comparable to another – Different business mixes, capabilities,
performance and growth prospects – Different accounting methods
• Usually provides wide range of values
• Compare ratios of recent transactions to target – Earnings multiples – Cash-flow multiples – Asset multiples – Sales multiples – Other multiples
• Compare financial ratios of public firms to target – Earnings multiples – Cash-flow multiples – Asset multiples – Sales multiples – Other multiples
Method Description Advantage Disadvantage
Valuation range should be determined by multiple methods
• Publicly
traded
comparables
• Simple, transparent
Cash flow
Investment
Residual value
• Recent
transaction
comparables
• Simple, transparent
• Discounted
cash flow
(DCF)
• Usually more
accurate than
comparables
analysis
1
2
3
M&A — overview
Target assessment process determines valuation range Process performed in four distinct steps
Stand Alone
Evaluation
• Market and
competition
• Products and pricing
• Cost structure
• Capabilities and
processes in R&D,
distribution, marketing,
sales, operations
• Resources
• Key success factors
• Culture and
management
strengths
• Finance, legal and tax
issues
• IT systems
Independent growth
prospects
• Market growth
• Competitive shifts
• Organic growth plans
• New product and
pricing strategies
• Technological and
regulatory trends
• Risk factors
• Business model
stability
Combined
prospects (Synergies)
• Potential along
merged value chain
• Revenue synergies
• Cost synergies
• Financing synergies
• Managerial synergies
• Market synergies
• Future options
provided
• Integration needed to
achieve synergies
• Costs of integrating
the companies
Feasibility
• Internal resources
• Investments required
• Financing capability
• Culture and
organizational issues
• People retention
• Management team
• Integration needs
• Other bidders
• Competitive response
1 2 3 4
Initial data input into financial model from available
sources; to be clarified/updated during due diligence
M&A — overview
Stand alone evaluation covers all relevant areas of target (I) Target assessment step 1
Market
• Market size and development
• Profitability
• Sales and pricing structure
• Market cycles
• Growth trends
• Barriers to entry
• Customer mix and behavior
• Buying patterns
• Historical and future trends
• Analysis by
regions/geographies
Products
• Product portfolio
• Sales volumes and trends
• Cost position
• Price position
• Level of differentiation
• Quality
• Branding, image
Marketing, sales
• Marketing capabilities
• Sales organization
• Channel access and
development
• Advertising and
promotion strategies
Competition
• Analysis of major players
• Strengths and weaknesses
• Sources of advantage
• Profitability
• Market share trends
• Relative price levels
• Likely responses to acquisition
• Competitive forces
• Possible new entrants or new
business models
Operations
• Production facilities and
equipment
• Maintenance and investments
• Supply contracts, partnerships
• Cost structures
• Capacity
Distribution, logistics
• Distribution system and
capabilities
• Logistics
• Trends in distribution and
logistics
• Speed, flexibility and quality
M&A — overview
Align internal and external assumptions and forecasts
Independent growth assessment reviews plan of target Target assessment step 2
Identify and evaluate
internal growth plans and
assumptions
• Future plans
• Internal strengths and
weaknesses
• Internal processes
• Human resources
• Investments and financial
resources
• Operational capacities
Define and verify
assumptions on market and competition
• Market structure and trends
• Cyclicality
• Strategy and positioning
• Change in customer needs
• New entries or exits
• Competitor reactions
Define and verify
assumptions on market and competition
Rev
Realistic range of growth assumptions to be included in
financial valuation
M&A — overview
Value creation depends on
ability to realize synergies
Combined prospects values potential synergies Target assessment step 3
Operating synergies
• Potential synergies exist in all
steps of the value chain from
R&D to after-market service
Financial synergies
• Acquisitions may provide tax
shields, improved credit rating,
access to capital, etc
Managerial synergies
• Acquisitions can improve
management practices
• Can provide additional talented
managers
Market-evaluation
reassessment
• Market may view the acquirer
as a survivor in a consolidating
industry
Realistic expectations of synergies should be included in
financial valuation
M&A — Overview
Source: BCG experience; adaptation of Chakravarty in Business Today, March 1998
• Financial capabilities – Potential price range – Financial situation – Alternative bidders and their resources – Deal structure – Investment required – Financing possibilities
• Organizational issues – Culture and management styles in both entities – Internal resources and management capabilities for integration – Ability to manage new company
• Strategic fit (confirmed in screening phase)
?
?
M&A — overview
All dimensions have to support the deal
Verifying feasibility of merger/acquisition critical step Target assessment step 4
• Phase objective
– Determine final range of valuations for bidding
– Finalize due diligence efforts on all aspects of target
– Structure transaction
– Determine deal terms through negotiations
• Key resource and funding decisions
– Final investment Decision
• Decision makers
– KPI Major Project Committee, Aruba, KPC (as necessary)
• Cost/Valuation estimates
– Range based on triangulation of different valuation techniques (DCF, recent transaction multiples, publicly
traded comparables)
• Phase deliverables
– Checklist
Execution in M&A performs due diligence effort, provides range of valuations for FID and negotiates terms
M&A — overview
Post-merger
integration Origination and
screening
Target
assessment Execution Closing
Deal
close Gate
1
Gate
2 Gate
3
Minority share-holder
• Select structure reflecting strategic requirements of the business
High
Full takeover
or merger
Takeover with guarantees, eg,
employment
Majority share-holder
Joint venture Licensing
Cooperation without financial
involvement
Integration level Low
Alliance
Define deal-structure options to most effectively achieve strategic objectives
• Identify optimum tradeoff between financial logic and personal objectives of target management, as seen by target company
• Possess ability to creatively modify proposed structure during negotiating process
M&A — overview
• Management structure – Board structure – Individual manager and board
member roles
• Organizational details – Name, logo, branding – Location of headquarters – Organization of businesses
• Post-merger integration planning
• Confirm strategic and operational logic – Gather additional data and insight
• Refine synergy estimates and financial evaluation
• Assess management, culture and organizational capabilities and fit
• Monitor and respond to other bidders and key stakeholders
3. Determining key aspects
of the new entity
4. Drafting the contract
Represe
n-tations
Indemnities
Conditions
Covenants
Price
Friendly Hostile
1. Make the approach
2. Refine and understand
Manage
the human
context and
balance of
power
issues
Strategic focus should be kept during deal negotiations Deal negotiation components
M&A — overview
• Management individuals, team and approach – Personalities and capabilities – Centralized versus decentralized
• Market position – Market trends or changes – Competitor strengths and weaknesses
• Products or services position – Product issues – Market-share positions or trends – Sales and marketing capabilities
• Operations and R&D – Capabilities – Liabilities – Supplier relationships
• Human resources and organizational culture – Characteristics and type – Cross-border cultural differences – Union relationships
• Financials – Additional historical or projected results – Practices
• Information technology
– Compatibility and cost of integrating platforms – Capabilities
New information can emerge ... ... with implications on
• Strategic fit • Cultural fit • Personal fit • Appropriate price • Post-merger integration success
Negotiation is a learning process, where iteration
is required
New information can change initial perceptions Revise assessment as necessary with new data
M&A — overview
Closing phase in M&A is value realization post regulatory approvals and signing
• Phase objective
– Deal signed, final documentation
– Obtain required regulatory approvals
– Initiate post-merger integration plans for successful transition
• Key decisions
– Final value for offer
• Decision makers
– KPI Major Project Committee, Aruba, KPC (as necessary)
• Phase deliverables
– Checklist
– End of project review
M&A — overview
Post-merger
integration Origination and
screening
Target
assessment Execution Closing
Deal
close Gate
1
Gate
2 Gate
3
• Start actual implementation – Transfer responsibilities
to the line organization (BUs)
• Already involved as sponsors in phase 1
• Integration teams continue to push cross-BU topics
– Line organizations set up own integration teams
• Define detailed integration
performance and control measures – Break down integration
concept into detailed measures
• Setup tracking processes
– Eg, enter measures in tracking tool
Following a thorough post merger integration process essential for integration success
Phase 3:
Implementation
(12–24 months)
Phase 0: Integration preparation
Phase 2:
Integration detailing/
implementation initiation
(4–6 months)
Phase 1:
Integration planning
(2–3 months)
• Continue implementation
• Thoroughly track implementation through defined measures
• Communicate and implement restructuring measures in phased approach
• Manage as a single company
M&A — overview
• Define integration logic – Strategic logic – Speed of integration – Spirit of integration – Strategy of products and
regions – Scope of integration
• Develop first hypotheses on major integration challenges – Assessment along
functions and organizations
• Define overall integration
structure and approach – Set up integration teams
and integration office – Define processes and
interaction modes
• Get the organization ready for integration – Prepare all legal entities
for closing – Track closing
preparation through checklists
– Ensure business continuation
• Define finance and
headcount baselines and targets – Derive productivity
targets, get management buy-in
– Break-down targets to BUs and functions
– Benchmark competitors
• Define strategic direction and top-level org structure – Select and retain key
talent – Develop migration
process
• Develop consistent communication and change management concept – Determine ways to
support the change process
Best practices and pitfalls in post-merger integration
• Believe that you can't stabilize the
organization until all the details of the new company are agreed, and lose key people as a result
• Miss the strategic opportunities resulting from the integration
• Manage change, but failing to lead change • Target most benefits to occur after the first
twelve months
• Declare victory too soon — fail to follow through and track promised changes
• Assume a fair approach means equal treatment for all partners
• Use one single approach across the
entire organization
Best practices in PMI Potential pitfalls in PMI x • Develop clear merger goals, objectives,
philosophy, and principles • Manage the integration as a discrete
process
• Set up dedicated teams — staffed with the best/key people from both organizations
• Design a clear new organization structure • Define an explicit communications program • Build objective HR processes
• Define explicit targets • Tackle IT-issues early and pragmatically
• Remember that the customer expects 'business as usual'
• Develop the new 'constitution' — the rules
of the game
M&A — overview
• Project review is mandatory requirement
– Focus on lessons learned
– Increases opportunity for knowledge transfer and skill development
– Generates continual improvements to project management solutions
• Participants from all phases of project
– BD organizes and leads effort
– Representatives from assurance reviews, support functions, project team and operations
• Continual learning
– BD records and maintains all lessons learned
– Future projects should have open access to database/files
End of project review critical link for knowledge sharing Focus on lessons learned
End of
project
review
M&A — overview
Post-merger
integration Origination and
screening
Target
assessment Execution Closing
Deal
close Gate
1
Gate
2 Gate
3
Project review to occur for all projects
Agreement closing checklist
• Sign agreement
• File with regulatory entities
• Receive regulatory review
• Execute any required stockholder vote
• Close the deal
• Make the payment
• Register with local government if necessary
• Plan and begin post-merger integration
M&A — checklist
1
2
3
4
5
6
7
8
Operation
Capital Projects overview
Screening Feasibility FEED EPC
Projects
• Strategic fit
• Confirm national
crude status
• Basis of
design, FEED
• Engineering
procurement
construction
Phase a
ctivi
ty
Decis
ion
• Allocate
resources for
feasibility
• Approve
project;
• fund next
phase
• Final Investment
Decision (FID);
fund project
• Internal
check after
BOD
Start
-up Gate
1
Gate
2
Gate
3
Rew ork, Change,
Hold, Discontinue Proceed Rew ork, Change,
Hold, Discontinue Proceed
Rew ork, Change,
Hold, Discontinue Proceed
Appro
val
• Project originator/sponsor leads • Project team leads
• Project team assembled
• Operations
Role
Hand
over
JV1
• MOU signed • Major commercial
/Technical items finalized • JV agreements
finalized
Start
-up
• Corporate
1st level • Corporate 1st level
• Corporate 2nd level
• Economic and
technical evaluation
• On-going
operations
Opportunities
• Corporate
1st level
• Corporate 1st level
• Corporate 2nd level
• Identify risks and sort by
– Category
– Impact area
• Category
– Technical
– Commercial/market
– External (political, Fx, etc)
– Legal
– Resource/organizational
• Impact area
– People
– Environment
– Project objectives (Cost,
schedule, commercial)
– Company reputation
• Evaluate risk level
(qualitative and quantitative)
– Likelihood of occurrence
– Severity of impact
• Prioritize risk based on level
– High, Medium, Low
• Assess manageability
– High — within complete
control of project
– Medium — project
can influence
– Low — out of project’s
control or influence
• Define risk control strategy
– Avoid
– Mitigate
– Transfer or share
– Accept
• Develop action plan for managing
risks
– All data on risks
– Resources required
to manage
– Schedule of risk
mgmt activities
• Allocate tasks and responsibilities
– Risk tracking
– Reporting
– Closure
Risk assessment should be a structured, core activity throughout the process
Identify Evaluate Plan and control
Risk register Risk management plan
Screening Feasibility FEED EPC Gate
1
Gate
2
Gate
3
Risk assessment
Screening phase is critical to ensure correct projects selected for evaluation
• Phase objective – To establish opportunity can support economically attractive development
– Confirm alignment with strategic direction; – Agree main principles of agreement and/or sign MOU with partners
• Key resource and funding decisions – Commit internal and external resources for feasibility phase
• Decision makers – Corporate major project committee1
• Cost estimates – Preliminary figures based on industry comparables
• Phase deliverables – Development support package – Initiation of project performance measurement
• Recommended timing – Up to four months; however, it is critical unattractive projects are discontinued as soon as possible to free up
valuable resources
Overview
Operation Screening Feasibility FEED EPC Start
-up Gate
1
Gate
2
Gate
3
• Country or market fundamentals (Score from 0–4)
– Forecasted crude product deficit, netback
– Country risk, margins, competitive landscape
• Product volume (Score from 0–3)
• Opportunities along value chain for Corporate (Score
from 0–2)
• Calculate Corporate share of project
NPV
• Determine probability of success
– Review of risk register
– Review of stakeholder plan
– Assessment of partner relations
– Type (brownfield, grassroots)
– Business judgment
• Multiply NPV x probability
Prioritize projects by attractiveness and strategic importance Resources to be allocated against highest priority projects
Attractiveness:
probabilistic value per product
Strategic importance
Low
Score of 0
High
Score of 10
Low
High Highest priority
Fully allocate
internal
and external
resources (Full
feasibility)
Medium priority
Allocate internal
resources and
limited external
resources (Pre-
feasibility)
Lower priority
Allocate internal
resources only
when available
(Pre-feasibility
with internal
resources only)
Medium priority
Allocate internal
resources and
limited external
resources (Pre-
feasibility)
1
2
3
1
2
3
Prioritization process is a key management decision tool Priorities likely to change as projects are further developed
Low High Strategic importance
Low
High
Attractiveness
probabilistic value of product
($)
Total Corporate NPV
represented
as size of bubble
Project C
Project B
Project A
$200MM
Project D
Project E
Project prioritization helps allocate resources to the most
valuable projects
Corporate cross-functional team requirements vary by phase of work - Screening
Org and skills — 100% ownership
Skills
• Planning/strategy
• Commercial
• Finance and tax
• Project Controls
• Legal
• Process engineer
• Project engineer
• HSE
• Operations
Technic
al
Functio
na
l
Active involvement Little to no involvement
Screening Feasibility FEED EPC
52
Feasibility phase sets the course for project approval
• Phase objective
– To establish project is technically feasible and economically attractive
– Confirm alignment with strategic direction and all stakeholders
– Finalize majority of terms and agreements with JV partners
• Key resource and funding decisions
– Approve the entire project (in concept)
– Fund internal and external resources for FEED phase
– Fund initial procurement costs of critical long-lead items
• Decision makers
– Corporate Investment Committee, Shareholders Board
• Cost estimates
– +/- 30–40%
• Phase deliverables
– Development Support Package with Feasibility study
– Assurance review
• Recommended cumulative timing
– Up to 14 months for screening and feasibility phases
Overview
Operation Screening Feasibility FEED EPC Start
-up Gate
1
Gate 2
Gate
3
53
• Request formal confirmation1 from internal
stakeholders that
– No known factors make the project
completely unworkable for Corporate
• Confirmation of no potential showstoppers2
– Unacceptable country risk
– Unacceptable partners (local or IOC)
– Availability of product (quality,
timing, quantity)
– Beyond limits of current technology
• Note: This process is not to gain approval,
but to confirm the project basis is not
fundamentally flawed with current information
Formalized kick-off meeting with internal stakeholders helps to agree objectives and identify any showstoppers
Identify any showstoppers
Corp.
1st lvl
Corp.
2nd lvl
Other
• Project should
incorporate any
new information
into assessment
• If showstoppers
identified,
development
efforts put on hold
or discontinued
until issue
resolved
Other gate requirements
Operation Screening Feasibility FEED EPC Gate
1
Gate 2
Gate
3
Kick-off meeting introduces project scope,
objectives, and context to internal stakeholders
Start
-up
Potential stakeholders
55
Optional gate provides Corporate management flexibility and helps speed up the process without sacrificing governance
Project team always has option to elect to
proceed with formal gate review
Gate is optional if specific criteria met
Operation Screening Feasibility FEED EPC Start
-up
Gate
1
Gate
2
Gate 3
Project approved by
Shareholders, Corporate
Project approved &
funded by Shareholders,
Corporate +/- 15/18 months
• Limited variation in project status between end of
feasibility and basis-of-design
– Estimated Capex increase less than 10%
• Corporate equity share is less than or equal to other
share
• An IEC is engaged for the FEED phase, with inputs
Corporate
• Assurance review and project team jointly recommend
formal gate review is not required
56
Front-end loading is best practice to define projects early to avoid costly re-work or re-design
$ (%)
Time (%)
Influence
Time (%)
Typical expenditures during project Ability to reduce costs, influence project
Highest potential to
influence project
Screening, Feasibility, FEED
EPC Start-up Screening,
Feasibility, FEED EPC Start-up
Companies have
FEL index1
requirements
before FID
Overview
Focus efforts during the early,
high-impact phases of a project
1. FEL index measures the level of definition in the basic design package prior to full authorization of project funds and aw ard of execution contracts
58
Value realization in the EPC phase
• Phase objective
– To deliver a world-class facility on schedule, under budget and without HSE incident
– Realization of product placement
• Key resources and funding decisions
– Approve and fund any significant variations from final cost estimates
• Decision makers
– Project steering committee and directorate for routine project management decisions
– If cost and/or schedule overrun occurs above thresholds outlined in Corporate guidelines, please refer to applicable Corporate policies
• Phase deliverables
– Hand-over commissioned facility to operating group
– End of project review
• Recommended cumulative timing
– Up to 68 months for screening, feasibility, FEED, and EPC phases
Overview
Operation Screening Feasibility FEED EPC Start -up
Gate 1
Gate 2
Gate 3
59
• Project review is mandatory requirement
– Focus on lessons learned
– Increases opportunity for knowledge transfer and
skill development
– Generates continual improvements to project
management solutions
• Participants from all phases of project
– BD organizes and leads effort
– Representatives from assurance reviews, support
functions, project team, and operations
• Continual learning
– BD records and maintains all lessons learned
– Future projects should have open access to
database/files
End of project review critical link for knowledge sharing Focus on lessons learned
Overview of project review
Other gate requirement
Operation Screening Feasibility FEED EPC Start -up
Gate 1
Gate 2
Gate 3
End of
project
review
Project review to occur for all projects, even those
that do not proceed to Operational phase
60
KPI cross-functional team requirements vary by phase of work — EPC
Skills
• Planning/strategy
• Commercial
• Finance and tax
• Project controls
• Legal
• Process engineer
• Project engineer
• HSE
• Operations
Te
chnic
al
Functio
nal
Active
involvement Little to no
involvement
Screening Feasibility FEED EPC
Divestment process overview
• Due diligence and Q&A
• Teaser and
information
memo
• Deal
closing,
signing
• Regulatory
approvals
• Strategic fit
and rationale
• Valuation and
impact
• Timing
• Best owners /
transaction
models
• Mgmt
presentation
• Site visits,
expert
meetings
• Negotiations
Ph
ase
acti
vit
y
De
cis
ion
A
pp
rova
l • Corporate
• Corporate 1st lvl
• Shareholder board
• Corporate 2nd lvl
• Asset not
strategic;
explore options
• Approve
divestment
• Approve final
divestment
price
Divestment — overview
• Evaluate
initial bids
• Qualify short-
list of bidders
• CA signed
and non-
binding offers
rec’d
• Bids
rec’d
• Data
room
Divestment process
'Unlocking the value'
Divestment preparation
'Creating the case'
Marketing
and bid
evaluation
Divestment
decision
Divestment
strategy
Deal
close Due diligence
Mgmt present Site visit Negotiations Gate
1
Gate
4
Gate
3
Gate
2
• Corporate 1st lvl
• Shareholder board
• Corporate 2nd lvl
• Corporate 1st lvl
• Shareholder board
• Corporate 2nd lvl
• Phase objective
– Robust rationale for divestment, focusing on lack of strategic fit
– Quantify valuation range
– Assess impact to current operations
• Key decisions
– Explore options for divestment
• Decision makers
– Corporate major project committee
• Phase deliverables
– Checklist
Lack of strategic fit initiates decision on divesting asset
Marketing and bid
evaluation
Divestment
decision
Divest- ment
strategy
Deal close
Due diligence
Mgmt present Site visit Negotiations Gate
1
Gate
4
Gate
3
Gate
2
Divestment — overview
• Assess valuation of remaining Corporate assets
• Impact to current operations – Product placement – Brand/awareness – Logistics – Purchasing power – Overhead
• Strategic portfolio evaluation – Strategic fit – Value creation
• Assessment of portfolio health before and after divestiture
Asset specific analysis during exit preparation phase helps focus efforts during divestment
Rationale/feasibility Valuation/impact
Va
lue
cre
atio
n
Strategic fit
Divestment — overview
• Phase objective
– Robust rationale for divestment, focusing on lack of strategic fit
– Determine best timing for divestment
– Short-list potential buyers; estimate values potential buyers willing to pay
• Key decisions
– Approve divestment
• Decision makers
– Corporate Major Project Committee, Shareholders, Corporate 2nd level
• Phase deliverables
– Checklist
Divestment strategy formulates best timing and potential buyers
Divestment — overview
Marketing and bid
evaluation
Divestment decision
Divest-
ment
strategy
Deal close
Due diligence
Mgmt present Site visit Negotiations Gate
1
Gate
4
Gate
3
Gate
2
• Screen potential buyers – Best strategic fit – Corporate acquisition history – Current financial position/strength
• Assess possibility of exit routes and
transaction models – Direct sale? – Auction? – Asset swap?
• Identification of best exit time in terms of – Economic cycle – Relative valuation to peers – Consolidation/industry dynamics – Internal growth opportunities – Market analysis – Financial markets
Asset specific analysis helps focus efforts
Timing Best owners/transaction models
Short-list of potential buyers in current market conditions result of analysis
Exit process unlocks the value in the asset
Exit-phase has to balance and optimize ...
... process management • Tight management of process (presentations, meetings, questions, etc) • Coordination of all involved parties (internal and external)
... potential investors • Providing all required information and enable fair negotiation • Realization of optimal price for seller, investor and divested asset
... internal organization • Handling of large workload and short notice schedule • Implementation of organizational changes, especially on impacted operations
Divestment preparation
'Creating the case'
Divestment process
'Unlocking the value'
Marketing
and bid
evaluation
Divestment
decision
Divest-
ment
strategy
Deal
close Due diligence
Mgmt present Site visit Negotiations Gate
1
Gate
4
Gate
3
Gate
2
• Phase objective
– Distribute initial information to potential bidders to gauge interest
– Receive and evaluate non-binding bids
– Qualify short-list of bidders, based on price and strategic fit
• Key decisions
– Approve short-list of potential buyers and price range of divestment
• Decision makers
– Corporate Major Project Committee, Shareholders , Corporate 2nd level
• Phase deliverables
– Checklist
Marketing and bid evaluation phase qualifies bidders for execution phase
Divestment — overview
Marketing
and bid
evaluation
Divestment decision
Divest- ment
strategy
Deal close
Due diligence
Mgmt present Site visit Negotiations Gate
4
Gate
3
Gate
2
Gate
1
• Confidentiality and indemnity agreements between
– Client and potential buyers – External advisors and potential buyers
• Describes the 'opportunity' (does not include reserved information)
– Business summary – Divestiture background – Key financials
Investor marketing material must clearly articulate strategic rationale for investment case
Information teaser
Information
Memorandum (IM)
Non-disclosure
agreements
Divestment — overview
• Comprehensive document providing
– Overview of market – Detailed business description, detailed financials including forecasts – Future outlook and business strategy
– Transaction process • Only numbered hard copies of Information Memorandum to be released
for confidentiality purposes
Divestment execution
• Phase objective
– Present reserved information (Management presentation, site visits, data room) to bidders
– Receive and evaluate final bids
– Agree final price, documentation and terms of divestment with successful bidder
• Key decisions
– Approve final price of divestment
• Decision makers
– Corporate major project committee, Shareholders, or Corporate 2nd level (as required)
• Phase deliverables
– Checklist
Divestment — overview
Marketing and bid
evaluation
Divestment decision
Divest- ment
strategy
Deal
close Due diligence
Mgmt present Site visit Negotiations Gate
4
Gate
3
Gate
2
Gate
1
Management presentations and site visits — an opportunity to reinforce key selling points
• Provide overview of business and management team
• 'Sell' the business Objective
Structure • Comprehensive presentation followed by Q&A
• Contents: Introduction to management team, market overview, business and financial overview, description of key functions
Preparation
Site visits • Profile key assets
• Due diligence requirements
• Dry runs and FAQ's
• Customize to suit bidder – eg, drop market overview section for local buyers
• Information classified into fund profile, distribution, financials, legal/regulatory, etc
• Circulated to shortlisted bidders prior to due diligence – Ensures appropriate team for due diligence – Additional information needs raised upfront
• Content to be approved by management and legal
Setting up a data room for due diligence Data room typically run by outside contractor
Define data
room protocols
• Rules for entry, exit, number of people allowed, responding to queries, copying
documents, data room timing, etc
Prepare data
room index
Collect data • Manage process with client, accounting firm, lawyers
• Consistency with information memorandum and management presentation
Data room
logistics
• Define location
• Assign responsibility for control of documents and entry/exit • Ordering of bidders in data room important — best/most likely bids to get
second/third slot, first one used as a ‘pilot’
Recommended