All right great.
The next slide you can consider adding to a company presentation is group structure group structure
is a useful piece of information for the stakeholders of a company.
Often companies include more than one legal entity.
The bigger a company or a business is the more legal entities are likely to be involved.
To illustrate with a simple example there can be a holding company or hold co owned by the ultimate
beneficial owners physical persons.
This holdco can then own several subsidiary companies operating in different countries or different
lines of business.
The aggregation of all subsidiaries holding company and ultimate beneficial owners form is the Group
of Companies.
A great way to present all that information visually is on a group structure slide but slides are often
used in pitch books.
Extended company profiles and other company presentation materials before we present the group's structure.
First we must source the data for it that can come from the company.
If we have access to its management that would be the case if we are working for the company as employers
or contractors.
If we are not insiders but the company is publicly listed.
A complete picture of its group and ownership structure can be assembled from the Investor Relations
section on its Web site including all its regulatory filings and from market data providers like Bloomberg
and fact set for listed companies.
The original source of information should always be checked.
So company information disclosure documents like financial reports and filings should take precedence
over secondary sources like Bloomberg and fact SEC which ultimately go to the same original source when
there is sufficient time for research and preparation.
It is recommended to check a few different sources and triangulate the information to make sure everything
you present is correct to give you more color on company structures.
They can vary for several reasons and extend to tens and even hundreds of legal entities involved.
But why would a business need such complicated structures.
Why wouldn't they incorporate everything under the same roof and operate with a single entity business
for extended company structures can include separation of assets and businesses tax efficiency regulations
in various jurisdictions financing requirements specific purposes and projects confidentiality and so
on to give you an example of how corporate structures can grow in complexity in an M&A process.
There will usually be one or more companies incorporated to make the acquisition.
These legal entities are also known as Peaveys or special purpose vehicles such acquisition structures
can involve multiple Espey viz one on top of each other depending on the specific situation.
Typically the number of espies would increase with the number of jurisdictions involved.
So this would be the case in cross-border acquisitions.
Private equity firms make extensive use of complex acquisition structures to optimize the efficiency
of their investment strategy when presenting a business comprising a very large number of legal entities.
We need not show every entity on the slide.
We must show only the most important entities.
These would normally be the holdco consolidating the group operations and issuing consolidated financial
reports.
The ultimate beneficial owners of the business also must be shown.
While any intermediary vehicles they use to hold their shares in the hold co can be skipped on the slide
key subsidiaries of the whole co. like other interim hold codes below used for example to consolidate
international operations or the operations of various business divisions with the conglomerate should
also be shown.
Usually we would suggest showing key operating subsidiaries and skipping any Espey these and smaller
subsidiaries when they are not the focus of the presentation due to space constraints on the slide.
Having established the optimal number of entities to present we can plan how to position them on a page.
Intuitively a corporate structure slide should start with the ultimate beneficial owners on top.
Then the main group consolidating holdco should feature on a prominent spot in the top or middle part
of the slide under the holdco should be the featured key operating subsidiaries all the entities should
be linked with connecter lines and respective shareholding percentages should be indicated in text boxes
next to them.
Good formatting practice would be to use different colors for the different entities and brand logos
when appropriate.
Keeping in mind all of these useful guidelines we would like to show you an example of a more complex
and interesting corporate structure slide.
Ali Baba the Chinese e-commerce giant listed on the New York Stock Exchange.
The reason for the increased complexity here is the variable interest entity structure.
This is one of the most common ways some companies with foreign ownership structure their business to
be able to conduct some of their heavily regulated operations in mainland China.
In the Alibaba case the structure is necessary due to the Chinese government's prohibitions against
foreign ownership of Internet assets.
In short Ali Baba's founders Jack Ma and Simon Ziyi listed Alibaba Group Holdings Limited Cayman Islands
entity on the New York Stock Exchange shareholders and that listed entity do not have direct ownership
in some of the key Chinese corporate entities of Alibaba Group due to the government restrictions on
foreign ownership that we mentioned.
Instead most of the groups Chinese assets are owned by Mr Ma and Mr G and the Cayman Islands holding
company has contractual rights to the profits of these Chinese assets but it has no economic interest
in them.
As you can see a group structure slide is especially useful to illustrate visually such complex cases.
And your audience will appreciate them.
Now we know how we can create a group structure slide and what to include in it in our next lesson.
We'll talk about another useful slide which provides an overview of the management team thanks for watching.