Benefits of Making Business in Honduras | Buy & Sell Business

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

4. Country Overview Honduras is a Central American country with Caribbean Sea coastlines to the north and the Pacific Ocean to the south. In the tropical rainforest near Guatemala, the ancient Mayan ceremonial site Copán has stone-carved hieroglyphics and stelae, tall stone monuments. In the Caribbean Sea are the Bay Islands, a diving destination that's part of the 1,000 km-long Mesoamerican Barrier Reef. Honduras is divided into 18 departments. While its political capital is Tegucigalpa, San Pedro Sula is the industrial capital due to its contribution to the country's economy. The official language of Honduras is Spanish, and the currency is the lempira (HNL)

5. Executive Summary Honduras, strategically located in the heart of Central America, is bordered by Guatemala to the west, El Salvador to the southwest, Nicaragua to the southeast, the Caribbean Sea to the north, and the Pacific Ocean to the south. Honduras is a distribution centre, with Puerto Cortés as the main sea port in Central America. The economy relies heavily on a range of exports, notably apparel, bananas, and coffee. However, it has emerging sectors in agriculture, textile, light manufacturing, sustainable tourism, and business services. The GDP composition by sector is: agriculture 14%, industry 28%, and service 58%. The United States-Central America Free Trade Agreement (CAFTA) entered into force in 2006.

6. Introduction – Doing business in Honduras Ease of Doing Business in Honduras averaged 123.08 from 2008 until 2019, reaching an all time high of 141 in 2009 and a record low of 101 in 2015. Business benefits as it is located in the center of Latin America and has lowest logistics costs in all of the region and operates as a distribution center for the rest of Central America For production and sales purposes, the country can be divided into 2 regions. The first area is the North Coast of the country, which includes the industrial and commercial city of San Pedro Sula, and the second region is the central part of the country which includes the political capitol of the country, Tegucigalpa.

7. Conducting business in Honduras .According to information gathered by the World Bank, it takes only 13 days to establish an entity and to begin doing business in Honduras. Also, the average time needed to set up a business entity in the rest of Latin America is 31 days. The Honduras limited liability company is the most preferred choice when setting up a business. This type of entity requires at least one director and two shareholders that do not need to be a resident of Honduras and can be any nationality. The requirements for a public limited company are two shareholders, either individuals or legal entities and at least one director. The appointed director should be a non-resident.

8. Taxation in Honduras Income tax: Foreign residents living on their foreign income, including pensions, are not subject to income taxes. Only the income earned in Honduras will be taxed. Business income tax is 25% on annual profits. Sales tax: The sales tax rate in Honduras is 15% and 18% on tobacco and alcohol sales. Customs Duties: There is a 25% (plus or minus) selective tax levied on all goods imported to Honduras. Property tax: Property is taxed at approximately $4 for every $1,000 in value according to the deed or catastral value, whichever is greater.

9. Trade Honduras is the 84th largest export economy in the world and the 87th most complex economy according to the Economic Complexity Index (ECI). In 2017, Honduras exported $9B and imported $9.9B, resulting in a negative trade balance of $901M. In 2017 the GDP of Honduras was $23B and its GDP per capita was $4.99k. The top exports of Honduras are Knit T-shirts ($1.29B), Coffee ($1.17B), Knit Sweaters ($870M), Insulated Wire ($609M) and Palm Oil ($365M), using the 1992 revision of the HS (Harmonized System) classification. Its top imports are Refined Petroleum ($1.09B), Non-Retail Pure Cotton Yarn ($377M), Non- Retail Synthetic Staple Fibers Yarn ($326M), Packaged Medicaments ($286M) and Delivery Trucks ($201M).

10. Banking in Honduras The Honduran banking system, currently comprised of seven financial groups and 15 private banks authorized by the National Banking and Insurance Commission (CNBS), includes financial intermediaries, one securities exchange, brokerages, credit operators, and foreign exchange houses. Total assets in the Honduran financial system in 2018 were $22,828 billion. Banks account for 95 percent of total assets in the financial system. Average interest rates for local currency in the banking system were 13 percent for 2018. Average interest rates in U.S. dollars were 6.9 percent in 2018. The Honduran banking system maintains 50.2 percent of its deposits in U.S. banks and financial institutions.

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