Red-Flag Due Diligence Report

For the Acquisition of Dram Distillery Limited ("DDL")

Prepared by [InterSpirit s.p.a] - [19.10.23]

Introduction:

This report is prepared as part of the due diligence process for the potential acquisition of DDL
by our client, a multinational beverage and alcohol company. The purpose of this report is to
identify potential red flags or issues that need to be addressed or considered during the
acquisition negotiations. The report is organized into several key sections, each addressing
different aspects of the due diligence process.

1. Legal and Regulatory Compliance:

 Review all licenses and permits required for alcohol production and distribution.

 Identify any ongoing or potential legal disputes, regulatory fines, or sanctions.

 Assess compliance with environmental regulations.

2. Financial Considerations:

 Examine DDL's financial statements for the last 5 years to identify any irregularities or
significant fluctuations.

 Assess the level of debt and contingent liabilities.

 Verify the accuracy of financial projections provided by DDL.

3. Operations and Management:

 Evaluate the competence and stability of the current management team.

 Review the condition and capacity of the distillery's facilities and equipment.

 Assess the efficiency and effectiveness of DDL's supply chain.

4. Intellectual Property and Brand Assets:

 Determine the status of trademarks, patents, and copyrights.

 Evaluate the reputation and goodwill associated with the DDL brand.

5. Market and Competition:

 Analyze the competitive landscape in the whisky industry and DDL's position within it.
  Identify any potential market risks, including changing consumer preferences or
economic factors.

6. Supply Chain and Distribution:

 Examine supplier relationships and dependencies.

 Assess the distribution network and potential risks associated with it.

7. Environmental and Sustainability:

 Investigate DDL's environmental practices and adherence to sustainability standards.

 Assess any potential environmental liabilities or issues.

8. Employee and Labor Relations:

 Review employment contracts, benefits, and any labor-related issues.

 Evaluate the potential for employee resistance or disruptions during the acquisition.

9. Technology and Cybersecurity:

 Assess the robustness of DDL's IT infrastructure and data security.

 Identify potential data breaches or vulnerabilities.

10. International Considerations:

 Review any international agreements or trade relations that could impact DDL's business.

Conclusion:

This due diligence report identifies areas of potential concern or risk that may impact the
acquisition of DDL. It is essential that our client takes these red flags into account when
negotiating the terms of the acquisition agreement. Further detailed investigations may be
necessary to fully assess and mitigate these issues.

Recommendations:

We recommend that our client conduct further detailed due diligence in the areas highlighted in
this report, engage legal and financial experts to provide in-depth analysis, and consider
developing a risk mitigation strategy. Open communication with DDL's management and
stakeholders is crucial to address any concerns and ensure a successful acquisition.