RISK FACTORS AND INTERNAL CONTROL and calendar of the exit process. The Rexel Group is The Rexel Group may also bear charges or following closely the evolution of the UK economic l iabil ities undisclosed in its acquisition and due environment and regularly updates different diligence processes and integration costs may be scenarios that may impact the operations. higher than initial ly anticipated. Lastly, in certain Although the Rexel Group cannot control the cases, minority shareholders may retain interests occurrence of external risks, it has implemented tools in the share capital of the companies that the to monitor and assess the risk level and impacts. For Rexel Group takes control of, to ensure continuity, this purpose, summaries consisting of financial data implying increased complexity in decision-making and macroeconomic indicators are drawn up by the processes. country and regional management teams as well as In addition, acquisitions carried out by the Rexel by the Rexel Group’s investor relations department. Group are reflected in its consol idated financial The summaries are delivered on a regular basis to statements through the recognition of goodwil l the Rexel Group’s management. representing the expected future economic benefits 2 These indicators are taken into account in the from the purchased assets. Downward revisions of budget process and may lead to measures aimed to these expected benefits, including due to changes adapt the Rexel Group’s strategy to the economic in macroeconomic conditions or in the context of a and political context. portfolio review, may lead to goodwill impairments, which would then have an adverse impact on the 2.1.1.2 Risks relating to acquisitions and financial condition and results of the Rexel Group. disposals At December 31, 2017, the amount of goodwi l l recognized in the Rexel Group’s assets amount to Risk €3,914.9 million and the impairments recognized in In the medium-term, Rexel wi l l continue its the consolidated income statement for 2017 amount targeted portfolio strategy (made of acquisitions to €133.7 mil lion (see note 12.1 of the Notes to the and divestments) from 2018 onwards, in line with consolidated financial statements of the Rexel Group its deleveraging objective and strict value-creation for the year ended December 31, 2017 included in criteria. The portfolio strategy fol lows three main section 5.2 “Consolidated Financial Statements” of objectives: strengthen its footprint in the most this Registration document). attractive geographic zones and segments (with Management of risk a priority on the US market), expand to adjacent segments in key markets and capture more of the In order to mitigate risks relating to acquisitions and value chain. In the last few years, the Rexel Group integration processes of the acquired companies, has carried out acquisitions to increase its market the Rexel Group monitors the implementation of shares, as wel l as disposals (see paragraphs 1.2 acquisition projects. An Investment Committee “History and development” and 1.3 “Recent reviews the suitabi l ity of each acquisition and Acquisitions and Disposals” of this Registration evaluates whether it is in line with the Group strategy. document). With respect to disposals, the Group The Investment Committee, composed by the may be unable to dispose of certain assets in members of the Executive Management and of the fair financial conditions and may therefore suffer concerned executives, meets at several stages of specific losses. the acquisition process to perform comprehensive analyses for an optimum execution. Moreover, However, the Rexel Group may be unable to throughout the entire acquisition process, the Rexel identify appropriate targets, complete deals Group employs specialized advisors. Any material under satisfactory terms or ensure compl iance acquisition or disposal is submitted directly to the with the terms of the relevant sale or purchase Rexel Board of Directors. agreement. In addition, whi le the Rexel Group seeks the successful integration of acquired In relation to the post-acquisition stage, an entities and businesses, it cannot guarantee that integration plan is defined and synergies are this integration wi l loccur within the planned fol lowed-up for the larger acquisitions. Moreover timeframes. Moreover, the Rexel Group may have a procedure for monitoring compl iance with difficulties in retaining the key employees identified contractual undertakings in acquisitions has been during the acquisition process, or achieving established and distributed throughout the Rexel expected synergies within planned timeframes. Group. REXEL 2017 – REGISTRATION DOCUMENT 37