Privatization Process  |  Pre- Privatization   Post- Privatization

Privatization Process

The privatization process involves the following activities:

1.   Due Diligence
2.   Valuation and Auditing
3.   Transforming the Public Enterprise into a Share Company
4.   Preparing Information Memoranda
5.   The Bidding Process
6.   Close of Sale (Transfer)

Due Diligence

   Due diligence is a task performed to sort out issues related to privatization of an enterprise. It is a stage where problems and constraints associated with privatization are identified and recommendations are made to rectify the problems. Due-diligence reports are produced by consultants where studies are outsourced.

Valuation and Auditing

The Valuing and Auditing Process involves the following steps:
Fixed assets of an enterprise are valuated for coming up with financial statements that reflect market-based values. The fixed assets include buildings, process plant and machinery, non-specialist equipment, vehicles, and office furniture and equipment.
Financial audit is done to get a true and fair view of the state of the financial position of the enterprise at a given point in time. The process is done according to international accounting standards.
Based on the results of financial audit, all problems in the audited financial statements are separated from the other items. The restructuring measures may include debt rescheduling or write offs, debtors' write-offs, stock write-offs and creditor write-offs to ensure the viability of each proposed share company.
Valuation of a business is undertaken to get information, which would serve as a benchmark that tells EPA what an enterprise worth. The value takes into account not only assets and liabilities but also the performance of the enterprise overtime, market conditions, product popularity and the financial strength of the enterprise.


   An enterprise is transformed into a new share company using internationally accepted methodologies. The share capital is derived based on the value of net assets in the opening restructured balance sheet.

Information Memoranda


Information Memorandum document contains historical profile of the company, i.e., its performances, principal activities, markets, customers, competitors, sales outlets, suppliers, production processes, fixed assets, human resources, etc. Besides, the document contains Ethiopian profile with respect to its economy in general and fiscal, tax and regulatory policies.

The document provides investors with necessary information regarding the enterprise and basic information about the overall economy of the nation that the enterprise is part of it. This gives them a chance to assess whether they can proceed to take part in the tender and sales process.

The Bidding Process

Bids are the instruments by which enterprises are sold. A bidding process comprises of:

   Preparing bid documents that contain instruction to bidders, criteria for evaluating bids and a description of what is offered for sale.
   Advertising the bid using appropriate media.
   Bid evaluation that is done by a technical committee comprising staff from the agency.
   Negotiation that is made between the investor and the EPA after approval from the Board of Management is obtained.
   Signing agreements after negotiations are complete. Necessary documents are prepared and signed on the basis of mutual agreements reached during the negotiations process by the parties.

Close of Sale (Transfer)

   Following signing of an agreement, a legal transfer of the enterprise from the Government to the buyer takes place depending on the mode of divestiture. The transfer also includes physical handover of assets to the new owner. Share transfers may also be done as per the contract signed.
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