1. 7. Consolidation of enterprise groups
ESTP Course on the EGR
16-17 November 2015
7. Consolidation of enterprise groups

2. EGR Data providers NSA DnB BvD
So our main input comes from 3 different sources.
The “National Statistical Authorities” from the participating countries and 2 commercial data providers.

3. Data entities Legal Units (LEU) Relationships (REL) Enterprises (ENT)
Links
Enterprise Groups
(GRP)
The data providers mainly provide us with information on 5 “Entities”
Entity is an abstract definition.
Color coding
Links intentionally left out

4. Data entities per provider
NSA
LEU
REL
ENT
GRP
DnB
BvD
These ar ethe different entities received by each data provider

5. Goal of consolidation [EX]
Swedish
Dutch
All the data from the different data providers have to be combined to form
the global enterprise group. This process is called consolidation and includes setting up priorites and rules
We will use this picture as our goal in upcoming examples!

6. Consolidation process
Cons. Legal units
Cons. Relationships
Create cluster of control
Cons.Enterprise group (and Enterprise)
This is the process of consolidation as it happens by type of entity

7. Consolidate legal units (overview)
Select preferred source
Determine continuity

8. Consolidate legal units (select source)
Source provided
Transformed
Consolidated
NSA(3) LEID X
NSA(3)
LEID X
NSA(1) LEID X
NSA(2) LEID X
DnB(1) LEID X
BvD(2) LEID X
BvD(1) LEID X
WITHIN ONE FRAMEYEAR
Collect
LEID
Priority:
NSA
DNB
BVD
Prioritize
Update

9. Consolidate legal units (continuity)
Source provided
Transformed
Consolidated
NSA(3) LEID X
NSA(3)
LEID X
NSA(1) LEID X
NSA(2) LEID X
DnB(1) LEID X
BvD(2) LEID X
BvD(1) LEID X
WITHIN ONE FRAMEYEAR
Collect
LEID
Same EGR
identification?
Priority:
NSA
DNB
BVD
UNIT in T or T-1
Prioritize
Update

10. Consolidate legal units (continuity)
This is little complex, what it comes down to that NSA_ID is primarely used to identify.
If not available, LEID will be used

11. Consolidate legal units (continuity)
LEID
NSA ID
EGR ID
2010 october
CCRRRRR12345
2010 november
2011 october
CCRRRRR23456
CCRRRRR98234
IMPORTANT: The continuity of the LEID follows the continuity of the National_ID and not of the NSA ID or of the EGR ID

12. Consolidate legal units [EX]
LEU FR
LEU SW
LEU NL
LEU NL
LEU NL
At teh end we have consolidated legal units.

13. Consolidate relationships
Start form “scratch”, per subsidiary
Collect all direct relationships on the same subsidiary
Determine highest percentage per parent
Create direct relationships in order of priority
Check for no violation (for example, no more than 100%)
Collect indirect relationships on the same subsidiary
Discard superfluous indirect (if there is direct control)
Discard lower priority (if more than 1 parent)
Establish indirect relationship

14. Consolidate relationships (EX)
20% P3
40% P1
55%%
Transformed relationships, explain percentages and P1, P2.
Refer back to sheet 19 P4
20% P2
45%

15. Consolidate relationships (EX)
20% P1
55%%
The result after the rules applied P4
20%

16. Consolidated units and relations [EX]
LEU FR
LEU SW
LEU NL
LEU NL
LEU NL
So if we go back to our example let’s immagine that the following relationships remain after consolidation.

17. Consolidated legal units and control [EX]
LEU FR
LEU SW
LEU NL
LEU NL
LEU NL
100%
100%
No priority
100%
100%
100%
40%
Controlling relationships determine the cluster as we will see during deriving the cluster of control.

18. Consolidated legal units and control [EX]
LEU SW
LEU NL
LEU NL
So this is what remains from our original example.

19. Deriving the cluster of control
The ‘cluster of control’ defines legal units that are involved in [controlling] relationships with each other, ultimately all being under control of the defined topmost legal unit (the head of the group).
A legal unit can have control with a single relationship in two cases:
‘Type of ownership’ = ‘I'(ndirect)’ or
(‘Type of ownership’ = ‘D(irect)’ and voting power > 50%)
Combine clusters with cumulative direct control > 50%!

20. Deriving the cluster of control
So if we look at the direct relationship (incl. cumulative) which clusters of more than 1 legal unit do we see?

21. Deriving the cluster of control (direct)

22. Combining cluster using indirect rel.
For each ‘cluster’ C found until now:
If the top-most legal unit is involved as a subsidiary in an indirect relationship with a legal unit that is not yet in cluster C : ‘combine’ cluster C with the cluster of the parent.
For all legal units in the ‘cluster’ C, including the top-most legal unit:
If the legal unit is involved as a parent in an indirect relationship with a legal unit that is not yet in cluster C : ‘combine’ cluster C with the cluster of the subsidiary.
Repeat the above with the newly formed clusters until no more clusters can be combined.
Explain on previous sheet

23. Deriving the cluster of control (indirect)

24. From cluster to enterprise group
The identification of the cluster as defined by the EGR is the linking pin to the Enterprise Group data supplied. The identification (continuity) of the Enterprise Group is determined by looking at the overlapping Enterprises and the number of persons employed.

25. Continuity of enterprise groups

26. Continuity of enterprise group
Final
Group (T-1)
Preliminary
Group (T)
Final employment Ent (T-1)
Preliminary employment
Ent (T) E1
FG1 - 10 E2 4 E3
PG1 15 E4 11 E5
PG2 54 77 E6
FG2
PG3 45 E7 12 E8
FG3 32 E9
PG4 14
We look at the enterprises in two frames: final frame of year t-1 and preliminary frame of the year in production t
We use the employment of the enterprises in the two frames
We want to set up rules that enable to take decisions whether a group in the preliminary is a candidate to be a continuation of a groups in the t-1
We look at the persistence of enterprises in the groups and at their employment
High persistence >> candidate for contiuity
Combination of various rules

27. Defining set C1: E1 (10) E2 (4) E3 (15) E4 (10) E5 (54) E6 (45)
FG (T-1)
PG (T)
E1 (10)
E2 (4)
E3 (15)
E4 (10)
E5 (54)
E6 (45)
E7 (12)
E8 (32)
… (0)
E3 (15)
E4 (11)
E5 (77)
E6 (45)
E8 (4)
E9 (14)
FG1
PG1
PG2
Is PG1 a candidate for continuation of FG1?
E1 E2 and E5 are missed.
Is PG2 a candidate for continuation of FG1?
E1 E2 E3 and E4 are missed.
Is PG3 a candidate for continuation of FG1?
No overlapping at all.
Is PG4 a candidate for continuation of FG1?
This is repeated for all PGs.
A set C1 is defined that contains all the ENT that have disappeared, so: E1, E2, E3, E4, E5, E7
PG3
FG2
FG3
PG4

28. Continuity of enterprise group
C1 = Enterprises in the final groups (T-1) and not in preliminary groups (T) as candidates for continuation C1
Not in PG1
Not in PG2
Not in PG3
Not in PG4
In FG1
E1,E2,E5
E1, E2, E3, E4
No overlap
In FG2 E7
In FG3 only -

29. Defining set C3: E1 (10) E2 (4) E3 (15) E4 (10) E5 (54) E6 (45)
FG (T-1)
PG (T)
E1 (10)
E2 (4)
E3 (15)
E4 (10)
E5 (54)
E6 (45)
E7 (12)
E8 (32)
… (0)
E3 (15)
E4 (11)
E5 (77)
E6 (45)
E8 (4)
E9 (14)
FG1
PG1
PG2
PG3
FG2
FG3
PG4

30. Continuity of enterprise group
C3 = Enterprises which are in final groups (T-1) and in the preliminary groups (T) candidates for continuation C3
In PG1
In PG2
In PG3
In PG4
In FG1
E3, E4 E5
No overlap
In FG2 E6
In FG3 E8

31. Continuity of enterprise group
C2 = Enterprises which are in the preliminary groups (T) but not in the final groups (T-1). C2
In PG1
IN PG2
In PG3
In PG4
Not in FG1 -
No overlap
Not in FG2
Not in FG3

32. Employment:
Consider the persons employed of the different combinations: PE_P_C1 = Persons employed of PGs in C1 PE_F_C1 = Persons employed of FGs in C1 PE_P_C2 = Persons employed PGs in C2 PE_F_C2 = Persons employed FGs in C2 PE_P_C3 = Persons employed of PGs in C3 PE_F_C3 = Persons employed of FGs in C3

33. For example, for checking if PG1 is a continuation of FG1:
PG1 – FG1
Note
PE_P_C1
Lost in PF1= 0
If lost then always 0
PE_F_C1
Lost from FG1 =68
E1 (10), E2 (4), E5 (54)
PE_P_C2
Lost in PG1 = 0
E3 and E4 both are FG1
PE_F_C2
Lost from PG1 =0
Always 0
PE_P_C3
Continuity PG1= 26
E3 and E4 are in PG1
PE_F_C3
Continuity FG1= 25
E3 and E4 are in FG1

34. Checking if PG1 is a continuation of FG1:
PE_P_C1 = = 0 PE_F_C1 = = 68 PE_P_C2 = 0 PE_F_C2 = 0 PE_P_C3 = = 26 PE_F_C3 = = 25

35. Continuity of enterprise group
RULE X0: IF PE_F_C3 >= 70% * (PE_F_C1 + PE_F_C3) 25 >= 70% * ( ) (25 > 65,1) FALSE AND PE_P_C3 >= 70% * (PE_P_C2 + PE_P_C3) 25 >= 70% (0 + 26) (25 > 18,2) THEN X0 = 0 (possible continuation) ELSE X0 = 1 (no continuation) PG1 IS NOT A CONTINUATION OF FG1, as the first part of Xo is false

36. Final remarks: Small groups
For small groups another rule is under discussion.
Implementation of continuity rules
Will start on EGR 2.0 – two cycles needed in 2.0
2015 will be the first cycle to apply continuity of groups with respect to 2014

37. Thanks for your attention
Questions?