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Joseph V. Rizzi March, 2013

Joseph V. Rizzi March, 2013. Market Overview. Underlying Focus. Framework. 2. Fin 70410 M&A Spring 2007. Market Overview. Underlying Focus. Framework. 3. Fin 70410 M&A Spring 2007. Issuer Objectives Driven by the Market. 12000. 10000. 8000. 6000. 4000. 2000. 0.

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Joseph V. Rizzi March, 2013

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  1. Joseph V. Rizzi March, 2013

  2. Market Overview Underlying Focus Framework 2 Fin 70410 M&A Spring 2007

  3. Market Overview Underlying Focus Framework 3 Fin 70410 M&A Spring 2007

  4. Issuer Objectives Driven by the Market 12000 10000 8000 6000 4000 2000 0 1980’s – The Age of The Financial Buyer Early 90’s – Fixing The Mistakes Mid 90’s – Age of the Strategic Buyer 1960’s and 1970’s The Age of the Conglomerate 2000 – 2003 Correction 2004 - ? U.S. 4 Fin 70410 M&A Spring 2007

  5. Catalysts for strategic M&A • Value gaps/low market valuation • Lack of top line growth • Declining cost reduction opportunities • Increasing importance of scale • Capital availability • Strong cash flow/under-leveraged balance sheets • Shareholder value pressure • Future • Cyclical • M&A moves with stock prices/economic cycle • Re-regulation • Mistakes • Financial failures/liquidity crisis • Style • Bigger • Hostile • Faster • Convergence 5

  6. Value Gaps • Expectations • Strategy Current Market Value Potential Value With Internal Improvements Maximum Market Value Internal Improvements External Improvements e.g. M&A 6

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  8. Institutional Barriers/Protection • Decline over time • No defense to a fully priced/financed bid • Economic Indicators • ROE – Ke < 0 • Dividends/FOCF < 50% (Cash is building) • Cash + Marketable Securities/Market Value > 5% • Debt/Cap < 20% (Under leveraged) • Relative lagging stock price performance • Value Gaps • Expectations • Strategic • Map • Responses • Buy (3rd Party or Self) • Stock repurchase Winners +/- FCF Growth Neg FCF + > 1 MV/BV Market Growth LBO Pos FCF Losers +/- FCF < 1 - ROE – Ke Market Position 8

  9. Stupidity Competitive Necessity Outlook/Information Adv. Potential Premium/ Value Gap Synergies Buyer has lower WACC Under Valuation Current Price 9

  10. Market Overview Underlying Focus Framework 10

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