Development Opportunities Mergers & Acquisitions

1. Development Opportunities Mergers & Acquisitions costin.mandrea@cchbc.com

2. 23 Mergers & Acquisition – Reminder Performance of big companies from all fields analyzed in-depth

3. Mergers & Acquisition – Possible development opportunities

4. Mergers & Acquisition – Possible development opportunities

5. Mergers & Acquisition – Possible development opportunities

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7. 23 • 18 Utilitycompanies • 18 Telecomcompanies • 18 HighTech com-panies Mergers & Acquisition – How are the companies growing Performance of big companies from all fields analyzed in-depth Source: Hoovers, Company reports, Analyst reports, McKinsey analysis

8. 23 Mergers & Acquisition – How are companies growing Transactions are core to growth strategies • Explanatory power for differences in company growth • percent • Out-executionof market growth • Market growth • 23 • 38 • 39 • Inorganic activity Source: Hoovers, Company reports, Analyst reports, McKinsey analysis

9. Mergers & Acquisition – What is about A merger/acquisition is a combination of two companies into one larger company • Mergers are a tool used by companies for the purpose of expanding their operations and increasing their profit. • A successful acquisition, regardless of industry, must either • enable growth • decrease cost • reduce capital required • Like all aspects of business, it has the potential to add value as well as to destroy it • M&A is inherent in business, and to say that it is either good or bad would be an incorrect generalization

10. Mergers & Acquisition – Why they make it Reasons vary by level of development of the market and the company • Investment in new growth platforms - 90% of highest performing companies use acquisition to build out platforms (e.g. GE, Intel, IBM, J&J) • Access to new markets (mature or new) • Increase revenue/Increase Market Share - the company will be absorbing a major competitor and thus increase its power • Roll-ups to provide access to larger customer base • Business repositioning (GE in medical equipment) • Maintain leadership during industry convergence • Leveraging channelsandtechnology • Taxes - buy a loss maker to use the target's tax write-offs • Cross selling - a bank buying a stock broker • Synergy - better use of complementary resources

11. Mergers & Acquisition – What’s behind Growth should be the stronger mid- to longer term driver of M&A • As an acquirer you need to believe that you can drive growth of the acquired asset higher than it would have been able to do on its own • Growth synergies can be realized either • by driving the assets of the acquired company harder • by driving the assets of the acquiring company to new heights

12. Mergers & Acquisition – Why they Succeed and Fail Only small part of deals are healthy and value creating Successful M&A 30%-40% 45%-50% Failed/ neutral M&A 15%-20% Source: McKinsey analysis

13. Mergers & Acquisition – Why they Succeed and Fail Only small part of deals are healthy and value creating • Good deal well executed • Well structured M&A approach with excellence in all phases of the process Successful M&A 30%-40% • Good deal poorly implemented • Poor integration management • Loss of key staff • Customer losses • Cultural differences persist 45%-50% Failed/ neutral M&A Bad deal • Weak strategic fit • Unrealistic synergies • Price too high 15%-20% Source: McKinsey analysis

14. Mergers & Acquisition – Value Creation and Destruction Behaviors of successful acquirers Earned the right to buy • Strong baseline performance (e.g., high ROIC) • Distinctive capabilities to add value to the target business • Clearly defined strategy to create value through the deal • Good deal well executed • Well structured M&A approach with excellence in all phases of the process Successful M&A 30%-40% Disciplined transaction processes • Structured, documented processes • BU management involved in due diligence • Clear ownership end-to-end • Integration issues considered early on • Pricing discipline (avoiding hubris/deal fever) • In-depth understanding of achievable synergies (size, time to capture) • Good deal poorly implemented • Poor integration management • Loss of key staff • Customer losses • Cultural differences persist 45%-50% Failed/ neutral M&A • Aggressive approach to bottom-line value capture (vs. just the process of integration) • Focus on customer retention Excelling in post-deal execution Bad deal • Weak strategic fit • Unrealistic synergies • Price too high 15%-20% Source: McKinsey analysis

15. Mergers & Acquisition – Value Creation and Destruction Only small part of deals are healthy and value creating • Good deal well executed • Well structured M&A approach with excellence in all phases of the process Successful M&A 30%-40% • Good deal poorly implemented • Poor integration management • Loss of key staff • Customer losses • Cultural differences persist 45%-50% Failed/ neutral M&A Bad deal • Weak strategic fit • Unrealistic synergies • Price too high 15%-20% Source: McKinsey analysis

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