The document is a presentation by Aranca on global mergers and acquisitions (M&A) in changing times. It provides context on the M&A boom between 2003-2007, when deal volume and value grew significantly due to strong corporate profits and industry consolidation. Private equity deals also increased rapidly during this period. The economic downturn led to a 35% decline in total M&A deal value from 2007 to 2008. However, M&A has proved more resilient than expected, with the decline less steep when excluding private equity deals. The presentation examines trends that may shape M&A going forward, such as signs of recovery in Q4 2009.

1. ARANCA PRESENTATION ON
GLOBAL M&A IN CHANGING TIMES
Presented at the Econique Global M&A Masters 2010
London, January 25-26, 2010
Confidential | This material is exclusive property of Aranca. No part of this presentation
may be used, modified or shared without explicit permission of Aranca.
© 2010, Aranca. All rights reserved.
www.aranca.com ▪ london ▪ new york ▪ san francisco ▪ brussels ▪ mumbai

2. Aranca: An introduction
Six + … of global research experience with offices in San Francisco, New York,
… of global research experience with offices in San Francisco, New York,
Years London, Brussels & Mumbai
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…focused on high end research across four complementary lines of business
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400 + … across the globe including mid-size and large Corporates, law firms, PE/VC
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team Analysts
Analysts
80 + … researched across geographies, covering 2000+ companies
… researched across geographies, covering 2000+ companies
sectors
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5. January 2010:
No better time to take stock on M&A
4

6. A peek into the past ‐ Post 2003 deal making grew hotter, reaching a frenzy in 2007
Growth in M&A deals between 2003 and 2007
100.0 5.6
# of Deals ('000)
Total Deal Value (USD Tn)
80.0
60.0
2.4
40.0 1.9
1.4
0.9
20.0
0.0
2003 2004 2005 2006 2007
Source : Zephyr report, MergerStat 2009
5

7. Key factors contributed to this deal boom ‐ notably growing corporate profit pools …
US Corporate profit share of GDP , %
US Corporate Profit as % of GDP
12.0%
11.5%
11.0% With strong economic
10.5% growth, US Corporate
profits as % of GDP in
2006 touched 12%, the
8.8% highest levels since the
1960’s
2003 2004 2005 2006 2007
Source : US Bureau of Economic analysis, BCG Research
6

8. … and the rush for consolidation
Industry consolidation as share of total deals, %
71.4 The Rush for consolidation
by Corporates intensified and
48.7 BCG estimates that
conslidation deals shot up
between 2000 and 2006 from
48.7 to 71.4%
1999-2000 2006
Source : US Bureau of Economic analysis, BCG Research
7

9. Private Equity also played its part and PE deals grew exponentially from 2003
Private Equity deal volume and share of total deal volume Private Equity deal value and share of total deal value
1,000
850
.
700
550
.
400
250
100
2003 2004 2005 2006 2007
Total value of PE deals (US$ Bn)
Source :, Zephyr data published by BvD
8

10. As a result PE deals grew to ~ 25% of deal value at the peak
Private Equity deal volume and share of total deal volume Private Equity deal value and share of total deal value
1,000
850
30.0%
700
550
20.0%
400
250
100 10.0%
2003 2004 2005 2006 2007
Total value of PE deals (US$ Bn) Share of total M&A deal value
Source :, Zephyr data published by BvD
9

11. In the downturn, total M&A deal value declined by 35% from its peak in 2007
Declining Deal Volume and value in downturn
100.0 5.6
-35%
80.0 4.2
3.6
60.0
2.4
40.0 1.9
1.4
0.9
20.0
0.0
2003 2004 2005 2006 2007 2008 2009
# of Deals ('000) Total Deal Value (USD Tn)
Source : Zephyr published by BvD , MergerStat 2009
10

12. To a great extent this was driven by declining deal size which reduced 30% from 2007 to
2009
Avg Deal Size (US$ Mn)
286.4
267.0
244.1
212.3
177.1 183.9
132.1
2003 2004 2005 2006 2007 2008 2009
Source : Bloomberg
11

13. But in this downturn,
M&A is proving resilient
12 www.aranca.com

14. Private Equity clearly had a great fall..
Private Equity share of M&A deals by volume Private Equity share of M&A deals by value
5,500 14.0% 1,000 40.0%
5,000 12.0% 35.0%
850
4,500 30.0%
10.0%
700
4,000 25.0%
8.0%
3,500 550 20.0%
6.0%
3,000 15.0%
400
4.0%
2,500 10.0%
2.0% 250
2,000 5.0%
1,500 0.0% 100 0.0%
2006 2007 2008 2009 2006 2007 2008 2009
# of PE Deals Share of total M&A deals (%)
Total value of PE deals (US$ Bn) Share of total M&A deal value
In 2007 volume share was ~7% and value share at 16% while in 2009, volume
and value share fell under 5% suggesting that the large value deals
disappeared
Source : BCG Research, Zephyr published by BvD
13

15. and if we look at M&A deals excluding PE, the fall in total deal value was less dramatic
M&A Deals (including PE Deals) M&A Deals (excluding PE Deals)
5.6 4.7
80.0 -35% 80.0 -17%
3.9
4.2 3.5
60.0 60.0
3.6
40.0 40.0
20.0 20.0
0.0 0.0
2007 2008 2009 2007 2008 2009
# of Deals ('000) Total Deal Value (USD Tn) # of Deals ('000) Total Deal Value (USD Tn)
Source : BCG Research, Zephyr published by BvD
14 www.aranca.com

16. Also if we adjust for market capitalisation loss, the fall in M&A deals becomes even less
Source : McKinsey research
15 www.aranca.com

17. Europe appears to have the steepest fall while Asia and the US were more stable
suggesting that the decline was not universal…
Global M&A Deal Volume - Excluding PE ('000) Global M&A Deal Value - Excluding PE ($ B)
0 10 20 30 40 0 500 1,000 1,500 2,000 2,500
Europe Europe
Americas Americas
Asia Asia
Pacific Pacific
Others Others
2007 2008 2009 2007 2008 2009
Source : Zephyr published by BvD
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18. We need to take M&A in the downturn in context
The recession started since Dec ‘07; deepened with waning of ‘Animal Spirits’ as
aggregate demand fell severely and valuations were seen as high
The fall of Lehman Brothers froze credit markets making debt raising difficult for M&A
activity
PE deals collapsed from 20% of total deal value to <5%
Climate of “worst recession” since depression led to extreme caution among dealmakers
Stock market plunged to lowest levels in Mar ’09 due to de-leveraging that took place
adding to uncertainty
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19. So what factors are likely to
shape M&A going forward?
18 www.aranca.com

20. Q4 2009 saw a bounce in M&A suggesting and uptick in sentiment
Increasing M&A in Q4 2009
25.0 1.3
Total Deals in North America, Europe & Asia Pacific
20.0 1.0 1.0
0.9
15.0 0.8 0.8 Q4 deal value twice the average of
0.6
0.5 previous 3 quarters
10.0
5.0
0.0
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09
# of Deals ('000) Total Deal Value (USD Bn)
Select deals announced / started
Comcast to acquire 51% controlling stake in NBC for $30 B
HP’s acquisition of 3Com for $2.7 B in November
Kraft’s recently revised bid of $19.6 B for UK-based Cadbury
Pfizer’s acquisition of Wyeth, Inc. for $68 B in October.
Source : Zephyr published by BvD
19 www.aranca.com

21. Q4 2009 M&A offers some interesting insights on the emerging trends
Europe bounced back contributing 51% of deal value Cash component in deals declined from 80% to
vs. the conventional share 71% over the year
1,400.0
Total Deal Value ($Bn)
1,200.0 Break of Known Deal Value by Consideration
North America Europe Asia Pacific 100%
1,000.0
800.0 Cash 80%
600.0 Stock 60%
400.0 40%
Others
200.0 20%
0.0 0%
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 4Q08 1Q09 2Q09 3Q09 4Q09
Private Equity deals which plunged Falling deal premiums suggest improved
consistently; also picked up valuations
PE Deals in North America, Europe & Asia Pacific
1500.0
99.1
Premium on Known Deals
1200.0
60
67.2 31.5% 30.4%
900.0 61.5 28.9% 50
27.1%
54.0
40
600.0
33.4 30.2 14.7% 30
24.4 20.8 20
300.0
10
0.0 -
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 4Q08 1Q09 2Q09 3Q09 4Q09
# of Deals ('000) Total Deal Value (USD Bn) Average Premium (USD M) Average Premium (%)
Source : Zephyr published by BvD , Bloomberg
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22. Valuations are still moderately attractive, if not compelling
35 1,600
P/E Ratio Price 1,500
30 1,400 Valuations still quite attractive
1,300 compared to 2007 levels
25 1,200
1,100
20 1,000
900
15 800
700
10 600
Source : Bloomberg
21 www.aranca.com

23. Cross border deals especially in growth markets still seen as key…
7.0 41%
6.0 35%
5.0 28% 29% 29% 29%
25% 25%
4.0 23%
3.0
2.0
1.0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008
Total Deal Value (USD Tn) % of Cross Border Deals
Source : McKinsey Quarterly
22 www.aranca.com

24. … and Asia’s share of deals has grown dramatically over the years and is likely to continue
45% 46% 46% 42% 40%
49% 47%
58% 56%
39% 41%
38% 40% 37% 38% 39%
33% 32%
13% 15% 16% 16% 15% 19% 19%
9% 12%
2000 2001 2002 2003 2004 2005 2006 2007 2008
Asia Pacific Europe Americas
Source : McKinsey Quarterly
23 www.aranca.com

25. Emerging markets gaining strength and are set to flex muscles
800
BOVESPA NSE HANG SENG SSE S&P 500
700
600
500
400
300
200
100
0
Source : Bloomberg
24 www.aranca.com

26. BRIC deal examples
RIL’s plans to acquire US-based chemical giant LyondellBasell – if successful, will
result in biggest M&A deal for an Indian Company. Bid may be of more than $13
billion
Bharati Telecom Acquired 70% stake in Bangladesh based Warid Telephone for ~
$1billion
The Oil and Natural Gas Corp took control of Imperial Energy Plc for $2.8 billion, in
January 2009
Yanzhou Coal Mining Co has got approval from Australian government for its A$3.5
billion ($3.2 billion) takeover of Felix Resources Ltd
Xi´an Aircraft Industry Company (XAC), part of China's AVIC consortium got
ownership of FACC, a supplier of composite components based in Ried, Austria,
Source : Bloomberg
25 www.aranca.com

27. Other factors likely to shape M&A
Private Equity will be back - still has USD 500 billion to invest*
Pressure to do deals is high once the trend begins. Corporates with strong cash
positions will look to jump in
There will be financially distressed companies looking to sell part or whole businesses
at better valuations
Credit markets are loosening up, though not anywhere near 2007 levels
26 www.aranca.com

28. Factors to consider for
M&A in the future
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29. Factors to consider for M&A 2010
Proactively identify opportunities whether looking at growth or value
Need to move quickly in downturns - McKinsey estimates that the average time from deal
announcement to completion has declined from 130 days (1995-07 avg.) to 60 days in
2008
Due diligence needs to be targeted and focused on key issues to move quickly
Need to be creative both in identifying opportunities and in structuring deals
Post-merger integration needs strong execution not just good planning
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30. www.aranca.com
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