More Related Content Similar to 03. merger of microsoft and adobe (deb sahoo) (20) More from Deb Sahoo, MBA(Finance), MS(EE), BTech(EE), (20) 03. merger of microsoft and adobe (deb sahoo)1. ACQUISITION OF ADOBE SYSTEMS BY MICROSOFT CORP.
DEB SAHOO, MBA, ROSS SCHOOL OF BUSINESS, UNIVERSITY OF MICHIGAN, ANN ARBOR
April 25, 2011
3. TABLEOFCONTENTS
Executive Summary
Financial Statements of Buyer
Financial Statements of Target
Discounted Cash Flow Valuation of Target
Comparable Company Valuation of Target
Financial Projections of Buyer and Target
Transaction Analysis
4
8
12
16
19
27
30
3
Target Overview 6
EPS Accretion/Dilution Analysis 36
Profitability Contribution Analysis 41
Precedent Transactions Valuation of Target 23
Valuation Summary 25
5. EXECUTIVESUMMARY
Target OverviewBuyer Overview
•Total deal value: $55, 147 MM
•Total Enterprise Value/ 2011P EBITDA: 30.9x
•Total Enterprise Value/ 2011P Revenue: 12.8x
•FY 2011P P/E: 18.3x
•Offer Price per Share: $40.00
•Cash Consideration: 40%
•Premium: 19.5%
•EPS Accretion without synergy: -7.9%
•% Shares owned by Microsoft shareholders: 86.9%
•Pretax synergy required to breakeven: $2,743 MM
Valuation
•Company: Microsoft Corp.
•Headquarter: Redmond, Washington
•CEO: Steven Anthony Ballmer
•Number of Employees: 89,000
•Develops, manufactures, licenses, and supports a wide range of
software products and services
•Offers operating systems for personal computers, servers, and
intelligentdevices; server applications, high performance
computing applications; software development tools, video games
•Designs and sells hardware, including the Xbox 360 gaming
console , the Zune digital music device and Microsoft personal
computer hardware products
Key Financials of Buyer and Target
5
Buyer
• Ticker: MSFT
• Stock Price: $25.52
• 5 Year avg. Sales Growth: 9.70%
• Market Cap: $215.2B
• Number of Basic Shares: 8,430 MM
• 2010 EBITDA: $27,363 MM
• Total Enterprise Value: $184 B
Target
• Ticker: ADBE
• Stock Price: $33.48
• 5 Year avg. Sales Growth: 15.6%
• Market Cap: $16.763 B
• Number of Basic Shares: 1,310 MM
• 2010 EBITDA: $1,309 MM
• Total Enterprise Value: $43 B
•Company: Adobe Systems Inc.
•Headquarter: San Jose, California
•CEO: Shantanu Narayen
•Number of Employees: 9,117
•Offers a line of creative, business, Web and mobile software and
services used by creative professionals, knowledge workers,
developers, marketers, enterprises and consumers for creating,
managing, delivering, optimizing and engaging with compelling
content and experiences across multiple operating systems
7. BACKGROUNDANDTARGETOVERVIEW
Products and ServicesCompany Overview
Adobe Systems Incorporated (Adobe) offers a range of
business, Web and mobile software and services used by
professionals, knowledge workers, developers, marketers,
enterprises and consumers for creating, managing,
delivering, optimizing and engaging with content and
experiences across multiple operating systems, devices and
media
Distributes its products through a network of distributors,
value-added resellers (VARs), systems integrators,
independent software vendors (ISVs) and original equipment
manufacturers (OEMs)
Its software runs on personal computers (PC) and server-
based computers, as well as various non-PC and mobile
devices
Has operations in the Americas, Europe, Middle East and
Africa (EMEA) and Asia
Stock PerformanceIndustry Comparables
7
• Acrobat X Pro
•Authorware
•BrowserLab
•Creative Suite 5.5
•Dreamweaver CS5.5
•Flash Media Playback
•FrameMaker Server 10
•Adobe Genesis™
•Illustrator® CS5
•Photoshop CS5
•Shockwave® Player
•Adobe SiteSearch
•Stock Price: $33.48
•52 Week High: $36.35
•52 Week Low: $23.45
•Stock Beta: 1.59
•FY 2010 EPS: $1.83
9. FINANCIALSTATEMENTSOFBUYER
5 Year Income Statement of Microsoft Corp.
9
All figures in millions of U.S. Dollar, except per share items 30-Jun-10 30-Jun-09 30-Jun-08 29-Jun-07 30-Jun-06
Sales/Revenue 62,484.0 57,553.0 60,420.0 51,122.0 44,282.0
Cost of Goods Sold (COGS) incl. D&A 12,395.0 12,155.0 11,598.0 10,693.0 7,650.0
COGS excluding D&A 9,722.0 9,593.0 9,542.0 9,253.0 6,660.0
Depreciation & Amortization Expense 2,673.0 2,562.0 2,056.0 1,440.0 990.0
Depreciation 1,800.0 1,700.0 1,400.0 1,170.0 863.0
Amortization of Intangibles 873.0 862.0 656.0 270.0 127.0
Gross Income 50,089.0 45,398.0 48,822.0 40,429.0 36,632.0
SG&A Expense 25,399.0 25,306.0 24,530.0 21,394.0 18,840.0
Research & Development 8,714.0 9,010.0 8,164.0 7,121.0 6,584.0
Other SG&A 16,685.0 16,296.0 16,366.0 14,273.0 12,256.0
EBIT (Operating Income) 24,690.0 20,092.0 24,292.0 19,035.0 17,792.0
Nonoperating Income (Expense) - Net 1,275.0 900.0 1,408.0 1,969.0 1,980.0
Nonoperating Interest Income 843.0 706.0 888.0 1,319.0 1,510.0
Other Income (Expense) 432.0 194.0 520.0 650.0 470.0
Interest Expense 151.0 0.0 0.0 0.0 0.0
Unusual Expense (Income) - Net 801.0 1,171.0 1,886.0 869.0 1,728.0
Pretax Income 25,013.0 19,821.0 23,814.0 20,135.0 18,044.0
Income Taxes 6,253.0 5,252.0 6,133.0 6,036.0 5,663.0
Equity in Earnings of Affiliates 0.0 0.0 0.0 -34.0 218.0
Net Income 18,760.0 14,569.0 17,681.0 14,065.0 12,599.0
EBITDA 27,363.0 22,654.0 26,348.0 20,475.0 18,782.0
EBIT 24,690.0 20,092.0 24,292.0 19,035.0 17,792.0
Depreciation & Amortization Expense 2,673.0 2,562.0 2,056.0 1,440.0 990.0
10. FINANCIALSTATEMENTSOFBUYER
5 Year Balance Sheet of Microsoft Corp.
10
All figures in millions of U.S. Dollar, except per share items 30-Jun-10 30-Jun-09 30-Jun-08 29-Jun-07 30-Jun-06
Assets
Cash & ST Investments 36,788.0 31,447.0 23,662.0 23,411.0 34,161.0
Total Accounts Receivable 13,014.0 11,192.0 13,589.0 11,338.0 9,316.0
Inventories 740.0 717.0 985.0 1,127.0 1,478.0
Other Current Assets 5,134.0 5,924.0 5,006.0 4,292.0 4,055.0
Total Current Assets 55,676.0 49,280.0 43,242.0 40,168.0 49,010.0
Net Property, Plant & Equipment 7,630.0 7,535.0 6,242.0 4,350.0 3,044.0
Total Investments and Advances 7,754.0 4,933.0 6,588.0 10,117.0 9,232.0
Intangible Assets 13,552.0 14,262.0 14,081.0 5,638.0 4,405.0
Other Assets 1,501.0 1,599.0 1,691.0 1,509.0 1,295.0
Total Assets 86,113.0 77,609.0 71,844.0 61,782.0 66,986.0
Liabilities & Shareholders' Equity
ST Debt & Curr. Portion LT Debt 1,000.0 2,000.0 0.0 0.0 0.0
Accounts Payable 4,025.0 3,324.0 4,034.0 3,247.0 2,909.0
Income Tax Payable 1,074.0 725.0 3,248.0 1,040.0 1,557.0
Other Current Liabilities 20,048.0 20,985.0 22,604.0 19,467.0 17,976.0
Total Current Liabilities 26,147.0 27,034.0 29,886.0 23,754.0 22,442.0
Long-Term Debt 4,939.0 3,746.0 0.0 0.0 0.0
Deferred Taxes 229.0 -279.0 -949.0 -1,389.0 -2,611.0
Other Liabilities 8,623.0 7,550.0 6,621.0 8,320.0 7,051.0
Total Liabilities 39,938.0 38,051.0 35,558.0 30,685.0 26,882.0
Common Equity 46,175.0 39,558.0 36,286.0 31,097.0 40,104.0
Common Stock Par/Carry Value 62,856.0 62,382.0 62,849.0 60,557.0 59,005.0
Retained Earnings -17,736.0 -23,793.0 -27,703.0 -31,114.0 -20,130.0
Cumulative Translation Adjustment/Unrealized For. Exch. Gain -176.0 30.0 270.0 149.0 64.0
Unrealized Gain/Loss Marketable Securities 1,231.0 939.0 870.0 1,505.0 1,165.0
Total Shareholders' Equity 46,175.0 39,558.0 36,286.0 31,097.0 40,104.0
Liabilities & Shareholders' Equity 86,113.0 77,609.0 71,844.0 61,782.0 66,986.0
11. FINANCIALSTATEMENTSOFBUYER
5 Year Cash Flow Statement of Microsoft Corp.
11
All figures in millions of U.S. Dollar, except per share items 30-Jun-10 30-Jun-09 30-Jun-08 29-Jun-07 30-Jun-06
Operating Activities
Net Income before Extraordinaries 18,760.0 14,569.0 17,681.0 14,065.0 12,599.0
Depreciation, Depletion & Amortization 2,673.0 2,562.0 2,056.0 1,440.0 903.0
Depreciation and Depletion 1,800.0 1,700.0 1,400.0 1,170.0 863.0
Amortization of Intangible Assets 873.0 862.0 656.0 270.0 40.0
Deferred Taxes & Investment Tax Credit -220.0 762.0 935.0 421.0 219.0
Other Funds 2,199.0 2,339.0 787.0 1,181.0 1,356.0
Funds from Operations 23,412.0 20,232.0 21,459.0 17,107.0 15,077.0
Changes in Working Capital 661.0 -1,195.0 153.0 689.0 -673.0
Receivables -2,238.0 2,215.0 -1,569.0 -1,764.0 -2,071.0
Other Assets/Liabilities 2,899.0 -3,410.0 1,722.0 2,453.0 1,398.0
Net Operating Cash Flow 24,073.0 19,037.0 21,612.0 17,796.0 14,404.0
Investing Activities
Capital Expenditures 1,977.0 3,119.0 3,182.0 2,264.0 1,578.0
Net Assets from Acquisitions -245.0 -868.0 -8,053.0 -1,150.0 -649.0
Purchase/Sale of Investments -7,590.0 -11,783.0 6,648.0 9,503.0 10,230.0
Other Funds -1,502.0 0.0 0.0 0.0 0.0
Net Investing Cash Flow -11,314.0 -15,770.0 -4,587.0 6,089.0 8,003.0
Financing Activities
Cash Dividends Paid -4,578.0 -4,468.0 -4,015.0 -3,805.0 -3,545.0
Change in Capital Stock -8,958.0 -8,774.0 -9,039.0 -20,793.0 -17,106.0
Issuance/Reduction of Debt, Net 190.0 5,746.0 0.0 0.0 0.0
Other Funds 55.0 33.0 120.0 54.0 89.0
Net Financing Cash Flow -13,291.0 -7,463.0 -12,934.0 -24,544.0 -20,562.0
Exchange Rate Effect -39.0 -67.0 137.0 56.0 18.0
Net Change in Cash -571.0 -4,263.0 4,228.0 -603.0 1,863.0
13. FINANCIALSTATEMENTSOFTARGET
5 Year Income Statement of Adobe Systems Inc.
13
All figures in millions of U.S. Dollar, except per share items 30-Nov-10 30-Nov-09 28-Nov-08 30-Nov-07 30-Nov-06
Sales/Revenue 3,800.0 2,945.9 3,579.9 3,157.9 2,575.3
Cost of Goods Sold (COGS) incl. D&A 504.2 395.0 433.5 432.6 462.8
COGS excluding D&A 211.5 112.5 163.2 117.1 155.0
Depreciation & Amortization Expense 292.7 282.4 270.3 315.5 307.8
Depreciation 107.5 95.9 83.3 73.2 67.7
Amortization of Intangibles 185.2 186.5 187.0 242.3 240.1
Gross Income 3,295.8 2,550.9 3,146.4 2,725.3 2,112.5
SG&A Expense 2,279.4 1,819.1 2,086.1 1,867.2 1,541.5
Research & Development 680.3 565.1 662.1 613.2 539.7
Other SG&A 1,599.1 1,254.0 1,424.0 1,253.9 1,001.8
EBIT (Operating Income) 1,016.3 731.8 1,060.3 858.1 571.0
Nonoperating Income (Expense) - Net 13.3 22.4 60.8 89.9 128.4
Nonoperating Interest Income 21.9 35.0 57.6 92.8 62.5
Other Income (Expense) -8.6 -12.6 3.2 -2.9 66.0
Interest Expense 57.0 3.4 10.0 0.3 0.0
Unusual Expense (Income) - Net 29.6 49.3 32.6 0.6 19.7
Financial Assets Impairment -- -- -- -- --
Reorganization and Restructure Expense 23.3 41.3 32.1 0.6 19.7
Goodwill Write Off -- -- -- -- --
Unrealized Investment Loss (Gain) 6.3 8.0 0.6 -- --
Other Unusual Expense 0.0 0.0 0.0 0.0 0.0
Pretax Income 943.2 701.5 1,078.5 947.2 679.7
Income Taxes 168.5 315.0 206.7 223.4 173.9
Consolidated Net Income 774.7 386.5 871.8 723.8 505.8
Net Income 774.7 386.5 871.8 723.8 505.8
EBITDA 1,309.1 1,014.2 1,330.6 1,173.6 878.8
EBIT 1,016.3 731.8 1,060.3 858.1 571.0
Depreciation & Amortization Expense 292.7 282.4 270.3 315.5 307.8
14. FINANCIALSTATEMENTSOFTARGET
5 Year Balance Sheet of Adobe Systems Inc.
14
All figures in millions of U.S. Dollar, except per share items 30-Nov-10 30-Nov-09 28-Nov-08 30-Nov-07 30-Nov-06
Assets
Cash & ST Investments 2,468.0 1,904.5 2,019.2 1,993.9 2,280.9
Total Accounts Receivable 554.3 410.9 467.2 362.8 408.7
Other Current Assets 193.7 158.3 248.7 216.3 194.9
Total Current Assets 3,216.1 2,473.6 2,735.1 2,573.0 2,884.5
Net Property, Plant & Equipment 448.9 388.1 313.0 289.8 227.2
Total Investments and Advances 246.0 287.1 307.3 274.1 173.1
Long-Term Note Receivable -- 0.0 0.0 0.0 2.4
Intangible Assets 4,170.6 4,106.3 2,440.3 2,550.7 2,655.9
Other Assets 59.6 27.1 25.8 26.1 19.5
Total Assets 8,141.1 7,282.2 5,821.6 5,713.7 5,962.5
Liabilities & Shareholders' Equity
ST Debt & Curr. Portion LT Debt 8.8 0.0 0.0 0.0 0.0
Accounts Payable 52.4 58.9 55.8 41.7 55.0
Income Tax Payable 53.7 46.6 27.1 215.1 178.4
Other Current Liabilities 953.1 739.0 679.6 595.6 443.9
Total Current Liabilities 1,068.1 844.6 762.6 852.4 677.3
Long-Term Debt 1,513.7 1,000.0 350.0 0.0 0.0
Provision for Risks & Charges 164.7 223.5 123.2 0.0 0.0
Deferred Taxes 103.1 252.5 117.3 148.9 70.7
Other Liabilities 99.2 71.1 58.1 62.3 62.6
Total Liabilities 2,948.8 2,391.7 1,411.2 1,063.7 810.7
Common Equity 5,192.4 4,890.6 4,410.4 4,650.0 5,151.9
Total Shareholders' Equity 5,192.4 4,890.6 4,410.4 4,650.0 5,151.9
Liabilities & Shareholders' Equity 8,141.1 7,282.2 5,821.6 5,713.7 5,962.5
15. FINANCIALSTATEMENTSOFTARGET
5 Year Cash Flow Statement of Adobe Systems Inc.
15
All figures in millions of U.S. Dollar, except per share items 30-Nov-10 30-Nov-09 28-Nov-08 30-Nov-07 30-Nov-06
Operating Activities
Net Income before Extraordinaries 774.7 386.5 871.8 723.8 505.8
Depreciation, Depletion & Amortization 292.7 282.4 270.3 315.5 307.8
Deferred Taxes & Investment Tax Credit -172.3 49.6 46.6 58.4 -4.3
Other Funds 240.5 216.0 218.3 269.8 171.7
Funds from Operations 1,135.6 934.6 1,406.9 1,367.5 981.1
Changes in Working Capital -22.6 183.2 -126.2 71.8 -53.8
Receivables -134.3 172.3 -153.4 -103.2 -112.8
Accounts Payable -10.1 -13.6 14.1 11.5 11.8
Income Taxes Payable -48.7 109.6 -57.7 61.4 27.2
Other Accruals 101.0 -61.8 10.4 61.5 -72.1
Other Assets/Liabilities 69.4 -23.3 60.3 40.6 92.1
Net Operating Cash Flow 1,113.0 1,117.8 1,280.7 1,439.3 927.2
Investing Activities
Capital Expenditures 169.6 119.6 111.8 132.1 83.3
Net Assets from Acquisitions -193.3 -1,582.7 -4.3 -77.2 0.0
Sale of Fixed Assets & Businesses 32.2 0.0 0.0 13.0 0.0
Purchase/Sale of Investments -830.7 202.4 -189.3 360.9 -160.7
Other Funds 2.2 2.8 0.7 -81.3 439.1
Net Investing Cash Flow -1,159.3 -1,497.1 -304.7 83.3 195.2
Financing Activities
Cash Dividends Paid 0.0 0.0 0.0 0.0 0.0
Change in Capital Stock -710.8 -170.4 -1,403.6 -1,435.4 -854.9
Issuance/Reduction of Debt, Net 479.1 636.1 350.0 0.0 0.0
Other Funds 16.4 12.0 32.0 85.1 80.2
Net Financing Cash Flow -215.3 477.7 -1,021.6 -1,350.4 -774.7
Exchange Rate Effect 12.0 14.7 -14.4 1.7 3.9
Net Change in Cash -249.6 113.0 -60.0 173.9 351.7
17. DISCOUNTEDCASHFLOWVALUATIONOFTARGET
Free Cash Flow Projection
17
Free Cash Flow Projection FY Ending December 30 CAGR
2010 2011 2012 2013 2014 2015 2011-2015
Revenue $3,800.0 $4,115.1 $4,564.4 $5,023.4 $5,073.6 $5,124.4 5.6%
% Growth 29.0% 8.3% 10.9% 10.1% 1.0% 1.0%
EBITDA 1,309.1 1,705.9 1,888.9 2,061.2 2,081.8 2,102.6 5.4%
% Margin 34.5% 41.5% 41.4% 41.0% 41.0% 41.0%
Less: Depreciation (107.5) (65.4) (64.0) (63.8) (64.4) (65.1)
EBITA 1,201.6 1,640.5 1,824.9 1,997.4 2,017.4 2,037.5 5.6%
Tax Rate 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Unlevered Net Income $901.2 $1,230.4 $1,368.7 $1,498.1 $1,513.0 $1,528.2 5.6%
Plus: Depreciation 107.5 65.4 64.0 63.8 64.4 65.1
Less: Capital Expenditures (137.5) (133.9) (159.4) (175.6) (202.9) (205.0)
Less: Change in Working Capital (9.5) 8.3 3.1 1.6 1.9 2.3
Free Cash Flow $861.7 $1,170.2 $1,276.4 $1,387.9 $1,376.4 $1,390.6 4.4%
Net Debt ($954.2)
FDSO 1,312.830
18. DISCOUNTEDCASHFLOWVALUATIONOFTARGET
Valuation Sensitivity Analysis
18
DCF Valuation (2011-2015): EBITDA Multiple Method
Total Enterprise Value Total Equity Value
(1)
Terminal EBITDA Multiple Terminal EBITDA Multiple
14.0x 15.0x 16.0x 14.0x 15.0x 16.0x
Discount 5.0% $28,757.5 $30,405.0 $32,052.4 Discount 5.0% $29,711.7 $31,359.2 $33,006.6
Rate 6.0% $27,531.4 $29,102.7 $30,673.9 Rate 6.0% $28,485.6 $30,056.9 $31,628.1
(WACC) 7.0% $26,370.9 $27,870.1 $29,369.2 (WACC) 7.0% $27,325.1 $28,824.3 $30,323.4
Implied Perpetuity Growth Rate Price Per Share
(2)
Terminal EBITDA Multiple Terminal EBITDA Multiple
14.0x 15.0x 16.0x 14.0x 15.0x 16.0x
Discount 5.0% 0.3% 0.6% 0.8% Discount 5.0% $22.6 $23.9 $25.1
Rate 6.0% 1.2% 1.5% 1.8% Rate 6.0% $21.7 $22.9 $24.1
(WACC) 7.0% 2.2% 2.5% 2.8% (WACC) 7.0% $20.8 $22.0 $23.1
DCF Valuation (2011-2015): Perpetuity Growth Method
Total Enterprise Value Total Equity Value
(1)
Terminal Perpetuity Growth Rate Terminal Perpetuity Growth Rate
1.0% 1.5% 2.0% 1.0% 1.5% 2.0%
Discount 5.0% $33,204.0 $37,289.8 $42,737.6 Discount 5.0% $34,158.2 $38,244.0 $43,691.8
Rate 6.0% $26,524.6 $28,972.3 $32,031.9 Rate 6.0% $27,478.8 $29,926.5 $32,986.1
(WACC) 7.0% $22,072.4 $23,679.7 $25,608.6 (WACC) 7.0% $23,026.6 $24,633.9 $26,562.8
Implied Terminal EBITDA Multiple Price Per Share
(2)
Terminal Perpetuity Growth Rate Terminal Perpetuity Growth Rate
1.0% 1.5% 2.0% 1.0% 1.5% 2.0%
Discount 5.0% 16.7x 19.2x 22.5x Discount 5.0% $26.02 $29.13 $33.28
Rate 6.0% 13.4x 14.9x 16.9x Rate 6.0% $20.93 $22.80 $25.13
(WACC) 7.0% 11.1x 12.2x 13.5x (WACC) 7.0% $17.54 $18.76 $20.23
21. COMPARABLECOMPANYVALUATIONOFTARGET
Comparable Company Key Financial Statistics
21
Capitalization Analysis
LTM as of 21-Apr-2011
Diluted Cash Long
Price Market Shares Equity Enterprise and ST Total Preferred Minority Total Term D/
Company Name Ticker (21-Apr-2011) Value Outstanding Value Value Investments Debt Equity Interest Assets Debt D+E
Apple, Inc. AAPL 350.70 324,279.5 935.9 328,231.8 295,045.5 29,234.0 0.0 0.0 0.0 94,904.0 0.0 0.00x
Microsoft Corp. MSFT 25.52 214,428.8 8,570.0 218,706.4 182,847.8 41,252.0 9,671.0 0.0 0.0 92,306.0 9,671.0 0.17x
Autodesk, Inc. ADSK 44.88 10,228.2 234.2 10,510.9 8,953.9 1,274.3 0.0 0.0 0.0 2,696.9 0.0 0.00x
Yahoo!, Inc. YHOO 16.85 22,063.6 1,364.6 22,993.7 19,285.8 2,884.1 68.0 0.0 38.3 14,885.1 61.0 0.01x
Google, Inc. GOOG 525.10 169,206.6 323.3 169,739.1 137,696.6 34,975.0 3,465.0 0.0 0.0 57,586.0 0.0 0.07x
Oracle Corp. ORCL 34.75 175,852.9 5,149.0 178,927.8 166,691.9 24,355.0 14,752.0 0.0 442.0 66,147.0 14,752.0 0.29x
Mean 166.3 152,676.6 152,676.6 2,762.8 154,851.6 135,086.9 22,329.1 4,659.3 - 80.0 54,754.2 4,080.7
Median 39.8 172,529.8 172,529.8 1,150.3 174,333.4 152,194.3 26,794.5 1,766.5 - - 61,866.5 30.5
Margin Analysis
LTM as of 21-Apr-2011
Company Name Ticker FY-1 FY0 LTM FY-1 FY0 LTM FY-1 FY0 LTM FY-1 FY0 LTM
Apple, Inc. AAPL 39.6 39.3 39.1 26.7 28.1 29.0 28.4 29.7 30.6 19.3 21.5 22.4
Microsoft Corp. MSFT 78.9 80.2 78.4 34.9 39.5 39.6 39.4 43.8 43.5 25.3 30.0 30.8
Autodesk, Inc. ADSK 88.8 89.9 89.9 7.9 14.5 14.5 13.3 19.9 19.9 3.4 10.9 10.9
Yahoo!, Inc. YHOO 54.9 58.0 58.0 7.9 13.1 13.1 19.4 23.9 23.9 9.3 19.5 19.5
Google, Inc. GOOG 62.6 64.5 64.5 35.1 35.4 35.4 41.6 40.2 40.2 27.6 29.0 29.0
Oracle Corp. ORCL 72.0 71.2 68.3 36.8 36.7 34.4 45.3 45.1 42.3 24.1 22.9 22.4
Mean 66.1 67.2 66.3 24.9 27.9 27.7 31.2 33.8 33.4 18.2 22.3 22.5
Median 67.3 67.8 66.4 30.8 31.7 31.7 33.9 34.9 35.4 21.7 22.2 22.4
Gross Margin (%) EBIT Margin (%) EBITDA Margin (%) Net Margin (%)
Valuation Analysis
LTM as of 21-Apr-2011
Price to Price
Market Enterprise Book to
Company Name Ticker Value Value Sales EBITDA LTM FY1 FY2 Sales EBIT EBITDA Value Sales
Apple, Inc. AAPL 324,279.5 295,045.5 87,451.0 26,774.0 16.72 14.31 12.41 3.4x 11.6x 11.0x 5.3x 3.8x
Microsoft Corp. MSFT 214,428.8 182,847.8 66,690.0 28,987.0 10.86 10.03 9.26 2.7x 6.9x 6.3x 4.4x 3.3x
Autodesk, Inc. ADSK 10,228.2 8,953.9 1,951.8 387.6 49.87 27.21 22.98 4.6x 31.7x 23.1x 6.3x 5.4x
Yahoo!, Inc. YHOO 22,063.6 19,285.8 6,324.7 1,513.0 18.72 22.02 18.98 3.0x 23.2x 12.7x 1.8x 3.6x
Google, Inc. GOOG 169,206.6 137,696.6 29,321.0 11,777.0 24.43 15.45 13.18 4.7x 13.3x 11.7x 3.6x 5.8x
Oracle Corp. ORCL 175,852.9 166,691.9 34,353.0 14,518.0 23.01 15.92 14.55 4.9x 14.1x 11.5x 4.8x 5.2x
Mean 152,676.6 135,086.9 37,681.9 13,992.8 23.9 17.5 15.2 3.9x 16.8x 12.7x 4.4x 4.5x
Median 172,529.8 152,194.3 31,837.0 13,147.5 20.9 15.7 13.9 4.0x 13.7x 11.6x 4.6x 4.5x
Low 10,228.2 8,953.9 1,951.8 387.6 10.9 10.0 9.3 2.7x 6.9x 6.3x 1.8x 3.3x
High 324,279.5 295,045.5 87,451.0 28,987.0 49.9 27.2 23.0 4.9x 31.7x 23.1x 6.3x 5.8x
Price / EPS Enterprise Value /
22. COMPARABLECOMPANYVALUATIONOFTARGET
Comparable Company Valuation Range
22
Adobe Systems Inc. Key Financial Metrics
Net Debt ($954.2)
FDSO 1,312.830
Book Value of Share 4.0$
EPS (FY1) 2.2$
EPS(FY2) 2.4$
Sales 3,800.0$
EBIT 1,016.4$
EBITDA 1,309.1$
Mean Median Low High
22,704.9 23,953.1 9,118.6 - 32,870.8
50,209.5 45,029.2 28,785.1 - 78,115.1
48,670.0 44,303.2 29,604.1 - 73,458.0
14,757.2 15,126.5 10,418.7 - 18,438.8
17,091.6 13,919.4 7,043.9 - 32,249.1
16,658.1 15,168.4 8,257.7 - 30,241.2
Implied Total Enterprise Value
Mean Median Low High
17.3 18.2 6.9 - 25.0
38.2 34.3 21.9 - 59.5
37.1 33.7 22.5 - 56.0
12.0 12.2 8.7 - 14.8
13.7 11.3 6.1 - 25.3
13.4 12.3 7.0 - 23.8
Implied Price per Share
24. PRECEDENTTRANSACTIONVALUATIONOFTARGET
Precedent Transactions Analysis
24
Precedent Transactions
Deal
Year Name Industry Ticker Name Industry Ticker Enterprise Value EV/Revenue EV/EBITDA Premium
2009 Adobe Systems Software ADBE Omniture Software OMTR $1,800.0 4.6x 22.3x 45%
2009 IBM Corp. IT Services IBM SPSS Software SPSS $785.0 2.7x 18.0x 42%
2010 Intel Corp. Hardware INTC McAfee Software MFE $6,800.0 3.4x 16.1x 60%
2009 Intel Corp. Hardware INTC Wind River Software WIND $790.0 2.2x 21.0x 44%
2010 SAP AG Software SAP Sybase Inc. Software SYBS $5,800.0 4.5x 15.7x 56%
Mean $3,195.0 3.5x 18.6x 49%
Median $1,800.0 3.4x 18.0x 45%
Low $785.0 2.2x 15.7x 42%
High $6,800.0 4.6x 22.3x 60%
Buyer Target Deal Details
Adobe Systems Inc. Key Financial Metrics
Net Debt ($954.2)
FDSO 1,312.830
Revenue 3,800.0$
EBITDA 1,309.1$
Mean Median Low High Mean Median Low High
13,224.0 12,920.0 8,360.0 17,480.0 10.8 10.6 7.1 14.0
24,375.4 23,563.8 20,552.9 29,192.9 19.3 18.7 16.4 23.0
Implied Total Enterprise Value Implied Price per Share
26. VALUATIONSUMMARY
Target Valuation Summary
26
5% -7% WACC 14x -16x Exit Multiple
Low $27,870.1 $27,531.4
Range $2,534.9 $3,142.4
High $30,405.0 $30,673.9
DCF Analysis
2.2x -4.6x Revenue 15.7x -22.3x EBITDA
$8,360.0 $20,552.9
$9,120.0 $8,640.1
$17,480.0 $29,192.9
Precedent Transactions
3.2x - 4.7x Revenue 11.02x - 14.1x EBITDA
$12,160.0 $14,426.1
$5,700.0 $4,032.2
$17,860.0 $18,458.3
Comparable Companies
28. FINANCIALPROJECTIONSOFBUYERANDTARGET
Income Statement Projection of Microsoft Corp.
28
FY Ended December 30 FY Ending December 30 CAGR
2008A 2009A 2010A 2011P 2012P 2013P 2014E 2015E 2011-2015
Total Revenue $60,420.0 $57,553.0 $62,484.0 $69,590.0 $74,123.0 $79,131.0 $84,477.4 $90,184.9 6.7%
% Growth NA (4.7%) 8.6% 11.4% 6.5% 6.8% 6.8% 6.8%
COGS 9,542.0 9,593.0 9,722.0 12,481.6 13,551.1 15,796.9 16,864.2 18,003.6
% of Sales 15.8% 16.7% 15.6% 17.9% 18.3% 20.0% 20.0% 20.0%
Gross Profit $50,878.0 $47,960.0 $52,762.0 $57,108.4 $60,571.9 $63,334.1 $67,613.2 $72,181.3 6.0%
% Margin 84.2% 83.3% 84.4% 82.1% 81.7% 80.0% 80.0% 80.0%
SG&A 24,530.0 25,306.0 25,399.0 26,789.0 28,519.4 28,537.5 30,465.6 32,523.9
% of Sales 40.6% 44.0% 40.6% 38.5% 38.5% 36.1% 36.1% 36.1%
EBITDA $26,348.0 $22,654.0 $27,363.0 $30,319.4 $32,052.5 $34,796.6 $37,147.6 $39,657.4 6.9%
% Margin 43.6% 39.4% 43.8% 43.6% 43.2% 44.0% 44.0% 44.0%
Depreciation 1,400.0 1,700.0 1,800.0 1,850.0 1,720.0 1,900.0 2,028.4 2,165.4
% of Sales 2.3% 3.0% 2.9% 2.7% 2.3% 2.4% 2.4% 2.4%
Amortization 656.0 862.0 873.0 835.0 800.0 906.2 906.2 906.2
% of Sales 1.1% 1.5% 1.4% 1.2% 1.1% 1.1% 1.1% 1.0%
Total D&A $2,056.0 $2,562.0 $2,673.0 $2,685.0 $2,520.0 $2,806.2 $2,934.6 $3,071.6
% of Sales 3.4% 4.5% 4.3% 3.9% 3.4% 3.5% 3.5% 3.4%
Stock-Based Comp 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
% of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
EBIT $24,292.0 $20,092.0 $24,690.0 $27,634.4 $29,532.5 $31,990.4 $34,213.0 $36,585.8 7.3%
% Margin 40.2% 34.9% 39.5% 39.7% 39.8% 40.4% 40.5% 40.6%
EBITA $24,948.0 $20,954.0 $25,563.0 $28,469.4 $30,332.5 $32,896.6 $35,119.2 $37,492.0 7.1%
% Margin 41.3% 36.4% 40.9% 40.9% 40.9% 41.6% 41.6% 41.6%
Interest (Income) / Expense 0.0 0.0 (151.0) 0.0 0.0 0.0 0.0 0.0
Equity (Income) (1,886.0) (1,171.0) (801.0) 0.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other (Income) / Expense 1,408.0 900.0 1,275.0 0.0 0.0 0.0 0.0 0.0
Income Before Taxes $25,426.0 $21,225.0 $25,240.0 $28,469.4 $30,332.5 $32,896.6 $35,119.2 $37,492.0 7.1%
Income tax 6,133.0 5,252.0 6,253.0 6,798.2 7,441.6 8,119.6 8,668.2 9,253.8
% Tax Rate 24.1% 24.7% 24.8% 23.9% 24.5% 24.7% 24.7% 24.7%
Net Income $19,293.0 $15,973.0 $18,987.0 $21,671.2 $22,890.9 $24,777.0 $26,451.0 $28,238.1 6.8%
% Margin 31.9% 27.8% 30.4% 31.1% 30.9% 31.3% 31.3% 31.3%
Diluted EPS $2.04 $1.81 $2.13 $2.53 $2.73 $3.01 $3.19 $3.38 7.5%
Diluted Shares Out 9,455.100 8,823.700 8,933.300 8,554.600 8,370.600 8,240.300 8,300.000 8,350.000
Cash to GAAP Reconciliation
Amortization $497.8 $648.7 $656.7 $635.6 $603.7 $682.5 $682.5 $682.5
Stock-Based Comp 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
One-Time Charges 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Income - GAAP $18,795.2 $15,324.3 $18,330.3 $21,035.6 $22,287.2 $24,094.5 $25,768.5 $27,555.6 7.0%
% Margin 31.1% 26.6% 29.3% 30.2% 30.1% 30.4% 30.5% 30.6%
Diluted EPS - GAAP $1.99 $1.74 $2.05 $2.46 $2.66 $2.92 $3.10 $3.30 7.6%
Capex $3,182.0 $3,119.0 $1,977.0 $2,407.0 $2,565.5 $2,524.3 $2,534.3 $2,615.4
% of Sales 5.3% 5.4% 3.2% 3.5% 3.5% 3.2% 3.0% 2.9%
29. FINANCIALPROJECTIONSOFBUYERANDTARGET
Income Statement Projection of Adobe Systems Inc.
29
FY Ended December 30 FY Ending December 30 CAGR
2008A 2009A 2010A 2011P 2012P 2013P 2014E 2015E 2011-2015
Total Revenue $3,579.9 $2,945.9 $3,800.0 $4,115.1 $4,564.4 $5,023.4 $5,073.6 $5,124.4 5.6%
% Growth NA (17.7%) 29.0% 8.3% 10.9% 10.1% 1.0% 1.0%
COGS 163.2 112.5 211.5 194.2 233.4 1,175.5 1,187.3 1,199.1
% of Sales 4.6% 3.8% 5.6% 4.7% 5.1% 23.4% 23.4% 23.4%
Gross Profit $3,416.7 $2,833.4 $3,588.5 $3,920.9 $4,331.0 $3,847.9 $3,886.4 $3,925.2 0.0%
% Margin 95.4% 96.2% 94.4% 95.3% 94.9% 76.6% 76.6% 76.6%
SG&A 2,086.1 1,819.1 2,279.4 2,215.0 2,442.1 1,786.7 1,804.6 1,822.6
% of Sales 58.3% 61.8% 60.0% 53.8% 53.5% 35.6% 35.6% 35.6%
EBITDA $1,330.6 $1,014.3 $1,309.1 $1,705.9 $1,888.9 $2,061.2 $2,081.8 $2,102.6 5.4%
% Margin 37.2% 34.4% 34.5% 41.5% 41.4% 41.0% 41.0% 41.0%
Depreciation 83.3 95.9 107.5 65.4 64.0 63.8 64.4 65.1
% of Sales 2.3% 3.3% 2.8% 1.6% 1.4% 1.3% 1.3% 1.3%
Amortization 187.0 186.5 185.2 120.0 120.0 140.0 140.0 140.0
% of Sales 5.2% 6.3% 4.9% 2.9% 2.6% 2.8% 2.8% 2.7%
Total D&A $270.3 $282.4 $292.7 $185.4 $184.0 $203.8 $204.4 $205.1
% of Sales 7.6% 9.6% 7.7% 4.5% 4.0% 4.1% 4.0% 4.0%
Stock-Based Comp 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
% of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
EBIT $1,060.3 $731.9 $1,016.4 $1,520.5 $1,704.9 $1,857.4 $1,877.4 $1,897.5 5.7%
% Margin 29.6% 24.8% 26.7% 36.9% 37.4% 37.0% 37.0% 37.0%
EBITA $1,247.3 $918.4 $1,201.6 $1,640.5 $1,824.9 $1,997.4 $2,017.4 $2,037.5 5.6%
% Margin 34.8% 31.2% 31.6% 39.9% 40.0% 39.8% 39.8% 39.8%
Interest (Income) / Expense (10.0) (3.4) (57.00) 0.0 0.0 0.0 0.0 0.0
Equity (Income) (32.60) (49.30) (29.60) 0.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other (Income) / Expense 60.8 22.40 13.30 0.0 0.0 0.0 0.0 0.0
Income Before Taxes $1,229.1 $948.7 $1,274.9 $1,640.5 $1,824.9 $1,997.4 $2,017.4 $2,037.5 5.6%
Provision for Tax 296.5 234.8 315.8 391.7 447.7 493.0 497.9 502.9
% Tax Rate 24.1% 24.7% 24.8% 23.9% 24.5% 24.7% 24.7% 24.7%
Net Income $932.6 $713.9 $959.1 $1,248.8 $1,377.2 $1,504.4 $1,519.4 $1,534.6 5.3%
% Margin 26.1% 24.2% 25.2% 30.3% 30.2% 29.9% 29.9% 29.9%
Diluted EPS $1.97 $1.07 $1.83 $2.19 $2.43 $2.66 $2.67 $2.67 5.1%
Diluted Shares Out 472.800 667.800 523.400 571.100 565.700 566.000 570.000 575.000
Cash to GAAP Reconciliation
Amortization $141.9 $140.4 $139.3 $91.3 $90.6 $105.4 $105.4 $105.4
Stock-Based Comp 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
One-Time Charges 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Income - GAAP $790.7 $573.6 $819.7 $1,157.4 $1,286.6 $1,399.0 $1,414.0 $1,429.2 5.4%
% Margin 22.1% 19.5% 21.6% 28.1% 28.2% 27.8% 27.9% 27.9%
Diluted EPS - GAAP $1.67 $0.86 $1.57 $2.03 $2.27 $2.47 $2.48 $2.49 5.2%
Capex $111.8 $119.6 $137.5 $133.9 $159.4 $175.6 $202.9 $205.0
% of Sales 3.1% 4.1% 3.6% 3.3% 3.5% 3.5% 4.0% 4.0%
31. TRANSACTIONANALYSIS
Sources and Uses of Funds
31
Current
Price
$33.48 $39.00 $40.00 $41.00 $42.00 $43.00 $44.00 $45.00
Sources & Uses
Uses
Adobe Systems Inc. Common Consideration $44,865.7 $52,262.9 $53,603.0 $54,943.1 $56,283.2 $57,623.2 $58,963.3 $60,303.4
Adobe Systems Inc. Options Consideration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adobe Systems Inc. Preferred Consideration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Equity Consideration $44,865.7 $52,262.9 $53,603.0 $54,943.1 $56,283.2 $57,623.2 $58,963.3 $60,303.4
Adobe Systems Inc. Revolver Refinanced 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adobe Systems Inc. Convertible Debt Assumed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adobe Systems Inc. Convertible Debt Refinanced/Retired 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adobe Systems Inc. Non-Convertible LT Debt Assumed 1,513.7 1,513.7 1,513.7 1,513.7 1,513.7 1,513.7 1,513.7 1,513.7
Adobe Systems Inc. Non-Convertible LT Debt Refinanced/Retired 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Levered Consideration $46,379.4 $53,776.6 $55,116.7 $56,456.8 $57,796.9 $59,136.9 $60,477.0 $61,817.1
Acquirer Refinanced Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Financing Fees 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Advisory Fees 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0
Total Uses $46,409.4 $53,806.6 $55,146.7 $56,486.8 $57,826.9 $59,166.9 $60,507.0 $61,847.1
Sources
Microsoft Corp. Common Consideration $26,919.4 $31,357.8 $32,161.8 $32,965.8 $33,769.9 $34,573.9 $35,378.0 $36,182.0
Microsoft Corp. Options Consideration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Microsoft Corp. Preferred Consideration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Cash Consideration 17,976.3 20,935.2 21,471.2 22,007.2 22,543.3 23,079.3 23,615.3 24,151.4
Microsoft Corp. Revolver 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Acquisition Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adobe Systems Inc. LT Debt Assumed 1,513.7 1,513.7 1,513.7 1,513.7 1,513.7 1,513.7 1,513.7 1,513.7
Total Sources $46,409.4 $53,806.6 $55,146.7 $56,486.8 $57,826.9 $59,166.9 $60,507.0 $61,847.1
Check 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
Cash Schedule
Cash Available
Microsoft Corp. Existing Cash $36,788.0 $36,788.0 $36,788.0 $36,788.0 $36,788.0 $36,788.0 $36,788.0 $36,788.0
Adobe Systems Inc. Existing Cash 2,468.0 2,468.0 2,468.0 2,468.0 2,468.0 2,468.0 2,468.0 2,468.0
Minimum Cash Balance (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0) (100.0)
Total Cash Available $39,156.0 $39,156.0 $39,156.0 $39,156.0 $39,156.0 $39,156.0 $39,156.0 $39,156.0
Cash Needed
Cash Paid to Adobe Systems Inc. Shareholders $17,946.3 $20,905.2 $21,441.2 $21,977.2 $22,513.3 $23,049.3 $23,585.3 $24,121.4
Financing Fees 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Advisory Fees 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0
Microsoft Corp. Debt Retired 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adobe Systems Inc. Debt Retired 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Cash Needed Before Revolver $17,976.3 $20,935.2 $21,471.2 $22,007.2 $22,543.3 $23,079.3 $23,615.3 $24,151.4
Optional Paydown of Adobe Systems Inc. Revolver 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Optional Paydown of Microsoft Corp. Revolver 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Cash Needed $17,976.3 $20,935.2 $21,471.2 $22,007.2 $22,543.3 $23,079.3 $23,615.3 $24,151.4
Transaction Prices Per Adobe Systems Inc. Share
32. TRANSACTIONANALYSIS
Pro Forma Balance Sheet
32
Transaction Value Per Share $41.00 Microsoft Corp. Adobe Systems Inc. Adjustments Pro Forma
25-04-11 25-04-11 Write-Up Financing 25-04-11
Assets
Current Assets
Cash and Equivalents $36,788.0 $2,468.0 ($22,007.2) $17,248.8
Accounts Receivable 13,014.0 554.3 13,568.3
Inventory 740.0 0.0 740.0
Deferred Income Taxes 0.0 0.0 0.0
Other Current Assets 5,134.0 193.7 5,327.7
Total Current Assets $55,676.0 $3,216.0 $36,884.8
Net PP&E $7,630.0 $448.9 15.0 $8,093.9
Goodwill 12,394.0 3,641.8 40,250.0 56,285.8
Intangibles 1,158.0 528.8 12,437.7 14,124.5
Investments/Restricted Cash 7,754.0 246.0 8,000.0
Unearned Compensation 0.0 0.0 0.0 0.0
Deferred Financing Fees 0.0 0.0 0.0 0.0
Other Assets 1,501.0 59.6 1,560.6
Total Assets $86,113.0 $8,141.1 $124,949.5
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable $4,025.0 $52.4 $4,077.4
Accrued Expenses 0.0 0.0 0.0
Income Taxes Payable 1,074.0 53.7 1,127.7
Deferred Revenue 0.0 0.0 0.0
Other Current Liabilities 20,048.0 953.1 21,001.1
Current Portion of Long-Term Debt 1,000.0 8.8 1,008.8
Total Current Liabilities $26,147.0 $1,068.0 $27,215.0
Revolver $0.0 $0.0 $0.0 $0.0
Non-Convertible Debt 4,939.0 1,513.7 0.0 6,452.7
Convertible Debt 0.0 0.0 0.0 0.0
Deferred Income Taxes 229.0 103.1 3,055.1 (103.1) 3,284.1
Other Long-Term Liabilities 8,623.0 263.9 8,886.9
Total Liabilities $39,938.0 $2,948.7 $45,838.7
Preferred Stock, par value $0.0 $0.0 $0.0 $0.0
Common Stock, par value 62,856.0 0.1 32,965.7 95,821.8
APIC / Capital Surplus 0.0 2,458.3 (2,458.3) 0.0
Treasury Stock 0.0 (3,264.3) 3,264.3 0.0
Accum. & Other Comp. Income (Loss) (176.0) 7.8 (7.8) (176.0)
Unrealized Gain/Loss Marketable Securities 1,231.0 9.6 (9.6) 1,231.0
Retained Earnings (17,736.0) 5,980.9 (6,010.9) (17,766.0)
Total Stockholders' Equity $46,175.0 $5,192.4 $79,110.8
Total Liabilities and Stockholders' Equity $86,113.0 $8,141.1 $124,949.5
Check 0.000 0.000 0.000
33. TRANSACTIONANALYSIS
Pro Forma Income Statement
33
FY Ended December 30 FY Ending December 30 CAGR
2008A 2009A 2010A 2011E 2012E 2013E 2014E 2015E 2011-2015
Total Revenue $63,999.9 $60,498.9 $66,284.0 $73,705.1 $78,687.4 $84,154.4 $89,551.0 $95,309.3 6.6%
% Growth NA (5.5%) 9.6% 11.2% 6.8% 6.9% 6.9% 6.9%
COGS 9,705.2 9,705.5 9,933.5 12,675.8 13,784.5 16,972.4 18,051.4 19,202.7
COGS Synergies 0.0 0.0 0.0 0.0 (25.0) (25.0) (25.0) (25.0)
% of Sales 15.2% 16.0% 15.0% 17.2% 17.5% 20.1% 20.1% 20.1%
Gross Profit $54,294.7 $50,793.4 $56,350.5 $61,029.3 $64,927.9 $67,207.0 $71,524.5 $76,131.6 5.7%
% Margin 84.8% 84.0% 85.0% 82.8% 82.5% 79.9% 79.9% 79.9%
SG&A 26,616.1 27,125.1 27,678.4 29,004.0 30,961.5 30,324.2 32,270.2 34,346.6
SG&A Synergies 0.0 0.0 0.0 0.0 (50.0) (50.0) (50.0) (50.0)
% of Sales 41.6% 44.8% 41.8% 39.4% 39.3% 36.0% 36.0% 36.0%
EBITDA $27,678.6 $23,668.3 $28,672.1 $32,025.3 $34,016.4 $36,932.8 $39,304.4 $41,835.0 6.9%
% Margin 43.2% 39.1% 43.3% 43.5% 43.2% 43.9% 43.9% 43.9%
Existing Depreciation 1,483.3 1,795.9 1,907.5 1,915.4 1,784.0 1,963.8 2,092.8 2,230.5
New Depreciation 0.0 0.0 0.0 1.5 1.5 1.5 1.5 1.5
% of Sales 2.3% 3.0% 2.9% 2.6% 2.3% 2.3% 2.3% 2.3%
Existing Amortization 843.0 1,048.5 1,058.2 955.0 920.0 1,046.2 1,046.2 1,046.2
New Amortization 0.0 0.0 0.0 2,487.5 2,487.5 2,487.5 2,487.5 2,487.5
% of Sales 1.3% 1.7% 1.6% 4.7% 4.3% 4.2% 3.9% 3.7%
Total D&A 2,326.3 2,844.4 2,965.7 5,359.4 5,193.0 5,499.0 5,628.0 5,765.7
% of Sales 3.6% 4.7% 4.5% 7.3% 6.6% 6.5% 6.3% 6.0%
Stock-Based Comp 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
% of Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
EBIT $25,352.3 $20,823.9 $25,706.4 $26,665.9 $28,823.4 $31,433.8 $33,676.3 $36,069.3 7.8%
% Margin 39.6% 34.4% 38.8% 36.2% 36.6% 37.4% 37.6% 37.8%
EBITA $26,195.3 $21,872.4 $26,764.6 $30,108.4 $32,230.9 $34,967.5 $37,210.1 $39,603.0 7.1%
% Margin 40.9% 36.2% 40.4% 40.8% 41.0% 41.6% 41.6% 41.6%
Interest (Income) / Expense 0.0 440.1 440.1 440.1 440.1
Equity (Income) 0.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0
Other (Income) / Expense 0.0 0.0 0.0 0.0 0.0
Other Transaction Adjustments 0.0 0.0 0.0 0.0 0.0
Income Before Taxes $30,108.4 $31,790.8 $34,527.4 $36,769.9 $39,162.9 6.8%
Income Tax 7,386.6 7,799.4 8,470.7 9,020.9 9,608.0
% Tax Rate 24.5% 24.5% 24.5% 24.5% 24.5%
Pro Forma Net Income $22,721.8 $23,991.4 $26,056.6 $27,749.0 $29,554.9 6.8%
% Margin 30.8% 30.5% 31.0% 31.0% 31.0%
Pro Forma Diluted EPS $2.31 $2.48 $2.73 $2.89 $3.07 7.4%
Diluted Shares Out 9,846.365 9,662.365 9,532.065 9,591.765 9,641.765
Accredition/Dulition
Microsoft Corp. Standalone Diluted EPS $2.53 $2.73 $3.01 $3.19 $3.38
$ Accretion / (Dilution) ($0.23) ($0.25) ($0.27) ($0.29) ($0.32)
% Accretion / (Dilution) (8.9%) (9.2%) (9.1%) (9.2%) (9.4%)
Incremental Pre-Tax Synergies to Breakeven $2,944.1 $3,222.7 $3,451.2 $3,735.0 $4,043.9
Capex $2,540.9 $2,724.9 $2,699.9 $2,737.3 $2,820.3
% of Sales 3.4% 3.5% 3.2% 3.1% 3.0%
34. TRANSACTIONANALYSIS
Purchase Price Allocation and Accounting Adjustments
34
Purchase Price Calculation
Common Equity Consideration $44,865.7 $52,262.9 $53,603.0 $54,943.1 $56,283.2 $57,623.2 $58,963.3 $60,303.4
Fair Value of Unvested Options 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Fair Value of Vested Options 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Fair Value of Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Purchase Price $44,865.7 $52,262.9 $53,603.0 $54,943.1 $56,283.2 $57,623.2 $58,963.3 $60,303.4
Unearned Compensation $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Adjusted Purchase Price $44,865.7 $52,262.9 $53,603.0 $54,943.1 $56,283.2 $57,623.2 $58,963.3 $60,303.4
Purchase Price Allocation
Adjusted Purchase Price $44,865.7 $52,262.9 $53,603.0 $54,943.1 $56,283.2 $57,623.2 $58,963.3 $60,303.4
Less: Target Book Value of Net Assets (5,192.4) (5,192.4) (5,192.4) (5,192.4) (5,192.4) (5,192.4) (5,192.4) (5,192.4)
Excess Purchase Price to Allocate $39,673.3 $47,070.5 $48,410.6 $49,750.7 $51,090.8 $52,430.8 $53,770.9 $55,111.0
Write-Up of Tangible Assets $15.0 $15.0 $15.0 $15.0 $15.0 $15.0 $15.0 $15.0
Write-Up of Identifiable Intangible Assets 9,918.3 11,767.6 12,102.7 12,437.7 12,772.7 13,107.7 13,442.7 13,777.7
Write-Off of Target's Existing Goodwill (3,641.8) (3,641.8) (3,641.8) (3,641.8) (3,641.8) (3,641.8) (3,641.8) (3,641.8)
Write-Off of Target's Existing DTL 103.1 103.1 103.1 103.1 103.1 103.1 103.1 103.1
Allocation to Goodwill (Before DTL Allocation) $33,278.7 $38,826.6 $39,831.7 $40,836.7 $41,841.8 $42,846.8 $43,851.9 $44,856.9
DTL From Write-Up of Assets ($2,437.0) ($2,890.7) ($2,972.9) ($3,055.1) ($3,137.3) ($3,219.4) ($3,301.6) ($3,383.8)
DTL From Deferred Compensation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Goodwill Created $35,715.7 $41,717.3 $42,804.5 $43,891.8 $44,979.0 $46,066.3 $47,153.5 $48,240.8
Amortization of Identifiable Intangibles
Excess of Purchase Price Over Book Value $39,673.3 $47,070.5 $48,410.6 $49,750.7 $51,090.8 $52,430.8 $53,770.9 $55,111.0
% Allocated to Identifiable Intangibles 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Write-Up of Intangible Assets $9,918.3 $11,767.6 $12,102.7 $12,437.7 $12,772.7 $13,107.7 $13,442.7 $13,777.7
Amortization Period (yrs) 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0
Annual Incremental Amortization Expense $1,983.7 $2,353.5 $2,420.5 $2,487.5 $2,554.5 $2,621.5 $2,688.5 $2,755.5
Marginal Tax Rate 24.5% 24.5% 24.5% 24.5% 24.5% 24.5% 24.5% 24.5%
After-Tax Annual Amortization Expense $1,497.0 $1,776.1 $1,826.7 $1,877.3 $1,927.8 $1,978.4 $2,029.0 $2,079.5
Depreciation of Fixed Asset Write-Up
Write-Up of Tangible Assets $15.0 $15.0 $15.0 $15.0 $15.0 $15.0 $15.0 $15.0
Depreciation Period (yrs) 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
Annual Incremental Depreciation Expense $1.5 $1.5 $1.5 $1.5 $1.5 $1.5 $1.5 $1.5
Marginal Tax Rate 24.5% 24.5% 24.5% 24.5% 24.5% 24.5% 24.5% 24.5%
After-Tax Annual Depreciation Expense $1.1 $1.1 $1.1 $1.1 $1.1 $1.1 $1.1 $1.1
35. TRANSACTIONANALYSIS
Transaction Premium and Multiple Analysis
35
Adobe Systems Inc. Transaction Prices Per Adobe Systems Inc. Share Microsoft Corp.
$33.48 $39.00 $40.00 $41.00 $42.00 $43.00 $44.00 $45.00 $25.52
Common Stock $43,858.8 $51,090.0 $52,400.0 $53,710.0 $55,020.0 $56,330.0 $57,640.0 $58,950.0 $215,133.6
Stock Options 1,006.9 1,172.9 1,203.0 1,233.1 1,263.2 1,293.2 1,323.3 1,353.4 4,772.2
ITM Convertible Securities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Diluted Equity Value $44,865.7 $52,262.9 $53,603.0 $54,943.1 $56,283.2 $57,623.2 $58,963.3 $60,303.4 $219,905.8
Net Debt (945.5) (945.5) (945.5) (945.5) (945.5) (945.5) (945.5) (945.5) (30,849.0)
Total Enterprise Value $43,920.2 $51,317.4 $52,657.5 $53,997.6 $55,337.7 $56,677.7 $58,017.8 $59,357.9 $189,056.8
Premiums Analysis Adobe Systems Inc. Transaction Premium Per Adobe Systems Inc. Share Microsoft Corp.
Current Price $33.48 0.0% 16.5% 19.5% 22.5% 25.4% 28.4% 31.4% 34.4% 0.0% $25.52
52-Week High 36.35 (7.9%) 7.3% 10.0% 12.8% 15.5% 18.3% 21.0% 23.8% (19.2%) 31.58
52-Week Low 23.45 42.8% 66.3% 70.6% 74.8% 79.1% 83.4% 87.6% 91.9% 12.3% 22.73
1 Week Trading Average 32.65 2.5% 19.4% 22.5% 25.6% 28.6% 31.7% 34.8% 37.8% (0.4%) 25.62
1 Month Trading Average 34.66 (3.4%) 12.5% 15.4% 18.3% 21.2% 24.1% 26.9% 29.8% (0.7%) 25.71
3 Months Trading Average 33.69 (0.6%) 15.8% 18.7% 21.7% 24.7% 27.6% 30.6% 33.6% 9.8% 23.24
6 Months Trading Average 40.47 (17.3%) (3.6%) (1.2%) 1.3% 3.8% 6.3% 8.7% 11.2% (0.4%) 25.62
Multiples Analysis Transaction Muliple Analysis of Adobe Systems Inc. Acquisition
FY 2011P Revenue $4,115.1 10.67x 12.47x 12.80x 13.12x 13.45x 13.77x 14.10x 14.42x 2.72x $69,590.0
FY 2012P Revenue 4,564.4 9.62x 11.24x 11.54x 11.83x 12.12x 12.42x 12.71x 13.00x 2.55x 74,123.0
FY 2013P Revenue 5,023.4 8.74x 10.22x 10.48x 10.75x 11.02x 11.28x 11.55x 11.82x 2.39x 79,131.0
FY 2011P EBITDA $1,705.9 25.7x 30.1x 30.9x 31.7x 32.4x 33.2x 34.0x 34.8x 6.2x $30,319.4
FY 2012P EBITDA 1,888.9 23.3x 27.2x 27.9x 28.6x 29.3x 30.0x 30.7x 31.4x 5.9x 32,052.5
FY 2013P EBITDA 2,061.2 21.3x 24.9x 25.5x 26.2x 26.8x 27.5x 28.1x 28.8x 5.4x 34,796.6
FY 2011P EBITA $1,640.5 26.8x 31.3x 32.1x 32.9x 33.7x 34.5x 35.4x 36.2x 6.6x $28,469.4
FY 2012P EBITA 1,824.9 24.1x 28.1x 28.9x 29.6x 30.3x 31.1x 31.8x 32.5x 6.2x 30,332.5
FY 2013P EBITA 1,997.4 22.0x 25.7x 26.4x 27.0x 27.7x 28.4x 29.0x 29.7x 5.7x 32,896.6
FY 2011P Cash P/E $2.19 15.3x 17.8x 18.3x 18.8x 19.2x 19.7x 20.1x 20.6x 10.1x $2.53
FY 2012P Cash P/E 2.43 13.8x 16.0x 16.4x 16.8x 17.3x 17.7x 18.1x 18.5x 9.3x 2.73
FY 2013P Cash P/E 2.66 12.6x 14.7x 15.0x 15.4x 15.8x 16.2x 16.6x 16.9x 8.5x 3.01
37. EPSACCRETION/DILUTIONANALYSIS
EPS Accretion/Dilution – All Stock Deal
37
Standalone All Stock
Microsoft Corp.
Transaction Value Per Share $39.00 $40.00 $41.00 $42.00 $43.00 $44.00 $45.00
Equity Purchase Price $215,290.7 $52,262.9 $53,603.0 $54,943.1 $56,283.2 $57,623.2 $58,963.3 $60,303.4
Transaction Multiples Analysis
FY 2011P Revenue 2.72x 12.47x 12.80x 13.12x 13.45x 13.77x 14.10x 14.42x
FY 2012P Revenue 2.55x 11.24x 11.54x 11.83x 12.12x 12.42x 12.71x 13.00x
FY 2011P EBITDA 6.2x 30.1x 30.9x 31.7x 32.4x 33.2x 34.0x 34.8x
FY 2012P EBITDA 5.9x 27.2x 27.9x 28.6x 29.3x 30.0x 30.7x 31.4x
FY 2011P Cash P/E 10.1x 17.8x 18.3x 18.8x 19.2x 19.7x 20.1x 20.6x
FY 2012P Cash P/E 9.3x 16.0x 16.4x 16.8x 17.3x 17.7x 18.1x 18.5x
Microsoft Corp. Standalone EPS
FY 2012P Cash Net Income $22,890.9 $22,890.9 $22,890.9 $22,890.9 $22,890.9 $22,890.9 $22,890.9
FY 2012P Shares Outstanding 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600
FY 2012P Cash EPS $2.73 $2.73 $2.73 $2.73 $2.73 $2.73 $2.73
After-Tax Acquisition Adjustments
Adobe Systems Inc. FY 2012P Cash Net Income $1,377.2 $1,377.2 $1,377.2 $1,377.2 $1,377.2 $1,377.2 $1,377.2
Interest Lost on Cash Used (0.5) (0.5) (0.5) (0.5) (0.5) (0.5) (0.5)
Incremental Interest on New Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Interest Gained on Conversion of Convert(s) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Deferred Stock-Based Compensation 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amortization of Indentifiable Intangibles 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Depreciation of Acquired Tangible Assets (1.1) (1.1) (1.1) (1.1) (1.1) (1.1) (1.1)
Write-Down of Deferred Revenue 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Pro Forma Cash Net Income Without Synergies $24,266.5 $24,266.5 $24,266.5 $24,266.5 $24,266.5 $24,266.5 $24,266.5
After-Tax Synergies 56.6 56.6 56.6 56.6 56.6 56.6 56.6
Pro Forma Cash Net Income With Synergies $24,323.1 $24,323.1 $24,323.1 $24,323.1 $24,323.1 $24,323.1 $24,323.1
Diluted Shares - Treasury Method
Microsoft Corp. FY 2012P Shares Outstanding 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600
Shares Issued for Adobe Systems Inc. Basic Shares 2,047.920 2,100.431 2,152.942 2,205.453 2,257.963 2,310.474 2,362.985
Total Shares Post-Transaction 10,418.520 10,471.031 10,523.542 10,576.053 10,628.563 10,681.074 10,733.585
Accretion/Dilution Summary
FY 2012P Cash EPS Without Synergies $2.73 $2.33 $2.32 $2.31 $2.29 $2.28 $2.27 $2.26
$ Accretion / Dilution ($0.41) ($0.42) ($0.43) ($0.44) ($0.45) ($0.46) ($0.47)
% Accretion / Dilution (14.8%) (15.3%) (15.7%) (16.1%) (16.5%) (16.9%) (17.3%)
Pre-Tax Synergies to Breakeven $5,598.2 $5,788.5 $5,978.8 $6,169.1 $6,359.4 $6,549.7 $6,739.9
% of Combined Opex (Excl. Syngergies) 11.2% 11.6% 12.0% 12.4% 12.7% 13.1% 13.5%
FY 2012P Cash EPS With Synergies $2.73 $2.33 $2.32 $2.31 $2.30 $2.29 $2.28 $2.27
$ Accretion / Dilution ($0.40) ($0.41) ($0.42) ($0.43) ($0.45) ($0.46) ($0.47)
% Accretion / Dilution (14.6%) (15.1%) (15.5%) (15.9%) (16.3%) (16.7%) (17.1%)
Pre-Tax Synergies to Breakeven $5,523.2 $5,713.5 $5,903.8 $6,094.1 $6,284.4 $6,474.7 $6,664.9
% of Combined Opex (Excl. Syngergies) 11.1% 11.4% 11.8% 12.2% 12.6% 13.0% 13.3%
Ownership Structure Post Transaction
% Shares Owned by Microsoft Corp. Shareholders Post-Transaction 80.3% 79.9% 79.5% 79.1% 78.8% 78.4% 78.0%
% Shares Owned by Adobe Systems Inc. Post-Transaction 19.7% 20.1% 20.5% 20.9% 21.2% 21.6% 22.0%
Total % 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
38. EPSACCRETION/DILUTIONANALYSIS
EPS Accretion/Dilution – 60% Stock + 40% Cash Deal
38
Standalone
Microsoft Corp.
Transaction Value Per Share
Equity Purchase Price $215,290.7
Transaction Multiples Analysis
FY 2011P Revenue 2.72x
FY 2012P Revenue 2.55x
FY 2011P EBITDA 6.2x
FY 2012P EBITDA 5.9x
FY 2011P Cash P/E 10.1x
FY 2012P Cash P/E 9.3x
Microsoft Corp. Standalone EPS
FY 2012P Cash Net Income
FY 2012P Shares Outstanding
FY 2012P Cash EPS
After-Tax Acquisition Adjustments
Adobe Systems Inc. FY 2012P Cash Net Income
Interest Lost on Cash Used
Incremental Interest on New Debt
Interest Gained on Conversion of Convert(s)
Deferred Stock-Based Compensation
Amortization of Indentifiable Intangibles
Depreciation of Acquired Tangible Assets
Write-Down of Deferred Revenue
Pro Forma Cash Net Income Without Synergies
After-Tax Synergies
Pro Forma Cash Net Income With Synergies
Diluted Shares - Treasury Method
Microsoft Corp. FY 2012P Shares Outstanding
Shares Issued for Adobe Systems Inc. Basic Shares
Total Shares Post-Transaction
Accretion/Dilution Summary
FY 2012P Cash EPS Without Synergies $2.73
$ Accretion / Dilution
% Accretion / Dilution
Pre-Tax Synergies to Breakeven
% of Combined Opex (Excl. Syngergies)
FY 2012P Cash EPS With Synergies $2.73
$ Accretion / Dilution
% Accretion / Dilution
Pre-Tax Synergies to Breakeven
% of Combined Opex (Excl. Syngergies)
Ownership Structure Post Transaction
% Shares Owned by Microsoft Corp. Shareholders Post-Transaction
% Shares Owned by Adobe Systems Inc. Post-Transaction
Total %
60.0% Stock / 40.0% Cash
$39.00 $40.00 $41.00 $42.00 $43.00 $44.00 $45.00
$52,262.9 $53,603.0 $54,943.1 $56,283.2 $57,623.2 $58,963.3 $60,303.4
12.47x 12.80x 13.12x 13.45x 13.77x 14.10x 14.42x
11.24x 11.54x 11.83x 12.12x 12.42x 12.71x 13.00x
30.1x 30.9x 31.7x 32.4x 33.2x 34.0x 34.8x
27.2x 27.9x 28.6x 29.3x 30.0x 30.7x 31.4x
17.8x 18.3x 18.8x 19.2x 19.7x 20.1x 20.6x
16.0x 16.4x 16.8x 17.3x 17.7x 18.1x 18.5x
$22,890.9 $22,890.9 $22,890.9 $22,890.9 $22,890.9 $22,890.9 $22,890.9
8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600
$2.73 $2.73 $2.73 $2.73 $2.73 $2.73 $2.73
$1,377.2 $1,377.2 $1,377.2 $1,377.2 $1,377.2 $1,377.2 $1,377.2
0.0 0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0
(1.1) (1.1) (1.1) (1.1) (1.1) (1.1) (1.1)
0.0 0.0 0.0 0.0 0.0 0.0 0.0
$24,267.0 $24,267.0 $24,267.0 $24,267.0 $24,267.0 $24,267.0 $24,267.0
56.6 56.6 56.6 56.6 56.6 56.6 56.6
$24,323.6 $24,323.6 $24,323.6 $24,323.6 $24,323.6 $24,323.6 $24,323.6
8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600
1,228.752 1,260.259 1,291.765 1,323.272 1,354.778 1,386.284 1,417.791
9,599.352 9,630.859 9,662.365 9,693.872 9,725.378 9,756.884 9,788.391
$2.53 $2.52 $2.51 $2.50 $2.50 $2.49 $2.48
($0.21) ($0.21) ($0.22) ($0.23) ($0.24) ($0.25) ($0.26)
(7.6%) (7.9%) (8.2%) (8.5%) (8.8%) (9.1%) (9.3%)
$2,629.2 $2,743.4 $2,857.6 $2,971.7 $3,085.9 $3,200.1 $3,314.2
5.3% 5.5% 5.7% 6.0% 6.2% 6.4% 6.6%
$2.53 $2.53 $2.52 $2.51 $2.50 $2.49 $2.48
($0.20) ($0.21) ($0.22) ($0.23) ($0.23) ($0.24) ($0.25)
(7.3%) (7.6%) (7.9%) (8.2%) (8.5%) (8.8%) (9.1%)
$2,554.2 $2,668.4 $2,782.6 $2,896.7 $3,010.9 $3,125.1 $3,239.2
5.1% 5.3% 5.6% 5.8% 6.0% 6.3% 6.5%
87.2% 86.9% 86.6% 86.3% 86.1% 85.8% 85.5%
12.8% 13.1% 13.4% 13.7% 13.9% 14.2% 14.5%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
39. EPSACCRETION/DILUTIONANALYSIS
EPS Accretion/Dilution – All Cash Deal
39
Standalone
Microsoft Corp.
Transaction Value Per Share
Equity Purchase Price $215,290.7
Transaction Multiples Analysis
FY 2011P Revenue 2.72x
FY 2012P Revenue 2.55x
FY 2011P EBITDA 6.2x
FY 2012P EBITDA 5.9x
FY 2011P Cash P/E 10.1x
FY 2012P Cash P/E 9.3x
Microsoft Corp. Standalone EPS
FY 2012P Cash Net Income
FY 2012P Shares Outstanding
FY 2012P Cash EPS
After-Tax Acquisition Adjustments
Adobe Systems Inc. FY 2012P Cash Net Income
Interest Lost on Cash Used
Incremental Interest on New Debt
Interest Gained on Conversion of Convert(s)
Deferred Stock-Based Compensation
Amortization of Indentifiable Intangibles
Depreciation of Acquired Tangible Assets
Write-Down of Deferred Revenue
Pro Forma Cash Net Income Without Synergies
After-Tax Synergies
Pro Forma Cash Net Income With Synergies
Diluted Shares - Treasury Method
Microsoft Corp. FY 2012P Shares Outstanding
Shares Issued for Adobe Systems Inc. Basic Shares
Total Shares Post-Transaction
Accretion/Dilution Summary
FY 2012P Cash EPS Without Synergies $2.73
$ Accretion / Dilution
% Accretion / Dilution
Pre-Tax Synergies to Breakeven
% of Combined Opex (Excl. Syngergies)
FY 2012P Cash EPS With Synergies $2.73
$ Accretion / Dilution
% Accretion / Dilution
Pre-Tax Synergies to Breakeven
% of Combined Opex (Excl. Syngergies)
Ownership Structure Post Transaction
% Shares Owned by Microsoft Corp. Shareholders Post-Transaction
% Shares Owned by Adobe Systems Inc. Post-Transaction
Total %
All Cash
$39.00 $40.00 $41.00 $42.00 $43.00 $44.00 $45.00
$52,262.9 $53,603.0 $54,943.1 $56,283.2 $57,623.2 $58,963.3 $60,303.4
12.47x 12.80x 13.12x 13.45x 13.77x 14.10x 14.42x
11.24x 11.54x 11.83x 12.12x 12.42x 12.71x 13.00x
30.1x 30.9x 31.7x 32.4x 33.2x 34.0x 34.8x
27.2x 27.9x 28.6x 29.3x 30.0x 30.7x 31.4x
17.8x 18.3x 18.8x 19.2x 19.7x 20.1x 20.6x
16.0x 16.4x 16.8x 17.3x 17.7x 18.1x 18.5x
$22,890.9 $22,890.9 $22,890.9 $22,890.9 $22,890.9 $22,890.9 $22,890.9
8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600
$2.73 $2.73 $2.73 $2.73 $2.73 $2.73 $2.73
$1,377.2 $1,377.2 $1,377.2 $1,377.2 $1,377.2 $1,377.2 $1,377.2
(789.3) (809.5) (829.7) (850.0) (870.2) (890.4) (910.6)
0.0 0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 0.0 0.0
(1.1) (1.1) (1.1) (1.1) (1.1) (1.1) (1.1)
0.0 0.0 0.0 0.0 0.0 0.0 0.0
$23,477.7 $23,457.5 $23,437.2 $23,417.0 $23,396.8 $23,376.6 $23,356.3
56.6 56.6 56.6 56.6 56.6 56.6 56.6
$23,534.3 $23,514.1 $23,493.8 $23,473.6 $23,453.4 $23,433.2 $23,412.9
8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600
0.0 0.0 0.0 0.0 0.0 0.0 0.0
8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600 8,370.600
$2.80 $2.80 $2.80 $2.80 $2.80 $2.79 $2.79
$0.07 $0.07 $0.07 $0.06 $0.06 $0.06 $0.06
2.6% 2.5% 2.4% 2.3% 2.2% 2.1% 2.0%
($777.5) ($750.7) ($723.9) ($697.1) ($670.3) ($643.5) ($616.7)
(1.6%) (1.5%) (1.4%) (1.4%) (1.3%) (1.3%) (1.2%)
$2.81 $2.81 $2.81 $2.80 $2.80 $2.80 $2.80
$0.08 $0.07 $0.07 $0.07 $0.07 $0.06 $0.06
2.8% 2.7% 2.6% 2.5% 2.5% 2.4% 2.3%
($852.5) ($825.7) ($798.9) ($772.1) ($745.3) ($718.5) ($691.7)
(1.7%) (1.7%) (1.6%) (1.5%) (1.5%) (1.4%) (1.4%)
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
40. EPSACCRETION/DILUTIONANALYSIS
EPS Accretion/Dilution Sensitivity Analysis
40
Accretion/Dilution without Synergy Accretion/Dilution with Synergy
Pre Tax Synergy Required to Breakeven % Share Owned by Microsoft Post Transaction
-7.9% 38.00$ 39.00$ 40.00$ 41.00$ 42.00$
30% -9.1% -9.5% -9.8% -10.2% -10.5%
Cash 35% -8.2% -8.5% -8.9% -9.2% -9.5%
% 40% -7.3% -7.6% -7.9% -8.2% -8.5%
45% -6.3% -6.6% -6.8% -7.1% -7.4%
50% -5.3% -5.5% -5.8% -6.1% -6.3%
Offer Price
-7.6% 38.00$ 39.00$ 40.00$ 41.00$ 42.00$
30% -8.9% -9.3% -9.6% -10.0% -10.3%
Cash 35% -8.0% -8.3% -8.6% -9.0% -9.3%
% 40% -7.0% -7.3% -7.6% -7.9% -8.2%
45% -6.1% -6.3% -6.6% -6.9% -7.2%
50% -5.1% -5.3% -5.6% -5.8% -6.1%
Offer Price
274339.3% 38.00$ 39.00$ 40.00$ 41.00$ 42.00$
30% $3,238.1 $3,371.3 $3,504.5 $3,637.7 $3,770.9
Cash 35% $2,876.6 $3,000.3 $3,124.0 $3,247.6 $3,371.3
% 40% $2,515.1 $2,629.2 $2,743.4 $2,857.6 $2,971.7
45% $2,153.5 $2,258.2 $2,362.8 $2,467.5 $2,572.1
50% $1,792.0 $1,887.1 $1,982.3 $2,077.4 $2,172.5
Offer Price
86.9% 38.00$ 39.00$ 40.00$ 41.00$ 42.00$
30% 85.7% 85.4% 85.1% 84.7% 84.4%
Cash 35% 86.6% 86.3% 86.0% 85.7% 85.4%
% 40% 87.5% 87.2% 86.9% 86.6% 86.3%
45% 88.4% 88.1% 87.9% 87.6% 87.3%
50% 89.4% 89.1% 88.9% 88.6% 88.4%
Offer Price
42. PROFITABILITYCONTRIBUTIONANALYSIS
Profitability Contribution by Buyer and Target
42
Microsoft Corp. Adobe Systems Inc. Combined
(1)
Synergies Pro Forma
(2)
FY11 FY12 FY11 FY12 FY11 FY12 FY11 FY12 FY11 FY12
Revenue $69,590.0 $74,123.0 $4,115.1 $4,564.4 $73,705.1 $78,687.4 $0.0 $0.0 $73,705.1 $78,687.4
% Growth 11.4% 6.5% 8.3% 10.9% 11.2% 6.8% 11.2% 6.8%
EBITDA $30,319.4 $32,052.5 $1,705.9 $1,888.9 $32,025.3 $33,941.4 $0.0 $75.0 $32,025.3 $34,016.4
% Margin 43.6% 43.2% 41.5% 41.4% 43.5% 43.1% 43.5% 43.2%
GAAP Net Income $21,035.6 $22,287.2 $1,157.4 $1,286.6 $22,193.0 $23,573.8 $0.0 $56.6 $22,249.6 $23,630.4
% Margin 30.2% 30.1% 28.1% 28.2% 30.1% 30.0% 30.2% 30.0%
Cash Net Income $21,671.2 $22,890.9 $1,248.8 $1,377.2 $22,920.0 $24,268.1 $0.0 $56.6 $22,976.6 $24,324.7
% Margin 31.1% 30.9% 30.3% 30.2% 31.1% 30.8% 31.2% 30.9%
Contribution
Revenue 94.4% 94.2% 5.6% 5.8% 100.0% 100.0%
EBITDA 94.7% 94.4% 5.3% 5.6% 100.0% 100.0%
GAAP Net Income 94.8% 94.5% 5.2% 5.5% 100.0% 100.0%
Cash Net Income 94.6% 94.3% 5.4% 5.7% 100.0% 100.0%