The document discusses strategic considerations for mergers and acquisitions (M&A) and joint ventures. It covers topics such as defining an acquisition strategy, valuation issues, due diligence processes, financing options, cultural integration challenges, and post-acquisition risk management. Special issues for government contractors, cross-border deals, and tax implications are also addressed. Case studies are provided to illustrate successful M&A and joint venture deals.

1. Strategic Use of Mergers & Acquisitions and Joint Ventures

2. February 2009

3. February 2009

4. June 2010

5. M&A Considerations Why Buy? Why Now? Defining Your Acquisition Strategy Valuation Issues Due Diligence, Negotiations and Closing the Deal Financing the M&A Deal Cross-Cultural Issues Post-Acquisition Operations/Risk Management The Joint Venture Alternative Special Issues: IP, Antitrust, Buying Government Contractors Reducing Taxes U.S. Immigration: recruiting/retaining global talent post-acquisition.

6. M&A Considerations Why Buy? Why Now? Stimulus Act spending in 2010-2011. Economic rebound expected in 2010. Availability of middle market acquisition opportunities; flexibility of deal terms. Benefits of acquisitions or joint ventures. Case studies and examples. M&A activity, beginning to rebound from 2009. Favorable legal/regulatory considerations: antitrust; unions; immigration policies; attitudes of US administration and Congress.

7. M&A Considerations 2. Defining Your Acquisition Strategy Your internal business strategy review process Understanding and applying your business goals Defining acquisition parameters Selecting your M&A advisors and legal team Financing: how best to present the deal to your investors

8. M&A Considerations 3. Acquisition Process and Valuation: Identifying your target companies Approaching targets Valuation techniques and approaches Tax Issues Stimulus Act impact on valuations Special considerations for U.S. targets: environmental issues, employment policies, non-competes and confidentiality agreements, goodwill/intangible assets. Is seller publicly traded corporation?

9. Make initial contacts with identified targets to explore potential strategies for partnership Monitor websites that list businesses for sale, and reach out to investment banks and business brokers to learn about their existing sell-side clients Be prepared to execute the seller’s form of Confidentiality Agreement prior to receiving any detailed information Review available information on the target, and request additional data, as needed Prepare financial models reflecting the effects of the acquisition and quantify any available synergies. Sellers may request preliminary valuation feedback before proceeding to in-person meetings If interest exists to move forward, visit the target’s headquarters to meet the management team and tour the facility. More detailed information is typically made available at this stage Based on information obtained to-date and with support of shareholders and financing sources, prepare a formal, non-binding letter of intent to make the acquisition Identifying Targets And Initial Due Diligence Internal Preparation Define high-level acquisition strategy, including rationale(s) for acquisition, characteristics and deal size of ideal target, etc. As possible, develop a list of potential targets, such as high-quality competitors, joint venture partners, other members of industry trade groups, etc. Coordinate the assembly of a professional deal team, including experienced transaction attorneys, investment bankers/buy-side brokers, an accounting diligence firm, and other advisors Begin assessing long-term capital needs, including meeting with bankers and expanding financial flexibility as needed Closing the Transaction (8-10 weeks) If agreement on transaction price and structure is reached, proceed to closing through multiple and simultaneous “work streams” (1) : Conduct confirmatory due diligence Financial/Accounting and Tax Operations Sales & Marketing Human Resources Legal and Risk Management Environmental Negotiate Purchase & Sale agreement and disclosure schedules Secure transaction funding (as needed) Execute P&S agreement and close Post-closing true-ups Buy-Side M&A Process (1) See next slide for a diagram of a coordinated buy-side due diligence and closing process.

10. Target Company Operations / Manufacturing Sales & Marketing Environmental Legal & Intellectual Property Acquiring Company Real Estate Risk Management Accounting Finance & Treasury Human Resources & Benefits Buy-Side Financial Advisor HR and Benefits consultants, if appropriate 3 rd party insurance providers, if appropriate Appraisal firms, if necessary Transaction services team, if desired Banks & Financial institution discussions Outside Counsel Consultant for market study, if appropriate Environmental consultants, if appropriate Tax work and review with Auditor Coordinated Buy-Side Due Diligence and Closing Process

11. Investment bankers contact the potential buyers and/or investors All parties execute a Confidentiality Agreement prior to receiving a CIM Potential buyers submit initial indications of interest (“IOI”) Qualifying buyers visit the Company's headquarters for management presentations and are given access to an electronic data site to begin diligence Investment bankers respond to follow-up due diligence requests from interested potential buyers Potential buyers submit Letters of Intent (“LOIs”), often including a mark-up of the Purchase & Sale Agreement Marketing the Company (10-12 weeks) Internal Preparation (6-8 weeks) Investment bankers conduct due diligence Investment bankers work with the Company to complete the Confidential Information Memorandum (“CIM”) Investment bankers work with the Company to complete the list of potential buyers CIM and buyers list reviewed and approved by the Company Closing the Transaction (8-10 weeks) Buyer chosen Buyer conducts confirmatory due diligence Purchase & Sale Agreement is negotiated, finalized, and executed Closing Post-closing true-ups Traditional Sell-Side M&A Process

12. M&A Considerations 4. Due Diligence, Negotiations and Closing the Deal U.S. negotiation tactics Due diligence checklists Legal and fiscal issues: Stock versus asset purchase; LLC or C corporation; tax considerations under U.S. and foreign law Stimulus Act tax incentives Financing issues at closing Special issues: buying divisions/subsidiaries of U.S. publicly held companies How to protect against post-transaction risks

13. M&A Considerations 5. Financing the M&A Transaction: Private equity, mezzanine, and venture capital; seller and bank financing. International tax issues. Sources of capital overseas and in the United States. 6. Bridging the Gap between Foreign and U.S. Corporate Cultures Cross-cultural issues and questions : The importance of communication and leadership. Who manages and controls? Which culture(s) predominant? How culture clashes can undo the merger Human resources: why human capital may be your most important asset Case examples

14. M&A Considerations Successful Post-Acquisition Operations Employment and immigration Intellectual property Marketing to customers Legal and tax considerations: minimizing risks Contracts and licensing Other operational considerations Supply chain logistics Status as government contractor or subcontractor

15. Joint Ventures: Alternate Strategy? Often an excellent alternative to the M&A deal Factors for success When and why does it not work? How to structure: tax, legal issues Use in Government Contracting? Use in private sector projects Case examples

16. Special Issues Purchasing Government Contractors Buying Divisions of Public Companies Insuring against Risks arising out of Transactions

17. Other Inbound Investment Considerations: Tax and Treaty Eligibility Corporate vs. LLC form: Corporations do not have "flow through" tax treatment and hence are required to file tax returns. Limited liability companies, on the other hand, have "flow-through" tax treatment and are not required to file income tax returns; rather their parent companies must file income tax returns in the United States. Since most foreign companies do not want to file tax returns in the United States, the preferred form of entity for U.S. operations of foreign companies most often is the corporation.

18. Taxes Worldwide Income Taxation (subject to foreign tax credit regime) Income Tax . The revenue generated by the U.S. subsidiary or U.S. operations of a foreign business will be subject to taxation in the U.S. This tax is assessed at the federal and state levels. Federal Tax . Federal income tax rates are set depending upon many factors. Federal corporate tax rates range between 15% and 39%; the average tax rate is typically 35%. State Tax . State income tax rates are set forth on a state by state basis. The current rate for corporate income tax in North Carolina is 6.9%. This is lower than many other states, including California (8.84%) and New York (7.5%-9%). Accounting considerations (FIN 48; permanent establishment, etc.)

19. International Tax Planning Permanent establishment: initial assessment of taxable presence; Transfer pricing: Where to direct profit: Profit Drivers: Capital; Function; Know how (and other intangibles); Risk

20. International Tax Planning Financing: debt-to-equity considerations (including section 163(j) restrictions); Treasury Management – repatriation planning Where a treaty is absent LOB provisions and treaty “shopping” Holding company planning techniques

21. Level Playing Field for Foreign Companies?

22. The Level Playing Field

23. Thank You Questions? Margaret Piret CEO Newbury Piret Companies [email_address] 933.2013.617. Eliot Norman, Warren Nowlin Williams Mullen 8300 Greensboro Drive Suite 1100 McLean, VA 22102 T 703.760.5200 [email_address] 804.783.6482. [email_address] 301.775.9876 www.williamsmullen.com Philippe de Dreuzy Rutherfoord [email_address] 703.813.6502