Creating Value through mergers and acquisitions. 2 Contents M&A activity Growth objectives The three P’s M&A process Post-merger integration How advisors

Creating Value through mergers and acquisitions

2

Contents

M&A activity

Growth objectives

The three P’s

M&A process

Post-merger integration

How advisors can help

Financial Advisory Services

© 2011 Deloitte Corporate Finance Limited. Private and confidential

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Creating value through M&ARising M&A activity

3 Financial Advisory Services

Global M&A Activity

GCC M&A Activity

KSA M&A Activity

Financial Advisors league table Mid-market – (USD250m) – Jul 2005 to June 2011 Rank

No. of Deals

Deloitte 1 451

KPMG 2 426

Rothschild 3 365

PwC 4 359

Ernst & Young 5 305

Lazard 6 178

DC Advisory Partners 7 165

M&A International Inc. 8 165

BDO LLP 9 144

Grant Thornton Corporate Finance 10 126

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The increasing volume of transactions suggests that appetite for mergers and acquisitions is returning

Source: Mergermarket and Capital IQ

Num

ber

of d

eals

Num

ber

of d

eals

Num

ber

of d

eals


Creating value through M&AMeeting growth objectives


Common growth objectives

New technologies

Increase profitability

(cross selling / cost saving)

Diversification

Focus on core skills

Responding to market ( e.g.. consolidating)

New markets

New lines of business

M&A vs. Organic growth

M&A Organic

Speed of entry into a new market

Rapid launch of new lines of business or technologies

Elimination of a competitor

Acquire human and intellectual capital

Economies of scale

Improved earnings and efficiency

Less expensive Takes time and

occurs over a period of time

Occurs through innovation and sustained effort

Lower stakes and risks of failure

No clash of cultures.

Typically less debt

Less organizational stress


Creating value through M&AThe three P’s of a successful M&A


Planning Process

Post-merger integration

(PMI)

Prior to commencing any M&A activity, the rationale and acquisition strategy must be well-defined to ensure suitable deal identification

Comprehensive due diligence, reasonable pricing and acceptable deal terms are key components of an organised M&A process and are essential for the successful completion of transactions

Reasons for failure

A structured plan needs to be designed and implemented to improve the likelihood of complete integration into current operations

Weak strategic rationale

Unplanned process

(Bad timing)

Unstructured execution

Poor fit / mismatch

Paying too much

Ineffective integration

The three P’s

Deloitte Corporate Finance can support you throughout the entire M&A process and provide the expertise required to increase the probability of a successful transaction


Risks Cant develop

specialised industry capabilities and focus

Unable to maximise cross-selling benefits

Difficult to manage at an executive level

Define strategic rationale

Formulate high level acquisition strategy which will typically be based on:

• Business strategy

• Funding capacity

• Market conditions

• Regulatory factors

Define screening criteria and selection process

Con

trac

tion

Gro

wth

t

Business cycle

Acquire for growthSell non-core

assets

Disposal to reduce costs

Acquire at attractive valuations

In-house management

team

Lead advisor

Other advisors

Assemble the right

team

Assemble the right

team

Portfolio review

Timing

Creating value through M&APlanning


Develop M&A

strategy

Screen targets

Shortlist targets

Screen targets

Shortlist targets

Too diversified

Too specialised

Identify the in-house team with the appropriate range of technical skills and industry expertise and assess the effect it will have on their current responsibilities

Ensure selected advisors compliment the skills of the in-house team and provide the necessary assistance to minimise disruption to management

Concentration risk to certain sectors

Highly correlated to market movement

Restricted growth opportunities

Develop strategy

Pool of potential targets

Develop ‘initial list’ of potential opportunities

Screening of potential targets ‘short list’

High-level research and analysis of shortlisted

opportunities

Suitable acquisition opportunities

(Buy-side example)


Creating value through M&AM&A process – Buy-side


Planning and structuring the

approach

• Contact selected targets

• Arrange meetings

• Execute NDA

• Gather information

• Analyze and re-assess strategic fit

• Present indicative bid

• Request Due diligence (DD) information

• Negotiate key terms and exclusivity

• Manage DD process

• Evaluate potential deal structures

• Renegotiate or finalize negotiation

• Conclude negotiations

• Signing and closing

• Communicate with stakeholders

• Completion accounts

Assess and approach short-listed targets

Initial negotiations and indicative offers

Due diligence and deal structuring

Final negotiations and completion

• Extensive global network

• Access to decision makers

• Legal advisors to prepare initial legal documentation

• Introduce PMI team

• Undertake detailed financial, commercial, tax and legal DD

• Draw on expertise of specialist SPA negotiation team

• Broad transaction experience with complex deal structures

• In-house DD team to issue report and identify key risks

Lead advisor

role

How Deloitte can help

• In-house valuations team to provide technical guidance on pricing parameters

• Strong existing relationships with legal advisors

Other advisors

• Legal advisors to prepare legal documentation (e.g. SPA and shareholders agreement)

• Assist creating an acquisition plan

• Create and maintain a structured approach

• Evaluate negotiation strategy

• Proprietary market intelligence

• Experienced deal team

Deloitte provides lead advisory services whereby we manage the entire process to completion


Creating value through M&AM&A process – Sell side


Planning and structuring the

approach

• Price expectations

• Assist with preparation of business plan

• Easy fixes

• Prepare presentation material

• Short-list potential investors

• Contact selected investors

• Execute NDA

• Present structured information

• Evaluate indicative bids

• Negotiate main terms and conditions

• Coordinate due diligence

• Deal structuring

• Final negotiations

• Complete legal documentation

• Payment of funds

• Communicate with stakeholders

Preparation for sale

Targeting of potential investors

Bid management Completion

• In-house valuations team to provide technical guidance on pricing parameters

• In-house VDD team

• Legal advisors to prepare initial legal documentation

• Undertake detailed financial, commercial, tax and legal DD

• Draw on expertise of specialist SPA negotiation team

• Broad transaction experience with complex deal structures

• In-house DD team to issue report and identify key risks

Lead advisor

role

How Deloitte can help

• Access to decision makers

• Strong existing relationships with legal advisors

Other advisors

• Legal advisors to prepare legal documentation (e.g. SPA and shareholders agreement)

• Agree timelines for transaction including key milestones

• Identify potential investors

• Gather information

• Extensive global network

• Experienced deal team

Deloitte provides lead advisory services whereby we manage the entire process to completion

• Potentially undertake Vendor due diligence (VDD)


Creating value through M&APost-merger integration


The majority of merger failures are due to poorly executed

integration

True value Actual Value

What we actually

achieved

Integration gap

Benefits weren't delivered!

Clarity of purpose

Clear understanding of the rationale for the merger

across all areas of the business.

Control

Managing the process without

diverting attention from

day-day operations

Managing people

Implementing the new

organizational design as quickly as

possible and preparing HR

team

Successful integration

Blue Printing & Design

PreparationImplementation

& Tracking

Within the integration phase, Deloitte delivers value through a three step approach


Our MENA coverageHow we can add value

Creating value through M&AHow advisors can help


We can leverage our unique global network with on-the-ground audit, consulting and advisory teams across the GCC and in Qatar

Unique regional/ global network

We have diversified sector teams covering the Middle East supported by global specialists who have full coverage of all segments of the industry

Diversified sector team

We have the skills and resources to support you in this engagement as well as drawing on the expertise of our in-house professionals (consulting, financial due diligence and valuation)

Integrated service

We are a partner driven organization with a focus on relationship building through active involvement of leadership team during the engagement

Strategic relationship building

We have consistently been the leading financial adviser focusing on middle market transactions over the past five years, in EMEA and globally

Leading mid-market adviser

Fact sheet• Employees: over 2,200• Partners, Principals, Directors: 130• Countries: 15• Offices: 26

Iraq

QatarEgyptLibya

Yemen

Oman

Saudi Arabia

Bahrain

UAE

SyriaLebanon

KuwaitJordan

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Documents

Creating Value through mergers and acquisitions. 2 Contents M&A activity Growth objectives The three P’s M&A process Post-merger integration How advisors