Overseas Growth and Exit Opportunities for Utah Businesses,
PEs, and VCs
Slide 2
Agenda I.Speakers i.Michael Gibbons Chairman of Global M &
A ii.Faisal Alsayrafi, ASA, CEO of Financial Transaction House (fka
Andersen M & A Worldwide) iii.Pablo Rion iv.Saul Zeigen
v.Roberto H Castro II.Why Pursue a Merger, Joint Venture, or a
Strategic Alliance? i.Overview ii.UT and International Trade 2Utah
World Trade Center
Slide 3
Agenda III.Do Emerging Markets Offer greater return potential?
Do we forgo Mature Markets? IV.Tax Issues: US Taxation of US
Entities Abroad: an Overview of US International Tax V.Corporate
Governance and Compliance Issues VI.Conclusions VII.Supplemental
Material Colombia and Saudi Arabia 3Utah World Trade Center
Slide 4
I.Speakers Utah World Trade Center4
Slide 5
Michael Gibbons, Chairman of Global M & A Brown Gibbons
Lang & Company is a leading independent investment bank serving
middle market companies and their owners throughout the U.S. and
internationally. BGLs professionals are experts in mergers &
acquisitions, debt & equity placements, and financial
restructurings. The firm has over 35 experienced professionals from
diversified backgrounds, all of whom have an appreciation for the
unique cultures and complexities of middle market businesses and
the financial institutions that support them. Founded in 1989, BGL
has remained true to its mission of delivering corporate finance
solutions to companies with enterprise values between $50 and $500
million. Although BGLs professionals have skills applicable to
companies in a broad range of sectors, the firm has developed
specialized expertise and publishes periodic research in a number
of key industries, including metals & metals processing,
healthcare, business services, chemicals, and food & beverage.
BGL is the U.S. partner in Global M&A, one of the worlds
leading partnerships of independent middle market financial
advisory firms focusing on cross-border transactions with values
between $25 and $500 million. Utah World Trade Center5
Slide 6
Pablo Rin Pablo Rin y Asociados, S.A. de C.V. Mergers /
Acquisitions / Corporate Finance Mr. Rin is an investment banker
with more than 20 years of experience in Mexico. His firm is
specialized in middle market transactions. As founder and managing
partner of Pablo Rin y Asociados, the firm is the exclusive partner
of Global M&A for Mexico. Pablo Rin y Asociados has closed more
than 100 transactions in 20 years, with an accumulated value of
that exceeds USD $1.5 Billion. Utah World Trade Center6
Slide 7
Faisal Alsayrafi, ASA, MBA CEO of Financial Transaction House
(FTH) FTH founded in 1994 to function as the regional corporate
finance arm of Arthur Andersens financial advisory services
subsidiary. FTH has operated as a licensed independent corporate
finance advisory firm since 2002 with a GCC and North Africa focus.
Work Experience: FTH has provided corporate financial advisory
services in more than 100 transactions with a total value exceeding
$4 billion USD; including the $1.9 billion USD acquisition of a
commercial bank, a $220 million USD IPO (Al-Jazeera News), and
numerous private placements ranging up to $85 million USD. FTH
serves as financial advisor to certain members of the Saudi Royal
Family, Board Members for Saudi Holding Companies, and Saudi
Arabian Private Equity funds and regional banks involving small to
middle market company transactions, with a focus on
recapitalizations, capital raises, acquisitions, formation of Joint
Ventures and strategic alliances. FTH also provides valuation
advisory services to start-ups and mature firms in connection with
acquisitions, Fairness Opinions, and financial reporting (Purchase
Price Allocation, Goodwill Impairment Testing). FTHs investment
banking services include Feasibility studies, Exit and Succession
Planning, the issuance of Solvency Opinions, Reorganizations, and
litigation support services. Industry focus: Real estate, media and
entertainment, financial services, petrochemicals, health care,
agriculture, and basic materials or sectors focused on the
infrastructure. Utah World Trade Center7
Slide 8
Sal Zeigen Sal Zeigen is a Director at Nogal Asesoras
Financieras, Global M & As Colombia partner. Prior to joining
Nogal, Mr. Zeigen worked for 13 years with Citgroup and Rothschilds
investment banks. Mr. Zeigens M & A experience includes
numerous going private transactions involving sales by both
Colombian Government and private sector companies. Significantly,
Mr. Zeigens experiece includes the privatization process of over 20
electricity companies in Colombia, as well as in transactions in
the water, sewage, and telecommunications sectors. His private
sector M & A and JV experience project financing in the
financial sector, oil & gas sector, steel, toll roads, consumer
goods and airports concessions, among others. Utah World Trade
Center8
Slide 9
Roberto Castro Roberto Castro is a Draper, UT resident. He is
Managing Director of Wasatch Business Valuation and M & A
Consultants, LLC, based in Sandy, UT. Wasatch Business Valuation
and M & A is focused on US business valuation for tax and
financial reporting purposes, litigation support, and investment
banking engagements. He serves as Advisor to Faisal Alsayrafi, ASA,
CEO of FTH. His latest non-U.S. projects involve: Feasibility Study
of a Substantial Mixed Commercial Property Development in the
Middle East Private Placement involving a hospital operated as a
Joint Venture Purchase Price Allocation involving an acquisition by
a UAE of Saudi-based telecom company Valuation of a bank owned four
star Cairo, Egypt hotel In the US, where he recently opened his
office, his work has included providing valuation advisory services
and Exit planning services to small business owners, including use
of an ESOP, buy-sell agreements for professional service companies
in the healthcare and law sectors, valuation of start-ups, IP, and
intangible assets. Utah World Trade Center9
Slide 10
Why Pursue a Merger, Joint Venture, or a Strategic Alliance?
Timing Issues Five crucibles of change will restructure the world
economy for the foreseeable future. Companies that understand them
will stand the best chance of shaping it. McKinsey Quarterly, (June
2010) 1.The great rebalancing the rise of the middle class in
emerging markets impacts product design, market infrastructure, and
value chains 2.The productivity imperative developed countries need
to focus on innovation to create jobs 3.The global grid the rise of
global networks 4.Increased demand for commodities and the
emergence of clean tech industries 5.Challenge of governments
providing a safety net to maintain stability and balancing growth
initiatives Utah World Trade Center10
Slide 11
Why Pursue a Merger, Joint Venture, or a Strategic Alliance?
Global M & As view The sooner Boards and management commit to a
global strategy the better, while markets continue to change, the
best markets and opportunities will always go to firms that
planned, identified the market leaders, and devised controls to
build and protect shareholder value Diversify sales base Commit to
Product Innovation Secure IP Use multiple channels to build and
protect the brand Identify trends and respond Identify competitors
and competitive forces early-on Utah World Trade Center11
Slide 12
UT and International Trade Utah Governors Office of Economic
Development is focused on job creation within the state and
targeted clusters, but it is also committed [t]hrough the
International Trade and Diplomacy Office, conducts activities such
as trade missions to encourage expansion of international business
opportunities for Utah companies and attract foreign investment.
Largest international trade partners: UK, Canada, Mexico, China,
and India Active Trade in Industries: commodities/mining,
electronics, medical equipment, industrial machinery, aerospace
equipment, auto parts, and cosmetics Utah World Trade Center12
Slide 13
Tax Issues: US Taxation of US Entities Abroad: an Overview of
US International Tax DISCLAIMER The following are issues thatin our
experiencearise with US- based clients and operations. We are
investment bankers, not attorneys. Accordingly, neither this
section nor anything in this presentation is intended to serve as
legal advise. Each firm is strongly encouraged to consult with
qualified international business, IP, and/or tax counsel! Utah
World Trade Center13
Slide 14
US (International) Tax Regime History of Tax Acts impacting
Foreign Income Income Tax Act of 1913 (imposed a 1% tax on the
worldwide net income of US citizens) Revenue Act of 1918 (credit
against US tax liability for foreign taxes paid) Revenue Act of
1921 (limit of foreign tax credit imposed on an overall basis)
Revenue Act of 1932 (foreign tax credit limitation imposed on the
lesser of a per country or overall basis. In addition, sec. 367
extended non-recognition-of-income rules under subchapter C to
certain extraordinary transactions involving a foreign corporation
(e.g., the transfer of a parents patent rights to a foreign
subsidiary in exchange for shares in a foreign subsidiary)). Utah
World Trade Center14
Slide 15
US (International) Tax Regime History of Tax Acts impacting
Foreign Income (cont.) International Revenue Code of 1954 (overall
limitation on the foreign tax credit repealed, leaving a per
country limitation as the sole limitation and the deemed-paid
credit extended to second- and third-tier foreign subsidiaries.
Revenue Act of 1958 (allowed for the carry-back and forward of
excess foreign tax credits. This remained in effect until 2005 when
The American Jobs Creation Act (AJCA) of 2004 reduced the
carry-back period but extended the carry- forward period to 10
years) HR 0087 (1960) (the overall FTC reenacted as an optional
method, but if elected, cannot use the per-country method) Revenue
Act of 1962 (Subpart F enacted, this eliminated the deferral
taxation of passive foreign subsidiary income in situations deemed
abusive (e.g., FPHC income (e.g.. US citizens w/tax haven company
that earned passive income in the form of dividends, interest,
rents, and royalties), Foreign Base Company Sales income, Foreign
Base Company Services Income (e.g., a tax haven company providing
marketing, engineering, or accounting services to a related
corporation)). Utah World Trade Center15
Slide 16
US (International) Tax Regime History of Tax Acts impacting
Foreign Income (cont.) Foreign Investors Tax Act of 1966 (replaced
the force-of-attraction with the effectively connected income.
Significantly, the pre-1966 exemption from US taxation for the
foreign source income of a US branch was repealed, but the Foreign
Tax Credit was allowed for foreign-sourced income) Tax Reform Act
of 1969 Revenue Act of 1971 (DISC created) Tax Reduction Act of
1975 Tax Reform Act of 1976 Tax Reform Act of 1984 (sec. 367(d)
introduced governing outbound transfers of intangible property,
such as patents, copyrights, trademarks, and trade secrets; such a
transfer to a foreign company was treated as giving rise to a
stream of royalty payments over its useful life, rather than
recognition of gain upon the transfer) Tax Reform Act of 1986
(significantly reduced the FTC; baskets of income, each with its
own foreign tax credit limitation) Utah World Trade Center16
Slide 17
US (International) Tax Regime History of Tax Acts impacting
Foreign Income (cont.) OBRA 1993 (new anti-deferral provisions
added to the Code (sec. 956A) subjecting accumulated active
business profits of CFCs that were not reinvested in active
business assets to US taxation) Small Business Job Protection Act
of 1996 (repealed sec. 956A since the law provided incentives for
CFCs to make foreign investments, enter into transactions, and
engage in reorganizations to avoid the tax it discouraged
investment in the US Tax Payer Relief Act of 1997 November 2000;
Congress repealed the FSC structure and replaced with the
Extraterritorial Income Exclusion Act; this Act provided a partial
territorial system proving relief from double taxation for both
exports and foreign production; declared illegal in 2002 by WTO
American Jobs Creation Act of 2 2004 (among other things it enacted
provisions aimed to stop abusive corporate inversion transactions)
Utah World Trade Center17
Slide 18
US (International) Tax Regime History of Tax Acts impacting
Foreign Income (cont.) More recent activity The Education Jobs and
Medicaid Assistance Act of 2010 (new provisions target the foreign
tax credit planning, with an emphasis on indirect credit planning
by US multinationals) Utah World Trade Center18
Slide 19
US (International) Taxation The US employs a credit system and
taxes U.S. persons on their worldwide income. 61 and 901. U.S.
persons: includes U.S. citizens, resident aliens, and domestic
corporations. Exception: The U.S. credit system contains a deferral
wherein the U.S. does not tax foreign-source income earned by a
U.S. person through a foreign corporation until those profits are
repatriated by the domestic shareholder through a dividend
distribution. Utah World Trade Center19
Slide 20
US (International) Taxation Strategic Planning considerations
will include tax planning too. There will be situations where the
taxpayer (U.S. corp.) will be in an excess limitation position
(that is when the foreign tax rate is lower the U.S. tax rate) and
in an excess credit position (that is when the foreign tax rate is
higher than the U.S. rate) Eliminate the excess credit by
increasing the percentage of taxpayers total taxable income (buy
more of the foreign entity or arrange to have titlewhen inventory
is soldpass in the foreign country. Another option is
cross-crediting (blend low- and high tax foreign source income).
Utah World Trade Center20
Slide 21
US (International Taxation) Subpart F (Code secs. 951-965) was
enacted in 1962 to close a perceive loophole (a U.S. multinational
corp.'s foreign-source income earned through a foreign source was
not taxed until the sub repatriated the dividend through a
dividend). Prior to 1962, this was one of many reasons for
cross-border M & A (Code driven) Subpart F requires U.S.
shareholders of a CFC to include in income a deemed dividend equal
to a pro rata share of the CFCs Subpart F income. Sec. 951. A
foreign corp. is a CFC if the U.S. shareholders own more than 50%
of the stock of the foreign corp., either by vote or value.
Effective for tax years after 2006, sec. 954(c)(6) treats DIRR
accrued or earned from a related CFC to be outside the FPHCI
(Foreign Personal Holding Company Income). This placed US
multinationals on par with foreign multinationals. Utah World Trade
Center21
Slide 22
Mergers and Acquisitions Developed Markets v. Emerging Markets
Global M & A sees more M & A in emerging markets as opposed
to developed markets. Liquidity and Exits are more readily
available in the developed markets where Private Equity funds
compete, as do strategic purchasers Emerging Markets M & A are
picking-up, however, the activity is regional and with known
competitors. Liquidity and exits are available provided management
is patient. Utah World Trade Center22
Slide 23
Merger and Acquisitions In the US, Mergers are usually pursued
in lieu of building from scratch--to: Boost economies of scale
Generate greater sales revenue Build market share within existing
or new markets Broaden or diversify the customer and/or product
base, and Increase tax efficiency Cross-border M & As share
these same reasons and are pursued by US firms that have worked
with the target, understand local customs, management, and believe
the target market is relatively efficient and ready for growth.
Utah World Trade Center23
Slide 24
What is the trend in cross-border M & A? Taxable or
Non-taxable transactions? On January 23, 2006 the Treasury issued
final regulations that allow for certain mergers (A Reorgs, sec.
368(a)(1)(A)) with foreign entities to qualify as tax-free
reorganizations. Treas. Reg. Section 1.368-2(b)(1)(i) expands the
ability of certain foreign and disregarded entities to qualify
under Section 368(a)(1)(A) as statutory mergers, only if two events
occur simultaneously at the effective time of the transaction.
Those events are (1.) All of the assets and liabilities of the
transferor become assets and liabilities of one or more of the
members of one other combining unit; and (2) the combining entity
of each transferor unit ceases its separate legal existence for all
purposes.. Utah World Trade Center24
Slide 25
What is the trend in cross-border M & A? Taxable or
Non-taxable transactions? The IRC favors A reorgs. involving
foreign entities. The language in the regulations suggests that
forward triangular reorganizations fall within the tax-free
exchange, but not reverse triangular mergers. But how common are A
reorgs. Review: An A reorg. Combines two separate legal entities
into one (consolidation or merger) Utah World Trade Center25
Slide 26
What is the trend in cross-border M & A? Taxable or
Non-taxable transactions? A Reorg considered the most flexible; no
limitation on the type of consideration involved; Target
shareholders may receive cash, voting or nonvoting common or
preferred shares, notes or real property. At least 40% of the
purchase price must be acquiring company stock to ensure the
Continuity of Interests requirement is satisfied. B Reorg
stock-for-stock and no boot. Can replicate using a reverse
triangular merger (E Reorg) that allows some boot. C Reorg
stock-for-assets reorganization; substantially all assets of the
Target solely for voting stock of Acquirer D Reorg Forward
Triangular Merger and divisive reorgs E Reorg Reverse Triangular
Merger (common in the US but not a good option for cross-border M
& A Double Dummy more common in the US (sec 351 followed by a
Reverse Triangular Merger) but problematic w/cross-border M & A
Utah World Trade Center26
Slide 27
Joint Venture: Definition There is no fixed legal definition.
It is generally understood that it encompasses an: 1. Undertaking
by two existing businesses; 2. That share risks (liabilities and
losses); 3. Profits; 4. Control; and/or 5. Management Utah World
Trade Center27
Slide 28
Global M & As experience with US firms pursuing a foreign
Joint Venture Classic Form Other Two parties (or more) form a
corporation In the case of 2 businesses, they each take a 50-50
share in the business, Both entities manage the operations; and Key
person (from the US side) monitors compliance and reports to the US
CEO. Buy a 50% +/- share in an existing foreign business or where
IP involved, form a JV in a tax haven (to protect IP and have that
entity enter a licensing agreement with foreign partner) One of the
Joint Venturers takes a lead role managing operations (usually the
foreign partner) Key US person (from the US side) monitors
compliance and reports to the US CEO. Utah World Trade
Center28
Slide 29
Global M & As experience with US firms pursuing a foreign
Joint Venture The form of Joint Venture often reflects the
intensity of cooperation. Equity JVs typically require a greater
commitment and a more hands on approach Equity JVs require more
than just termination of the contractual agreement, it requires a
liquidity event. The liquidity event can involve: an acquisition,
merger with a portfolio firm (meaning a sale to a foreign or US PE
or VC) Contractual JVs (where the JV enters into a licensing or
distribution agreement with the foreign partner) Easier to unwind,
less costly, less risky and limited to no upward potential besides
what the channels developed. Utah World Trade Center29
Slide 30
Joint Ventures: Get to know the market and minimize the
downside risk The Cass School of Business recently conducted a
study where it compared the frequency of use of Joint Ventures v.
Strategic Alliances and it found that: the activity of both joint
ventures and strategic alliances during our sample period. It is
clear from the exhibit that strategic alliances in most years are
the most common alliance type. However, joint venture activity
rises in frequency after a major downturn (indicated with circles),
whereas strategic alliances show no such correlation to these
crises. Utah World Trade Center30
Slide 31
Joint Ventures: IRC sec. 902 Applies if you are a 10/50
corporation If you own more than a 10% interest in the JV, but own
50% or less, then this interest is called a Non- controlled foreign
corporations subject to IRC 902. It is referred to as a 10/50
corporations. See IRS Notice 2003-5 (consult with counsel) As long
as the U.S. corporation owns at least 10 percent of the voting
stock of a foreign corporation, it is deemed to have paid an
allocable share of foreign income taxes paid by the foreign
corporation on earnings distributed as a dividend. (It became
easier in 2003 to get the Foreign Tax Credit.) Utah World Trade
Center31
Slide 32
Joint Venture Capital sources remain cautious and Global M
& A believes that will continue to be the case for the next few
years. Research undertaken by academia in the UK confirms this
impression: the activity analysis uncovered another important
finding: relative joint venture activities increased significantly
after the last credit crisis in the early 1990s. An explanation
could be that the constraint of capital in the years during and
immediately following the crisis significantly changed the
relationship in activity between the two deal types, as one
fundamental component in an acquisition is the acquirers access to
capital. In joint venture deals, the capital requirement is
typically significantly less. Utah World Trade Center32
Slide 33
Global M & As experience with US firms pursuing a foreign
Joint Venture Why Joint Ventures Enter a new market or a new
business segment Risk averse Limited capital (resources for an M
& A are limited) Limited personnel Risks exists: In the case of
technology, control is partially lost; Management efficiency can
improve or be compromised; Future resource allocation/focus can
change Forms Seen R & D JV(ideal for VCs), Production of goods,
distribution, sale of products, marketing, property development JV,
e- commerce Utah World Trade Center33
Slide 34
Legal Form and Capital Structure Legal Form Partnership
Corporation LLC Capital Structure Remarks regarding multiple
classes of preferred stocks and convertible debt instruments
(sometimes these cannot be used at all or are so rarely used that
there is little local experience with them and it would be unwise
to use them) Utah World Trade Center34
Slide 35
Exits and Terms of the JV: Global M & As Experience Exits
events take several forms Based on a term of years (time)
Termination of a Project (a government project; example a project
where US firm enters via World Bank, US AID) Terms in a JV
Agreement Interest-transfer provisions are critical and challenging
Common ownership transfer provisions Right of First Refusal Right
of First Offer Drag-Along Rights Tag-Along Rights Russian
Roulette/Texas-Shoot-out/Dutch Auction Arrangement Forced Sale Utah
World Trade Center35
Slide 36
Mexico: Asociacion en Participacion (akin to a JV in Mexico- an
unincorporated partnership) The Asociacin en Participacin is
described in MXs General Corporation Law as the contract by which
one person shares capital profits or loss with others that provided
goods of services within a commercial relation or one or several
commercial transactions. Considerations involving Mexico Antitrust
laws, Foreign Investment Law, General Corporation Law, NAFTA and
other Treaties (US MX Tax Treaty) Choice of law Dispute Resolution
Methods (arbitration is recognized) Importation (import duties ad
satisfaction of non-tariff requirements) Intellectual Property and
Licensing (if MX is distributor, need to register the license
agreement with MX IP authorities) Utah World Trade Center36
Slide 37
Strategic Alliances: Test the Waters and Minimize the Upfront
Risk When to think alliance In some circumstances, the market seems
to reward alliances more richly than mergers and acquisitions.
Maybe it knows something that many managers dont. McKinsey
Quarterly, November 2000 37Utah World Trade Center
Slide 38
Strategic Alliances: Tax Issues U.S. companies that export
their products through independent distributors will not have a
taxable presence within the importing country and, therefore,
foreign tax reduction planning is a considered a moot issue.
Generally, a U.S. exporter will be subject to host country taxation
only if it has a permanent establishment within the host country.
Once the U.S. exporter establishes a foreign sales office it must
decide whether to structure the foreign sales operations as either
a branch or a subsidiary. An unincorporated foreign branch is
considered an extension of the domestic corporation, as opposed to
a separate legal entity. The foreign branch is subject to the U.S.
tax at the regular corporate rate with a FTC. The foreign
subsidiary arrangement has historically enabled those foreign corps
to defer payment. A foreign sub may receive local tax incentivesa
tax holidayand more control over the timing of income. Utah World
Trade Center38
Slide 39
Strategic Alliance(s) The term Strategic Alliance is also
undefined. As a general rule, they entail less upfront costs, but
also a lot of risk; this is often the least expensive way to enter
a market. Profit potential is capped, as are losses. You get to
learn about the target market, companies in the market, and your
staffs talents. Shareholders tend to like it b/c it does not
involve the transfer of an equity stake and in non-dilutive. Global
M & As experience: Works well with firms with limited capital
and access to finances Enables smaller firms to learn, build
relationships, and either form a JV, acquire an interest in the
foreign partner and have a greater say, or establish a new business
relationship with a (former) competitor in the new market. Tricky
issues: who owns the IP rights developed pursuant to the strategic
alliance? What about capital infusions? Utah World Trade
Center39
Slide 40
Do Emerging Markets Offer greater return potential? Do we forgo
Mature Markets? Utah World Trade Center40
Slide 41
2010 World Bank Ranking: Business Friendly Countries Economy
Ease of Doing Business Rank Starting a Business Dealing with
Construction Permits Registering Property Getting Credit Protecting
Investors Paying Taxes Trading Across Borders Enforcing Contracts
Closing a Business Singapore 142156241132 Hong Kong SAR, China
261562332215 New Zealand 3153212628916 United Kingdom
41716222101615237 United States 592712656220814 Denmark
62710301528135305 Canada 7329373251041583 Norway 833658462018944
Ireland 9113878155723379 Australia 102633565948291612 Saudi Arabia
1113141461661814065 Georgia 128721520613541105 Utah World Trade
Center41
Slide 42
Discipline and Experience are needed to Succeed in both
Developed and Emerging Markets 42Utah World Trade Center
Slide 43
Wall Street Journal, 3 January 2011 With this stronger
foundation, coupled with new confidence about the global economy,
corporations are looking to expand. Many are focusing on the
faster- growing economies of Asia, Latin America and Africa, rather
than the sluggish markets of Europe and the U.S. Others plan to
enlarge existing operations through new equipment, products,
factories and research labs. Big Firms Poised to Spend Again by
James R. Hagerty and Dana Mattioli 43Utah World Trade Center
Slide 44
MarketWatch, 3 January 2011 The current growth rate of 2% to
2.5% makes this the most anemic recovery since World War II. At
this rate, it could take us another three or four years just to get
back to the employment level we had prior to the start of the
recession, and that does not account for the added jobs we need for
normal population growth, immigration and returning veterans if we
withdraw from the Middle East. * * * Now, the worlds manufacturing
axis is shifting to Asia, and it is not coming back to the United
States except in a more efficient form that uses less labor to be
globally competitive. We have expanded government and services at
all levels beyond our ability to support them without further
damaging competitiveness. The Long Road to Recovery by Robert
Mittelstaedt, Dean of the W.P. Carey School of Business at Arizona
State University 44Utah World Trade Center
Slide 45
The Outlook: Emerging Markets Lead in GDP Growth Stability,
Pro-business environment, and emergence of a Middle Class 45Utah
World Trade Center
Slide 46
Views on entering a new market by way of M & A, JV, or a
Strategic Alliance Michael Gibbons, CEO of Global M & A Faisal
Alsayrafi, ASA, CEO of FTH Strategic Alliances offer the best
opportunity to enter and assess the GCC markets (especially where
Intellectual Property is involved). Private Equity in the Middle
East usually buys a minority interestthat can changeand look for an
IPO as the preferred exit. Within the firm, constructive advise and
involvement is critical. Returns are high and US Private Equity is
beginning to enter the GCC and Egypt market, usually in a recap or
sale of portfolio company not ready for an IPO. Utah World Trade
Center46
Slide 47
Views on entering a new market by way of M & A, JV, or a
Strategic Alliance Pablo Rin, Pablo Rin y Asociados, S.A. de C.V.
Instead of entering alone, it is better to do enter into a joint
venture with a local market because of : Know who and know how are
critical Understand market trends, opportunities, risks, and
weaknesses Seek and Retain Experience in managing local personnel
Due Diligence: Ensure contacts with key customers and suppliers
exist and assess the quality of these Retain competent legal to
assist in the JV and address any and all regulatory issues Saul
Zeigen, Nogal Asesoria Financieras S.A. Utah World Trade
Center47
Slide 48
Conclusions: 1. Expanding the business into new markets has
always been an attractive option to achieve growth for well-
established firms. Whether the expansion is geographical or in
terms of boosting the product line, the need for expertise and
knowledge of unexplored areas is of vital importance. Cass School
of Business 2.Joint Ventures and Strategic Alliances enable firms
to enter new markets and learn. They require patience and
commitment and are usually a precursor to M & A. 48Utah World
Trade Center
Slide 49
Conclusions: 3.Think and act Regionally and Globally Emerging
Markets: Beyond The Big Four -- Egypt, Mexico, Poland, South
Africa, South Korea, and Turkey are investor-friendly and boast
strong growth, too The biggest, fastest-growing economies of the
Third World are Brazil, Russia, India, and China. But while the Big
Four, also known as BRICs, have attracted the most investor
attention in recent years, there are also opportunities in less
prominent but more promising emerging markets such as Egypt,
Mexico, Poland, South Africa, South Korea, and Turkey. They may not
have the buzz of billion-plus population markets, but their growth
is impressive -- and their stocks, in many cases, can offer s
superior value. BusinessWeek article (2005) 49Utah World Trade
Center
Slide 50
Conclusion We invite you to visit Global M & A at
http://www.globalma.com To learn more about Global M & A and/or
explore M & A, JVs, or Strategic Alliances within our network
please contact: Roberto H Castro, JD, MST, MBA, AVA at 801-953-3675
Utah World Trade Center50
Slide 51
Global M & A: Contact Information Thank you for attending
the UT Global M & A presentation. For further information
and/or comments regarding Global M & A and any of the parnters,
please contact us through: Roberto H Castro, JD, MST, MBA, AVA
(801) 676-6433 (office) (801) 953-3675 (c) (801) 285-7401 (fax)
Utah World Trade Center51
Slide 52
Investment Banking Global Partners Industrialized Countries
Emerging Markets United StatesUnited Kingdom FranceCanada
ItalyAustria SwedenSwitzerland SpainDenmark GermanyHungary
Netherlands Belgium AustraliaLuxembourg JapanNorway IsraelPoland
MexicoGuatemala Costa RicaGCC & Yemen India (Mumbai) China
(Beijing) China (Shanghai) Brazil (Porto Alegre) Brazil (Sao Paolo)
TurkeyRussia ChileArgentina ColombiaPeru Utah World Trade
Center52
Slide 53
Industries Served Business Sector Logistics, Security,
Facilities Management Chemicals Agricultural, Specialty, Paintings
and Coatings, Rubber and Plastics, Consumer Chemical Construction
and Real Estate including Hotels, Commercial Mixed Use Consumer
Products Home furnishings, food and beverage, health and personal
care, lawn and garden Energy and Mining oil and gas (services),
coal, precious metals, rare earth, green energy, water, utilities
Utah World Trade Center53
Slide 54
Industries Served (cont.) Financial Services & Insurance
commercial banks, asset lending, private banking Healthcare and
Pharmaceutical healthcare services (hospitals, ASC, out-patient
surgery centers), medical devices and equipment (patented and
subject to approvals by either FDA or the EMA (European Medicines
Agency)), pharmaceutical, and biotechnology (Phases I to III)
Industrials automotive components, hydraulics and fluid power,
instrumentation, and power generation, conversion, distribution,
and transmission Information Technology - software to hardware to
communication Leisure and Retail Media, Marketing &
Entertainment Packaging Utah World Trade Center54
Slide 55
Global M & A Services Utah World Trade Center55 Mergers
& Acquisitions over 1,500 transactions closed with an aggregate
deal value of over 30 billion Small-to-Middle Market focus Assist
PE funds, VC firms, and Angels to identifying potential Exit
options Formation of Joint Ventures and Strategic Alliances as a
precursor to M & A Succession Planning Recaps Identification of
International Financial Buyers, particularly Private Equity funds
(as buyers)/Auctions Identification of International Strategic
Buyers (as purchasers)/Auctions Restructurings and Turnarounds
IPOs: US and foreign countries (UKs AIM, NASDAQ Dubai)
Slide 56
Global M & A Recent Transactions Utah World Trade
Center56
Slide 57
Sampling of Recent Transactions by Global M & A Partners
Germany Healthcare (sale of hospital group w/8,000 beds) Saudi
Arabia Private Placement for hospital (a operated as a Joint
Venture SAR 220,000,000) Saudi Arabia Private Placement (tourism
company focused in the promotion of Middle East destinations SAR
175,000,000) Denmark Sale to Norwegian company of off-shore crane
installer) Chile sale of vineyard and several recaps Israel
Purchase by Polish firm of leading Israeli IT comp Mexico Sale to
Kimberly Clark of diaper company US Sale of Georgia firm (specialty
metals) Utah World Trade Center57
Slide 58
Colombias Global M & A Partner Supplemental Material Utah
World Trade Center58
Slide 59
Colombia Macroeconomic Highlights January 2011
Slide 60
Colombia As An Investment Destination Colombia General
Information and Location Official name: Repblica de Colombia
Population (2010): 45.5 million Capital: Bogot (2010), Population:
7.4 million GDP nominal (2009): US$ 208.551 million* GDP per cpita
(2009): US$ 4.676 GDP growth (2010): 4,0%; (2009): 0,4% Inflation
(2010): 3,2%; Exports (FOB) (2010): US$ 35.974 million ** Imports
(FOB) (2010): US$ 32.897 million*** Foreign Direct Investment
(2010): US$ 9.483 million Literacy rate: 92,8% Currency: Peso
colombiano Current Exchange rate: $1.914 pesos per US$1 dollar
(31/12/2010) 60 *Estimated ** November 2010 ***October 2010
Slide 61
Colombia As An Investment Destination Macroeconomic Stability
Colombia has become one of the major investment destinations in
Latin America due to several aspects: Colombia's GDP has grown
steadily over the Latin American average and has kept inflation
within the single digits. Increased FDI (Foreign Direct Investment)
Foreign Direct Investment has been growing steadily over the past
decade, rising from USD $ 2,134 million in 2002 to $ 10,600 million
in 2009. Increased levels of security Colombia is ranked within the
top 10 countries for doing business in Latin America, according to
"Doing Business Report" 2010. Part of this progress is due to the
issuance of new legislation that improves its business platform
standards. 42 positions were modified during 2007 and 2010.
Investor incentives: Free Zones. Legal stability contracts. Income
tax deductions. Emerging Markets Emerging markets are driving the
worlds GDP growth, becoming recipients of the investments once
directed to developed countries. Safety is the central governments
primary objective evidenced by improved safety level indicators.
Private investment Stimulus 61
Slide 62
During the past years, Colombia has maintained a steady GDP
growth and has kept inflation within the single digits, positioning
the country as one of the regions most solid economies with
significant growth prospects: Colombias Historical
InflationColombia s GDP Growth Source: Banco de la Republica The
country's sustained growth has taken place in a healthy manner and
is based on several aspects: Increased commodity demand from
emerging economies. Gradual diversification of the market.
Appropriate fiscal and monetary policy. Security. Stability. 2009
GDP : Colombia Vs. Other Countries In The Region Source: Banco de
la Republica Source: Banco de la Republica and International
Monetary Fund Evolution Of Macroeconomic Indicators 8.8% 7.7% 7.0%
6.5% 5.5% 4.9% 4.5% 5.7% 7.7% 2.0% 3.2%
20002001200220032004200520062007200820092010 2.2% 2.5% 4.6% 4.7%
5.7% 6.9% 7.5% 2.4% 0.4% 3.6% 4.0% 2001 2002 2003 200420052006
20072008 2009 2010 QIII 2010 (E) 62
Slide 63
2,134 1,720 3,016 10,252 6,656 9,049 10,600 7,261 5,466
200220032004200520062007200820092010* Source: Proexport and Banco
de la Repblica FDI growth has been supported by: Decrease in the
countrys risk premium. Increase in the international commodity
prices. Higher local interest rates compared to local rated AAA
economies. USD$ 4.714 M SAB Miller Investment * Other includes
construction and communal services. Source: Banco de la Republica
Foreign Direct Investment (USD$ MM) Foreign Direct Invesment by
industry 2009 (USD$ MM) Source:Standard & Poors` * Figures for
August 2010 Source: Standard & Poors Sovereign Ratings
Latinamerica A+ BBB+ BBB- BB+ BB- B- Investment Grade Colombia is
one notch below the investment grade level. Standard & Poors
expects a rating improvement based on: Improvements in the
flexibility of economic policy. Increased size of the local
financial market. Improved safety standards. Increased economic
strength. Prudent fiscal management. Increased investment in
infrastructure. Regardless of the non-investment grade level, debt
and capital resources have increased over the last decade. Brazil
Mining Oil Agriculture Public Services CommerceFinancialManufactu
ring Transporta tionl Other* Sovereign Rating and Foreign Direct
Investment 63
Slide 64
Consumer Confidence Index Source: Fedesarrollo The continuing
decline in inflation, during the last decade, combined with
sustained economic growth (GDP), lower interest rates and increased
foreign direct investment reflect the higher levels of consumer
confidence. The increase confidence levels will result in increased
investment flows, mergers and acquisitions, reflecting the economys
dynamism. Banco de la Republica Intervention Rate Source: Banco de
la Repblica M&A Colombia (USD$ MM) Source: Capital IQ Low
investor confidence Bavaria: 65% Telecom: 33% Avianca and
Coltabaco: 68% Prodeco: 28% BP: 39% Financial crisis Transaction
proportion to year total Increased Confidence Levels 64
Slide 65
65 Doing Business in Colombia: Conclusions Most stable
democracy in the neighborhood Consistently stable regulatory
framework Oil and Gas sectors strongly growing: High Capital
Expenditures levels in Exploration & Production Infrastructure
sector outrageous potential growth Oil and Gas transportation
networks needed Appropriate macroeconomic scenario: inflation,
interest rates and devaluation under control Private Equity Funds
entering Colombia Infrastructure and Hydrocarbon funds have been
set to boost new projects Banks strongly willing to finance
projects in infrastructure sectors Colombian companies willing to
become regional players Improved security
Slide 66
Saudi Arabia: Global M & As Partner Supplemental
Information Utah World Trade Center66
Slide 67
Financial Transaction House Company Profile and Credentials
Strictly Confidential M & A and Financial Advisory
Services
Slide 68
68 INTRODUCTION TO FTH Financial Transaction House was
established by Mr. Faisal Alsayrafi, ASA, MBA, who serves as FTHs
President and CEO. FTH is as an investment banking firm based in
Jeddah, Saudi Arabia. FTH was started in 1994 and was previously
the corporate finance arm of Andersen M & A Worldwide in the
Middle East. FTH provides a wide range of corporate finance
advisory services to a diversified client base in the Middle East,
the base is comprised of strategic and financial investors. FTH
continues to offer its clients a complete and integrated solution
from structuring M & A transactions, reorganizations,
recapitalizations, business valuations, including business
valuations for IFRS financial reporting purposes, establishment of
JVs, and litigation support services. Our focus on the Middle East
and our knowledge of the local business context and culture has
helped us establish close relationships with senior management of
top companies, as we help them address the challenges they face in
an increasingly complex, global and competitive business
environment.
Slide 69
69 Financial Transaction House (FTH) is the 3rd licensed firm
by the Capital Market Authority (CMA) Financial Transactions House
receives License 28 June 2005 According to the Subject (6/A-18) of
the Capital Market Authority issued by Royal Decree number (M/30)
dated (2/6/1424H) and subject (7) of the Capital Market Authority
by decision number 1-38-2005 dated 21-5-1426H, 28/6/2005, the
Capital Market Authority has approved applications of Financial
Transaction House and granted it the license to operate as a
transaction manager and offer advisory services for Capital Market
engagements.
Slide 70
70 Financial Transaction House (FTH) Services Offered.
Financial Advisory Services Business Valuations IPO & Private
Placements Mergers & Acquisitions/JV Local & International
Strategic Partnership Structuring Financial Instruments Debt
Syndication Fairness Opinions Corporate restructuring
Slide 71
71 INTRODUCTION TO FTH - Continued ( FTH) Currently became the
Global M&A Partner for the Gulf Region and Yemen. Global
M&A is widely recognized as one of the world's leading
partnerships of independent merger and acquisition houses. Its
prime purpose is to provide cross-border support and opportunities
for clients who wish to complete acquisitions, company sales,
buy-outs and buy-ins, fund raising and other corporate finance
transactions. Global M & A is comprised of over 30 partner
firms; its partners are in the U.S., UK, Western and Eastern
Europe, Russia, Hong Kong, Japan, India, Mexico, Argentina,
Colombia, Chile, Brazil, and Turkey. The partnership's focus is on
mid-market transactions, valued at between 20 million and 250
million, and each partner has been carefully selected as 'best of
breed' in their own local territories. Global M&A's success in
delivering outstanding results for its clients is borne out by its
recent track record: over 700 completed transactions with an
aggregate deal value of over 15 billion since 2000. For more
details about Global M&A, please visit www.globalma.com
www.globalma.com
Slide 72
72 Equity Research Department Equity Research Department is a
key support to the FTH arranging and advisory services Create a
Complete Saudi Market Database which Covers: State of the economy
and related news General Stock Market news All corporate actions
pertaining to listed companies including earning reports, stock
splits, financial statements and ratios Historical market data on
all companies CMA news and announcements. Support Technical
department with equity research data Market Reports: Prepare and
issue a weekly market coverage report which covers the technical
aspects of selected companies and also for the market as a
whole
Slide 73
SELECTED TOMBSTONES. 2010 Business valuation Magrabi Hospitals
& Centers 2008 Al Banawi Industrial Group Business Valuation
2009 Business Valuation Global Arabian For Modern Application LTD
2010 Restructuring Saudi Bell Co. 2009 Advisory Valuation
Information Memorandum 2009 Business Valuation Global Distribution
Co. Ltd. 2008 Information Memorandum National Experimental
Establishment (Mutawaffy HujjajSouth Asian Countries) 2006 Buy side
Mandate 2008 Al Raya Foodstuff Est 2009 Business Valuation Al Rajwa
Est. 2009 Anaam International Holding Group Capital Restructuring
Al Hajerah Est. SAR 97,845,000 In progress Private Placement Taif
Investment & Tourism Co. In progress Private Placement Najran
Holding Co. (Under Establishment) SAR 450,000,000 Undisclosed 2009
Private Placement Al Aton Steel Industry 2010 Valuation Sell side
mandate Sami Mufti Est. SAR 10,000,000
Slide 74
FTH Team Mr. Alsayrafi founded FTH in 1994 as the regional
corporate finance arm of Andersen, and has operated as an
independent corporate advisory firm since 2002, offering a wide
range of corporate finance advisory services to a diversified
client base in the Middle East. Faisal, responsible for reviewing
technical aspects of transactions and ensuring quality advisory,
has directed the development of relationships and managed high
profile transactions in the real estate, media and entertainment,
financial services, petrochemical and general industrials sector,
working with client organizations in Saudi Arabia, Egypt, UAE,
Lebanon, Bahrain, Yemen, Qatar, UK and USA. Mr. Alsayrafis
experience includes his role as managing partner of Andersens
Global Corporate Finance practice in the Middle East, a senior
management position with one of the regions largest food
manufacturers, and numerous international and regional finance and
strategy roles, leading to an exceptionally strong network of
regional and local contacts in finance, business and government.
Faisal holds an MBA from the University of Vermont and an MS in
Accounting from the University of New Haven. He is a Registered
Financial Consultant (RFC), Saudi Arabia, and an Accredited
Arbitrator by the GCC Association for Arbitration. In addition,
Faisal holds the following qualifications from the United States;
American Society of Appraisal (ASA), CFC, RFC, CFE, CVM, CVA,
CM&E, CM&A, CPES, as well as being a Master Financial
Professional and a Certified Senior Business Analyst. Faisal has
also earned the prestigious ASA designation conferred by the
American Society of Appraisers and is an Accredited Senior
Appraiser (ASA). Mr. Alsayrafi is the first and only Arab
investment banker to complete and pass the ASAs stringent
experience and examination requirements. Faisal Alsayrafi Managing
Director & CEO 74