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8/8/2019 EY Webcast Capital Matters
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Disclaimer
Ernst & Young refers to the global organization of member firms ofErnst & Young Global Limited, each of which is a separate legalentity. Ernst & Young LLP is a client-serving member firm ofErnst & Young Global Limited located in the US.
This presentation is 2010 Ernst & Young LLP. All rightsreserved. No part of this document may be reproduced,
transmitted or otherwise distributed in any form or by any means,electronic or mechanical, including by photocopying, facsimiletransmission, recording, rekeying or using any information storageand retrieval system, without written permission fromErnst & Young LLP. Any reproduction, transmission or distributionof this form or any of the material herein is prohibited and is in
violation of US. and international law. Ernst & Young LLPexpressly disclaims any liability in connection with use of thispresentation or its contents by any third party.
The views expressed by panelists in this webcast are notnecessarily those of Ernst & Young LLP.
8/8/2019 EY Webcast Capital Matters
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Capital matters:Strategic transactions andIPO readiness
27 April 2010
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Todays moderator
Jeff GreeneErnst & Young LLPPrincipal, Transaction Advisory Services
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Todays agenda
Moving from survival to growth
Navigating your transaction strategy
What does it take?
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What size company do you represent?
A. Less than $500M in revenue
B. $500M - $1BC. $1B - $5B
D. $5B -$10B
E. More than $10B
F. Work for Ernst & Young
Fact check
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Todays panelists
Live from New York
David Tehle, Dollar GeneralExecutive Vice President and CFO
Thomas Wroe, Jr., Sensata
Chairman and CEO
Jacqueline Kelley, Ernst & Young LLPStrategic Growth Markets
Gary Silacci, Ernst & Young LLPTransaction Advisory Services
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Dollar General
Discount retailer with 8,800+ stores in 35 states
$11.8 billion revenues in 2009
79,000 employees
Acquired by KKR for $7.3 billion in 2007
November 2009 IPO raised $823 million
Secondary offering in April for $810 million
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Sensata
Sensors and controls for HVAC, automotive, andindustrial markets
$1.1 billion revenue in 2009
9500 employees worldwide
Purchased by Bain Capital in 2006 for $3 billion fromTexas Instruments
March 2010 IPO raised $569 million
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Todays agenda
Moving from survival to growth
Navigating your transaction strategy
What does it take?
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Moving from survival to growth focus
CreditBubble
Financial Crisis/Recession
Uneven Recovery
RestructuringCost cutting
Hoardingcash
Positioning forgrowth
Investing inflexibility
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Capital confidence barometer
EY/EIU surveyed 817 executives in March 2010
Represented 40 industries and 51 countries
329 C-level respondents
419 qualify for Fortune Global 500 based on revenues
Improving economic outlook
40% believe downturn will end in the next 12 months
61% expect it to end in their industry within 12 months
Global IPO activity showing substantial improvement
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Increasing optimism for M&A
Companies expect to grow through M&A 57% expect to make an acquisition in the next 12
months, compared with 33% in October 2009
67% in the next two years
Transaction market recovery underway
Strategics with financial capacity driving consolidation
Distressed opportunities
Private Equity reappearance
Capital markets opening selectively
Variety of deal structures, contingent consideration
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IPO activity on the upswing
Q1 2010: 267 global IPOs raised $53.2 billion
Q1 2009: 52 global IPOs raised $1.4 billion
New IPO registrations are back to pre-recession levels
Over 90 in registration at Q1 2010 versus 62 at Q4 2009
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Enabling
Driving an integrated capital agenda
Adapt capital structure
Restructure ops
Improve riskmonitoring
Structure creatively
Rigorous investment
analysis, due diligenceAcquisition readiness
Revamp performancemetrics
Accelerate synergies
Review portfolio
systematically
Refinanceopportunistically
Diversify fundingDivestiture readiness
Improve planning,forecasting
Upgrade strategicdecision makingaround capitalallocation
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In the next 18 months, which type of transaction are
you most likely to consider?
A. Divest a businessB. Launch a public equity offering
C. Enter into a joint venture
D. Make an acquisition
E. N/A
Fact check
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Todays agenda
Moving from survival to growth
Navigating your transaction strategy
What does it take?
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Stakeholder goals Economic and competitive environment
Business model and growth potential
Scalability
Predictability Ongoing capital requirements
Company maturity: management, infrastructure
Valuation: M&A versus public offering
Determining the optimal exit strategy
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Benefits to a multi-track approach
Simultaneous pursuit of two or more transactions
Creates competitive tension among alternatives
Increases negotiating leverage
Improves optionality in uncertain markets Reduce execution risk from a single deal
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Sale to third party
Upfront liquidity, shareholdervalue and support for growth
Operational efficiency focus
PE provides an alternative forcompanies that may not beready to access public capitalmarkets
Exit strategy
Shareholder value and supportfor growth
Integration of products,customers, people, culture
Carve-out needs:
Financial data
Operational separation
Implications for liquidity ofvarious structures
Risk of transactioncompletion
Distractions to managementand employees
Anti-trust constraints
Strategic rationale Issues to consider
PrivateEquity
Corporate
s
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Initial public offering (IPO)
Deleveraging alternative
Retains future upside
Maximizes intrinsic value
as independently managedbusiness
Helps retain and motivate
Increases credibility withcustomers, suppliers,
employees
Provides liquid currency forgrowth M&A
Limited windows
Management readiness
Financial statements
Broad range of publiccompany costs andexpectations
For growth companies,trade off near-term IPO
versus allowing businessto continue to mature
Strategic rationale Issues to consider
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Partnership/JV/Alliance
Can require less financing
Retain some control
Provides bridge to sale or
IPO
Gain some synergieswithout full sale
Shared risks and rewards
Special considerations forlicensing, distribution/supply,manufacturing, employeeand other relationship
agreements
Governance
Potentially incompatiblecorporate cultures
Exit
Strategic rationale Issues to consider
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In preparing for a strategic transaction, what area do
you feel your company should focus on first?
A. Testing the potential valuationB. Strengthening the management team
C. Enhancing processes and infrastructure
D. Rationalizing our capital structure
E. N/A
Fact check
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Todays agenda
Moving from survival to growth Navigating your transaction strategy
What does it take?
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What does it take?
1. Preparation
2. Keep your options open (multi-track)
3. Timing the market
4. Building the right management and advisory teams
5. Building your business processes and infrastructure
6. Establishing corporate governance
7. Managing investor relations and communications
8. Conducting a successful diligence process
9. Attracting the right investors and analysts
10.Delivering on your promises
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Enablingtools,processes
and systems
Building competitive advantage
How can we increaseand maintain investorconfidence?
How can we win the
competition forscarce capital?
How can we seize
growth opportunitiesthat others may beunable to?
How can we betteranticipate and adapt tomarket conditions asthey change?
Investing
Preserving Optimizing
Raising
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Recap
Oneminute
recap
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For more information go to: ey.com/us/transactions
Visit the Ernst & Young transactions page on Facebook!
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Capital matters:Strategic transactionsand IPO readiness
27 April 2010
Thanks for participating!