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M&A due diligence workshop - Deloitte

M&A due diligence workshop 2017 Engineering and Construction Conference Introductions Bruce Gribens James Mark Andrews Partner | Managing Director M&A Transaction Services (Tax) M&A Transaction Services (IT). Direct: +1 415 783 5959 Direct: +1 215 789 2757. Email: Email: Location: San Francisco, CA Location: Philadelphia, PA. Bryan Johnson Todd Wilson Senior Manager Managing Director M&A Transaction Services M&A Transaction Services Direct: +1 617 437 3657 Direct: +1 312 486 3892. Email: Email: Location: Boston, MA Location: Chicago, IL.

Hire outside experts • Collect external data ... Reporting. Human Resource Diligence. Day 1 Readiness ... reductions, new revenue) • Lead: Business Development • Provide deal-model input on synergy opportunities and costs to achieve • Develop preliminary synergy targets

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Transcription of M&A due diligence workshop - Deloitte

1 M&A due diligence workshop 2017 Engineering and Construction Conference Introductions Bruce Gribens James Mark Andrews Partner | Managing Director M&A Transaction Services (Tax) M&A Transaction Services (IT). Direct: +1 415 783 5959 Direct: +1 215 789 2757. Email: Email: Location: San Francisco, CA Location: Philadelphia, PA. Bryan Johnson Todd Wilson Senior Manager Managing Director M&A Transaction Services M&A Transaction Services Direct: +1 617 437 3657 Direct: +1 312 486 3892. Email: Email: Location: Boston, MA Location: Chicago, IL.

2 Rob Strahle Senior Manager Engineering & Capital Projects Direct: +1 212 436 7439. Email: Location: Jersey City, NJ. Copyright 2017 Deloitte Development LLC. All rights reserved. 2. Agenda Topic Presenter(s) Timing Introductions All 5 minutes The M&A Lifecycle and Overview of Todd Wilson / Bruce Gribens 5 minutes Transaction Execution Importance of Integrated Due diligence Mark Andrews / Bryan Johnson / 10 minutes Rob Strahle Functional Due diligence Breakouts Accounting, Finance, & Treasury Todd Wilson and Bryan Johnson 25 minutes each Tax Bruce Gribens IT Mark Andrews Project Due diligence Rob Strahle Copyright 2017 Deloitte Development LLC.

3 All rights reserved. 3. The M&A Lifecycle and Overview of Transaction Execution M&A Lifecycle Overview A multidisciplinary and integrated approach is key to success across the M&A lifecycle The M&A Lifecycle Pre-deal Pre-Announcement Post-Announcement Integration / Integration /. M&A Strategy Target Screening diligence & Evaluation Separation Planning Separation Execution Establish a broad corporate Define and prioritize acquisition Conduct Financial / Accounting Establish operating model and Provide Day 1 stabilization of the strategy and assess means to criteria to apply to entire and Tax diligence overall integration blueprint organization and functional realize that vision universe of potential targets Perform business due Organize controls such as capabilities Review

4 Portfolio against value Collect screening data from diligence , including integration management office Execute and manage integration creation and strategic entire universe of potential commercial, operations, IT, and synergy / work thread plans imperative targets, and apply the and HR teams Deploy all clean room analysis and Assess and prepare for multiple, acquisition criteria to evaluate Initial internal controls Conduct clean room analysis to immediately execute on synergy potential acquisition pathways potential fit diligence front load synergy capture opportunities to achieve goals Prioritize initial acquisition Identify core and non-core Develop Day One requirements Define customer retention, Identify, evaluate, and prioritize candidates and develop profiles portfolio assets and eventual and End State plans workforce transition.

5 Strategies for achieving organic High level pre deal integration sale opportunities Design customer, market, communication and growth plans and inorganic growth planning and initial diligence for Negotiations execution product and organizational Integration Execution Support Assess capability to undergo a synergy opportunities including deal valuation, asset strategies IP rights protection and strategic M&A program Detailed screening of potential or target valuation and Address people and culture management Establish decision rights and targets on the basis of business structuring issues accountability within the strategy, competitive strategy Refine integration planning on Develop and execute a organization and value potential target communications strategy Valuation of business entities, including financial modeling, approaches.

6 And challenges Copyright 2017 Deloitte Development LLC. All rights reserved. 5. Leading Practices Leading companies tightly integrate their upstream and downstream M&A processes Approach Execution M&A Target Due Transaction Integration Divestiture Strategy Screening diligence Execution High Integration Curve Approach Risk Execution Required Risk Level of Handoff Risk Resources Transaction Curve Low Start M&A Lifecycle End Handoff Risk: Execution Risk: Approach Risk: Resources dedicated to integration are not Resources most knowledgeable with the Resources are focused on the transaction and added to the team early enough to sufficiently transaction do not remain on the team through not integration and its associated costs prepare the integration phase A holistic, integrated approach minimizes risks, gaps and handoffs and captures value Copyright 2017 Deloitte Development LLC.

7 All rights reserved. 6. Due diligence A dynamic set of activities involving working with many unknowns identified via an iterative process & addressed when the acquirer takes eventual control of the target Typical Due diligence Issues Value Drivers Improve/Validate Early capture and realization of synergies from Products Valuation Model & Deal the M&A transaction Markets Structure Customers Financial Uncertainty around target management's claims on growth Capabilities Commercial Tax Culture Stability of customer base

8 ROIC Operations Improve Synergy Accelerating time to close Risk Due Tax and accounting structuring diligence IT. Internal control structure, including Sarbanes Value drivers Process Oxley compliance determine price Technical Tax Develop Additional and structure of Negotiating Leverage Effect of regulatory matters on a target company's industry the transaction and Human Capital define the nature Identification and quantification of tax Risk Management and the scope of Provide Feedback exposures and optimization of related benefits due diligence on Acquisition Employee benefits.

9 Information technology Forensic /. Investigative Agreements systems and risk management practices Services Supply chain and manufacturing site inspection Legal Benefit plan funding and liability exposures Legal Identify, Assess & Minimize Risk Our experience shows that it takes a well organized and executed, multidisciplinary approach to due diligence , focused on validating value proposition assumptions, understanding risks and providing actionable feedback Copyright 2017 Deloitte Development LLC. All rights reserved.

10 7. Due diligence Due diligence objectives, activities and outputs can be segmented into three stages within the M&A lifecycle Phase I Phase II Phase III Phase IV. Integration / Divestiture M&A Strategy Target Screening Due diligence Transaction Execution Preliminary Due diligence Detailed Due diligence Final Due diligence Objectives: Identify business risks Analyze data room and any relevant external Obtain signed Definitive Agreements Research scouting issues and contact target information Reach favorable Close terms & final pricing Make go/no-go decision Feed negotiation, deal structure, valuation and Organize for integration integration Continuously improve due diligence process Make go/no-go decision General Identify core team and specialists Identify due diligence teams Collect any outstanding data Activities.


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