Bloomberg - 2011 M&a Outlook

Table of Contents * 1
Foreword 02 Executive Summary 03 2011 Global M&A Outlook 04 Private Equity Review 10 Americas M&A Review 14 APAC M&A Review 18 EMEA M&A Review 22 The Year In Opinions .. 26
Foreword * 2
The 2011 M&A Outlook report is a compilation of key M&A activity statistics from various perspectives. The report presents in-depth data on deal-making activity across a broad array of deal types, regions, and industry sectors. Historical data cited in the report represents M&A transactions that Bloomberg was made aware of between January 1, 2010 and November 30, 2010. Aggregate M&A data is comprised of mergers, acquisitions, divestitures, spin-offs, debt-for-equity-swaps, joint ventures, private placements of common equity and convertible securities, and the cash injection component of recapitalizations according to Bloomberg standards. The announced total value represents the price paid, and not the value of individual companies or their assets. Bloomberg delivers real-time coverage of the M&A market around the world. We provide a global perspective and local insight into unique deal structures in various markets through a network of over 800 financial and legal advisory firms, ensuring an accurate reflection of key market trends. Our quarterly league table rankings are a leading benchmark for legal and financial advisory performance, and our DealSpace and Brief newsletters provide daily and weekly summaries of M&A activity. Visit NI BRIEF<GO> or NI DEALSPACE<GO> or NI LEAG CRL<GO> on the Bloomberg Professional to download copies of the report and a full range of market-specific league tables. Visit MA <GO> and PE <GO> for related data and functionality. Edited By: Uvarshanie Nandram, Mariana Trindade, Iyan Adewuya, and Carol Chuang
For queries please contact: Uvarshanie Nandram +212-617-7743 unandram1@bloomberg.net Carol Chuang +212-617-3642 cchuang2@bloomberg.net Iyan Adewuya +212-617-6152 iadewuya@bloomberg.net Mariana Trindade +212-617-3692 mtrindade1@bloomberg.net Humphrey Johandy Putra +65-6231-3431 hjohandyputr@bloomberg.net Jon Daly +44-20-7073-3353 jdaly13@bloomberg.net
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Executive Summary
The results of the Bloomberg Global Poll of over 1,000 financial market professionals show a tempered optimism about a continuing rebound of dealmaking activity in 2011. Survey respondents expect attractive target valuations to be the primary driver that will present M&A opportunities in 2011. While domestic competition is perceived as another strong catalyst for M&A activity, respondents saw market volatility as the most significant potential obstacle to global deal-making in 2011. Asia Pacific companies are expected to be the most acquisitive buyers in 2011, while respondents expect the most attractive targets to continue to be found among firms based in the North American region. Global M&A activity witnessed a strong comeback with aggregate volume and deal count figures surpassing 2009 levels. Through the end of November 2010, over 21,000 deals were announced with more than $1.9 trillion in total volume. This represented a 12% increase from 2009 volume levels, and marked a sharp reversal in the two-year decline of dealmaking activity that began in 2008. Dealmaking opportunities are expanding beyond domestic borders, with over 8,100 cross border deals worth roughly $945 billion announced in 2010, a 41% increase in volume compared to last year. On average, targets of cross border transactions are receiving slightly higher premiums, 24% on average compared to the 22% for all deals. Roughly 52% of all cross border volume is in the form of a company takeover, with 22% in asset sales, 14% in minority stake purchase, and 9% in majority stake purchases. Tender offers comprise 8% of cross border deals in 2010. Asia Pacific experienced a significant growth in M&A activity, reporting over 8,700 deals that involved an Asian company as the target, seller, or buyer, eclipsing Europe as the second most active region, following North America. Fueling this growth is acquisition opportunities in China, with approximately 2,500 deals worth $110 billion, a 29% increase in deal activity and 15% increase in volume from 2009, and a staggering 108% increase in deal volume since 2005. Chinas appetite for buying opportunities is also increasing, with $145 billion worth of deals announced in 2010, a 453% increase from 2005 levels. Brazil M&A is at a 10 year high, with over $130 billion in announced M&A activity. This includes deals such as the sale of Brasilcel NV to Telefonica SA, and the sale of Repsol YPF Brasil to China Petroleum & Chemical company. Energy & communications were the top industries undergoing consolidation in the country. Lastly, Private Equity players are on the comeback, with more than 1,700 deals announced. The Carlyle Group in particular, announced 33 deals year to date worth $16 billion in transactions, the highest number of deals since 2007. Top buyers and targets remain in the U.S. and U.K., with Canada and Australia emerging as attractive countries for private equity dealmaking. The majority of transactions are below $500 million, with 58 deals in the $1-5 billion range and 53 deals in the $500 million to $1 billion range. Overall, while deal activity and deal volume has increased substantially from 2009 levels and is on track to surpass 2008 levels, there is still quite a way to recovery.
Executive Summary * 3
2011 GLOBAL M&A OUTLOOK
M&A Sentiment M&A Sentiment

Overall, 2010 M&A activity turned out to be largely in-line with expectations expressed in the 2010 M&A sentiment survey conducted last year.
80% $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 $1,500 $1,000 $500 $60% 40% 20% 0% -20% -40% -60%
In 2009, 60% of survey respondents expected a small increase in global M&A volume, with the most optimistic group being on the buy-side. In fact, global volume increased by 5%.
Volume
% Growth
Compared to 2010, what do you expect to happen to the volume of mergers and acquisitions in 2011?
This years survey respondents were slightly less optimistic than last year, with approximately 70% expecting an increase in M&A volume overall compared to 90% in 2009.
ASIA Large Increase EUR Small Increase No Change Small Decrease US Large Decrease 0% 20% 40% 60% 80% 100%
70%
Of the different roles in the financial industry, research analysts and traders were less bullish than PMs and Sales, with roughly 60% expressing positive responses compared to 80% of the PM community.
60% 50% 40% 30% 20% 10% 0% Large Increase TRADER Small Increase RESEARCH ANALYST No Change Small Decrease Large Decrease SALES
PORTFOLIO MANAGERS
2011 Global M&A Outlook * 5
Macro Trends & Drivers

Attractive target valuations continue to be the primary driver that will present M&A opportunities in 2011. Domestic competition is perceived as another strong catalyst for M&A activity for the upcoming year. Market volatility is seen as the most significant obstacle to global deal-making in 2011, which is consistent with last years results.
In your opinion, what will be the primary drivers of M&A activity in 2011?
Shareholder Demand 10% Domestic Competition 17%
What do you think will be the most significant obstacles to the global dealmaking in 2011?
Slow Economic Growth Market Volatility
Financing 16% Market Stability 11%
Government Regulation Unrealistic Valuations
Target Valuations 23%
Foreign Players 23%
Target Finances 0.0% 20.0% 40.0%
Target Profile
Billion-dollar deals are expected to make a comeback in 2011, with roughly 35% of survey respondents expecting to see deals within the $1-$5 billion range, compared to 25% of respondents last year. The majority of deals are still expected to fall within the $250 million -$1 billon range. All eyes are still on distressed companies as the most frequent target in 2011, followed by public mid-cap companies.
What ranges will most M&A deals fall within in 2011?

50.0% 40.0% 30.0% 20.0% 10.0% 0.0% > 5bln 5bln-1bln 1 bln-250mln <250mln
Which type of firm do you think will be the most frequent target in 2011?
90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%
Regional Expectations
The market was very optimistic about M&A growth in the Asia Pacific region. While the region did experience moderate growth compared to other regions, it was Latin America M&A activity that jumped the most, followed by North America.
$500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Latin America & Caribbean Eastern Europe Middle East & Africa North America Western Europe Asia Pacific
Looking ahead, Asia Pacific companies are expected to be the most acquisitive buyers in 2011, followed closely by North American firms. In terms of attractive buyout targets, the global respondents are looking to North America & South and Central America in 2011, as opposed to Asia Pacific (projected target region for 2010).
In which region do you expect the most active buyers to be based in 2011?
Asia Pacific 45%
In which regions do you think that the most attractive acquisition targets will be based in 2011?
Central Asia 6% North America 25%
Central Asia 13%
Asia Pacific 23%
Africa / Middle East 3% Western Europe 7%
North America 22% South & Central America 7%
Africa / Middle East 7% Western Europe 18% Eastern Europe 6%
South & Central America 15%
Industry & Private Equity Outlook

The energy industry was projected to experience the heaviest consolidation in 2010; in reality, mergers in the financial industry overtook M&A volume in the energy industry, reporting a total of $328 billion worth of deals compared to $300 billion. This year, survey respondents expected the utilities and energy industries to undergo more consolidation in 2011.
Which industry sectors do you expect to contain the most M&A activity in 2011?
IT Consumer Discretionary FIG Industrials Utilities Health Care Materials Telecom Consumer Staples Energy 0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Global M&A Volume By Top Industries

Energy $146.67 $139.62 $74.26 $73.59 $186.05 $215.18 $252.45 $279.54 $235.33 $223.14 $300.10 Financials $506.91 $408.24 $260.77 $347.89 $522.14 $581.61 $940.56 $1,016.80 $724.34 $422.55 $328.86 Telecom $526.11 $140.81 $91.15 $105.64 $220.69 $269.44 $281.37 $205.93 $175.35 $98.40 $162.71 Healthcare $20.76 $17.37 $24.03 $52.29 $55.03 $90.48 $133.68 $118.66 $63.53 $25.96 $56.05 Materials $118.69 $94.75 $50.50 $63.81 $105.19 $149.37 $283.92 $296.35 $184.88 $81.73 $134.42 Utilities $97.24 $108.89 $95.30 $47.01 $68.43 $123.95 $249.33 $304.52 $121.10 $103.01 $127.08
From 2009 to 2010, North America, Western Europe, and Asia Pacific experienced the most growth in private equity deal volume. Next year, private equity players are expected to be the most active within North America and Asia Pacific.
$500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 North America Western Europe Asia Pacific Latin America & Caribbean Eastern Europe Middle East & Africa
Asia Pacific 36% South & Central America 8%
In which regions do you expect private equity/venture capital firms to be the most active in 2011?
Central Asia 12% North America 31%
Africa / Middle East 1%
Eastern Western Europe 3% Europe 9%
Cross-Border Opportunities
Cross-border deals were deemed as the most attractive deal type for 2010, according to 68% of the respondents. This proved to be true with 49% of global M&A volume being cross-border transactions, a significant hike up from 39% in 2009, and 30% six years ago.
60% 50% 40% 30% 20% 10% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 $1,000 $500 $$2,500 $2,000 $1,500
What deal type will present a more attractive proposition for buyers in 2011?
Domestic 25%
Cross border 75%
Cross-border deals are also looking increasingly attractive, with 75% of survey respondents favoring these deals over domestic M&A.
Doing The Deal

The majority of survey respondents expect equity to be the major source of capital for M&A deal financing, followed by cash, and finally debt. This is in contrast with last year, when debt issuance was expected to be the main source of M&A financing.
What do you expect to be the major source of capital for M&A deal financing in 2011?
Cash 29% Equity 44%
Debt 27%
PRIVATE EQUITY REVIEW
Notable Highlights
After hitting a seven-year low in total transaction volume in 2009, the Private Equity dealmaking firmly rebounded in 2010. With over 1,700 deals announced and an aggregate transaction volume of $211 billion, this years activity marked a stark 142% increase over 2009 levels. Despite the uptick, Private Equity deal activity is still a long way off from its 2007 highs with this years transaction volume still coming in 5% below 2008 levels. Another sign of the fragility of the comeback of Private Equity dealmaking was the lack of deals larger than $10 billion in size. Only the KKR-led buyout of Del Monte Foods managed to crack the $5 billion ceiling. The largest pool of deals were transacted within the $1 billion to $5 billion range, with 58 deals having an aggregate value of $116 billion in this pool. This years most popular targets were companies in the Chemicals, Retail Restaurant, and Manufacturing Operations sectors and were primarily based in the US, UK, and Australia.
Top Industry by Volume

Chemical Services $33.10 Chemicals Diversified $123.06
Diversified Manufacturing Operations $41.76 Consumer NonCyclical $224.65
Top Countries by Volume

United Kingdom $27,500 Australia $12,140 Spain $6,440 France $7,070 United States $104,690
Top Private Equity Company Takeovers

Deal Type Acquisition Acquisition Acquisition Divestiture Acquisition Divestiture Acquisition Divestiture Divestiture Divestiture Announce Date 11/25/10 07/19/10 04/22/10 07/27/10 07/15/10 06/23/10 10/25/10 08/11/10 11/04/10 11/05/10 Target Name & Country Del Monte Foods Company
United States
Acquirer Name & Country Centerview / KKR / Vestar

United STates
Announced Total Value $ $ $ $ $ $ $ $ $ $
Thomkins PLC
United Kingdom
Pinafore Acquisitons Ltd

Canada
Target Business Description 5.10 Private label food & pet product, producer, distributor, & marketer 4.77 Group of manufacturing co 3.93 Fast-food hamburger chain & franchisor 3.93 Develops, owns, & operates extended long stay facilities 3.81 Nutritional supplement manufacturer & retailer in US & UK 3.80 Chemicals holding co 3.79 Hihg-performance electronic & fiber optic cable operations 3.69 Toll highway & parking garage operations 3.41 Diversified operations 3.40 Rail transportation
Burger King Holdings

United States
3G Capital Inc
United STates
Extended Stay America Inc

United States
Blackstone / Centerbridge / Paulson

Russia
NBTY Inc
United States
Carlyle Group
United States
Cognis Holding GmbH

Germany
BASF SE
Germany
CommScope Inc
United States
Carlyle Group
United States
Albertis Infraestructers SA
Spain
CVC Capital Partners Ltd

United Kingdom
Eversholt Rail Group

United Kingdom
Eversholt Investment Group

United States & United Kingdom
High Speed 1
United Kingdom
Ontario Teachers' Pension Plan

Canada
*All Total Value figures in USD Billions. *Data is as of November 30, 2010.
2010 Private Equity Review * 11
Notable Highlights
On average, firms paid a 27% premium for acquisition targets with median enterprise value EBITDA of 9x. Evidence of Private Equity firms chasing healthy returns overseas could be seen in the significant amount of cross border deals. Cross border transactions accounted for 40% of total deal count and 50% of aggregate deal volume. The downstream effect of investors looking for higher yields and banks nearly doubling leveraged loans sales was clearly felt with the announcement of 454 leveraged buyouts having a total volume of $92 billion. While some Private Equity firms sought to deploy significant amounts of dry powder in their funds, others desperate sought exits. This caused a significant amount of secondary transactions with firms selling 14 portfolio companies to each other with a total value of $6 billion. With 33 deals announced and an aggregate value of $16 billion, The Carlyle Group was this years most acquisitive Private Equity firm. Carlyle, which oversees $98 billion, participated in a diverse range of transactions ranging from its $3.8 billion leveraged buyout of vitamin maker NBTY Inc, to its purchase of a $200 million stake in Shandong Aneng Conveyor Rubber Co.
Private Equity Target Multiples

Target Multiples FFO Free Cashflow Income B/F XO Net Income Net Income + Deprec EBIT Cashflow from Ops. EBITDA Stockholder Eqty Book Value Market Cap Revenue Enterprise Value Total Assets Deals 1 100 103 108 123 117 129 114 158 155 136 166 142 172 Min - Max 99.31 - 99.31 1.64 - 1925.25 1.91 - 619.56 .46 - 619.56 .46 - 1968.98 1.62 - 148.82 1.57 - 365.65 .81 - 2653.18 .00 - 224.93 .01 - 224.93 .00 - 29.67 .01 - 70.81 .00 - 11.39 .00 - 1553.25 Median 99.31 28.77 21.58 21.47 13.20 12.77 11.46 8.81 2.56 2.55 1.57 1.37 1.28 1.04
Private Equity Announced Premiums

Premiums Paid >100% 75.01-100% 50.01-75% 25.01-50% 10.01-25% 0-10% # Deals 21 20 36 99 92 3,594 Volume 2.42B 1.69B 11.38B 54.77B 35.34B 164.45B % 0.9 0.62 4.22 20.28 13.09 60.89
Private Equity M&A Trend: 2009 -2010

$40 Volume Deal Count 200 180 160 140 120 $20 100 80 60 40 20 $0 0
Deal Volume ($ Blns)
Apr-09
Feb-09
Sep-09
Feb-10
Apr-10
Mar-09
Mar-10
Dec-09
Sep-10
Jun-09
Jun-10
Jul-09
Oct-09
Jul-10
Aug-09
Nov-09
Aug-10
Oct-10
Jan-09
Jan-10
May-09
May-10
Nov-10
Deal Count (#)
Private Equity Deal Type Summary

Deal Type Summary # Deals 757 Company Takeover Cross Border 672 Leveraged Buyout 454 Asset sale 217 Minority purchase 618 Real Estate 12 Special Situations/Distressed 12 Venture Capital 270 Co-Investment 30 Mezzanine 6
2010 Private Equity Capital Flow

% 62.42 51.82 43.9 14.66 15.72 3.42 2.75 1.98 1.64 1.43
$120 $100
Volume 131.84B 109.46B 92.71B 30.97B 33.2B 7.22B 5.81B 4.18B 3.47B 3.03B
$109.92
Volume (Blns)
$80 $60 $40 $20
$70.98
$27.22 $2.72
$-
$0.37 Middle East
North America
Europe
Asia Pacific
LatAm
Top Private Equity M&A News PRIVATE EQUITY LOSES FUND COMMITMENTS AS TONY JAMES WOOS OREGON
(Aug. 26) -- A year after the financial crisis subsided, the $2.5 trillion private-equity industry is finding the easy money may be gone. Managers saddled with $1.6 trillion in buyouts made during a three-year boom have marked at least 6 of the eras 10 biggest deals at or below cost, according to data compiled by Bloomberg. About $470 billion sits idle, according to London-based researcher Preqin Ltd. Announced purchases so far this year total less than a fifth of their volume at the peak in 2007. Pensions, endowments and mutual funds cut new commitments to buyout funds by more than 50 percent, according to Preqin, questioning whether firms led by Blackstone Group LP have grown too large to generate the returns that made their founders billionaires. MIDEAST PRIVATE EQUITY HAS ROOM TO
RUN
(Dec. 7) -- Over the last decade, private equity in the Middle East has gone from being virtually nonexistent to become a booming prospect and then an industry facing a shakeout. In 2004 the region was home to about 25 funds with a total of around $3 billion under management; as of this year, roughly 142 funds are managing more than $34.5 billion. The breakneck evolution of private equity has made it difficult for investors to obtain a clear picture of its fundamentals. They have thus been understandably cautious about directing funds to regional PE firms. In fact, it is now becoming clear that the Middle Eastern region's heady growth over the last decade masked some critical weaknesses in the PE industry.
BUYOUT BETS WANE AS ECONOMY KEEPS LBOS IN CHECK

(Dec. 7) -- Buyout speculation that sent credit derivatives on companies from Cardinal Health Inc. to Dell Inc. soaring two months ago is waning as rising unemployment keeps the takeover revival in check. The average cost of credit-default swaps on 15 companies including the Dublin, Ohio-based drug distributor and the computer maker founded by Michael Dell has declined 33 basis points to 148 basis points, compared with a drop of 2.5 for a benchmark swaps index. Contracts on Cardinal Health have plunged to 60 basis points from 148.3 on Oct. 25. Bets on a surge in leveraged buyouts are diminishing as the sluggish recovery limits private-equity and bank deals.
FORTRESS $5 BILLION BUYOUT LOSS HAUNTS EDENS AS BLACK HAS GAIN

(Jun. 16) -- Fortress Investment Group LLC has $5 billion in unrealized losses from private-equity funds started since 2005, the beginning of a two-year buyout boom, more than its largest New York rivals combined. Blackstone Group LP, the biggest private-equity firm, had an unrealized loss of $861 million in the period and KKR & Co.s buyout funds are down $708 million, according to regulatory filings in the past six weeks. Funds at Leon Blacks Apollo Global Management LLC posted a profit. The numbers, some disclosed for the first time, show how the largest buyout firms have navigated the damage from investments made before the 2007 financial crisis and allow clients to compare performance as managers seek new money.
AMERICAS M&A REVIEW
Notable Highlights
The Americas region announced over $1.1 trillion in transaction volume in 2010. This represented of 12% increase from 2009. The average deal size for transactions in the region for 2010 was $264 million, and buyers paid 9.29x EBITDA on average for publicly traded targets. Deals in the region were dominated by exploration & production oil companies, with an aggregate volume of $99.70 billion for targets and $74.85 billion for acquirers. The most prominent deal in this sector was the Petrobras purchase of offshore Brazilian oil properties from the Federative Republic of Brazil for $42.5 billion. Private Equity buyers were the second most active acquirers in the Americas, announcing over $78 billion worth of deals. Company takeovers (61.57% in 2010 and 62.2% in 2009), cross border deals (45.68% in 2010 compared to 39.88% in 2009) & asset sales (24.45% compared to 23.5% in 2009) remain the top three M&A transaction types.
Top Target Industry by Volume

Oil Exploration & Production $99.84
Consumer NonCyclical $224.65
Medical Biomedical $41.26
Telephone Integrated $50.40
Top Target Countries by Volume

Mexico $51.19 Canada $81.12 Brazil $127.44 UK $45.90 US $675.36
Top M&A Company Takeovers in the Americas

Deal Type Acquisition Acquisition Acquisition Divestiture Acquisition Divestiture Divestiture Acquisition Divestiture Acquisition Announce Date 01/13/10 04/22/10 08/29/10 03/08/10 02/21/10 02/25/10 01/19/10 01/14/10 05/11/10 02/11/10 Target Name & Country Carso Global Telecom SAB de CV
Mexico United States
Acquirer Name & Country America Movil SAB de CV

Mexico
Target Business Description 25.74 Telecom holding company 22.16 Telecom provider in US 18.24 Biotechnology product development 12.59 Insurance coverage provider 12.34 Oil & gas exploration and production supplier 12.24 Drink bottling and distribution 11.81 Assets 10.57 Develops, manufactures, & markets eye care & related products 9.56 Telecom provider in Brazil 9.22 Electric utility holding company
Qwest Communications International Inc CenturyLink Inc

United States
Genzyme Corp
United States
Sanofi-Aventis SA
France
American Life Insurance Co

United States
MetLife Inc
United States
Smith International Inc

United States
Schlumberger Ltd
United States
Coca-Cola Refreshments USA Inc

United States
Coca-Cola Co/The
United States
Pipeline & Midstream Assets Alcon Inc

United States
Williams Partners LP
United States
Novartis AG
Switzerland
Brasilcel NV
Brasil
Telefonica SA
Spain
Allegheny Energy Inc

United States
FirstEnergy Corp
United States
2010 M&A Review of the Americas * 15
Notable Highlights
North American and Latin American / Caribbean companies received the most capital from other North American firms, totaling $611 billion in transaction volume and 7,106 in deal count. North American acquirers targeted firms in Europe more than in any other region in 2010 while those in Latin America / Caribbean looked to North America for attractive targets. Cash was the most prominent payment type, with more than 70% of deals being paid in either cash alone, or a mix of cash and stock. The majority of premiums paid were below 10%, with 15% of deals reporting announced premiums between 10-25% and nearly 30% of deals reporting premiums in the 25%-50% range. Between 2000 and 2010, the oil & gas industry dominated. Its resilience from the 2003 low ($26 billion) is apparent with its total volume reaching $176 billion in 2010. The second best performer is the telecommunications industry reporting $87 billion in 2010 M&A activity. Commercial services fell into third place with $47 billion worth of deals announced.
Americas Target Multiples

Target Multiples Free Cashflow Income B/F XO Net Income EBIT Net Income + Deprec Cashflow from Ops. EBITDA Book Value Stockholder Eqty Revenue Market Cap Enterprise Value Total Assets # Deals 357 366 374 399 452 446 405 639 645 626 621 615 700 Min - Max .01 - 1925.25 .00 - 2300.54 .00 - 2300.54 .00 - 983.92 .00 - 2300.54 .00 - 1821.27 .00 - 394.75 .00 - 1391.42 .00 - 811.87 .00 - 2193.78 .00 - 824.00 .00 - 62.52 .00 - 1553.25 Median 29.30 22.40 22.34 13.51 13.43 12.18 9.30 2.23 2.15 1.57 1.36 1.26 1.08
Americas Announced Premiums

Monthly M&A Trend in the Americas: 2009 -2010

$160 $140 Volume Deal Count 1,200 1,000
$120 $100 $80 $60 $40 $20 $0 200 -
600 400
Apr-09
Feb-09
Sep-09
Feb-10
Apr-10
Mar-09
Mar-10
Dec-09
Sep-10
Jun-09
Jun-10
Jul-09
Oct-09
Jul-10
Aug-09
Nov-09
Aug-10
Oct-10
Jan-09
Jan-10
May-09
May-10
Nov-10
Deal Count (#)
800
Regional Deal Type Summary

Deal Type Summary Company Takeover Cross Border Asset sale Private Equity Additional Stake Purchase Tender Offer Minority purchase Leveraged Buyout Majority purchase Joint Venture
2010 Regional Capital Flow

% 62.03 46.65 24.17 14.6 12.62 11.04 9.38 7.59 5.19 1.89
$800 $700 $600
# Deals 5,415 4,116 3,307 1,167 542 147 907 325 461 254
$746.70
Volume (Blns)
$500 $400 $300 $200 $100 $-
$211.04 $102.10 $66.89 $7.17 North America LatAm Europe Asia Pacific Middle East
Top Regional M&A News BHP SAYS WONT CHANGE ACQUISITION PLAN AWAY FROM LARGE TARGETS
(Nov. 16) -- "Urbanisation and industrialisation are the key drivers that are transforming the lives of people infast developing countries including Indonesia, Mexico and Turkey," Chief Executive Marius Kloppers said. BHP abandoned its US$39 bln bid to take over Potash Corp. of Saskatchewan Inc. the world's largest miner of the commodity used mainly in fertiliser, after the deal was blocked by Canada's government. Kloppers said the Canada's minister for industry "would have required undertakings that would have been adverse to our strategy and counter to creating shareholder valueNow, the combination of this simple company structure, an organisation of talented people focused on what is important, & portfolios shape, enables our growth. PETROBRAS TO PAY BRAZIL $42.5B IN STOCK
FOR OIL RESERVES

(Sept. 22) -- Petroleo Brasileiro SA, agreed to pay the Brazilian government $42.5 bln in new stock for the right to develop 5 billion barrels of offshore oil reserves. Petrobras will pay on average $8.51 a barrel for the oil. The value set for the reserves will determine how much new stock Petrobras must offer minority investors in a related public offering to raise funds for a $224 bln plan to develop offshore fields and boost refinery capacity. The price is certainly at the high end of what investors and analysts were expecting, said Gianna Bern, president of Brookshire Advisory & Research Inc., based near Chicago. Market conditions right now are less than desirable, but Petrobras has a good long-term growth story.
PIMCO SAID TO SEEK $1B TO BUY TROUBLES ASSETS FROM BANKS

(Nov. 19) -- Pacific Investment Management Cois raising at least $1 bln for a private fund to buy troubled loans from banks divesting assets to meet new rules. Pimco plans to work with a loan servicer to renegotiate the terms of the acquired debt directly with creditors. Financial institutions are selling assets after the 27-nation Basel Committee on Banking Supervision adopted standards in September that will more the double the ratio of capital banks must hold in relation to the amount of risk on their balance sheets. Pimcos institutional fund will target smaller lenders and community banks, and wont buy consumer debt such as credit-card Pimco and auto loans.
DYNEGY MAY SELL BLACKSTONE BID FAILS
IN
PIECES
AFTER
(Nov. 24) -- Dynegy Inc. , the third-largest U.S. independent power producer, may need to sell itself piece by piece after Blackstone Group LPs $604.5 million offer to buy the whole company was rejected. yesterday voted down the $5-a-share Blackstone bid. The company is seeking a new buyer and proposed immediate talks with Icahn and Seneca and also said it would consider asset sales, cost cutting and debt restructuring to remain a standalone company. Dynegy may be worth $9 a share if its broken apart, Fishman said. Selling off the companys assets could take several years and provide more value to shareholders.
APAC M&A REVIEW
Notable Highlights
The developed and emerging economies of Asia Pacific engaged in over 8,700 deals worth more than $594 billion. This is a 25% increase in volume compared to 2009, where there were 9,288 reported deals worth $477 billion. The average deal size for transactions in the Asia Pacific for 2010 was $95 million, and buyers paid 8.22x EBITDA on average for publicly traded targets. The financial industry experienced the highest M&A activity, with acquirers paying over $150 billion to acquire companies located in China, Australia, Japan, India, and the United States. The largest deal in the region was Bharti Airtel's purchase of Zain Africa BV from Mobile Telecommunications for $10.7 billion. Cross border deals represented 61% of all APAC M&A volume, with over 3,600 deals worth $362 billion announced. This is an increase from 2009 cross border M&A activity, which took up 50% of overall M&A activity in the Asia Pacific region. The top M&A targets in the Asia Pacific region were companies located in China, Australia, and Japan, announcing an aggregate of $259.95 billion in transactions.

Life/Health Insurance $26.32
Reasl Estate Operations $29.36 Consumer NonCyclical $224.65

China $110.31
US $37.21
Hong Kong $35.12
Japan $65.57 Australia $84.07
Top M&A Company Takeovers in APAC

Deal Type Divestiture Acquisition Acquisition Acquisition Acquisition Acquisition Acquisition Divestiture Acquisition Acquisition Announce Date 03/30/10 08/24/10 04/01/10 10/25/10 11/28/10 11/15/10 08/17/10 09/30/10 07/15/10 03/08/10 Target Name & Country Zain Africa BV
Kenya
Acquirer Name & Country Bharti Airtel Ltd

India
Announced Total Value $ $ $ $ $ $ $ $
Target Business Description 10.70 African telecom operator 9.20 Trust banking & commercial banking services 8.96 Gold exploration & development 8.28 Operates Australia's national stock exchange & equity derivatives market 7.06 Holding co for oil & natural gas development cos in Argentina 6.12 Insurance & investment provider 5.95 Consumer & foodservice/food packaging producer 4.80 Multi-line insurance provider 4.63 Infrastructure investment group 3.32 Oil & gas exploration co
Simotomo Trust & Banking Co Ltd

Japan
Chuo Mitsui Trust Holdings

Japan
Lihir Gold Ltd

Papau New Guinea
Newcrest Mining Ltd

Australia
ASX Ltd
Australia
Singapore Exchange Ltd

Singapore
Pan American Energy LLC

United Kingdom
Bridas Corp
Argentina & China
AXA Asia Pacific Holdings Ltd

Australia
AMPH Ltd
Australia
Pactiv Corp
United States
Rank Group Ltd

New Zealand
Mutiple Targets
United States & Japan
Prudential Financial Inc

United States
Intoll Group
Australia
Canada Pension Plan Investment Board $

Canada
Arrow Energy Ltd

Australia
Multiple Acquirers
China & Netherlands
2010 M&A Review of APAC * 19
Notable Highlights
Asia Pacific targets received over 7,700 M&A offers with average premiums of 15.12%. The most foreign investment came from North America, in which buyers transacted over $47 billion worth of M&A deals. Buyers in the Asia Pacific region have transacted over 7,800 deals from January to November 2010. On average, they paid 16.96% in premiums for deals. The average disclosed size of deals is $89 million. There is a significant increase in volume compared to 2009, with $517 billion worth of deals announced compared to $417 billion last year. The most acquisitive country was China, which announced over $144.52 billion of deals. Japan and Australia followed, with $85 billion and $58 billion worth of transactions respectively. Top private equity deals within the region include the buyout of Healthscope Ltd by TPG and Carlyle for A$2.5 billion. The most acquisitive buyer in this category is Sequoia Capital, which announced 13 deals worth nearly $200 million in M&A deals.
APAC Target Multiples

Target Multiples Net Income Income B/F XO Free Cashflow EBIT Net Income + Deprec Cashflow from Ops. EBITDA Book Value Stockholder Eqty Market Cap Enterprise Value Revenue Total Assets Deals 507 506 434 514 561 578 539 886 889 886 860 849 931 Min - Max .00 - 2705.55 .00 - 1812.96 .01 - 1104.57 .00 - 4520.64 .00 - 1968.98 .01 - 1115.75 .00 - 2653.18 .00 - 3609.59 .00 - 3609.59 .00 - 135.46 .00 - 148.56 .00 - 2193.78 .00 - 1553.25 Median 18.72 18.38 13.13 12.93 11.00 9.24 8.22 1.59 1.54 1.22 1.15 0.99 0.72
APAC Announced Premiums

Monthly M&A Trend: in APAC 2009 -2010

$100 $80 Volume Deal Count 1200 1000
$60 $40 $20 $0
600 400 200 0
Apr-09
Feb-09
Sep-09
Feb-10
Apr-10
Mar-09
Mar-10
Dec-09
Sep-10
Jun-09
Jun-10
Jul-09
Oct-09
Jul-10
Aug-09
Nov-09
Aug-10
Oct-10
Jan-09
Jan-10
May-09
May-10
Nov-10
Deal Count (#)
800

Deal Type Summary Cross Border Company Takeover Additional Stake Purchase Asset sale Majority purchase Minority purchase Private Placement Tender Offer Private Equity Leveraged Buyout

% 60.76 47.04 20.63 19.83 15.63 14.94 10.4 9.4 5.55 2.51
$500 $450 $400 $350
# Deals 3,647 2,897 1,589 1,873 1,217 1,611 589 240 346 47
$439.01
Volume (Blns)
$300 $250 $200 $150 $100 $50 $-
$49.93
$47.79
$34.24
$22.02 Middle East
Asia Pacific
North America
Europe
LatAm
Top Regional M&A News THAILANDS TAKEOVER SPREE SPREADS AS BAHT GAINS
(Nov. 30) -- Thai companies have gone beyond their nation's borders to buy assets at a faster pace than businesses elsewhere in Southeast Asia, spurred by the baht's surge to a 13-year high. "It's an unimaginable wave of overseas acquisitions," said Vana Bulbon, CEO at UOB Asset Management (Thai) Co., "There will be more overseas acquisitions with rising cash-flows at Thai companies and the strengthening baht. Most companies were fighting to survive bankruptcy a decade ago, and now they are on a takeover spree." Acquisitions announced or completed by Thai companies have totaled $8.38 billion so far this year, compared with $1.29 billion for all of 2009, the data show. PTT Exploration & Production Pcl this month agreed to buy 40 percent of Statoil ASA's oil sands project in Canada for $2.28 billion, the biggest-ever Thai acquisition. CHARLES RIVER YO BUY WUXI PHARMATECH
FOR $1.6B
(Apr. 26) -- Charles River Laboratories International Inc. agreed to buy WuXi PharmaTech (Cayman) Inc. for about $1.6 billion to expand in China, where revenue from drug-testing services is growing as much as 30% a year. Charles River will pay $21.25 a share, comprising $11.25 in cash and $10 in stock, for each WuXi American depositary share,. the deal would be the largest foreign takeover of a Chinese company. It would give Charles River testing facilities in Shanghai, Suzhou & Tianjin in China, where cheaper labor and laboratory costs are luring the world's biggest drugmakers in search of new blockbuster medicines. "This is a vote of confidence that China will be the main location for drug R&D outsourcing in the future," said Jinsong Du, an analyst at Credit Suisse Group AG.
AIG MAY SELL JAPAN UNITS FOR $4.8B IN CASH

(Sept. 29) -- American International Group Inc. may reach a deal as soon as today to sell two Japanese life insurance units to Prudential Financial Inc. for about $4.8 billion in cash. An agreement would cap two years of intermittent talks for Star Life Insurance Co. and AIG Edison Life Insurance Co. between Prudential CEO John Strangfeld and New York-based AIG, said the people who declined to be identified because the negotiations are private. The transaction under discussion values the units at close to their book value, a measure of assets minus liabilities. Prudential "is the most overcapitalized life insurance company that we cover" Randy Binner, an analyst said in the second quarter, "they're the classic acquirer.
INDIAN BILLIONAIRES SAID TO WEIGH BIDS FOR EVONIK CARBON BLACK

(Nov. 30) -- Companies controlled by Indian billionaires Kumar Mangalam Birla and Rama Prasad Goenka are considering making offers for the carbon black unit of Germany's Evonik Industries AG. Phillips Carbon Black Ltd., part of Goenka's RPG Group, and Aditya Birla Group are among potential bidders for Evonik's carbon black unit, which makes material used in tires and synthetic rubber. A deal would add to the record $26.9 billion of overseas acquisitions by Indian companies this year. Evonik is selling the carbon black unit and its real estate and energy businesses to concentrate on chemicals.
EMEA M&A REVIEW
Notable Highlights
EMEA region reported over $787 billion in transaction volume this year. This represented an 18% increase from 2009, a total of $662 billion. The average deal size for transactions in the region for 2010 was $250 million, and buyers paid 6.98x EBITDA on average for publicly traded targets. Financial companies and integrated electric companies were the most acquisitive companies, with each totaling $61 billion and $55 billion respectively. In comparison, 2009 was dominated by sovereign acquirers ($90.59 billion) with investment companies totaling only $58 billion. APAX Partners announced the most deals in 2010 (23) ; it partnered with Bridgepoint Capital Ltd to acquire Histoire DOr from One NFL LLP for 600 million in July . Cross border (84.85% in 2010 and 65% in 2009), company takeover (50.85% in 2010 compared to 36.52% in 2009) & asset sales (22.19% compared to 18.41% in 2009) remain the top 3 M&A transaction types. Acquirers paid smaller premiums for targets in 2010. 8.85% of acquisitions have moved into of the 0 10% range for premiums paid from 2009 to 2010, 2,927deals to 3,186 deals, respectively.

Consumer Banks - Non-Us $35.75
Electric Integrated $41.33 Consumer NonCyclical $224.65

Italy $41.55 US $150.59
France $28.89
Brazil $44.08
UK $123.10
Top M&A Company Takeovers in EMEA

Deal Type Divestiture Acquisition Acquisition Divestiture Acquisition Divestiture Acquisition Acquisition Acquisition Acquisition Announce Date 08/10/10 10/04/10 08/29/10 03/30/10 01/14/10 05/11/10 11/28/10 02/28/10 09/10/10 05/12/10 Target Name & Country GDF Suez Energy International
Belgium
Acquirer Name & Country International Power PLC

United Kingdom
Target Business Description 25.76 Alternate sources of energy 21.99 Telecom & internet service provider 18.24 Biotechnology product development 10.70 African telecom operator 10.57 Develops, manufactures, & markets eye care & related products 9.56 Telecom provider in Brazil 7.06 Holding co for oil & natural gas development cos in Argentina 6.81 Produces technology, tools, & sevices for drug companies 5.35 Commercial banking services 5.32 Computing solutions provider
Weather Investments SpA

Italy
VimpelCom Ltd
Russia
Genzyme Corp
United States
Sanofi-Aventis SA
France
Zain Africa BV
Kenya
Bharti Airtel Ltd

India
Alcon Inc
United States
Novartis AG
Switzerland
Brasilcel NV
Brasil
Telefonica SA
Spain
Pan American Energy LLC

United Kingdom
Bridas Corp
Argentina & China
Millipore Corp
United States
Merck KGaA
Germany
Bank Zachodni WBK SA

Poland
Banco Santander SA
Spain
Sybase Inc
United States
SAP AG
Germany
2010 M&A Review of EMEA * 23
Notable Highlights
The European region kept most of its capital within the region, paying $295 billion for other European targets in 2010. The Middle East / Africa region acquired targets in North America for a total of $2 billion. European targets were the second most pursued targets, attracting $45 billion in 311 deals in 2010. 2009s economic slump severely affected the M&A market. It totaled only $663 billion as compared to over $2 trillion in 2007. The 2010 exit from the global recession positively affected the M&A market. Deal volume increased 19.5%. 2003 was the only other year between 2000 and 2010 that matched the M&A low of 2009 ($731 billion). Over a ten year period, investment companies have maintained a volume range between $8.9 billion and $2.7 billion, reaching its lowest point in 2002. The oil & gas industries, however, were much more volatile over the decade moving from a peak in 2000 ($231.5 billion) its lowest in 2002 ($86.5 billion); it has pursued an upward trend and now accounts for $86.5 billion in M&A activity.
EMEA Target Multiples

Target Multiples Free Cashflow Net Income Income B/F XO EBIT Net Income + Deprec Cashflow from Ops. EBITDA Book Value Stockholder Eqty Revenue Market Cap Enterprise Value Total Assets Deals 272 352 343 355 395 353 355 513 515 499 471 456 539 Min - Max .01 - 1821.27 .00 - 2749.56 .00 - 2749.56 .00 - 2898.84 .00 - 2300.54 .00 - 1821.27 .00 - 2653.18 .00 - 811.87 .00 - 811.87 .00 - 3372.09 .00 - 154.47 .00 - 74.19 .00 - 154.83 Median 22.19 17.74 17.69 12.53 11.33 11.26 8.28 2.11 2.06 1.52 1.20 1.13 0.87
EMEA Announced Premiums

Monthly M&A Trend in EMEA: 2009 -2010

$120 $100 Volume Deal Count 800 700 600 500 400 300 200 $20 $0 100 0
$60 $40
Apr-09
Feb-09
Sep-09
Feb-10
Apr-10
Mar-09
Mar-10
Dec-09
Sep-10
Jun-10
Jun-09
Jul-09
Oct-09
Jul-10
Aug-09
Nov-09
Aug-10
Oct-10
Jan-09
Jan-10
May-09
May-10
Nov-10
Deal Count (#)
$80

Deal Type Summary Cross Border Company Takeover Asset sale Additional Stake Purchase Minority purchase Tender Offer Private Equity Majority purchase Reverse Merger Leveraged Buyout

% 84.82 50.81 22.25 13.91 13.43 12 11.83 9.05 3.83 3.58
$450 $400 $350
# Deals 4,620 3,239 1,591 621 886 169 699 649 28 171
$415.11
Volume (Blns)
$300 $250 $200 $150 $100 $50 $-
$163.65 $70.97 $67.11
$65.11
Europe
North America
Middle East
LatAm
Asia Pacific
Top Regional M&A News BARCLAYS SETPS UP IN HIRING RUSSIA IN LEADERSHIP BID
(June 18) -- Barclays Plc, the U.K.'s third-largest lender, will hire dozens of bankers in Russia as it seeks to become the leading foreign investment bank in 2 to 3 years, local chief Bob Foresman said. "We will need to have over 100 people just in the broker-dealer," Foresman. He is overseeing "very aggressive strategy" in Russia. Barclays of London is stepping up hiring as the economy of the world's biggest energy exporter rebounds from a record 7.9% contraction last year, bolstered by higher oil and metals prices. Barclays rival VTB Group is looking to recruit 250 bankers as it merges its investment and corporate units, Yuri Soloviev, CEO of the state-run bank's investment arm. We have every intention to set up a sales, trading & research team on the equity side & build our own platform, said Foresman. ALBERTIS LOAN SHOWS BANK APPETITE FOR
MERGERS
(July 7) -- Banks committed as much as 7 billion ($8.8 billion) in loans to fund the acquisition of Spain's Abertis Infraestructuras SA as lenders boost financing for takeovers and shrug off concern that a slowing economy will weaken credit markets. Its two main shareholders & CVC Capital Partners Ltd. are in talks with banks for the biggest leveraged buyout financing commitment since May, when Blackstone LP lined up $10 billion of debt to back a failed takeover bid of Fidelity National Information Services Inc. The transaction may signal that banks from around the world have diminished concern that Europe's fiscal crisis will slow the global economic recovery or that stress tests on the region's financial institutions will reveal inadequate capital.
SANOFI SID TO WEIGH HIGHER TAKEOVER BID FOR GENZYME

(Sept. 29) -- Sanofi-Aventis SA is weighing whether to make a sweetened takeover offer for Genzyme Corp. as soon as next week, said people with knowledge of the matter. France's largest drugmaker is leaning toward raising the current $69/share offer by $1 or $2. Genzyme rejected Sanofi's Aug. 29 offer, which valued the U.S. biotechnology company at $18.5 billion, as too low. Sanofi hasn't ruled out making a hostile offer, though would prefer friendly negotiations with Cambridge. An increased bid would come after Sanofi CEO Chris Viehbacher held meetings in the past month with Genzyme investors. Sanofi has the financing it needs for an offer. It lined up about $10 billion of loans from JPMorgan Chase & Co., BNP Paribas SA, and Societe Generale SA.
BAIN CAPITAL SAID CLOSE TO PURCHASE RBSS PRIORY GROUP

(Nov. 30) -- Bain Capital LLC may be close to a deal to acquire Priory Group Ltd., the U.K. operator of mentalhealth and addiction clinics being sold by RBS Group. RBS went back to previous bidders including Advent International Corp. & Blackstone Group LP last week after Bain sought a lower purchase price. Priory attracted offers of less than 1 billion ($1.55 billion), and RBS had been seeking about 1.1 billion pounds. RBS took over Priory, from ABN Amro Holding NV when it bought the Dutch bank in 2007. RBS is selling assets including bank branches and its credit card payment processing unit after taking 45.5 billion of U.K. government funding during the global financial crisis, more than any other bank in the world.
THE YEAR IN OPINIONS
2011 M&A Optimism

Ingrassia Sees More Optimism in Corporate Boardroom
Commentary by Michael J Moore & Jeffrey McCracken
(Sept. 30) -- Corporate boards are more optimistic about prospects for the U.S. economy than the general public is, said Timothy J. Ingrassia, head of mergers and acquisitions in the Americas for Goldman Sachs Group Inc. "I do think there's a little more optimism in the boardroom than you read in the newspapers,"Ingrassia, 46, said at the Bloomberg Dealmakers Summit in New York. "We've sensed a significant pickup in the brainstorming and white- boarding around activity that gives us some optimism about the merger market looking forward. The third quarter was the busiest in two years for mergers, with $566.5 billion of announced transactions. BHP Billiton Ltd. made an unsolicited $40 billion offer for Potash Corp. of Saskatchewan Inc., Sanofi- Aventis SA began its pursuit of Genzyme Corp. for at least $18.5 billion, and Intel Corp. announced its largest acquisition, the $7.7 billion takeover of security-software maker McAfee Inc. With almost $3 trillion of cash, companies drove a 60 percent increase in takeovers from a year ago. Record-low borrowing costs encouraged dealmaking as the Standard & Poors 500 Index headed for its best September since 1939. Even more important will be the pace of economic recovery, Peter Weinberg, founding partner of Perella Weinberg Partners LP, said today at the conference. "The big question mark is, where are we going and where is the economy going," Weinberg, 53, said. "The success of any merger will be determined more so by the environment than by the deal price. Though there are many factors that suggest a significant increase in activity, there's still one big question out there that's on everybody's mind." The U.S. economy grew at a 1.7 percent annual rate in the second quarter, marking the start of a slowdown in growth that has concerned the Federal Reserve. That's down from a 3.7 percent rate in the first quarter and 5 percent in last year's fourth quarter. In boardrooms, there is a reluctance to get involved in significant transactions because of the lack of certainty," Martin Lipton, 79, founding partner of Wachtell, Lipton, Rosen & Katz, said at the conference. "I personally doubt there will be great increases in activity in M&A until we have a restoration of confidence as to where the economy is going.
'Real Health' The financial system is in a slow state of recovery and areas such as basic middle-market lending are "very, very long way from real health, Evercore Partners Inc. Chairman Roger Altman, 64, said. Commercial and industrial loans at U.S. banks fell 24 percent from their 2008 peak to $1.24 trillion as of August. Completed global deals were $1.16 trillion so far this year, up 3.6 percent from a year earlier.. Total announced takeovers were $1.49 trillion in the first nine months of 2010, compared with $1.76 trillion in all of 2009. Financial institutions and health-care companies will be among the most active sectors, Weinberg said. Lazard Ltd. Vice Chairman Gary W. Parr said the pace of financial-industry takeovers will be held back by doubts over the value of bank assets and questions about new capital requirements from regulators. New Capital Banks worldwide will need $500 billion to $1 trillion of new capital over the next few years after having raised about $1.6 trillion since the financial crisis, Parr said. Regulators may push for higher capital levels faster than proposals from the Basel Committee on Banking Supervision, which phase in the new requirements from 2013 to 2023, he said. 'A lot of regulators around the world are applying pressure to their regulated entities and saying that we want you to be better capitalized sooner," Parr said. Banks could get the capital from earnings if given enough time, as U.S. and European lenders together generate about $400 billion a year in net income, Parr said. Tony James, president of Blackstone Group LP, said there isn't enough capital available from investors to fund all the opportunities he sees in the market, while Carlyle Group co-founder David Rubenstein said private-equity firms are having to cut their fees as fundraising becomes more difficult. Thomas Barrack, chairman of private-equity firm Colony Capital LLC, said his best investment opportunities can be found in the U.S.
A lot of regulators around the world are applying pressure to their regulated entities and saying that we want you to be better capitalized sooner
- Gary W Parr, Lazard Ltd
Commentary: A Year in Opinions * 27
2011 M&A Optimism (contd)

S&P Rally The S&P 500 Index rallied 80 percent from its bear market low in March 2009 through April 23 of this year, data compiled. The benchmark gauge for U.S. equities then retreated 16 percent through July 2 and has since rebounded 12 percent. "They are more confident that we'll be in a sluggish environment as opposed to a double-dip," said Blair Effron, co-founder of Centerview Partners. "If you ask most companies, they'll say that the next five years will be much more difficult than the five years before the downturn." Wall Street will probably have to eliminate about 80,000 jobs in coming months and year-end bonuses will "disappoint dramatically,"Meredith Whitney, founder of Meredith Whitney Advisory Group, said. It's natural to try to pick stocks that will become takeover bait. If you succeed, it can be very lucrative: purchases usually occur at a 20 percent to 70 percent premium over the previous day's trading price. And now is a good time to seek out such opportunities. The third quarter was the busiest for M&A activity in two years. The best way to play this game is to invest in companies whose financial characteristics make them attractive to potential buyers. Frequently these are stocks you would be happy to own even if no deal were imminent. Finding Targets Last week, I ran a screen to identify such situations. I looked for companies with an enterprise value no more than six times Ebitda. Enterprise value is the market value of a company's stock, plus the total of its debt. It gives an approximation of what one company must pay to acquire another. Ebitda is earnings before interest, taxes, depreciation and amortization. Some investors consider it a truer representation of a company's value than earnings under generally accepted accounting principles, or GAAP earnings. For most purposes, I usually prefer GAAP earnings because I consider interest, taxes and depreciation real things, not phantoms. In takeover situations, however, Ebitda may be a better measure. An acquirer may not care much about those factors because they may be nullified or changed after the acquisition. For example, the buyer might pay off the target company's debt, and not have to worry about interest charges thereafter. Key Characteristics To make sure my potential takeover targets were not too big or too small for acquirers' taste, I restricted my search to U.S. companies with a market value from $500 million to $5 billion. I also looked for ones that sell for 15 times earnings or less, have cash or safe short-term investments of at least $50 million, and have debt less than stockholders' equity. Those characteristics make a company more attractive to a potential acquirer -- and they are good things to see even if no one comes courting. When I ran the screen, 75 companies made the cut. Several were for-profit education companies: ITT Educational Services Inc. of Carmel, Indiana; Education Management Corp., based in Pittsburgh; Career Education Corp. in Hoffman Estates, Illinois; and Corinthian Colleges Inc. of Santa Ana, California.
The best way to play this game is to invest in companies whose financial characteristics make them attractive to potential buyers
- John Dorfman
Possible M&A Targets

Attractive Stocks Likely to Be Takeover Targets Commentary by John Dorfman (Oct. 4) -- Before I became an investment manager 13 years ago, I spent a decade as a reporter at the Wall Street Journal. I had a rival at another newspaper who frequently wrote about takeover rumors. One day he filed a story saying that Coca-Cola Co. might buy Wendy's, the fast-food chain. Coca-Cola responded with a statement, which I framed and have held onto all these years. The Atlanta-based soft drink giant said that its policy was not to comment on such speculation, and that in this case it wanted to add that the reporter "does not have a clue. People who invest based on unconfirmed reports about possible mergers or acquisitions often do themselves a disservice. If even well-connected pundits are often wrong, imagine how far you can go astray if you act on such gossip, whether it comes from friends, acquaintances or stockbrokers.

Opportunities Pop Up Another is Washington Post Co., which is known as a media company yet gets more than half its revenue from its Kaplan Higher Education unit. Education stocks have been popping up on value screens for weeks. They are cheap because the U.S. government may end aid to schools whose students are too slow repaying federally backed education loans, or whose students have low job-placement rates. In response to criticism that they recruit students indiscriminately, including some who have little chance of benefiting from their programs, several for-profit schools have begun no-fee provisional enrollment programs or instituted special training sessions to enhance the study skills of entering students. The biotech firm Cephalon Inc. is the largest company on the list, with a stock-market value of about $5 billion. Based in Frazer, Pennsylvania, its drugs treat pain, cancer and central nervous system disorders. The companys most successful product is Provigil, a drug that combats narcolepsy. Attractive Valuations A few years ago I sold Cephalon shares short, betting on a decline. At that time the stock was expensive, trading at 20 to 40 times earnings. I was also concerned about offlabel use of Provigil by truck drivers and others trying to induce wakefulness. I'm still concerned that if the U.S. regulators crack down, Provigil would quickly lose a lot of its sales, but valuations are now favorable with the stock priced at 11 times earnings. Information-technology stocks that look like potential takeover candidates include Teradyne Inc., a North Reading, Massachusetts-based maker of semiconductor test equipment; Tech Data Corp., a Clearwater, Florida, distributor of technology products; and Malvern, Pennsylvania-based Vishay Intertechnology Inc., which makes transistors, capacitors and other electronic components. Disclosure note: I have no long or short positions in the stocks discussed above, personally or for clients. Four stocks that I own did make the 75-stock list: Endo Pharmaceuticals Holdings Inc. of Chadds Ford, Pennsylvania; GT Solar International Inc. of Merrimack, New Hampshire; Mirant Corp. of Atlanta; and Rowan Cos. in Houston. Most of these have been discussed in previous columns.
Returns on LBOs
Buyout Firms Still Manage to Finagle Hefty Return Commentary by David Pauly (Nov. 11) -- Leveraged buyout firms are struggling. They have been begging lenders for better terms on the heavy debts of companies they control. An iffy stock market prevents them from unloading their investments on the public. Not all is lost, though. KKR & Co., Bain Capital LLC and Bank of America Corp. have pretty much recouped their 2006 investment as major players in HCA Inc., the biggest U.S. hospital chain. You won't be surprised to know they are doing it by paying themselves dividends out of HCA's pocket and adding still more to the hospital company's debt. HCA, based in Nashville, Tennessee, this week said in a Securities and Exchange Commission filing it plans to pay its owners, including associates of HCA co-founder Thomas F. Frist Jr., and key executives a $2 billion dividend. HCA distributed $1.75 billion to these same folks in February and paid an additional $500 million to them in May. The LBO investors initially said they would put up $5.3 billion for their buyout of HCA, borrowing the rest of the $33 billion cost. A later filing with the SEC indicates they may have invested less. HCA's three distributions this year total $4.25 billion. If KKR and the others did invest $5.3 billion, they have earned back 80% of that in four years. If they invested less, they may already have gotten most of their money back. The person I spoke to at HCA was unable to help me pin this down. The health-care company's total debt was already $26.1 billion as of Sept. 30.
Vital Signs HCA is healthy enough, considering all its borrowings. In the third quarter, the company said it earned $243 million on revenue of $7.65 billion. HCA executives say the new U.S. health-care law will help the company by forcing more patients to have medical insurance. Let's hope that HCA treats the patients at its 162 hospitals and 104 surgery centers as well as it does its stakeholders. The company's executives benefited from the 2006 buyout right away. They took advantage of the change-of

control provisions of the deal that enhanced their company holdings by immediately vesting options and restricted shares. Jack Bovender Jr. got $46 million in such benefits as the company's chief executive while then-president Richard Bracken made $20 million. As its chief executive last year, Bracken's salary and other pay totaled $12.3 million. Generating Fees Let's not forget those major stakeholders in all LBOs: Wall Street firms. They invest in the acquired companies. They get adviser fees on the deals. They earn fees for selling bonds to the bought-out companies and make more fees for taking them public again. HCA is half-way through the LBO process for a second time. It went private in 1989 and public again in 1992. Last May it announced plans for a public sale of $4.6 billion in shares but hasn't done so because of the tepid initial offering market. A successful IPO might allow KKR and HCA's other investors to get an additional return of as much as $2.1 billion by selling some of their shares. HCA said $2.5 billion of the sale would be in new shares earmarked for debt payment. The preliminary notice for the IPO stated that after the sale, HCA had no plans to pay dividends. No need: KKR, Bain and Bank of America already have done very well on their original stake in HCA, in spite of the unruly times. capital, and would perform better if it were the sole focus of manager-owners. Or maybe the CEO was so insulated from market pressure, or fattened with guaranteed bonuses, he had no incentive. Henry Kravis, a KKR founder, and like apostles preached the remedy of going private. Give managers a piece of the action and, surely, their capitalist juices would stir. Since not even the KKRs of the world could replace the public equity, most of the enterprise was financed with debt. Not that this was cause for alarm. Lots of debt meant lots of interest, which cut the tax man's take. Better still, leverage magnified gains. Admiring scholars added a beguiling coda: high levels of debt were actually a plus, as the ever-present risk of bankruptcy would keep managerial minds focused. Celebrated Essay In a celebrated 1989 essay, Harvard's Michael Jensen predicted the 'Eclipse of the Public Corporation.' Jensen's enthusiasm proved to be the peak. As early deals begat high profits, capital rushed in, pushing up buyout prices. Deals such as KKR's acquisition of RJR Nabisco didn't make sense, not that that cooled the dealmakers' ardor. In a trend that troubled even Jensen, buyout kings -supposed paragons of capitalist virtue -- were pocketing princely fees upfront (rather like the slothful, public CEOs they were replacing) and irrespective of eventual results. In 1990, the buyout market crashed. LBOs with too much "L" experienced the dubious charm of bankruptcy. Then, after a mild recession, buyouts returned. This second wave was distinguished by two subtle changes. Sloths Disappear First, public-company CEOs, under pressure to raise their stock prices, were no longer so slothful, if ever they had been so. They were cutting costs, spinning off divisions that didn't fit -- the very tricks employed in LBOs. This left fewer companies susceptible to formulaic, easy improvement. But the buyout artists were emboldened by the second change. Miraculously, they were 'LBO" firms no more; they had been reborn as "private equity." The new name conjured up an image of baronial elegance, as if merely to invest with a Stephen Schwarzman was to enter a satiny world of quiet money and managerial brilliance. Ultimately, Schwarzman bolted for the grubbier, but more bountiful, world of public markets. Blackstone Group Inc., the private-equity firm he co-founded, got a jump on KKR, going public in 2007. Evidently, buyout kingpins are anxious for an exit strategy, which public shares enable. The industry has never escaped its boom-to-bust pattern. Strong returns in the early 1990s attracted competition,
Focus on Private Equity

KKR Sale Means End of Private-Equity Stardom Commentary by Roger Lowenstein (Aug. 3) -- The public stock offering of KKR & Co. put me in mind of three vexing questions. First, if KKR is based on the premise that private equity is a better, more efficient form of organization, why did KKR itself go public? Second, is there evidence that private equity is truly better? Does society benefit? Do investors? Or only the fund managers who pocket those gargantuan fees? Third, what happened to Congress's plan to end the tax break that benefits managers of private-equity funds, as well as other investment funds? Will it summon the guts to tax billionaires at the same rate as other wage-earners? Private equity has its roots in the leveraged-buyout fad of the 1980s. The premise was that public-company chief executives weren't sufficiently rewarded for success, and thus had let their companies drift. Perhaps a small division of a big public company was overlooked, or starved for

leading to lower returns later in the decade. The cycle was repeated in the 2000s, as deals struck in the easy-credit environment of 2006-2007 collapsed. Index Funds How does the record look overall? Steven Kaplan, a University of Chicago Business School professor, has been studying private equity since the late 1980s. Kaplans findings: some firms solidly beat the pack, though the industry as a whole bests the stock market by only a modest amount. And after fees, outside investors would do as well or better with their money in an index fund that tracks the Standard & Poors 500. There is no doubt, Kaplan adds, that private-equity firms add operational improvements. But the gains are given back at the outset, in the premiums paid to acquire targets. And as public-company managements have improved, the gap between private and public efficiency has probably narrowed. In sum, private equity adds modest and probably only temporary efficiencies. As a social good, this isn't exactly curing cancer. Which brings us to the issue of taxes. Whereas the feds tax ordinary income at up to 35%, capital gains on investments held for more than one year are taxed at only 15%, a rate designed to attract investment in capital markets. Undeserved Break Managers of private-equity funds, and of other investment partnerships, enjoy an undeserved exception. The performance fee they charge investors, typically 20 percent of profits, is treated as a capital gain and taxed at the lower rate. This makes no economic sense; an outside investor has the same incentive to participate regardless of the tax paid by the manager. It makes sense only if you are Henry Kravis and prefer to pay less. The House of Representatives has voted three times to end this unwarranted privilege. After the financial crisis, the Senate seemed likely to concur. Then, industry lobbyists stormed Congress. The matter now rests with the Senate Finance Committee. Since nothing is more arbitrary than the proper rate at which to tax, the only sure principle is consistency: what one party pays, so should the other. No great industry is at stake -- private equity is hardly the engine of job creation its flag-waving lobby maintains, and the industry will survive at any rate. The only principle at stake is fairness: billionaires should pay as much as everyone else.
For queries please contact: Uvarshanie Nandram +212-617-7743 unandram1@bloomberg.net Carol Chuang +212-617-3642 cchuang2@bloomberg.net Iyan Adewuya +212-617-6152 iadewuya@bloomberg.net Mariana Trindade +212-617-3692 mtrindade1@bloomberg.net Humphrey Johandy Putra +65-6231-3431 hjohandyputr@bloomberg.net Jon Daly +44-20-7073-3353 jdaly13@bloomberg.net
The BLOOMBERG PROFESSIONAL service and data products are owned and distributed by Bloomberg Finance L.P. and its subsidiaries (BFLP) except in Argentina, Bermuda, China, India, Japan and Korea (where Bloomberg L.P. and its subsidiaries (BLP) distribute these products ). BLP provides BFLP with global marketing and operational support and service for these products. BFLP and BLP believe the information herein came from reliable sources, but do not guarantee its accuracy. No information or opinion herein constitutes a solicitation of the purchase or sale of securities or commodities.

Bloomberg - 2011 M&amp;a Outlook

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Table of Contents * 1

2011 GLOBAL M&A OUTLOOK

M&A Sentiment M&A Sentiment

2011 Global M&A Outlook * 5

Macro Trends & Drivers

Financing 16% Market Stability 11%

Government Regulation Unrealistic Valuations

Target Valuations 23%

Foreign Players 23%

Target Finances 0.0% 20.0% 40.0%

What ranges will most M&A deals fall within in 2011?

2011 Global M&A Outlook * 6

Central Asia 13%

Asia Pacific 23%

Africa / Middle East 3% Western Europe 7%

North America 22% South & Central America 7%

Africa / Middle East 7% Western Europe 18% Eastern Europe 6%

South & Central America 15%

2011 Global M&A Outlook * 7

Industry & Private Equity Outlook

Global M&A Volume By Top Industries

Africa / Middle East 1%

Eastern Western Europe 3% Europe 9%

2011 Global M&A Outlook * 8

Cross border 75%

Doing The Deal

2011 Global M&A Outlook * 9

PRIVATE EQUITY REVIEW

Top Industry by Volume

Diversified Manufacturing Operations $41.76 Consumer NonCyclical $224.65

Top Countries by Volume

Top Private Equity Company Takeovers

Acquirer Name & Country Centerview / KKR / Vestar

Announced Total Value $ $ $ $ $ $ $ $ $ $

Pinafore Acquisitons Ltd

Burger King Holdings

Extended Stay America Inc

Blackstone / Centerbridge / Paulson

Cognis Holding GmbH

CVC Capital Partners Ltd

Eversholt Rail Group

Eversholt Investment Group

Ontario Teachers' Pension Plan

2010 Private Equity Review * 11

Private Equity Target Multiples

Private Equity Announced Premiums

Private Equity M&A Trend: 2009 -2010

Deal Volume ($ Blns)

2010 Private Equity Review * 12

Deal Count (#)

Private Equity Deal Type Summary

2010 Private Equity Capital Flow

$80 $60 $40 $20

$0.37 Middle East

BUYOUT BETS WANE AS ECONOMY KEEPS LBOS IN CHECK

FORTRESS $5 BILLION BUYOUT LOSS HAUNTS EDENS AS BLACK HAS GAIN

2010 Private Equity Review * 13

AMERICAS M&A REVIEW

Top Target Industry by Volume

Consumer NonCyclical $224.65

Medical Biomedical $41.26

Telephone Integrated $50.40

Top Target Countries by Volume

Top M&A Company Takeovers in the Americas

Bloomberg - 2011 M&a Outlook

Bloomberg - 2011 M&a Outlook