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

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.

 Asia Pacific experienced a significant growth in M&A activity. following North America.  Global M&A activity witnessed a strong comeback with aggregate volume and deal count figures surpassing 2009 levels. while respondents expect the most attractive targets to continue to be found among firms based in the North American region. with 58 deals in the $1-5 billion range and 53 deals in the $500 million to $1 billion range. with $145 billion worth of deals announced in 2010. a 41% increase in volume compared to last year. over 21. The majority of transactions are below $500 million. While domestic competition is perceived as another strong catalyst for M&A activity.  Asia Pacific companies are expected to be the most acquisitive buyers in 2011. with approximately 2.  Brazil M&A is at a 10 year high.9 trillion in total volume. a 29% increase in deal activity and 15% increase in volume from 2009. This includes deals such as the sale of Brasilcel NV to Telefonica SA. Tender offers comprise 8% of cross border deals in 2010. and 9% in majority stake purchases. Energy & communications were the top industries undergoing consolidation in the country. with 22% in asset sales. targets of cross border transactions are receiving slightly higher premiums. and a staggering 108% increase in deal volume since 2005. Overall.700 deals announced.000 financial market professionals show a tempered optimism about a continuing rebound of dealmaking activity in 2011.K.S.100 cross border deals worth roughly $945 billion announced in 2010. 14% in minority stake purchase. with over $130 billion in announced M&A activity. Private Equity players are on the comeback. seller. Roughly 52% of all cross border volume is in the form of a company takeover. This represented a 12% increase from 2009 volume levels. while deal activity and deal volume has increased substantially from 2009 levels and is on track to surpass 2008 levels.  Survey respondents expect attractive target valuations to be the primary driver that will present M&A opportunities in 2011. The Carlyle Group in particular. with over 8. respondents saw market volatility as the most significant potential obstacle to global deal-making in 2011. with Canada and Australia emerging as attractive countries for private equity dealmaking. a 453% increase from 2005 levels.700 deals that involved an Asian company as the target.  Lastly. the highest number of deals since 2007. announced 33 deals year to date worth $16 billion in transactions. China’s appetite for buying opportunities is also increasing. eclipsing Europe as the second most active region. with more than 1. 24% on average compared to the 22% for all deals. Executive Summary * 3 .Executive Summary  The results of the Bloomberg Global Poll of over 1. there is still quite a way to recovery. Through the end of November 2010. Fueling this growth is acquisition opportunities in China..  Dealmaking opportunities are expanding beyond domestic borders.500 deals worth $110 billion. and the sale of Repsol YPF Brasil to China Petroleum & Chemical company. and U.000 deals were announced with more than $1. or buyer. Top buyers and targets remain in the U. On average. and marked a sharp reversal in the two-year decline of dealmaking activity that began in 2008. reporting over 8.

2011 GLOBAL M&A OUTLOOK .

with approximately 70% expecting an increase in M&A volume overall compared to 90% in 2009.000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 $1. with roughly 60% expressing positive responses compared to 80% of the PM community.M&A Sentiment M&A Sentiment Overall. 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 PM’s and Sales.000 $500 $60% 40% 20% 0% -20% -40% -60% In 2009.500 $2. 60% of survey respondents expected a small increase in global M&A volume.500 $1. what do you expect to happen to the volume of mergers and acquisitions in 2011? This year’s survey respondents were slightly less optimistic than last year.000 $3. In fact. with the most optimistic group being on the buy-side.500 $4. global volume increased by 5%. 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 . 2010 M&A activity turned out to be largely in-line with expectations expressed in the 2010 M&A sentiment survey conducted last year.500 $3. Volume % Growth Compared to 2010. 80% $4.000 $2.

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% Target Profile Billion-dollar deals are expected to make a comeback in 2011. Market volatility is seen as the most significant obstacle to global deal-making in 2011.0% 0. In your opinion.0% 40.0% 40.0% 60. followed by public mid-cap companies.0% 2011 Global M&A Outlook * 6 . compared to 25% of respondents last year.0% 20.0% 10. All eyes are still on distressed companies as the most frequent target in 2011.0% 10. Domestic competition is perceived as another strong catalyst for M&A activity for the upcoming year.Macro Trends & Drivers Attractive target valuations continue to be the primary driver that will present M&A opportunities in 2011.0% 20.0% 50. What ranges will most M&A deals fall within in 2011? 50.0% 30.0% > 5bln 5bln-1bln 1 bln-250mln <250mln Which type of firm do you think will be the most frequent target in 2011? 90. which is consistent with last year’s results. with roughly 35% of survey respondents expecting to see deals within the $1-$5 billion range. The majority of deals are still expected to fall within the $250 million -$1 billon range.0% 80.0% 40.0% 30.0% 0.0% 20.0% 70.

In terms of attractive buyout targets. While the region did experience moderate growth compared to other regions. followed closely by North American firms. as opposed to Asia Pacific (projected target region for 2010). Asia Pacific companies are expected to be the most acquisitive buyers in 2011. the global respondents are looking to North America & South and Central America in 2011. followed by North America. it was Latin America M&A activity that jumped the most. $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.Regional Expectations The market was very optimistic about M&A growth in the Asia Pacific region. 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% 2011 Global M&A Outlook * 7 .

88 $81.73 $134.0% 20.Industry & Private Equity Outlook The energy industry was projected to experience the heaviest consolidation in 2010.96 $56.0% 25.33 $304.33 $223.37 $24.05 Materials $118.93 $175. mergers in the financial industry overtook M&A volume in the energy industry.64 $220. survey respondents expected the utilities and energy industries to undergo more consolidation in 2011. Western Europe. private equity players are expected to be the most active within North America and Asia Pacific.69 $94.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Global M&A Volume By Top Industries Energy $146. North America.50 $63.0% 10.35 $98.37 $283.48 $133.14 $581.34 $422.62 $74.40 $162.43 $123.77 $347.91 $408.26 $73. reporting a total of $328 billion worth of deals compared to $300 billion.76 $17.0% 15.80 $724.89 $95. and Asia Pacific experienced the most growth in private equity deal volume.37 $205.68 $118.19 $149.44 $281.61 $940.53 $25.81 $91.95 $249. $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% 2011 Global M&A Outlook * 8 .0% 5.016.67 $139. Next year.08 From 2009 to 2010.52 $121.81 $105.35 $184.45 $279.75 $50.59 $186.03 $90.55 $328.86 Telecom $526.10 $103.42 Utilities $97.54 $235.01 $68.03 $52.89 $522. 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 0.11 $140.05 $215.92 $296.24 $108.10 Financials $506.71 Healthcare $20.56 $1.15 $105. in reality.66 $63.24 $260.18 $252. This year.14 $300.29 $55.01 $127.69 $269.30 $47.

and 30% six years ago. followed by cash.000 $500 $$2.000 $1. What do you expect to be the major source of capital for M&A deal financing in 2011? Cash 29% Equity 44% Debt 27% 2011 Global M&A Outlook * 9 . with 75% of survey respondents favoring these deals over domestic M&A. This proved to be true with 49% of global M&A volume being cross-border transactions. 60% 50% 40% 30% 20% 10% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 $1. according to 68% of the respondents. Doing The Deal The majority of survey respondents expect equity to be the major source of capital for M&A deal financing.Cross-Border Opportunities Cross-border deals were deemed as the most attractive deal type for 2010. and finally debt. a significant hike up from 39% in 2009.500 $2.500 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. This is in contrast with last year. when debt issuance was expected to be the main source of M&A financing.

PRIVATE EQUITY REVIEW .

65 Top Countries by Volume United Kingdom $27.93 Develops. UK.  With over 1.77 Group of manufacturing co 3.81 Nutritional supplement manufacturer & retailer in US & UK 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. producer. Private Equity deal activity is still a long way off from its 2007 highs with this year’s transaction volume still coming in 5% below 2008 levels. and Australia. 2010.  Another sign of the fragility of the comeback of Private Equity dealmaking was the lack of deals larger than $10 billion in size.10 Private label food & pet product. & operates extended long stay facilities 3.070 United States $104. and Manufacturing Operations sectors and were primarily based in the US. Retail Restaurant. & marketer 4. *Data is as of November 30. 2010 Private Equity Review * 11 .69 Toll highway & parking garage operations 3. this year’s activity marked a stark 142% increase over 2009 levels.  Despite the uptick. Top Industry by Volume Chemical Services $33. Only the KKR-led buyout of Del Monte Foods managed to crack the $5 billion ceiling.79 Hihg-performance electronic & fiber optic cable operations 3. distributor.140 Spain $6.  This year’s most popular targets were companies in the Chemicals.Notable Highlights  After hitting a seven-year low in total transaction volume in 2009.  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.10 Chemicals Diversified $123. owns.76 Consumer NonCyclical $224.500 Australia $12.440 France $7. the Private Equity dealmaking firmly rebounded in 2010.93 Fast-food hamburger chain & franchisor 3.80 Chemicals holding co 3.690 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 5.700 deals announced and an aggregate transaction volume of $211 billion.06 Diversified Manufacturing Operations $41.

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 .11.  With 33 deals announced and an aggregate value of $16 billion.45B % 0.62 4.39 .31 28.18 .00 . 2010.67 . This caused a significant amount of secondary transactions with firms selling 14 portfolio companies to each other with a total value of $6 billion.42B 1. *Data is as of November 30. which oversees $98 billion.58 21.89 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 *All Total Value figures in USD Billions.55 1.Notable Highlights  On average.81 .93 .25 1. The Carlyle Group was this year’s most acquisitive Private Equity firm.99.00 .  Carlyle. Cross border transactions accounted for 40% of total deal count and 50% of aggregate deal volume.224.98 1.29.81 2.20 12.00 .09 60.224.01-25% 0-10% # Deals 21 20 36 99 92 3.93 .365.  Evidence of Private Equity firms chasing healthy returns overseas could be seen in the significant amount of cross border deals.34B 164.81 .22 20.31 .57 1.619.01 .01-50% 10.82 1. May-10 2010 Private Equity Review * 12 Nov-10 Deal Count (#) .57 .37 1.148.25 Median 99.8 billion leveraged buyout of vitamin maker NBTY Inc.  While some Private Equity firms sought to deploy significant amounts of “dry powder” in their funds.  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.46 .1925.01-75% 25.2653.00 .Max 99.04 Private Equity Announced Premiums Premiums Paid >100% 75.28 13.46 . Private Equity Target Multiples Target Multiples FFO Free Cashflow Income B/F XO Net Income Net Income + Deprec EBIT Cashflow from Ops.594 Volume 2.56 . firms paid a 27% premium for acquisition targets with median enterprise value EBITDA of 9x.77 21.1968.62 .91 .64 .38B 54.77 11.619. to its purchase of a $200 million stake in Shandong Aneng Conveyor Rubber Co.01 .70.56 2.9 0.77B 35.56 .01-100% 50.28 1.1553.31 1.46 8. participated in a diverse range of transactions ranging from its $3.47 13.65 .69B 11. others desperate sought exits.

16) -.71B 30. In fact. The average cost of credit-default swaps on 15 companies including the Dublin. Funds at Leon Black’s Apollo Global Management LLC posted a profit. Blackstone Group LP. had an unrealized loss of $861 million in the period and KKR & Co.42 2. the $2. Bets on a surge in leveraged buyouts are diminishing as the sluggish recovery limits private-equity and bank deals.98 $27.6 trillion in buyouts made during a three-year boom have marked at least 6 of the era’s 10 biggest deals at or below cost. 7) -.43 $120 $100 Volume 131. 2010 Private Equity Capital Flow % 62.18B 3.92 Volume (Blns) $80 $60 $40 $20 $70.47B 3.  BUYOUT BETS WANE AS ECONOMY KEEPS LBOS IN CHECK (Dec. some disclosed for the first time. They have thus been understandably cautious about directing funds to regional PE firms. more than its largest New York rivals combined.64 1.97B 33.42 51. 2010 Private Equity Review * 13 .  MIDEAST PRIVATE EQUITY HAS ROOM TO RUN (Dec. as of this year. private equity in the Middle East has gone from being virtually nonexistent to become a booming prospect and then an industry facing a shakeout.81B 4. *Data is as of November 30.75 1.9 14. In 2004 the region was home to about 25 funds with a total of around $3 billion under management.2B 7.5 billion. questioning whether firms led by Blackstone Group LP have grown too large to generate the returns that made their founders billionaires. Pensions. to Dell Inc. the beginning of a two-year buyout boom.22B 5. Contracts on Cardinal Health have plunged to 60 basis points from 148. 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.46B 92.98 1. 7) -.72 3.82 43. roughly 142 funds are managing more than $34.’s buyout funds are down $708 million.  FORTRESS’ $5 BILLION BUYOUT LOSS HAUNTS EDENS AS BLACK HAS GAIN (Jun. the biggest private-equity firm. 2010. according to regulatory filings in the past six weeks. according to Preqin. endowments and mutual funds cut new commitments to buyout funds by more than 50 percent. 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. About $470 billion sits idle.03B $109.5 trillion private-equity industry is finding the easy money may be gone.Over the last decade.84B 109. compared with a drop of 2.22 $2.72 $- $0.3 on Oct. soaring two months ago is waning as rising unemployment keeps the takeover revival in check. The numbers. according to data compiled by Bloomberg.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.5 for a benchmark swaps index.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 *All Total Value figures in USD Billions.Fortress Investment Group LLC has $5 billion in unrealized losses from private-equity funds started since 2005.A year after the financial crisis subsided.66 15. 26) -. according to London-based researcher Preqin Ltd. Managers saddled with $1. 25. The breakneck evolution of private equity has made it difficult for investors to obtain a clear picture of its fundamentals. Announced purchases so far this year total less than a fifth of their volume at the peak in 2007.Buyout speculation that sent credit derivatives on companies from Cardinal Health Inc. Ohio-based drug distributor and the computer maker founded by Michael Dell has declined 33 basis points to 148 basis points.

AMERICAS M&A REVIEW .

90 US $675.29x EBITDA on average for publicly traded targets.24 Drink bottling and distribution 11.34 Oil & gas exploration and production supplier 12.40 Top Target Countries by Volume Mexico $51.  The average deal size for transactions in the region for 2010 was $264 million.65 Medical Biomedical $41.  Company takeovers (61.Notable Highlights • The Americas region announced over $1.81 Assets 10. *Data is as of November 30.57 Develops.45% compared to 23.5% in 2009) remain the top three M&A transaction types. & markets eye care & related products 9.5 billion. 2010 M&A Review of the Americas * 15 .  Private Equity buyers were the second most active acquirers in the Americas. Top Target Industry by Volume Oil Exploration & Production $99. announcing over $78 billion worth of deals.44 UK $45.59 Insurance coverage provider 12.  Deals in the region were dominated by exploration & production oil companies.16 Telecom provider in US 18.19 Canada $81.26 Telephone Integrated $50.57% in 2010 and 62.88% in 2009) & asset sales (24. manufactures. with an aggregate volume of $99.68% in 2010 compared to 39.56 Telecom provider in Brazil 9.36 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 Announced Total Value $ $ $ $ $ $ $ $ $ $ Target Business Description 25. This represented of 12% increase from 2009.24 Biotechnology product development 12.12 Brazil $127. 2010.74 Telecom holding company 22. The most prominent deal in this sector was the Petrobras purchase of offshore Brazilian oil properties from the Federative Republic of Brazil for $42.85 billion for acquirers. cross border deals (45.2% in 2009). and buyers paid 9.70 billion for targets and $74.22 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 *All Total Value figures in USD Billions.84 Consumer NonCyclical $224.1 trillion in transaction volume in 2010.

00 . Commercial services fell into third place with $47 billion worth of deals announced.787 Volume 4. *Data is as of November 30.106 in deal count. the oil & gas industry dominated.00 .42 .811.824.1821.54 .57 1.92 7.34 13.43 12.54 .87 . EBITDA Book Value Stockholder Eqty Revenue Market Cap Enterprise Value Total Assets # Deals 357 366 374 399 452 446 405 639 645 626 621 615 700 Min .01 .08 Americas Announced Premiums Premiums Paid >100% 75.52B 260.2300. or a mix of cash and stock.  North American acquirers targeted firms in Europe more than in any other region in 2010 while those in Latin America / Caribbean looked to North America for attractive targets.  Between 2000 and 2010.14 15.00 .61B % 0.15 1.28B 171.75 .78 .40 22.00 .  The majority of premiums paid were below 10%.000 Deal Volume ($ Blns) $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 *All Total Value figures in USD Billions.00 .01-75% 25.30 2.  Cash was the most prominent payment type.92 . Its resilience from the 2003 low ($26 billion) is apparent with its total volume reaching $176 billion in 2010. with 15% of deals reporting announced premiums between 10-25% and nearly 30% of deals reporting premiums in the 25%-50% range.22 45.00 .394. totaling $611 billion in transaction volume and 7.25 .200 1.01-50% 10.31B 86. Americas Target Multiples Target Multiples Free Cashflow Income B/F XO Net Income EBIT Net Income + Deprec Cashflow from Ops.30 22.00 .26 1.00 .00 .983.00 .2300.25 Median 29. The second best performer is the telecommunications industry reporting $87 billion in 2010 M&A activity.23 2.25B 40.01-100% 50.Max .00 .Notable Highlights  North American and Latin American / Caribbean companies received the most capital from other North American firms.18 9.5B 5.84 Monthly M&A Trend in the Americas: 2009 -2010 $160 $140 Volume Deal Count 1.1925.79 0. with more than 70% of deals being paid in either cash alone. 2010.54 .1391. 2010 M&A Review of the Americas * 16 May-10 Nov-10 Deal Count (#) 800 .36 1.09 30.2300.27 .00 .01-25% 0-10% # Deals 34 30 63 168 89 5.00 .52 .51 13.2193.62.1553.

96B 165.59 5. Selling off the company’s assets could take several years and provide more value to shareholders. & portfolio’s shape.5B IN STOCK FOR OIL RESERVES (Sept.“  PETROBRAS TO PAY BRAZIL $42. yesterday voted down the $5-a-share Blackstone bid. agreed to pay the Brazilian government $42.17B 528.70 Volume (Blns) $500 $400 $300 $200 $100 $- $211. 2010.6 12. the third-largest U. Petrobras will pay on average $8.62 11.51 a barrel for the oil. but Petrobras has a good long-term growth story. an organisation of talented people focused on what is important.Petroleo Brasileiro SA.10 $66.. Pimco plans to work with a loan servicer to renegotiate the terms of the acquired debt directly with creditors.32B 86.17 North America LatAm Europe Asia Pacific Middle East Top Regional M&A News  BHP SAYS WON’T CHANGE ACQUISITION PLAN AWAY FROM LARGE TARGETS (Nov.87B 273.79B 21.19 1.Dynegy Inc. Pimco’s institutional fund will target smaller lenders and community banks. after the deal was blocked by Canada's government.S.5 bln in new stock for the right to develop 5 billion barrels of offshore oil reserves. president of Brookshire Advisory & Research Inc.65 24."Urbanisation and industrialisation are the key drivers that are transforming the lives of people in…fast developing countries including Indonesia.18B 106. .03B 125.38 7. 2010 Regional Capital Flow % 62.42B $746. 22) -. 19) -.116 3. said Gianna Bern.00B 58.03 46. may need to sell itself piece by piece after Blackstone Group LP’s $604.”  PIMCO SAID TO SEEK $1B TO BUY TROUBLES ASSETS FROM BANKS (Nov. the combination of this simple company structure. Mexico and Turkey. enables our growth. independent power producer.17 14. The price is “certainly at the high end” of what investors and analysts were expecting.04 9.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.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 *All Total Value figures in USD Billions.5 million offer to buy the whole company was rejected. based near Chicago.89 $7. 24) -. and won’t buy consumer debt such as credit-card Pimco and auto loans. *Data is as of November 30. 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.04 $102.89 $800 $700 $600 # Deals 5. Dynegy may be worth $9 a share if it’s broken apart. BHP abandoned its US$39 bln bid to take over Potash Corp.415 4. 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 value…Now. 16) -. of Saskatchewan Inc.307 1. The company is seeking a new buyer and proposed immediate talks with Icahn and Seneca… and also said it would consider asset sales. “Market conditions right now are less than desirable.55B 143. the world's largest miner of the commodity used mainly in fertiliser. 2010 M&A Review of the Americas * 17 .167 542 147 907 325 461 254 Volume 703.  DYNEGY MAY SELL BLACKSTONE BID FAILS IN PIECES AFTER (Nov. cost cutting and debt restructuring to remain a standalone company. Fishman said. 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." Chief Executive Marius Kloppers said.

APAC M&A REVIEW .

 Cross border deals represented 61% of all APAC M&A volume.7 billion. This is a 25% increase in volume compared to 2009. announcing an aggregate of $259.65 Top Target Countries by Volume China $110. *Data is as of November 30. where there were 9. Australia.36 Consumer NonCyclical $224.32 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 $ *All Total Value figures in USD Billions. 2010.22x EBITDA on average for publicly traded targets.63 Infrastructure investment group 3.95 billion in transactions.57 Australia $84.21 Hong Kong $35.06 Holding co for oil & natural gas development cos in Argentina 6. with acquirers paying over $150 billion to acquire companies located in China.  The largest deal in the region was Bharti Airtel's purchase of Zain Africa BV from Mobile Telecommunications for $10. Japan.80 Multi-line insurance provider 4. which took up 50% of overall M&A activity in the Asia Pacific region. This is an increase from 2009 cross border M&A activity.95 Consumer & foodservice/food packaging producer 4. 2010 M&A Review of APAC * 19 .12 Insurance & investment provider 5. and buyers paid 8.07 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.Notable Highlights  The developed and emerging economies of Asia Pacific engaged in over 8.60 Reasl Estate Operations $29.32 Oil Exploration & Production $38.31 US $37.600 deals worth $362 billion announced. and the United States.20 Trust banking & commercial banking services 8.28 Operates Australia's national stock exchange & equity derivatives market 7. and Japan.  The financial industry experienced the highest M&A activity.70 African telecom operator 9.96 Gold exploration & development 8.700 deals worth more than $594 billion. Top Target Industry by Volume Life/Health Insurance $26.288 reported deals worth $477 billion.  The average deal size for transactions in the Asia Pacific for 2010 was $95 million. Australia.  The top M&A targets in the Asia Pacific region were companies located in China. with over 3.12 Japan $65. India.

594 Volume 2.72 18.57 .4520.00 . 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 .59 . There is a significant increase in volume compared to 2009.96 .148.18 .38B 54. The most foreign investment came from North America.3609.22 1.2705.22 20.01-100% 50.00 .98 . The most acquisitive buyer in this category is Sequoia Capital.00 .00 9.700 M&A offers with average premiums of 15.93 11.78 .54 1.00 .59 .52 billion of deals.89 Monthly M&A Trend: in APAC 2009 -2010 $100 $80 Volume Deal Count 1200 1000 Deal Volume ($ Blns) $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 *All Total Value figures in USD Billions.00 .42B 1.01-50% 10.24 8.01 .64 .38 13. APAC Target Multiples Target Multiples Net Income Income B/F XO Free Cashflow EBIT Net Income + Deprec Cashflow from Ops.55 . which announced over $144.09 60.1812.2193.Notable Highlights  Asia Pacific targets received over 7.69B 11.1968.3609.56 .Max . *Data is as of November 30.135.1553.800 deals from January to November 2010.12%.25 Median 18.13 12. Japan and Australia followed.00 .96% in premiums for deals.  Top private equity deals within the region include the buyout of Healthscope Ltd by TPG and Carlyle for A$2.77B 35.34B 164.1115. The average disclosed size of deals is $89 million.01-25% 0-10% # Deals 21 20 36 99 92 3.01-75% 25.01 .22 1.46 .00 .00 . May-10 2010 M&A Review of APAC * 20 Nov-10 Deal Count (#) 800 . which announced 13 deals worth nearly $200 million in M&A deals. with $85 billion and $58 billion worth of transactions respectively.1104.75 .2653.9 0. with $517 billion worth of deals announced compared to $417 billion last year. they paid 16.28 13. On average.  The most acquisitive country was China.5 billion.00 . 2010.45B % 0.59 1.00 .15 0.  Buyers in the Asia Pacific region have transacted over 7.62 4.72 APAC Announced Premiums Premiums Paid >100% 75. in which buyers transacted over $47 billion worth of M&A deals.00 .99 0.

Regional Deal Type Summary Deal Type Summary Cross Border Company Takeover Additional Stake Purchase Asset sale Majority purchase Minority purchase Private Placement Tender Offer Private Equity Leveraged Buyout *All Total Value figures in USD Billions.76 47.24 $22. an analyst at Credit Suisse Group AG.84B $439.83 15.02 Middle East Asia Pacific North America Europe LatAm Top Regional M&A News  THAILAND’S TAKEOVER SPREE SPREADS AS BAHT GAINS (Nov.8B IN CASH (Sept. may reach a deal as soon as today to sell two Japanese life insurance units to Prudential Financial Inc. which makes material used in tires and synthetic rubber.6B (Apr.63 19.8 billion in cash.897 1. the data show.Thai companies have gone beyond their nation's borders to buy assets at a faster pace than businesses elsewhere in Southeast Asia. an analyst said in the second quarter. Most companies were fighting to survive bankruptcy a decade ago.647 2. said the people who declined to be identified because the negotiations are private.. and AIG Edison Life Insurance Co. comprising $11.63 14. the deal would be the largest foreign takeover of a Chinese company." said Jinsong Du. spurred by the baht's surge to a 13-year high. the biggest-ever Thai acquisition.34B 92. CEO at UOB Asset Management (Thai) Co. for about $4.94 10.  AIG MAY SELL JAPAN UNITS FOR $4.51 $500 $450 $400 $350 # Deals 3.55 2. The transaction under discussion values the units at close to their book value.38 billion so far this year. Charles River will pay $21. "This is a vote of confidence that China will be the main location for drug R&D outsourcing in the future.25 in cash and $10 in stock.38B 61.53B 55.4 5.04 20.217 1." Acquisitions announced or completed by Thai companies have totaled $8. Prudential "is the most overcapitalized life insurance company that we cover" Randy Binner.28 billion. 29) -.”  INDIAN BILLIONAIRES SAID TO WEIGH BIDS FOR EVONIK CARBON BLACK (Nov. 26) -. where revenue from drug-testing services is growing as much as 30% a year.01 Volume (Blns) $300 $250 $200 $150 $100 $50 $- $49. 2010 M&A Review of APAC * 21 . An agreement would cap two years of intermittent talks for Star Life Insurance Co.47B 88. 30) -. for about $1. "It's an unimaginable wave of overseas acquisitions. and Aditya Birla Group are among potential bidders for Evonik's carbon black unit.. and now they are on a takeover spree.08B 117.86B 14.611 589 240 346 47 Volume 359. between Prudential CEO John Strangfeld and New York-based AIG.9 billion of overseas acquisitions by Indian companies this year. It would give Charles River testing facilities in Shanghai.79 $34.. Suzhou & Tianjin in China.93 $47. where cheaper labor and laboratory costs are luring the world's biggest drugmakers in search of new blockbuster medicines.589 1.  CHARLES RIVER YO BUY WUXI PHARMATECH FOR $1. Evonik is selling the carbon black unit and its real estate and energy businesses to concentrate on chemicals.Charles River Laboratories International Inc.American International Group Inc. *Data is as of November 30. A deal would add to the record $26. for each WuXi American depositary share. part of Goenka's RPG Group.25 a share. PTT Exploration & Production Pcl this month agreed to buy 40 percent of Statoil ASA's oil sands project in Canada for $2. 30) -. a measure of assets minus liabilities. "they're the classic acquirer.53B 278.62B 32. 2010 Regional Capital Flow % 60.873 1." said Vana Bulbon. compared with $1.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. "There will be more overseas acquisitions with rising cash-flows at Thai companies and the strengthening baht.6 billion to expand in China. 2010.29 billion for all of 2009.4 9. agreed to buy WuXi PharmaTech (Cayman) Inc.36B 122. Phillips Carbon Black Ltd.

EMEA M&A REVIEW .

98x EBITDA on average for publicly traded targets.19% compared to 18.33 Consumer NonCyclical $224.57 Develops.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 *All Total Value figures in USD Billions.06 Holding co for oil & natural gas development cos in Argentina 6. company takeover (50.08 UK $123.85% in 2010 and 65% in 2009).85% of acquisitions have moved into of the 0 – 10% range for premiums paid from 2009 to 2010.  Financial companies and integrated electric companies were the most acquisitive companies. and buyers paid 6.75 Oil Exploration & Production $54. tools. respectively. & markets eye care & related products 9.56 Telecom provider in Brazil 7. 8.99 Telecom & internet service provider 18. In comparison. manufactures.52% in 2009) & asset sales (22.  Acquirers paid smaller premiums for targets in 2010. *Data is as of November 30.55 US $150.35 Commercial banking services 5.70 African telecom operator 10. & sevices for drug companies 5.89 Brazil $44. it partnered with Bridgepoint Capital Ltd to acquire Histoire D’Or from One NFL LLP for €600 million in July . 2010 M&A Review of EMEA * 23 .  APAX Partners announced the most deals in 2010 (23) .Notable Highlights  EMEA region reported over $787 billion in transaction volume this year.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 Announced Total Value $ $ $ $ $ $ $ $ $ $ Target Business Description 25.927deals to 3. This represented an 18% increase from 2009. 2009 was dominated by sovereign acquirers ($90. with each totaling $61 billion and $55 billion respectively. 2010.Non-Us $35.24 Biotechnology product development 10.76 Alternate sources of energy 21.39 Electric Integrated $41.  The average deal size for transactions in the region for 2010 was $250 million. Top Target Industry by Volume Consumer Banks .41% in 2009) remain the top 3 M&A transaction types. a total of $662 billion.65 Top Target Countries by Volume Italy $41.81 Produces technology.  Cross border (84.186 deals.59 billion) with investment companies totaling only $58 billion.85% in 2010 compared to 36.59 France $28. 2.

00 . however.Max .18 .Notable Highlights  The European region kept most of its capital within the region. Deal volume increased 19.154.09 .00 .87 EMEA Announced Premiums Premiums Paid >100% 75. EMEA Target Multiples Target Multiples Free Cashflow Net Income Income B/F XO EBIT Net Income + Deprec Cashflow from Ops.00 .01 .83 Median 22.47 .00 .27 .01-50% 10.53 11. reaching its lowest point in 2002.28 2.19 .84 Monthly M&A Trend in EMEA: 2009 -2010 $120 $100 Volume Deal Count 800 700 600 500 400 300 200 $20 $0 100 0 Deal Volume ($ Blns) $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 *All Total Value figures in USD Billions.74 17. 2010.3372. investment companies have maintained a volume range between $8. attracting $45 billion in 311 deals in 2010.9 billion and $2.2653. were much more volatile over the decade moving from a peak in 2000 ($231.61B % 0.28B 171.154.5B 5.56 . it has pursued an upward trend and now accounts for $86.13 0.2749.5 billion in M&A activity.787 Volume 4. 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 .22 45.  2003 was the only other year between 2000 and 2010 that matched the M&A low of 2009 ($731 billion).09 30. It totaled only $663 billion as compared to over $2 trillion in 2007.84 .56 .2749.33 11.52 1. The 2010 exit from the global recession positively affected the M&A market.1821.00 .14 15.11 2.92 7. The Middle East / Africa region acquired targets in North America for a total of $2 billion.2898. *Data is as of November 30. 2010 M&A Review of EMEA * 24 May-10 Nov-10 Deal Count (#) $80 .5 billion) its lowest in 2002 ($86.  Over a ten year period.69 12.  2009’s economic slump severely affected the M&A market.811.00 .1821.52B 260.  European targets were the second most pursued targets.25B 40.74.31B 86.5 billion).811.00 .87 .00 . paying $295 billion for other European targets in 2010.00 .26 8.5%.7 billion.27 .19 17.79 0.2300. The oil & gas industries.06 1.87 .20 1.00 .01-25% 0-10% # Deals 34 30 63 168 89 5.54 .01-100% 50.01-75% 25.00 .00 .

239 1. as soon as next week.44B 396.11 Europe North America Middle East LatAm Asia Pacific Top Regional M&A News  BARCLAYS SETPS UP IN HIRING RUSSIA IN LEADERSHIP BID (June 18) -. 2010. & Blackstone Group LP last week after Bain sought a lower purchase price. *Data is as of November 30. He is overseeing "very aggressive strategy" in Russia.  BAIN CAPITAL SAID CLOSE TO PURCHASE RBS’S PRIORY GROUP (Nov. 2010 M&A Review of EMEA * 25 .81 22..Bain Capital LLC may be close to a deal to acquire Priory Group Ltd. and Societe Generale SA. RBS went back to previous bidders including Advent International Corp. RBS took over Priory.  ALBERTIS LOAN SHOWS BANK APPETITE FOR MERGERS (July 7) -. will hire dozens of bankers in Russia as it seeks to become the leading foreign investment bank in 2 to 3 years.9% contraction last year.'s third-largest lender. Its two main shareholders & CVC Capital Partners Ltd.25 13.Barclays Plc. Barclays of London is stepping up hiring as the economy of the world's biggest energy exporter rebounds from a record 7. Sanofi has the financing it needs for an offer. “We have every intention to set up a sales.91B 27.43 12 11.91 13.67B 29. Barclays rival VTB Group is looking to recruit 250 bankers as it merges its investment and corporate units.. 2010 Regional Capital Flow % 84.82B 173.82 50.11 Volume (Blns) $300 $250 $200 $150 $100 $50 $- $163.K. though would prefer friendly negotiations with Cambridge.78B 108. Priory attracted offers of less than £1 billion ($1. Genzyme rejected Sanofi's Aug. 30) -. government funding during the global financial crisis.Regional Deal Type Summary Deal Type Summary Cross Border Company Takeover Asset sale Additional Stake Purchase Minority purchase Tender Offer Private Equity Majority purchase Reverse Merger Leveraged Buyout *All Total Value figures in USD Billions. bolstered by higher oil and metals prices.83 9.05 3.92B $415.42B 70.67B 104.591 621 886 169 699 649 28 171 Volume 662. when Blackstone LP lined up $10 billion of debt to back a failed takeover bid of Fidelity National Information Services Inc. trading & research team on the equity side & build our own platform. "We will need to have over 100 people just in the broker-dealer. It lined up about $10 billion of loans from JPMorgan Chase & Co. the U.5 billion of U.  SANOFI SID TO WEIGH HIGHER TAKEOVER BID FOR GENZYME (Sept. from ABN Amro Holding NV when it bought the Dutch bank in 2007.11 $65. local chief Bob Foresman said.55 billion). said people with knowledge of the matter. are in talks with banks for the biggest leveraged buyout financing commitment since May.K. the U. operator of mentalhealth and addiction clinics being sold by RBS Group. 29) -. An increased bid would come after Sanofi CEO Chris Viehbacher held meetings in the past month with Genzyme investors.” said Foresman. France's largest drugmaker is leaning toward raising the current $69/share offer by $1 or $2.93B 93. more than any other bank in the world.73B 92. RBS is selling assets including bank branches and its credit card payment processing unit after taking £45.Banks committed as much as €7 billion ($8. Sanofi hasn't ruled out making a hostile offer. 29 offer. which valued the U.58 $450 $400 $350 # Deals 4. BNP Paribas SA. Yuri Soloviev.65 $70. and RBS had been seeking about £1. 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.620 3. CEO of the state-run bank's investment arm.K.97 $67." Foresman.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.S. biotechnology company at $18.83 3. as too low.Sanofi-Aventis SA is weighing whether to make a sweetened takeover offer for Genzyme Corp.5 billion.1 billion pounds.

THE YEAR IN OPINIONS .

banks fell 24 percent from their 2008 peak to $1.7 percent annual rate in the second quarter. made an unsolicited $40 billion offer for Potash Corp. Vice Chairman Gary W.6 percent from a year earlier. Even more important will be the pace of economic recovery. Weinberg said. "The big question mark is. marking the start of a slowdown in growth that has concerned the Federal Reserve.5 billion. 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. the $7. "The success of any merger will be determined more so by the environment than by the deal price. Lipton.“ 'Real Health' The financial system is in a slow state of recovery and areas such as basic middle-market lending are "very. head of mergers and acquisitions in the Americas for Goldman Sachs Group Inc..S. there's still one big question out there that's on everybody's mind. said Timothy J.." Parr said. companies drove a 60 percent increase in takeovers from a year ago. very long way from real health. said at the Bloomberg Dealmakers Summit in New York. Lazard Ltd. That's down from a 3. Record-low borrowing costs encouraged dealmaking as the Standard & Poor’s 500 Index headed for its best September since 1939. said today at the conference. compared with $1. "I do think there's a little more optimism in the boardroom than you read in the newspapers. Peter Weinberg. founding partner of Wachtell.7 percent rate in the first quarter and 5 percent in last year's fourth quarter. 30) -. Tony James.S. Though there are many factors that suggest a significant increase in activity.24 trillion as of August. Thomas Barrack. where are we going and where is the economy going.Gary W Parr." Weinberg.5 billion of announced transactions. Lazard Ltd Commentary: A Year in Opinions * 27 . BHP Billiton Ltd. there is a reluctance to get involved in significant transactions because of the lack of certainty. Parr said.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. and European lenders together generate about $400 billion a year in net income. Commercial and industrial loans at U. founding partner of Perella Weinberg Partners LP. 46. Banks could get the capital from earnings if given enough time. up 3. said there isn't enough capital available from investors to fund all the opportunities he sees in the market. With almost $3 trillion of cash."Ingrassia.boarding around activity that gives us some optimism about the merger market looking forward.” Evercore Partners Inc. In boardrooms.16 trillion so far this year. and Intel Corp." The U. economy grew at a 1. as U.6 trillion since the financial crisis. said his best investment opportunities can be found in the U.Corporate boards are more optimistic about prospects for the U. 79. which phase in the new requirements from 2013 to 2023.“ The third quarter was the busiest in two years for mergers. ‘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’ . of Saskatchewan Inc. 64. Completed global deals were $1. "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. Chairman Roger Altman. with $566. Sanofi. Total announced takeovers were $1.76 trillion in all of 2009.S. New Capital Banks worldwide will need $500 billion to $1 trillion of new capital over the next few years after having raised about $1. Regulators may push for higher capital levels faster than proposals from the Basel Committee on Banking Supervision.S. said at the conference. Ingrassia.7 billion takeover of security-software maker McAfee Inc. president of Blackstone Group LP." Martin Lipton. he said. 53. for at least $18. chairman of private-equity firm Colony Capital LLC. Parr said. announced its largest acquisition.49 trillion in the first nine months of 2010. said. "We've sensed a significant pickup in the brainstorming and white. Rosen & Katz. said. Financial institutions and health-care companies will be among the most active sectors. economy than the general public is.Aventis SA began its pursuit of Genzyme Corp.2011 M&A Optimism Ingrassia Sees More Optimism in Corporate Boardroom Commentary by Michael J Moore & Jeffrey McCracken (Sept. while Carlyle Group co-founder David Rubenstein said private-equity firms are having to cut their fees as fundraising becomes more difficult.

Several were for-profit education companies: ITT Educational Services Inc.2011 M&A Optimism (cont’d) 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.S. it can be very lucrative: purchases usually occur at a 20 percent to 70 percent premium over the previous day's trading price. whether it comes from friends. have cash or safe short-term investments of at least $50 million. Education Management Corp. Indiana. It gives an approximation of what one company must pay to acquire another. I had a rival at another newspaper who frequently wrote about takeover rumors. taxes and depreciation real things. It's natural to try to pick stocks that will become takeover bait. And now is a good time to seek out such opportunities. If you succeed. Some investors consider it a truer representation of a company's value than earnings under generally accepted accounting principles. of Carmel. I usually prefer GAAP earnings because I consider interest. In takeover situations. 4) -." said Blair Effron. said. Ebitda may be a better measure. Frequently these are stocks you would be happy to own even if no deal were imminent. however. they'll say that the next five years will be much more difficult than the five years before the downturn. Key Characteristics To make sure my potential takeover targets were not too big or too small for acquirers' taste. and have debt less than stockholders' equity." Wall Street will probably have to eliminate about 80.. ‘The best way to play this game is to invest in companies whose financial characteristics make them attractive to potential buyers’ . For example. Finding Targets Last week. not phantoms. The best way to play this game is to invest in companies whose financial characteristics make them attractive to potential buyers. the fast-food chain. plus the total of its debt. founder of Meredith Whitney Advisory Group. 75 companies made the cut. Coca-Cola responded with a statement. I looked for companies with an enterprise value no more than six times Ebitda. and not have to worry about interest charges thereafter. Commentary: A Year in Opinions * 28 . companies with a market value from $500 million to $5 billion. Ebitda is earnings before interest. taxes."Meredith Whitney. which I framed and have held onto all these years. For most purposes. Those characteristics make a company more attractive to a potential acquirer -. California. depreciation and amortization.Before I became an investment manager 13 years ago. The third quarter was the busiest for M&A activity in two 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. I restricted my search to U. or GAAP earnings. "If you ask most companies. the buyer might pay off the target company's debt. of Santa Ana. Illinois.000 jobs in coming months and year-end bonuses will "disappoint dramatically. acquaintances or stockbrokers. I also looked for ones that sell for 15 times earnings or less.John Dorfman Possible M&A Targets Attractive Stocks Likely to Be Takeover Targets Commentary by John Dorfman (Oct.S. imagine how far you can go astray if you act on such gossip. Enterprise value is the market value of a company's stock. might buy Wendy's. One day he filed a story saying that Coca-Cola Co. in Hoffman Estates. Career Education Corp. equities then retreated 16 percent through July 2 and has since rebounded 12 percent. The benchmark gauge for U. If even well-connected pundits are often wrong. co-founder of Centerview Partners. based in Pittsburgh.and they are good things to see even if no one comes courting. I ran a screen to identify such situations. I spent a decade as a reporter at the Wall Street Journal. When I ran the screen.“ People who invest based on unconfirmed reports about possible mergers or acquisitions often do themselves a disservice. data compiled. and Corinthian Colleges Inc. An acquirer may not care much about those factors because they may be nullified or changed after the acquisition. "They are more confident that we'll be in a sluggish environment as opposed to a double-dip.

75 billion to these same folks in February and paid an additional $500 million to them in May. and key executives a $2 billion dividend. HCA's three distributions this year total $4. which makes transistors. Massachusetts-based maker of semiconductor test equipment. of Atlanta. 11) -. HCA. but valuations are now favorable with the stock priced at 11 times earnings. trading at 20 to 40 times earnings.. have pretty much recouped their 2006 investment as major players in HCA Inc. government may end aid to schools whose students are too slow repaying federally backed education loans. Attractive Valuations A few years ago I sold Cephalon shares short. In response to criticism that they recruit students indiscriminately. GT Solar International Inc. The person I spoke to at HCA was unable to help me pin this down. though. they have earned back 80% of that in four years. cancer and central nervous system disorders. Based in Frazer. The LBO investors initially said they would put up $5. Four stocks that I own did make the 75-stock list: Endo Pharmaceuticals Holdings Inc. Vital Signs HCA is healthy enough. or whose students have low job-placement rates. I'm still concerned that if the U. Pennsylvania-based Vishay Intertechnology Inc. Tech Data Corp. including associates of HCA co-founder Thomas F. A later filing with the SEC indicates they may have invested less. of Chadds Ford. HCA distributed $1. and Rowan Cos. If they invested less.. its drugs treat pain. 30.. Education stocks have been popping up on value screens for weeks. distributor of technology products. 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. The company's executives benefited from the 2006 buyout right away. borrowing the rest of the $33 billion cost. of Merrimack. Returns on LBOs Buyout Firms Still Manage to Finagle Hefty Return Commentary by David Pauly (Nov. Let's hope that HCA treats the patients at its 162 hospitals and 104 surgery centers as well as it does its stakeholders. New Hampshire. Tennessee. HCA executives say the new U. capacitors and other electronic components. betting on a decline.S.65 billion. is the largest company on the list.3 billion for their buyout of HCA. Mirant Corp. in Houston. At that time the stock was expensive. The health-care company's total debt was already $26.3 billion.25 billion. I was also concerned about offlabel use of Provigil by truck drivers and others trying to induce wakefulness. health-care law will help the company by forcing more patients to have medical insurance.. Most of these have been discussed in previous columns. Pennsylvania. Information-technology stocks that look like potential takeover candidates include Teradyne Inc. hospital chain. a drug that combats narcolepsy. including some who have little chance of benefiting from their programs. Not all is lost. KKR & Co.S. which is known as a media company yet gets more than half its revenue from its Kaplan Higher Education unit. Frist Jr. They are cheap because the U. based in Nashville. Provigil would quickly lose a lot of its sales.1 billion as of Sept. this week said in a Securities and Exchange Commission filing it plans to pay its owners.. Florida. a North Reading. a Clearwater. Bain Capital LLC and Bank of America Corp.S. they may already have gotten most of their money back. and Malvern. They have been begging lenders for better terms on the heavy debts of companies they control. If KKR and the others did invest $5. the biggest U.Leveraged buyout firms are struggling. personally or for clients.. In the third quarter.. with a stock-market value of about $5 billion.Possible M&A Targets Opportunities Pop Up Another is Washington Post Co. 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. regulators crack down. considering all its borrowings. They took advantage of the change-of Commentary: A Year in Opinions * 29 . An iffy stock market prevents them from unloading their investments on the public. the company said it earned $243 million on revenue of $7. Disclosure note: I have no long or short positions in the stocks discussed above.S. Pennsylvania. The company’s most successful product is Provigil.

were no longer so slothful. Strong returns in the early 1990s attracted competition. The preliminary notice for the IPO stated that after the sale. buyouts returned. HCA is half-way through the LBO process for a second time. Not that this was cause for alarm. leverage magnified gains. he had no incentive. Miraculously. and like apostles preached the remedy of going private. world of public markets. 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. but more bountiful.were pocketing princely fees upfront (rather like the slothful. Blackstone Group Inc. what happened to Congress's plan to end the tax break that benefits managers of private-equity funds. 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." The new name conjured up an image of baronial elegance. They get adviser fees on the deals. buyout kings -supposed paragons of capitalist virtue -. Schwarzman bolted for the grubbier. Bracken's salary and other pay totaled $12. capital rushed in.the very tricks employed in LBOs. It went private in 1989 and public again in 1992. First. Give managers a piece of the action and. Since not even the KKRs of the world could replace the public equity. As its chief executive last year. not that that cooled the dealmakers' ardor. put me in mind of three vexing questions. Admiring scholars added a beguiling coda: high levels of debt were actually a plus. As early deals begat high profits.Possible M&A Targets control provisions of the deal that enhanced their company holdings by immediately vesting options and restricted shares. This second wave was distinguished by two subtle changes. their capitalist juices would stir. and would perform better if it were the sole focus of manager-owners. 3) -. they had been reborn as "private equity. spinning off divisions that didn't fit -. Generating Fees Let's not forget those major stakeholders in all LBOs: Wall Street firms. Celebrated Essay In a celebrated 1989 essay. capital. Bain and Bank of America already have done very well on their original stake in HCA. in spite of the unruly times. public-company CEOs.5 billion of the sale would be in new shares earmarked for debt payment. A successful IPO might allow KKR and HCA's other investors to get an additional return of as much as $2. HCA had no plans to pay dividends. which cut the tax man's take. In 1990. the buyout market crashed. Or maybe the CEO was so insulated from market pressure. Jack Bovender Jr.6 billion in shares but hasn't done so because of the tepid initial offering market. and thus had let their companies drift. Then. easy improvement. Last May it announced plans for a public sale of $4. or starved for Commentary: A Year in Opinions * 30 . after a mild recession. Deals such as KKR's acquisition of RJR Nabisco didn't make sense. more efficient form of organization.The public stock offering of KKR & Co. Lots of debt meant lots of interest. as the ever-present risk of bankruptcy would keep managerial minds focused. Evidently. most of the enterprise was financed with debt. They invest in the acquired companies. which public shares enable. The premise was that public-company chief executives weren't sufficiently rewarded for success. Henry Kravis. They were cutting costs. or fattened with guaranteed bonuses. HCA said $2. pushing up buyout prices. They earn fees for selling bonds to the bought-out companies and make more fees for taking them public again. Perhaps a small division of a big public company was overlooked. a KKR founder. surely. In a trend that troubled even Jensen. why did KKR itself go public? Second. as if merely to invest with a Stephen Schwarzman was to enter a satiny world of quiet money and managerial brilliance. But the buyout artists were emboldened by the second change.1 billion by selling some of their shares. Sloths Disappear First. No need: KKR. the private-equity firm he co-founded. public CEOs they were replacing) and irrespective of eventual results. they were 'LBO" firms no more. got a jump on KKR. got $46 million in such benefits as the company's chief executive while then-president Richard Bracken made $20 million. going public in 2007. buyout kingpins are anxious for an exit strategy.3 million. The industry has never escaped its boom-to-bust pattern. LBOs with too much "L" experienced the dubious charm of bankruptcy.. if KKR is based on the premise that private equity is a better. This left fewer companies susceptible to formulaic. Focus on Private Equity KKR Sale Means End of Private-Equity Stardom Commentary by Roger Lowenstein (Aug. under pressure to raise their stock prices. Better still. Ultimately. Harvard's Michael Jensen predicted the 'Eclipse of the Public Corporation. if ever they had been so.' Jensen's enthusiasm proved to be the peak.

And as public-company managements have improved. The cycle was repeated in the 2000s. After the financial crisis. The only principle at stake is fairness: billionaires should pay as much as everyone else. a University of Chicago Business School professor. has been studying private equity since the late 1980s.private equity is hardly the engine of job creation its flag-waving lobby maintains. Undeserved Break Managers of private-equity funds. enjoy an undeserved exception. an outside investor has the same incentive to participate regardless of the tax paid by the manager. and the industry will survive at any rate. Kaplan’s findings: some firms solidly beat the pack. typically 20 percent of profits. this isn't exactly curing cancer. Whereas the feds tax ordinary income at up to 35%. The performance fee they charge investors. private equity adds modest and probably only temporary efficiencies. as deals struck in the easy-credit environment of 2006-2007 collapsed. in the premiums paid to acquire targets. No great industry is at stake -. As a social good. and of other investment partnerships. The House of Representatives has voted three times to end this unwarranted privilege. the only sure principle is consistency: what one party pays. This makes no economic sense. Which brings us to the issue of taxes. In sum. Since nothing is more arbitrary than the proper rate at which to tax. The matter now rests with the Senate Finance Committee. There is no doubt. the gap between private and public efficiency has probably narrowed. But the gains are given back at the outset. It makes sense only if you are Henry Kravis and prefer to pay less. Commentary: A Year in Opinions * 31 . Then.Possible M&A Targets leading to lower returns later in the decade. Kaplan adds. industry lobbyists stormed Congress. Index Funds How does the record look overall? Steven Kaplan. the Senate seemed likely to concur. though the industry as a whole bests the stock market by only a modest amount. capital gains on investments held for more than one year are taxed at only 15%. And after fees. a rate designed to attract investment in capital markets. is treated as a capital gain and taxed at the lower rate. outside investors would do as well or better with their money in an index fund that tracks the Standard & Poor’s 500. so should the other. that private-equity firms add operational improvements.

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