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Capital matters: Strategic transactions and IPO readiness
27 April 2010

Transaction Advisory Services .Today’s moderator Jeff Greene Ernst & Young LLP Principal.

Today’s agenda ► ► ► Moving from survival to growth Navigating your transaction strategy What does it take? .

Less than $500M in revenue $500M . F. E.$1B $1B .$5B $5B -$10B More than $10B Work for Ernst & Young . B.Fact check What size company do you represent? A. C. D.

Ernst & Young LLP Transaction Advisory Services ► ► ► . Jr. Ernst & Young LLP Strategic Growth Markets Gary Silacci. Sensata Chairman and CEO Jacqueline Kelley.Today’s panelists Live from New York ► David Tehle.. Dollar General Executive Vice President and CFO Thomas Wroe.

Dollar General ► ► ► ► ► ► Discount retailer with 8.000 employees Acquired by KKR for $7.8 billion revenues in 2009 79.3 billion in 2007 November 2009 IPO raised $823 million Secondary offering in April for $810 million .800+ stores in 35 states $11.

1 billion revenue in 2009 9500 employees worldwide Purchased by Bain Capital in 2006 for $3 billion from Texas Instruments March 2010 IPO raised $569 million ► ► ► ► .Sensata ► Sensors and controls for HVAC. automotive. and industrial markets $1.

Today’s agenda ► ► ► Moving from survival to growth Navigating your transaction strategy What does it take? .

Moving from survival to growth focus Credit Bubble Financial Crisis/ Recession ► Restructuring ► Cost Uneven Recovery ► Positioning cutting growth for ► Hoarding ► Investing cash flexibility in .

Capital confidence barometer ► ► ► ► ► EY/EIU surveyed 817 executives in March 2010 Represented 40 industries and 51 countries 329 C-level respondents 419 qualify for Fortune Global 500 based on revenues Improving economic outlook ► 40% believe downturn will end in the next 12 months ► 61% expect it to end in their industry within 12 months ► Global IPO activity showing substantial improvement .

compared with 33% in October 2009 ► 67% in the next two years Transaction market recovery underway ► Strategics with financial capacity driving consolidation ► Distressed opportunities ► Private Equity reappearance ► Capital markets opening selectively ► Variety of deal structures. contingent consideration ► .Increasing optimism for M&A ► Companies expect to grow through M&A ► 57% expect to make an acquisition in the next 12 months.

2 billion Q1 2009: 52 global IPOs raised $1.4 billion New IPO registrations are back to pre-recession levels Over 90 in registration at Q1 2010 versus 62 at Q4 2009 .IPO activity on the upswing ► ► ► ► Q1 2010: 267 global IPOs raised $53.

forecasting • Upgrade strategic decision making around capital allocation •Adapt capital structure •Restructure ops •Improve risk monitoring •Structure creatively •Rigorous investment analysis.Driving an integrated capital agenda •Revamp performance metrics •Accelerate synergies •Review portfolio Enabling systematically • Improve planning. due diligence •Acquisition readiness •Refinance opportunistically •Diversify funding •Divestiture readiness .

Divest a business Launch a public equity offering Enter into a joint venture Make an acquisition N/A . D. C. which type of transaction are you most likely to consider? A. E.Fact check In the next 18 months. B.

Today’s agenda ► ► ► Moving from survival to growth Navigating your transaction strategy What does it take? .

Determining the optimal exit strategy ► ► ► Stakeholder goals Economic and competitive environment Business model and growth potential ► Scalability ► Predictability ► Ongoing capital requirements Company maturity: management. infrastructure Valuation: M&A versus public offering ► ► .

Exit alternatives ► ► ► ► ► Sale to private equity Sale to strategic buyer Partnering/joint venture/alliance Strategic investor Initial public offering .

Benefits to a multi-track approach ► ► ► ► ► Simultaneous pursuit of two or more transactions Creates competitive tension among alternatives Increases negotiating leverage Improves optionality in uncertain markets Reduce execution risk from a single deal .

shareholder value and support for growth Operational efficiency focus PE provides an alternative for companies that may not be ready to access public capital markets Exit strategy Shareholder value and support for growth Integration of products.Sale to third party Strategic rationale ► Issues to consider ► ► ► ► Upfront liquidity. people. customers. culture Carve-out needs: ► ► Private Equity Financial data Operational separation ► Implications for liquidity of various structures Risk of transaction completion Distractions to management and employees Anti-trust constraints ► Corporates ► ► ► ► .

employees Provides liquid currency for growth M&A Limited windows Management readiness Financial statements Broad range of public company costs and expectations For growth companies.Initial public offering (IPO) Strategic rationale ► ► ► Issues to consider ► ► ► ► Deleveraging alternative Retains future upside Maximizes intrinsic value as independently managed business Helps retain and motivate Increases credibility with customers. trade off near-term IPO versus allowing business to continue to mature ► ► ► ► . suppliers.

employee and other relationship agreements Governance Potentially incompatible corporate cultures Exit ► ► ► ► ► .Partnership/JV/Alliance Strategic rationale ► ► ► Issues to consider ► Can require less financing Retain some control Provides bridge to sale or IPO Gain some synergies without full sale Shared risks and rewards Special considerations for licensing. distribution/supply. manufacturing.

E. Testing the potential valuation Strengthening the management team Enhancing processes and infrastructure Rationalizing our capital structure N/A .Fact check In preparing for a strategic transaction. D. C. what area do you feel your company should focus on first? A. B.

Today’s agenda ► ► ► Moving from survival to growth Navigating your transaction strategy What does it take? .

Delivering on your promises . Conducting a successful diligence process 9. Establishing corporate governance 7.What does it take? 1. Building your business processes and infrastructure 6. Preparation 2. Managing investor relations and communications 8. Keep your options open (multi-track) 3. Timing the market 4. Attracting the right investors and analysts 10. Building the right management and advisory teams 5.

Building competitive advantage Preserving How can we better anticipate and adapt to market conditions as they change? Optimizing How can we increase and maintain investor confidence? Enabling tools. processes and systems Investing How can we seize growth opportunities that others may be unable to? Raising How can we win the competition for scarce capital? .

Recap One minute recap .

com/us/transactions Visit the Ernst & Young transactions page on Facebook! .For more information go to: ey.

Thanks for participating! Capital matters: Strategic transactions and IPO readiness 27 April 2010 .