EY Webcast Capital Matters

8/8/2019 EY Webcast Capital Matters

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Disclaimer

Ernst & Young refers to the global organization of member firms ofErnst & Young Global Limited, each of which is a separate legalentity. Ernst & Young LLP is a client-serving member firm ofErnst & Young Global Limited located in the US.

This presentation is 2010 Ernst & Young LLP. All rightsreserved. No part of this document may be reproduced,

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The views expressed by panelists in this webcast are notnecessarily those of Ernst & Young LLP.


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Capital matters:Strategic transactions andIPO readiness

27 April 2010


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Todays moderator

Jeff GreeneErnst & Young LLPPrincipal, Transaction Advisory Services


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Todays agenda

Moving from survival to growth

Navigating your transaction strategy

What does it take?


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What size company do you represent?

A. Less than $500M in revenue

B. $500M - $1BC. $1B - $5B

D. $5B -$10B

E. More than $10B

F. Work for Ernst & Young

Fact check


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Todays panelists

Live from New York

David Tehle, Dollar GeneralExecutive Vice President and CFO

Thomas Wroe, Jr., Sensata

Chairman and CEO

Jacqueline Kelley, Ernst & Young LLPStrategic Growth Markets

Gary Silacci, Ernst & Young LLPTransaction Advisory Services


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Dollar General

Discount retailer with 8,800+ stores in 35 states

$11.8 billion revenues in 2009

79,000 employees

Acquired by KKR for $7.3 billion in 2007

November 2009 IPO raised $823 million

Secondary offering in April for $810 million


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Sensata

Sensors and controls for HVAC, automotive, andindustrial markets

$1.1 billion revenue in 2009

9500 employees worldwide

Purchased by Bain Capital in 2006 for $3 billion fromTexas Instruments

March 2010 IPO raised $569 million


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Todays agenda



What does it take?


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Moving from survival to growth focus

CreditBubble

Financial Crisis/Recession

Uneven Recovery

RestructuringCost cutting

Hoardingcash

Positioning forgrowth

Investing inflexibility


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Capital confidence barometer

EY/EIU surveyed 817 executives in March 2010

Represented 40 industries and 51 countries

329 C-level respondents

419 qualify for Fortune Global 500 based on revenues

Improving economic outlook

40% believe downturn will end in the next 12 months

61% expect it to end in their industry within 12 months

Global IPO activity showing substantial improvement


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Increasing optimism for M&A

Companies expect to grow through M&A 57% expect to make an acquisition in the next 12

months, compared with 33% in October 2009

67% in the next two years

Transaction market recovery underway

Strategics with financial capacity driving consolidation

Distressed opportunities

Private Equity reappearance

Capital markets opening selectively

Variety of deal structures, contingent consideration


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IPO activity on the upswing

Q1 2010: 267 global IPOs raised $53.2 billion

Q1 2009: 52 global IPOs raised $1.4 billion

New IPO registrations are back to pre-recession levels

Over 90 in registration at Q1 2010 versus 62 at Q4 2009


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Enabling

Driving an integrated capital agenda

Adapt capital structure

Restructure ops

Improve riskmonitoring

Structure creatively

Rigorous investment

analysis, due diligenceAcquisition readiness

Revamp performancemetrics

Accelerate synergies

Review portfolio

systematically

Refinanceopportunistically

Diversify fundingDivestiture readiness

Improve planning,forecasting

Upgrade strategicdecision makingaround capitalallocation


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In the next 18 months, which type of transaction are

you most likely to consider?

A. Divest a businessB. Launch a public equity offering

C. Enter into a joint venture

D. Make an acquisition

E. N/A

Fact check


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Todays agenda



What does it take?


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Stakeholder goals Economic and competitive environment

Business model and growth potential

Scalability

Predictability Ongoing capital requirements

Company maturity: management, infrastructure

Valuation: M&A versus public offering

Determining the optimal exit strategy


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Benefits to a multi-track approach

Simultaneous pursuit of two or more transactions

Creates competitive tension among alternatives

Increases negotiating leverage

Improves optionality in uncertain markets Reduce execution risk from a single deal


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Sale to third party

Upfront liquidity, shareholdervalue and support for growth

Operational efficiency focus

PE provides an alternative forcompanies that may not beready to access public capitalmarkets

Exit strategy

Shareholder value and supportfor growth

Integration of products,customers, people, culture

Carve-out needs:

Financial data

Operational separation

Implications for liquidity ofvarious structures

Risk of transactioncompletion

Distractions to managementand employees

Anti-trust constraints

Strategic rationale Issues to consider

PrivateEquity

Corporate

s


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Initial public offering (IPO)

Deleveraging alternative

Retains future upside

Maximizes intrinsic value

as independently managedbusiness

Helps retain and motivate

Increases credibility withcustomers, suppliers,

employees

Provides liquid currency forgrowth M&A

Limited windows

Management readiness

Financial statements

Broad range of publiccompany costs andexpectations

For growth companies,trade off near-term IPO

versus allowing businessto continue to mature



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Partnership/JV/Alliance

Can require less financing

Retain some control

Provides bridge to sale or

IPO

Gain some synergieswithout full sale

Shared risks and rewards

Special considerations forlicensing, distribution/supply,manufacturing, employeeand other relationship

agreements

Governance

Potentially incompatiblecorporate cultures

Exit



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In preparing for a strategic transaction, what area do

you feel your company should focus on first?

A. Testing the potential valuationB. Strengthening the management team

C. Enhancing processes and infrastructure

D. Rationalizing our capital structure

E. N/A

Fact check


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Todays agenda

Moving from survival to growth Navigating your transaction strategy

What does it take?


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What does it take?

1. Preparation

2. Keep your options open (multi-track)

3. Timing the market

4. Building the right management and advisory teams

5. Building your business processes and infrastructure

6. Establishing corporate governance

7. Managing investor relations and communications

8. Conducting a successful diligence process

9. Attracting the right investors and analysts

10.Delivering on your promises


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Enablingtools,processes

and systems

Building competitive advantage

How can we increaseand maintain investorconfidence?

How can we win the

competition forscarce capital?

How can we seize

growth opportunitiesthat others may beunable to?

How can we betteranticipate and adapt tomarket conditions asthey change?

Investing

Preserving Optimizing

Raising


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Recap

Oneminute

recap


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For more information go to: ey.com/us/transactions

Visit the Ernst & Young transactions page on Facebook!


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Capital matters:Strategic transactionsand IPO readiness

27 April 2010

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EY Webcast Capital Matters

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