March2002 MergerIntegration IntellectualCapitalCollectionGenericProposal Tableofcontents ExecutiveSummaryOurUnderstandingofYourSituationA T Kearney sPerspectiveonMergerIntegrationProposedOverallApproachRealizingIntegrationSynergiesIntegrationManagementA T KearneyQualifications ExecutiveSummaryThissectionistailoredtotheclientsituationandsummarizestheapproachproposedinthedocument OurUnderstandingyourSituationThissectionistailoredtotheclientsituationandsummarizesthekeydriversofthemerger Itshouldhighlightrelevantquantitativeandqualitativeanalysisthatdemonstrateourinsightintotheclient sparticularchallengesanddriversofsuccessfortheintegration A T Kearney sPerspectiveonMergerIntegration Thebestvalue builderscombineorganicgrowthwithmergersandacquisitions Source A T KearneyMonographonValue BuildingGrowth2001 RevenueGrowth ValueGrowth Underperformers ProfitSeekers SimpleGrowers ValueGrowers GrowthMatrix CAGR1988 2000 ValueGrowersFollowConscious ConstantProcessToGrowth Mergersandacquisitionsarekeygrowthdrivers Whatreallymattersin acquisitionforgrowth strategiesisexecution Source A T KearneyMonographonValue BuildingGrowth2001 SourcesofGrowth 40 ofGrowthIsFromAcquisitions ValueGrowersManageBothWell Fewmergersactuallycreateshareholdervalue Source A T KearneyAnalysis2001 SDCdatabase GlobalWorldscope Acquirer sValueGrowthFollowingaMerger Topperformingmergerscreatesignificantshareholdervalue Valuegrowth 3 8 12 27 21 16 3 Underperformancecomparedtoindustryaverage Overperformancecomparedtoindustryaverage 100 60 30 30 60 150 15 15 0 Average 2 8 49 5 50 5 Top PerformingMergers 10 BusinessIntegrationissuesrequire usual managementdecisionswhilefourmainfactorsaddanotherlevelofconsiderablecomplexity Scope HighnumberofdecisionstobemadeinalloperationalandfunctionalareasDozensofprojects initiativesandriskstobemanaged Timepressure Allstakeholdersexpectrapidexecution shareholders employees management regulationcommittees government Decisionsneedtobemadewithoutdelay Simultaneity Co existenceofstrategic tacticandoperationaldecisionsStronginter dependenceofthedecisionsShorttermandstrategicdecisionsmayseemincompatible Humancomponent Highnumberofpeoplepotentiallyinvolved operational functionalandexecutivepeople RiskofculturalmismatchScarceresourcestobridgebetweenmergedcompanies explainingwhyonlyfewmergersandacquisitionssucceedfully Note 1 Shareholderreturnsfrombuyerdividedbyshareholderreturns industryaverage afterthemergerSources A T Kearneyanalysis GlobalPMISurvey 1998 Datastream Higher Nochange Lower 100 230companies Only29 ofCompaniesRealizeanIncreaseinAggregateProfitability Topperformersacrossmostindustriescancreatesignificantshareholdervalue Note 1 Totalshareholderreturnspercentageover underperformancerelativetoindustryindexinthetimeframebetween3monthsbeforeand24monthsaftermergerannouncement totalshareholderreturnsdefinedasthetangiblereturnsinvestorsreceivethroughdividendsandstockpriceappreciationsSources Datastream A T KearneyAnalysis2001 Retailers 62 5 64 5 32 3 44 2 26 6 49 9 34 2 26 6 36 1 25 1 16 0 43 3 26 0 27 5 17 2 17 4 31 9 22 4 18 0 40 4 17 4 14 8 4 0 6 5 31 5 38 9 10 8 25 9 11 0 35 0 20 6 17 6 28 8 18 0 9 7 39 6 22 7 24 9 17 4 20 3 35 3 26 7 24 1 46 8 26 5 27 2 19 4 24 1 Recreation Chemicals MetalProducers Paper Transportation Diversified Drugs Cosmetics HealthCare Utilities Automotive PrintingandPublishing Electronics Financial Beverages MetalProductsManufacture Food Tobacco Machinery Equipment Electrical Miscellaneous Oil Gas Coal RelatedServices Construction Textiles Aerospace IndustrySpecificRangesofValueCreation 1 Oncethedealisclosed theprincipalproblemsrelatealmostentirelytofailuresinmergermanagement ratherthantotheunderlyingstrategicrationale ProblemsIdentifiedinMergerIntegration Under communication Financial synergyExpectationsUnrealistic Unclear NewOrg StructureWithTooManyCompromises MasterPlan Missing MissingMomentum MissingTopManagementCommitment UnclearStrategicConcept MissingPaceofProject ITIssuesAddressedTooLate Source A T Kearney sGlobalMergerIntegrationSurvey1998 PercentofRespondents Tomanageinherentrisks criticalsuccessfactors canbedistilledfromsuccessfullarge scalemergerstoguidevaluecreation CriticalSuccessFactorsfromLarge ScaleMergers Source A T KearneyMergerIntegration Source A T Kearney sglobalPMIsurvey 98 ValueCaptureofTopPerformersOverTime 15 Year1 Year2 CumulativeValueCaptureAfterTwoYears 85 Time ClosingtheDeal 1 2 3 4 5 6 7 8 9 10 10 8 6 4 2 0 2 4 6 ValueCapture Loss MM YearinWhichSynergiesAreRealized TimingofSynergyRealizationIsAlsoCritical Source MarlLSirower TheSynergyTrap Calculatedbasedona 10MMacquisitionpremium representing50 ofmarketvalue Inourexperience themostcriticalelementinachievingtargetedbenefitsisspeed ProposedOverallApproach A T Kearneyhasaflexiblemergerintegrationframeworkwithacomprehensivetoolkittosupportplanningandimplementationthroughoutthemergerprocesstoensurevaluecapture A T Kearney sMergerIntegrationFramework DevelopStrategy EstablishStructureandPlan Merger AcquisitionoptionsCre