mergermarket

Forum 2009:
French M&A and
Restructuring
Forum

Post-event briefing

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2 French M&A forum

June 2009
CONTENTS

05 Chair’s welcome address

06 Where next for the French economy?

09 New ethics for tomorrow’s capitalism – the future of

shareholder value

11 Is more regulation the solution?

14 Corporate finance in the post-crisis economy

14 How to get a deal done in France

17 The importance of technology in an M&A transaction

18 Is restructuring the way out?

20 Historical data

22 Where the debt breaks

FRENCH M&A forum 3

June 2009
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4 French M&A forum
June 2009
Chair’s welcome address
Patrick Valroff, Chief Executive Officer, Calyon
The French M&A and Restructuring Forum
began with a welcome speech by Patrick
Valroff, Chief Executive Officer of corporate
and investment banking firm Calyon.
Mr Valroff started the forum by quoting a
famous line from Giuseppe Di Lampedusa’s
bestseller, The Leopard: “If we want things to
stay as they are, things will have to change.”
Valroff likens this to the predicament faced
by modern-day regulator’s who, one year on
from the bankruptcy of US investment bank
Lehman Brothers, are calling for a new
balance to be struck between shareholders
and stakeholders, companies and banks
and employees and the market in order to
promote a new form of wealth distribution.
According to Valroff, there is a need for
reform within the Financial Services
sector but he warns that, in the context
of the economic crisis, such an approach
heightens the risk of reducing competition
and impairing free markets. The only way to
avoid this is for regulatory bodies the world
over to take concerted and united action
so as to avoid regional disparities between
different jurisdictions – especially in the case
of North American and European markets.
Furthermore, Valroff explained that there is
a robust correlation between global stock
markets and M&A activity. It was argued that
the principal impediment to deal-making
activity is the mismatch between bidder
and seller expectations and not, as many
commentators have been speculating, a lack
of deal financing options being available.
Valroff also said that the current crisis will
invariably cause a reshuffling of the cards.
Players who were able to maintain a strong
balance sheet throughout the downturn
will be in a good position to snap up weaker
players in their respective industries. In
conclusion, Valroff urged decision makers
to worry about the real economy rather than
‘hydroponic finance’. The governance of
regulatory bodies around the globe remains
a key issue that needs to be addressed in
the future with too much regulation today
likely to have a negative impact in the future.
Patrick Valroff, Chief
Executive Officer, Calyon
FRENCH M&A forum 5
June 2009
Where next for the
French economy?

Philippe Mills, Chief Executive Officer, Agence France TrEsor

Philippe Mills began his keynote speech
by looking at the international response
to the banking and financial crisis over
the past two years. According to Mills, the
response was both quick and coordinated
with both the Federal Reserve and the
European Central Bank cutting interest
rates swiftly and decisively. Furthermore,
in October 2008, following the collapse
of Lehman Brothers, European leaders
met in Paris to hold an emergency
finance summit and in December, they
agreed a European Economic Recovery
Plan, equivalent to around 1.5% of the
annual GDP of the European Union.
At the national level, Mills recalled that the
French plan was designed to be temporary,
targeted and delivered on time as a means
of restoring confidence and increasing
liquidity within the domestic economy.
Mills took an optimistic view of the
final outcome of these measures and
suggested that there is a considerable
‘potential upside’ in terms of the wider
economic recovery. He explained that
economists tend to underestimate
the extent of economic recoveries
after recessions and generally adopt a
conservative stance in terms of growth
predictions – as was the case in 1993.
Paradoxically, the global economic
downturn also served to highlight some
encouraging characteristics of the French
economy, namely its diversity and lack
of exposure to the Financial Services
and Real Estate industries, as well as a
relatively low level of indebtedness. This
perception has been supported by the rating
agencies as they have remained bullish
about the French economy throughout
the crisis, having placed France in the
‘very fundable’ category – a rating which
is unlikely to change going forward.

However, Mills also warned that there are

a number of potentially mitigating factors
which currently exist and these could
serve to hinder the economic revival. Such
factors include the price of commodities,
macroeconomic imbalances caused by
the rapid expansion of emerging markets
and the exchange rate environment.

6 French M&A forum

June 2009
New ethics for tomorrow’s
capitalism – the future of
shareholder value
Augustin de Romanet, Chief Executive Officer, Caisse des DEpots
Colette Neuville, Founding Director/President, ADAM
Nicole Notat, Founding President, Vigeo
Anton Brender, Director of Economic studies, Dexia Asset Management (moderator)
The panel began with both Nicole Notat
and Augustin de Romanet emphasising
that companies need to consider all their
stakeholders when examining the value
creation chain. De Romanet went on to
suggest that a company’s employees
should also be considered within such a
chain – especially given the increasing
tendency for companies to incentivise their
employees now with shareholding schemes.
Colette Neuville added that the short
term emphasis on shareholder value
has been the result of an incorrect
definition of what real shareholder
value actually is. She argued that only
by integrating the company’s external
costs into shareholder value would the
true definition of the concept actually
be achieved – a process that would
only take place over the long-term.
De Romanet went on to explain that
he believed there could be three ways
to maximise long-term value: firstly,
by having long-term shareholders;
secondly, by improving the financing of
small and medium-sized enterprises
(SMEs) in order to support domestic
family businesses; and thirdly, by taking
corporate governance away from quarterly
short-term reporting. Notat particularly
agreed with the second point and added
that SMEs should be given the means to
reach the next stage of their development.
Neuville pointed out that financial market
volatility has encouraged investors to
increasingly adopt short-term views. As
a result of this, governance should be
put in place so as to allow for the more
efficient management of savings and
investments, “One cannot get people on
board if they don’t share the company’s
profits and long term vision.” De Romanet
added that “this puts a lot of old business
models into question.” He argued that
capitalism has been transformed in recent
times, away from the traditional family
model seen in smaller businesses.
Neuville agreed with de Romanet’s
viewpoint, suggesting that the true owners
of capital now are not shareholders
but mutual funds. In addition, the key
question for a new form of capitalism was
how to reconcile risk-taking with profit-
making. She acknowledged that it will be
very difficult to change the managers of
mutual funds into shareholders as they
are ultimately not interested in being
associated with a company over the long-
term, instead seeking short-term profits.
Equally, the company’s directors are
rarely chosen by the shareholders.
Indeed, they are typically chosen by
the management and presented to
shareholders at the AGM. Neuville believes
that such a procedure has been, at best,
inappropriate given that shareholders
have now lost control over the decision-
making process with regards to capital
raising and reduction, or debt issuance.
Neuville and Notat both offered some
interesting thoughts for the future. Firstly,
directors should represent the shareholders
and not the management. Secondly, it is
crucial to set management’s bonuses on
a long-term basis as a way to reintegrate
the risk attached to running a business.
Thirdly, it was argued that the board of
a business should look to play some
role in managing risk within the firm.
FRENCH M&A forum 7
June 2009
 “banks need visibility in the current climate
and a covenant reset negotiation is not
simple as it raises questions of business
plans where sometimes there is no visibility
about where the business is going.”
Fabrice Keller, Managing Director, Duff & Phelps

8 French M&A forum

June 2009
Is more regulation the solution?

Jean-Paul BetbEze, Chief Economist and Director of Economic Studies, CrEdit Agricole
Pierre Fleuriot, Chief Executive Officer, PCF Conseil
Jean-FranCois ThEodore, Deputy Chief Executive Officer & Director, NYSE Euronext
Anne Perrot, Vice President, l’AutoritE de la concurrence
Arnaud de Bresson, Director General, Paris EUROPLACE (moderator)

Anne Perot started off the discussion by
tackling the problems posed by state aid.
She claimed that although the aid is meant
to improve the way the market operates, it
can actually distort it. The first issue with
aid is that, often being ill-informed, the
state is not always best placed to decide
how or where to improve the market. The
second risk is that it can prevent poor
performing companies exiting the market
and thus constitutes an obstruction to
the market’s automatic regulation.
The European Commission therefore needs
to act as quickly as possible to help rescue
troubled companies while ensuring that
state aid effectively meets companies’ needs
on a short-term basis. Companies can
sometimes face short-term difficulties but
state-sponsored consolidation in certain
sectors will have long term consequences.
Jean-Paul Betbèze pointed out that the
financial crisis impacted on the whole
global financial system and caused such
panic that it forced governments and
regulators to act quickly. This time pressure
inevitably led to inequalities and certain
perversities and those companies which
benefited from such support now have
an advantage over those that did not. As
a result, the market has become slightly
distorted in certain areas and this will
have to be rectified as soon as possible.
Pierre Fleuriot went on to compare state
intervention in the US and European
Financial Services sectors. He highlighted
that the US Government intervened and
oversaw the notional buyouts of Bear
Stearns and Merrill Lynch before allowing
Lehman Brothers to enter bankruptcy.
In Europe, the solution revolved around
state support and private remittances
back to various governments are yet to
be fully established. Fleuriot warned
that regulatory bodies could encounter
difficulty in managing the exits of
state investment in various banks.
Fleuriot moved on to say that as a result of
several ‘overnight mergers’ in September
and October 2008, consolidation in the
Financial Services space could accelerate
once market conditions improve. Behind
such a consolidation is not the idea that the
bigger the banks are, the less likely they
will be to fail, but more to do with the fact
that banks will now be more connected.
The process of consolidation among stock
exchanges has also seen some important
changes, Jean-François Théodore noted.
Between 2000 and 2008, there was
strong competition between European
stock exchanges and the search for
economies of scale drove M&A activity.
However, since 2008 there has been a
drop off in activity involving European
bourses largely due to valuation issues. In
Europe, the implementation of Markets in
Financial Instruments Directive (MIFID) in
November 2007 has enabled multilateral
negotiation platforms to gain market
share free of the rules imposed upon
regulated exchanges. Such conditions
will be at the centre of revisions to MIFID,
scheduled to start in November 2009.
According to Betbèze, the September
G20 summit in Pittsburgh acknowledged
the need for accounting norms and
harmonisation of the regulation of
financial markets across the globe.
Fleuriot added that a new strand of global
governance is emerging behind the
evolution of these norms, highlighted by
the transformation of the G8 into the G20.
While Europe is addressing the regulation
of financial markets by looking to give more
power to authorities, Théodore warned
that Europe is less advanced than the
US or China in this respect. Indeed, the
United Kingdom and Europe disagree on
some crucial issues, highlighting that, to
a certain extent, continental regulation
remains a very much localised affair.

FRENCH M&A forum 9

June 2009
Corporate finance in the
post-crisis economy

Thierry Francq, General Secretary, AMF (AutoritE des MarchEs Financiers)

Thierry Francq, AMF General Secretary,
started the afternoon session by looking
at the current state of corporate finance
in France. Francq noted that that,
notwithstanding the Financial Services
sector, the levels of share placements and
rights issues in France were generally
down. While there have also been few initial
public offerings (IPOs), the market has lately
shown signs of recovery thanks in part to
the changing regulatory environment.
Going forward, such changes will
undoubtedly have an impact on corporate
activity. Firstly, the AMF has reviewed the
definition of threshold levels in light of
the use of derivatives to take control of
listed companies. Secondly, declarations
of intentions have also been made more
specific, including financing methods
and the future strategy towards the listed
company. The period for declaration has
also been shortened from ten to five
days and this should help transparency
by better identifying the shareholder
structure of listed companies and
alerting the market of stake building.
Thirdly, the AMF has also planned to lower
mandatory offer thresholds from 33% to
30% so as to prevent stealth takeovers
in a market where valuations remain
depressed. Francq commented that
although a date is yet to be set, the change
should be made some time in 2010.
Looking at corporate restructurings, France
has seen the continued strengthening of the
‘sauvegarde’ procedure. However, Francq
stressed that while it is possible to delay,
for a limited period of time, the publication
of information to preserve the company’s
interests, such an approach has to be
strictly governed. Meanwhile, the current
environment has seen an increase in debt-
to-equity conversions although these require
the authorisation of the AMF, Francq added.
More generally, Francq summarised that
the financial crisis has seen the AMF review
its strategy towards restoring confidence
by protecting savings and taking a more
proactive role in the domestic economy. On a
European level, the most significant change
for the regulation of European financial
markets revolves around the institutional
empowerment of the Committee of
European Securities Regulators (CESR). In
the long-term, this will aim to create a set
of rules to implement European directives.

10 French M&A forum

June 2009
“France tends to be one step ahead of
other European countries with regards
to the M&A market, on both the up-side
and down-side.”
Axel Kirstetter, Product Marketing Director, IntraLinks

FRENCH M&A forum 11

June 2009
How to get a deal done in France

Jacques Buhart, Partner, Herbert Smith

FrEdEric Dubuisson, Managing Director, Duff & Phelps
Bernard Gault, Partner, Perella Weinberg Partners
Sophie Javary, General Partner, Rothschild
Gilles Ourvoie, Managing Partner, PMI Factory
Serge Weinberg, Partner & Chairman, WEinberg Capital Partners
Beranger Guille, Deputy Editor, mergermarket (moderator)

The discussion began with moderator
Beranger Guille quoting mergermarket
M&A data which shows that the
total value of deals in France for the
first three months of 2009 is down
77% compared to the same period
last year. In volume, the numbers
of deals also saw a sharp decrease,
from 404 last year to 222 this year.
Sophie Javary, Managing Partner of
Rothschild in Paris, noted that while
deal flow has been considerably reduced
over the past 12 months, the first signs
of recovery have started to emerge. The
recovery is primarily being driven by
strategic players who are now targeting
companies they had been eyeing for some
time. Examples include Kraft Foods’
attempt to take over Cadbury, Suntory’s
bid on Orangina and Abbott’s acquisition
of Solvay’s pharmaceutical business.
Private equity players have so far been
largely absent from the top end of the
market and this is likely to remain the
case due to the difficult debt financing
environment. However, Serge Weinberg,
Chairman of Weinberg Capital Partners,
concurred that the market was beginning
to come out of a period of great uncertainty.
The rally in global equity markets and
better availability of debt for industry
players will likely continue to fuel M&A
while weak growth in exposed sectors
will also drive consolidation with firms
needing to realign and reduce their costs.
or debt. To a certain extent, this was the
case in the joint venture between Orange
and T-Mobile and the acquisition of
Razorfish by Publicis. Nevertheless, some
targets such as Cadbury are reluctant
to enter into agreements, likely due to a
lack of visibility in the equity markets.
Weinberg noted that while strategic players
could get financing for large deals, this
was not the case for private equity players.
Indeed, there are few examples of large
transactions brokered by financial investors
over the past year, except for the acquisition
of minority stakes in large listed companies.
On the other hand, financing remains
available to private equity players that are
making acquisitions in the mid-market.
Although difficult, it is definitely possible
to get €100m financing on a €300m
deal. Weinberg also argued that lowered
multiples and the scarcity of debt can
have positive consequences on sellers’
expectations and these will have to be
adjusted downwards over time to take
into account the new economic reality.

Bernard Gault, Partner of Perella Weinberg
Partners, argued that debt is still scarce
and confidence remains fragile, making
the M&A outlook uncertain in the short
term. According to Jacques Buhart, many
deals that have occurred recently have
been paid in shares as opposed to cash
However, Javary stated that the lack of
visibility over future economic conditions
and the inherent difficulty valuing a
business continue to constitute the main
obstacle to a recovery in deal activity. In this
context, deal structures will become more
innovative with vendor financing becoming

12 French M&A forum

June 2009
more common. There is also the capacity
for sellers to remain shareholders and
value creation participants post-deal. 'In
these cases, the seller can agree to an
initial lower price while also benefiting
from any potential future upside.
Frédéric Dubuisson, Managing Director of
Duff & Phelps, also concurred that buyers
could get away with lower transaction prices
if they can guarantee a future upside for
the seller when the market recovers. These
models can be applied to carve-outs or the
sale of distressed assets where healthy
strategic players broker deals that offer
good synergies without raising a lot of debt.
Gilles Ourvoie, Managing Partner of
PMI Factory, stressed that the overall
success of a deal is down to its execution
in particular in times of economic crisis.
In this regard, it is crucial to think of the
postmerger integration (PMI) process as
part of the M&A process rather than a mere
consequence of it. Ourvoie highlighted
that SMEs tend to lag behind large
companies when it comes to integrating
strategies – M&A specialists at large have
a role in activating PMI expertise early.
The panellists also went on to discuss
the impact of government intervention
and regulation on M&A activity in
France. Javary said that governments
won’t remain shareholders in financial In Italy, similar state intervention ensured
services companies in the long run that the merger between Alitalia and Air
and this could lead to consolidation. One went through. In France the antitrust
Elsewhere, the governments will also authority scrutinises deals on the sole
help secure transactions and give moral criteria of competition although the
backing and this should be a positive Finance Minister can approve or veto a
factor for deal activity going forward. deal on the grounds of public interest.
Gault argued that, whilst governments could Looking at future M&A activity, Javary
help push a deal through in some instances, noted that M&A will continue to return to
it will now be more difficult than ever before defensive sectors such as Pharmaceuticals
to acquire French companies that are and Consumer. Other panellists had
deemed strategic. Weinberg moved on to slightly different views with Dubuisson
warn that state intervention has not always predicting that the Technology sector will
been a good thing for the competitiveness be active while Buhart named the Energy
of the French economy although it is seen and Telecoms spaces as likely to see
as a positive both politically and socially. significant deal making going forward.
In spite of the economic downturn, Buhart
said that antitrust rules will not be bent
or softened by the European Commission
(EC). The UK has seen the striking example
of the merger between HBOS and Lloyds
although this deal was ultimately not
referred to the EC as more than two thirds
of these banks' activities were domestic in
nature. The Secretary of State for Business
and Enterprise also said that the public
interest in ensuring the stability of the UK
financial system outweighed competition
concerns raised by the Office of Fair
Trading (OFT) and as such, the merger
did not need to be referred either to the
OFT or to the Competition Commission.
FRENCH M&A forum 13
June 2009
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registeredFrench
14 trademarks M&A forum
of IntraLinks, Inc. in the United States and/or other countries.
June 2009
KEYNOTE: The importance of
technology in an M&A transaction
Axel Kirstetter, Product Marketing Director, IntraLinks
Axel Kirstetter, Director of Product
Marketing at IntraLinks, discussed the
evolution of the M&A process over the
last decade and the role that technology
has played in the development.
Kirstetter began by highlighting the
difficulties involved in the process;
managing and collaborating securely
with internal and external parties, the
need to gather and analyse information
in real time and the ability to capture best
practices involved throughout the process.
Kirstetter suggested that one of the main
issues when conducting transactions is
viewing them as a single event rather
than a structured process. He further
commented that when viewed as a single
event, technology usage is limited to the use
of spreadsheets containing lists of people,
activities and cost, together with simple
project management tools to manage the
timing and execution of projects and intranet
sites and email to manage, store and share
information. However, when M&A follows
a more structured process, other tools can
be utilised, such as virtual datarooms and
software-based project management tools,
to add increased efficiency and security.
Kirstetter argued that to ensure internal
resources are productive, buyers fulfill
commitments and the asset achieves
the best value, M&A business process
tools should be used across the entire
lifecycle of the M&A process.
He stated that this should start in the deal
preparation phase where online tools, such
as IntraLinks, can be used for document
discovery and approval, utilising workflow
and versioning functions to ensure the
correct information is approved and
stored in a central secure repository.
In the marketing phase, these tools can then
be used to send out offering memorandums,
teasers and confidentiality agreements,
allowing the marketing of a deal to be
conducted online from a central location.
Due diligence is the phase in which
virtual datarooms have been widely
utilised, adding both speed and security
to this part of the process, by reducing the
need to travel and allowing buyers from
across the globe to conduct due diligence
simultaneously on a secure platform.
However, Kirstetter highlighted that
there are also innovations happening
in this phase, with the Q&A process
for example. Traditional Q&A is a
spreadsheet-driven, insecure and labour
intensive process. Using an online Q&A
tool can help the sell-side team, the
subject matter experts and the bidders
streamline this part of the transaction.
Kirstetter also asserted that using
technology solutions in the closing
phase generates further time savings
with legal teams being able to
collaborate and communicate on the
drafting of final documentation.
He stated these online tools are also
being used when the deal has been
signed, to facilitate the post-merger
integration process, where platforms are
being used by teams to collaborate and
develop integration plans and analysis
in a neutral, secure environment.
Finally, Kirstetter discussed deal trends that
IntraLinks was witnessing in the French
market. He commented that France tends
to be one step ahead of other European
countries in regards to M&A, on both
the up-side and down-side. Looking at
recent announced deals, IntraLinks has
seen that the Real Estate, Consumer and
Pharma sectors have been most active in
the past few months. In terms of listings,
Kirstetter remarked that the IntraLinks
platform has not seen a single initial
public offering (IPO) in France in 2009.
Furthermore, between 2007 and 2008,
36% of all European financing activity
on IntraLinks platforms took place in
France, although such activity was down
200% in 2009. Additionally, he stated
that France has been responsible for
around one third of overall European
restructurings seen on IntraLinks this
year, although the average value of these
transactions has dropped by around 50%.
FRENCH M&A forum 15
June 2009
Is restructuring the way out?
Bruno Basuyaux, Partner, Herbert Smith
Gonzague de BligniEres, Co-Head of Private Equity & Managing Director, Barclays Private Equity
Jacques Guonon, Chief Executive Officer, Eurotunnel
Fabrice Keller, Managing Director, Duff & Phelps
Laurent Le GuernevE, Judicial Administrator
Laurent PerpEre, Group Managing Partner, Brunswick
Michel Rouger, Honorary President, Tribunal de Commerce de Paris
Yves de Kerdel, Le Figaro (moderator)
Fabrice Keller started the discussion
by distinguishing between operational
and financial restructuring. Financial
restructuring typically involves debt
re-negotiation, covenant resets
or repayment waivers and this is
often a complicated process even if
there is no need for new money.
Keller added that banks need visibility
in the current climate and a covenant
reset negotiation is not simple as it
raises questions of business plans where
sometimes there is no visibility about where
the business is going. People are asking
where the 2009 debt wall is and the answer
is probably in 2010 as both banks and
businesses try to hold on as long as possible
through effective cash management
and good use of working capital.
Gonzague de Blignières estimated that
there were around 2,200 French companies
that are significantly levered with 60% to
70% in breach of covenants. Around 20%
of these 2,200 companies have a value of
more than €50m, meaning that funds will
think twice before investing new money
in them. One of the issues is that private
equity firms need to raise money every four
to five years and the only way to do this is
to return money to limited partners. This
leads some funds to invest new money in
portfolio companies for which they might
previously have overpaid. When a portfolio
company is facing difficulties, it is important
to start negotiations as early as possible
with debt holders. However, this process
is made more complicated by the fact that
16 French M&A forum
June 2009
to renegotiate the debt you need to have a
unanimous agreement from the banks.
Bruno Basuyaux stressed that from
a legal point of view, the tipping point
was the suspension of payments. An
important development over the past
few years was the passing of the EU
Insolvency Regulation in 2000 which allows
distressed French companies to open
insolvency proceedings in other European
member states so long as their ‘centre
of main interest’ is the said country.
Judicial Administrator Laurent Le
Guernève strongly believed that preventing
proceedings have been empowered by the
recent reforms on insolvency. However,
he noted that while ‘sauvegarde’ has
been used successfully with regards
to financial restructurings, it has not
prevented companies from losing the
trust of its partners. Thus, one must give
emphasis to preventing proceedings.
From a communication standpoint, Laurent
Perpère, Managing Partner at Brunswick,
argued that a company has to acknowledge
that information will be made public sooner
or later. This is due to a number of reasons
including the large number of participants
and debt holders, the potential social and
political consequences as well as different
strategies pursued by the participants.
The management of a distressed company
tends to defend the interests of the company
and not the interests of the private equity
owner. Opinions vary and an important
factor is that communication now happens
in real time and Debtwire plays a significant
role in this respect. Consequently, one
has to be constantly prepared to react to
new events and handle divergent views.
Michel Rouger also conceded that views
are not always aligned in a restructuring.
Furthermore, tomorrow’s restructurings
will be very different from the deals we see
today as accounting and financing tools
are in constant evolution. In summary,
the know-how of a company and the
quality of its management should not be
ignored at the expense of the accounting
books when analysing a company that
is going through a restructuring.
Jacques Gounon, Chief Executive Officer
of Eurotunnel, recalled the company’s own
restructuring process that was undertaken
to ease a considerable debt burden. The first
measure taken by Gounon was to reduce
the number of employees by around 30%
while also communicating that, despite the
debt burden, the company’s fundamentals
were solid. Another challenge was to
present a balanced solution that would
enable every party to save face, including
reluctant US debt holders. The ‘sauvegarde’
process helped Eurotunnel to find a way
out as it forced different parties to address
the following question: do you want to
rescue the company? Gounon concluded
by saying that a restructuring process
should never be delayed (as was the case
with Eurotunnel) and should firstly aim to
simplify the debt structure of the company.
 [POST MERGER INTEGRATION] FACTORY®

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Mail: contact@pmifactory.com

FRENCH M&A forum 17

June 2009
historical data
TOP 10 FRENCH M&A TRANSACTIONS, Q1-Q3 2009
Announced Status Target company Target dominant Target dominant Bidder company Bidder dominant Seller company Seller dominant Deal value (€m)
date sector country country country

Aug-09 P Alcan Packaging (majority Industrials & France Amcor Ltd Australia Rio Tinto plc United Kingdom 1,433
of businesses) Chemicals

Mar-09 C Motier SAS (37.1% stake) Consumer France Moulin family (private France BNP Paribas SA France 1,100
investors)

Jun-09 C CACEIS (Crédit Agricole Financial Services France Crédit Agricole SA France Natixis SA France 595
Caisse d'Epargne Investor
Services) (35% stake)

Jan-09 C Crédit Foncier de France Financial Services France Caisse Nationale des France Nexity Initiale SAS France 540
(23.4% stake) Caisses d'Epargne et
de Prévoyance

Aug-09 C Kallista Energies Energy, Mining & France Holding Energies France Babcock & Brown Australia 220
Renouvelables SAS; Utilities Renouvelables SAS International Pty Ltd
Kallista France SAS

Aug-09 C Château Cheval Blanc Consumer France LVMH Moët Hennessy France Groupe Arnault SAS France 200
(50% stake); La Tour du Pin Louis Vuitton SA
(50% stake)

Jun-09 P NT1; TMC (40.00% stake) TMT France Télévision Française France AB Groupe SA France 192
1 SA

Mar-09 C Groupe Lucien Barrière Leisure France Accor SA France Colony Capital LLC USA 153
SAS (15% stake)

Jul-09 C FPEE Industries SA Construction France Barclays Private United Kingdom AGF Private Equity; France 150
Equity Ltd; Pragma AtriA Capital
Capital Partenaires;
Euromezzanine
Conseil SAS; UI
Gestion SA

Jan-09 C Société Foncière Lyonnaise Real Estate France CALYON France Inmobiliaria Colonial Spain 143
SA (8.8% stake) SA

C = Completed; P = Pending.

TOP 10 FRENCH PRIVATE EQUITY TRANSACTIONS, Q1-Q3 2009

Announced Status Target company Target dominant Target dominant Bidder company Bidder dominant Seller company Deal type Deal value (€m)
date sector country country

Aug-09 C Kallista Energies Energy, Mining & France Holding Energies France Babcock & Brown International IBO 220
Renouvelables SAS; Utilities Renouvelables SAS Pty Ltd
Kallista France SAS

Aug-09 C Château Cheval Blanc Consumer France LVMH Moët Hennessy France Groupe Arnault SAS Exit 200
(50% stake); La Tour du Louis Vuitton SA
Pin (50% stake)

Mar-09 C Groupe Lucien Barrière Leisure France Accor SA France Colony Capital LLC Exit 153
SAS (15% stake)

Jul-09 C FPEE Industries SA Construction France Barclays Private Equity United Kingdom AGF Private Equity; AtriA Capital SBO 150
Ltd; Pragma Capital Partenaires; Euromezzanine
Conseil SAS; UI Gestion SA

Mar-09 C Autodistribution Industrials & France TowerBrook Capital USA Investcorp SA SBO 110
Chemicals Partners LP

Sep-09 C Geoxia Maisons Construction France LBO France SAS France Initiative & Finance Investissement SBO 100
Individuelles SAS SA; NI Partners SA

Jun-09 C Eminence SA Consumer France Orium; Pechel Industries France MBO 100
III

Feb-09 C CTR Leyton Business Services France Gimv NV; Pragma Capital France Capzanine; iXEN Partners SBO 100

Feb-09 C Compin Industrials & France Barclays Private Equity United Kingdom LBO France SAS SBO 95
Chemicals Ltd

Jul-09 C Michel Thierry SA Industrials & France Fonds de Modernisation France Deutsche Bank AG; Exit 85
Chemicals des Equipementiers MatlinPatterson Global Advisers
Automobiles; HTP LLC
Investments BV

C = Completed; P = Pending.

18 French M&A forum

June 2009
 Overall M&A trends Deal size split of M&A activity
in France in France: volume
180 90,000 700

160 80,000 31
600
34 25
140 70,000 22 46
20
500 27 54 20

Value of deals (€m)

16

Number of deals
Number of deals

120 60,000 48 30
27 143
17 136
100 50,000 400 28 96
107
72
91 55 52
80 40,000 300 67
4
46
60 30,000 11
200 40
301 33
40 20,000 284 287
259
228
100 146
20 10,000

0 0 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2004 2005 2006 2007 2008 Q1-Q3 2009
04 04 04 04 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09

Number of deals Not disclosed <€15m €15m-€100m €101m-€250m

Value of deals (€m)
€251m-€500m >€500m

Sector split of M&A activity in Sector split of M&A activity in

France Q1-Q3 2009: volume France Q1-Q3 2009: value
2% 1%
3% 3%
3%
3% Industrials & Chemicals 4% Industrials & Chemicals
22%
4%
Consumer 4% 27% Consumer

6% TMT 4% Financial Services

Business Services TMT

6% 6%
Financial Services Real Estate

Pharma, Medical & Biotech Construction

6% Construction Business Services

9%
Leisure Leisure
20%
Energy, Mining & Utilities Energy, Mining & Utilities
9%
Real Estate Pharma, Medical & Biotech
24%
Transportation 16% Transportation
18%

Geographic split of inbound Geographic split of inbound

cross-border M&A activity in cross-border M&A activity in
France Q1-Q3 2009: volume France Q1-Q3 2009: volume
1% 1%
1% 4%
1%
6%
3% North America APAC
2%
4%
UK & Ireland UK & Ireland
29% 6%
6% Germanic North America

Iberia Germanic
9%
Benelux Iberia
11%
Italy Africa

APAC Nordic

CEE 59% Benelux

Other 16% Italy

11% 15%
Other

15%

FRENCH M&A forum 19

June 2009
Where the debt breaks

Robert A. Bartell, CFA (Managing Director, London)

FrEdEric DubuissOn (Managing Director, Paris)

Income approach Market multiple approach

The income approach faces limitations in the
current economic environment, including:
Challenges in estimating the Cost of Capital
• Which risk-free rate should be used?
• What is the proper equity risk premium?
• How did the collapse in the financial
industry affect my firm’s beta?
Assessing the reasonableness
of financial projections
• Are the projections aggressive
or conservative given the
current environment?
• How do we treat the Net Operating
Losses, a tax asset, of a company?
• What is the amount of 'new
money' necessary for a company
to achieve its business plan?
The market multiple approach has
a multitude of questions as well:
• Should a valuation use current,
historical or projected multiples?
• Is the current EBITDA appropriate
for applying to the multiple?
• Will the historical peak-to-trough
cycle of a company match the
future peak-to-trough?
Valuation-driving market multiple selections
are even more critical if the value falls within
the “Red Zone” in which slight adjustments
could dramatically affect a conclusion.

The “Red Zone”

Positive Equity Value

Low Multiple High Multiple

Senior Debt Second Lien Term Loan / Mezzanine Debt Enterprise Value

20 French M&A forum

June 2009
To assess the financial viability of a
company, long term projected performance
needs to be reviewed in conjunction with
the current situation. Companies that
look solvent today may not be solvent
tomorrow. A simple example comparing
two companies with similar free cash
flow but different capital structures
demonstrate the importance of not only
measuring the current health of a company
but also estimating its future strength.

Which company is in a better position?

Step 1: Balance Sheet Assess where the Debt Breaks
Is enterprise
value greater than
(€ in 000s) (€ in 000s)
outstanding debt?
Company 1 Company 2
Enterprise Value €300,000 Enterprise Value €140,000
Debt Securities Debt Securities
Senior Debt (125,000) Senior Debt (125,000)
Second Lien Term Loan / Mezzanine Debt (100,000) Second Lien Term Loan / Mezzanine Debt (100,000)

Aggregate Equity Value Surplus / (De it) €75,000 Aggregate Equity Value Surplus / (De it) -€85,000

Step 2: Cash Flows Assess Company Liquidity

Can cash flows pay

debt obligations?
(€ in 000s) (€ in 000s)
Company 1 Company 2
Enterprise Value €300,000 Enterprise Value €140,000
Debt Securities Debt Securities
Senior Debt (125,000) Senior Debt (125,000)
Second Lien Term Loan / Mezzanine Debt (100,000) Second Lien Term Loan / Mezzanine Debt (100,000)

Aggregate Equity Value Surplus / (De it) €75,000 Aggregate Equity Value Surplus / (De it) -€85,000

Step 3: Conclude Which Company is in Better Position

In the first scenario, company 1’s enterprise In the second scenario, company 2’s
value exceeds the outstanding debt but enterprise value is less than the outstanding
Company 1 may not have the ability to debt but Company 2 should have the
refinance in the current environment. ability to service upcoming payments.

Solvency Tests Solvency Tests

Balance Sheet: Pass Balance Sheet: Fail
Cash Flow: Fail Cash Flow: Pass

Duff & Phelps is well positioned to provide a debtor, creditor or security

trustee an independent going concern business enterprise value and expert
testimony. We are confident in assessing and defending 'where the debt
breaks' in connection with negotiations amongst various stakeholders.

FRENCH M&A forum 21

June 2009
About IntraLinks

IntraLinks® provides enterprise-class solutions, which facilitate the

secure, compliant and auditable exchange of critical information,
collaboration and workflow management inside and outside the
enterprise. Our on-demand solutions help you organise, manage,
share and track information enabling you to accelerate your workflow,
optimise your business processes and realise new profit potential.

Since 1997, IntraLinks has transformed
the way companies do business. More
than a decade ago, we began our life
revolutionising the way debt financing
was handled in an on-demand, on-line
model. We applied this same model to
M&A due diligence, dramatically changing
the way firms do business. With over
800,000 users across 90,000 organisations
around the world, including 800 of the
Fortune 1,000, we are the trusted choice
for critical information exchange.
Clients rely on IntraLinks for a broad
range of mission-critical uses including
M&A due diligence, study start up
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management of complex construction
projects, Board of Director reporting
for public corporations and more.
To find out more about using IntraLinks
to exchange your critical information
visit www.intralinks.com or contact
one of our offices listed below.

EMEA Milan Asia-Pacific

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IntraLinks Ltd. Fax: +39 02 4438 6087 Level 39, One Exchange Square
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Fax: +34 91 791 5228 Fax: +1 617 648 3550 Fax: +61 (0) 2 8249 4001

22 French M&A forum

June 2009
For information regarding this report
please contact:

Karina Cooper
Publisher
T: +44 20 7059 6324
E: karina.cooper@mergermarket.com FRENCH M&A forum 23
June 2009
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