Scott Barnette Principles of M&A .

Why is Corporate Development important ?

Successful M&A creates: revenue growth faster than the market, higher Free Cash Flow levels, powerful global repositioning capabilities against competitors Have a centralized and powerful collection of thought leadership, insights and perspectives from Investment Banks, Legal Advisors, Consulting Firm experts, middle tier M&A Advisories, Market Research firms, suppliers, local university business professors, local employees, your salesforce, numerous Associations, Conference Panelists. All of which exponentially enhances CHQs Senior Leadership teams vision development, corporate strategy, and forward operation planning. Interact continuously with strategic knowledge sources of what your businesses have the potential to be.

Scotts M&A Playbook..

1) 2) 3) 4) Buy smart -- Integrate successfully Have a disciplined approach to M&A: Dont overpay stick to 6X to 8X multiple range: (TA-TL)/EBITDA Build your own in-house Global Corporate Development team: structure, system, process, people Have a centralized repository of target information, market insights, business views, conference panelist comments, from everywhere. { from Investment Banks, Legal Advisors, all Consulting Firm experts, middle tier M&A Advisories, Market Research firms, suppliers, local university business professors, local employees, your salesforce, Associations, Conference Panelists } Do on-going proactive M&A target evaluations on your Business Units Presidents Wish List targets Do deals when the deal market is soft .and when you are cash rich If terms are just not sufficiently right .walk away from the deal In contracts, press your Legal and Financial Advisors to innovate, push the envelope on leading edge legal and business clauses .{ for warranties, indemnification, post-close adjustments, earn-out structures } Do not take-on excessive liabilities, such as debt, pension plans, or installed base warranty costs Develop your own experienced Integration PMO team of leaders Dont de-prioritize the need for experienced HR integration & communication.. Acquiring company C-level must assert an Authoritative one of New Ownership control from Day 1.. Assign a Culture Integration team: identify culture differences, explain the differences, use HR Integration to explain behavioral expectations

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14) Use on-boarding meetings for HR to explain what employees might be feeling, what to expect, how to get help on certain HR Integration related issues 15) Provide HR insight and empathy for what the employees are going through 16) Message to acquired senior management: zero tolerance for negative political agendas 17) Require information reports into PMO..minimize information loss between valuation, due diligence, negotiations, merger agreement creation 18) Require Deal Team and PMO Integration Leaders to do a deal post-mortem, report all important lessons learned into the centralized M&A repository 19) In CHQ Leadership Development Program, HR must require successful Integration Leadership experience as qualification for executive promotions 20) Due Diligence Lessons Learned applies to overseas targets where International Accounting Standards
are interpreted differently)

Be cautious not to be assuming liabilities that are not related to the business being acquired Be mindful of private companies owners loaning money to themselves or family (unrecorded) Be mindful of funds being lent to entities that were used for non-business purposes Lack of regular reconciliation processes Improper transaction cut-offs Business transactions without proper documentation or significant discrepancies Business Structure challenges and Tax Obligations after the deal with local regulatory authorities