Mergers, Acquisitions, and Other Restructuring Activities: An Integrated Approach to Process, Tools, Cases, and Solutions 10th Edition

21 Office products. European companies have been much faster to adopt open-source solutions, often in an effort to replace Microsoft software. With the announcement of the alliance, there was the danger that Nokia would see a portion of its customers move into Android-based devices and into iPhones. The partnerships

33 all of Perot Systems outstanding shares of Class A common stock was initiated in early November and completed on November 19, 2009, with Dell receiving more than 90 percent of Perots outstanding shares. Mars Buys Wrigley in One Sweet Deal Under considerable profit pressure from escalating

Chapter 10: Analysis and Valuation of Privately Held Companies Answers to End of Chapter Discussion Questions 10.1 What is a capitalization rate? When is it used and why? Answer: The capitalization rate, or simply the "cap rate," represents the ratio of net operating income divided

21 Cash & Merger Sub Shares Membership Interests Cash & Merger Sub Shares Membership Interests Cash & Merger Sub Shares Membership Interests Figure 10.1 Reverse Merger Process (Merger Sub) Common Shares Figure

Chapter 11: Structuring the Deal: Payment and Legal Considerations Answers to End of Chapter Discussion Questions 11.1 What are the advantages and disadvantages of a purchase of assets from the perspective of the buyer and seller? Answer: The advantages of an asset purchase from the standpoint of

21 that are automatically transfer. T-Mobile US, Inc. has a substantial amount of debt, which may on an historical basis be less than or in line with their competitors but may prove burdensome in the future. The wireless market is maturing and becoming increasingly price competitive to some degree

35 certainty of purchase price, since Chevron stock was not subject to a collar and could lose value between signing and closing. CNOOC also felt that Unocal shareholders would not find the firms shares attractive since the firm was not well-known to U.S. investors. Chevron was trying to appeal

Chapter 12: Structuring the Deal: Tax and Accounting Considerations Answers to End of Chapter Discussion Questions 12.1 When does the IRS consider a transaction to be non-taxable to the target firms shareholders? What is the justification for the IRS position? Answer: Under the law, tax-free transactions

of the subsidiarys stock. At closing, Merger Sub is merged into Sprint, with Sprint surviving. New Sprint provides the remaining $17.0 billion, of which $4.9 billion is retained by Sprint and $12.1 billion is used to acquire Sprint stock through a tender offer. Post-closing, Sprint continues to trade as a

32 Combined Company Resulting from Steps 1-3 Former Merck Shareholders New Merck (Schering-Plough) Former Schering-Plough Shareholders 32 Combined Company Resulting from Steps 1-3 Former Merck Shareholders New Merck (Schering-Plough) Former Schering-Plough Shareholders 32 Combined Company Resulting from Steps 1-3

1 generate significant synergies by combining the firm with its existing business. If the original buyout firms investment fund is coming to an end, the firm may be able to sell the LBO to another buyout firm that is looking for new investment opportunities. This option is best used

21 Answer: The form of payment was cash, due to its attractiveness to Heinzs public shareholders. The use of cash is common in these types of deals. The form of acquisition was the purchase of common stock from public shareholders, effectively converting Heinz from a public to a private

Chapter 15 Business Alliances: Joint Ventures, Partnerships, and Alliances Solutions to End of Chapter Discussion Questions 15.1 What is a limited liability company? What are its advantages and disadvantages? Answer: LLCs were first recognized for tax purposes in 1988. The LLC combines features of the corporation

21 Selecting an alliance partner must be done judiciously to avoid competing with a firms own customers or partners, cannibalizing its own product offering, or unintentionally transferring proprietary information and technology. ____________________________________________________________________________________ Smartphones outsold personal computers for the first time in the fourth quarter of 2010. The

32 advertising dollars from companies willing to pay for links on Microsofts and Yahoo!s websites. With Microsofts search technology believed to be superior to Yahoo!s, users requesting searches through Yahoo!s site will be implemented using Microsofts search software. Regulatory agencies in both the United States and the European Union

Chapter 16: Alternative Exit and Restructuring Strategies Divestitures, Spin-Offs, Carve-Outs, Split-Ups, and Split-Offs Answers to End of Chapter Discussion Questions 16.1 What are the advantages and disadvantages of tracking or target stocks to investors and to the firm? Answer: The purpose in creating tracking stock is to

21 tax free to P&G because it is an intracompany transfer. If the exchange offer had not been fully subscribed, P&G would have distributed through a tax-free spin-off the remaining shares as a dividend to P&G shareholders. The transaction agreement outlined the terms and conditions pertinent to completion

35 Answer: A breakup strategy is one in which a firms operations are offered for sale as independent, standalone entities. Following the divestitures of the firms operations, the after-tax proceeds from selling businesses that remain after repaying any outstanding liabilities held at the level of the parent are distributed

Chapter 17 Alternative Exit and Restructuring Strategies: Bankruptcy Reorganization and Liquidation Chapter Discussion Questions 17.1 Why would creditors make concessions to a debtor firm? Give examples of common types of concessions made? Answer: Creditors may decide to allow the insolvent firm to continue to operate, because they believe

bankruptcy discussed earlier in the case study constitutes a blend of the second and third options. The firm may voluntarily liquidate as part of an out-of-court settlement or be forced to liquidate under Chapter 7 of the bankruptcy code. The choice of which option to pursue is critically dependent on

investment. However, on the upside, pre-bankruptcy shareholders may receive some of their investment back to the extent they receive stock, rights, or warrants in the new company. Finally, the number of layoffs and plant closings, and their negative impact on local communities and government tax revenues, is mitigated to the

Chapter 18 Cross-Border Mergers and Acquisitions: Analysis and Valuation Answers to End of Chapter Discussion Questions 18.1 Discuss the circumstances under which a non-U.S. buyer may choose a U.S. corporate structure as its acquisition vehicle. A limited liability company? A partnership? Answer: A C corporation is

geographically through acquisition and apply the favorable corporate tax rates of Ireland to the earnings of firms it would acquire. geographically through acquisition and apply the favorable corporate tax rates of Ireland to the earnings of firms it would acquire. geographically through acquisition and apply the favorable corporate tax rates

Chapter 2 The Regulatory Environment Answers to End of Chapter Discussion Questions 2.1 What factors do U.S. antitrust regulators consider before challenging a merger or acquisition? Answer: Regulators attempt to measure the likelihood of increased market power, i.e., the ability to raise prices resulting from a business

renegotiated aircraft and other leases and earned $220 million in the second quarter of 2013 while in Chapter 11, its first profit in that quarter in 6 years. It was proposing to lease hundreds of new planes upon exiting bankruptcy. To make this deal happen, it was clear

the repos were undertaken just prior to the end of a calendar quarter, their financial statements looked better than they actually were. The firms outside auditing firm, Ernst & Young, was aware of the moves but continued to pronounce the firms financial statements to be in accordance with generally accepted

35 4. What takeover tactics were employed or threatened to be employed by Verizon? By Qwest? Be specific. Answer: Verizon pursued a friendly approach to MCI believing that it could convince MCIs management and board that it represented the stronger strategic partner. Consequently, its stock was likely to

21 Question: When does a business put itself up for sale? Answer: When it is unable to adapt to changing competitive conditions. That is exactly what the second largest US supermarket chain, Safeway, did in early 2014. Beset by slowing industry-wide sales and a daunting array of emerging

21 but seemingly unrelatd growth businesses. Google also is inclined to invest in products for which there is little 21 but seemingly unrelatd growth businesses. Google also is inclined to invest in products for which there is little 21 but seemingly unrelatd growth businesses. Google also is

33 as possible. In 1998, more than 40% of households had computers and, of those households with children, 70% had 33 as possible. In 1998, more than 40% of households had computers and, of those households with children, 70% had 33 as possible. In 1998, more than

Chapter 6 Integration: Mergers, Acquisitions, and Business Alliances Answers to End of Chapter Discussion Questions 6.1 Why is the integration phase of the acquisition process considered so important? Answer: If done correctly, the integration process can help to mitigate the loss of key talent or managers and

meet face to face to reach consensus. Moreover, Gillette managers were inclined to make decisions rapidly, while P&G decisions often were made only after lengthy deliberations. While these differences were eventually resolved, it did require substantial time and expense. For example, in 2009, Gillette completed a $50 million renovation

Despite realizing greater than anticipated cost savings, operating margins by 2004 in the PC business fell far short of expectations. This shortfall was due largely to declining selling prices and a slower than predicted recovery in PC unit sales. The failure to achieve the level of profitability forecast at this

Chapter 7: Merger and Acquisition Cash Flow Valuation Basics Answers to End of Chapter Discussion Questions 7.1 What is the significance of the weighted average cost of capital? How is it calculated? Do the weights reflect the firms actual or target debt to total capital ratio? Why?

Chapter 8: Relative, Asset-Oriented, and Real Option Valuation Basics Answers to End of Chapter Discussion Questions 8.1 Does the application of the comparable companies valuation method require the addition of an acquisition premium? Why? / Why not? Answer: Yes. The use of multiples of comparable companies to

Chapter 9: Financial Modeling Basics: Valuing the Target Firm Answers to End of Chapter Discussion Questions 9.1 What is financial modeling? How is it helpful in analyzing a firms financial statements? Answer: Financial modeling refers to the creation of a mathematical representation or model of the financial

Deal Terms and Conditions Cash Portion of Offer Price (%) 0.174 Equity Portion of Offer Price (%) 0.826 Percent of Anticipated Synergy Shared with Target % 1.00 Specific Firm Data Acquirer Share Price ($/Share) 102.50 Target Share Price ($/Share) 90.27 Target Shares Outstanding (Millions) 64.40 Acquirer Shares Outstanding, Pre-Closing (Millions) 44.60 PV of Anticipated Net Synergy ($M) (@11% WACC)

21 was not exclusive, Microsoft would continue to have other hardware partners, and Nokia would continue to make some Symbian powered devices, at least until a WP7-based smartphone had proven to be a commercial success. Microsoft also agreed to invest about 1 billion dollars in Nokia over a period

Chapter 1: Introduction to Mergers, Acquisitions, and Other Restructuring Activities Answers to End of Chapter Discussion Questions 1.1 Discuss why mergers and acquisitions occur. Answer: The primary motivations for M&As include an attempt to realize synergy by combining the acquiring and target firms, diversification, market power, strategic

Chapter 1: Introduction to Mergers, Acquisitions, and Other Restructuring Activities Answers to End of Chapter Discussion Questions 1.1 Discuss why mergers and acquisitions occur. Answer: The primary motivations for M&As include an attempt to realize synergy by combining the acquiring and target firms, diversification, market power, strategic

The Anatomy of a Transaction: K2 Incorporated Acquires Fotoball USA 1. How did K2s acquisition plan objective support the realization of its corporate mission and strategic objectives? Answer: K2s overarching financial objective for an acquisition was to earn at least its cost of capital. This

33 all of Perot Systems outstanding shares of Class A common stock was initiated in early November and completed on November 19, 2009, with Dell receiving more than 90 percent of Perots outstanding shares. Mars Buys Wrigley in One Sweet Deal Under considerable profit pressure from escalating

21 Answer: A corporate shell is a corporation usually without any significant operating assets and liabilities. Such legal entities may have value if they are listed on public stock exchanges. Private firms may be able to more rapidly 21 Answer: A corporate shell is a corporation usually without

Chapter 10: Analysis and Valuation of Privately Held Companies Answers to End of Chapter Discussion Questions 10.1 What is a capitalization rate? When is it used and why? Answer: The capitalization rate, or simply the "cap rate," represents the ratio of net operating income divided by

35 certainty of purchase price, since Chevron stock was not subject to a collar and could lose value between signing and closing. CNOOC also felt that Unocal shareholders would not find the firms shares attractive since the firm was not well-known to U.S. investors. Chevron was trying to appeal

21 Answer: The use of a reverse merger has all of the advantages (and disadvantages) of a conventional statutory merger. That is, all assets and liabilities known and unknown automatically transfer by rule of law to the merged firms. The impact on value can be positive or negative depending

Chapter 11: Structuring the Deal: Payment and Legal Considerations Answers to End of Chapter Discussion Questions 11.1 What are the advantages and disadvantages of a purchase of assets from the perspective of the buyer and seller? Answer: The advantages of an asset purchase from the standpoint of

stock through a tender offer. Post-closing, Sprint continues to trade as a public company: 70% owned by SoftBank and 30% owned by former Sprint shareholders. _________________ _________________ ______________________________________ ________________ Sprint Common Shares Outstanding2 3.0 billion Sprint Common Shares Outstanding 3.6 billion

32 Step 2: Schering-Plough Merger: a. Merger Sub 1 merges into Schering-Plough in a reverse merger with Schering-Plough surviving b. To compensate shareholders, Schering-Plough shareholders exchange their shares for cash and stock in New Merck c. Former Schering-Plough shareholders now hold stock

Chapter 12: Structuring the Deal: Tax and Accounting Considerations Answers to End of Chapter Discussion Questions 12.1 When does the IRS consider a transaction to be non-taxable to the target firms shareholders? What is the justification for the IRS position? Answer: Under the law, tax-free transactions

39 and Roberts (KKR), to buy the firm for $90 per share (Wasserstein, 1998). The firms board immediately was faced with the dilemma of whether to accept the KKR offer or to consider some other form of restructuring of the company. The board appointed a committee of outside directors to

39 the shares held by RJR Nabisco common stockholders. It often is argued that at least some part of the premium is offset by a reduction in the value of the firms outstanding bonds and preferred stock because of the substantial increase in leverage that takes place in LBOs.

21 Answer: The form of payment was cash, due to its attractiveness to Heinzs public shareholders. The use of cash is common in these types of deals. The form of acquisition was the purchase of common stock from public shareholders, effectively converting Heinz from a public to a private firm.

.1482 shares of its American Depository Shares3 for each outstanding common share of Baxalta in January 2016. At closing, Shire shareholders will own 66% of the combined firms and Baxalta shareholders the remainder, which appeared to preserve the tax status of the spinoff.4 M&A negotiations are by their

Chapter 14: Applying Financial Modeling To Value, Structure, and Negotiate Mergers and Acquisitions Answers to End of Chapter Discussion Questions 14.1 Why should a target company be valued as a standalone business? Give examples of the types of adjustments that might have to be made if the

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Assumptions: Sales Growth % 0 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 Cost of Sales (COS) as % of Sales 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Sales, General & Admin. Exp. as

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Assumptions: Sales Growth % 0 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 Cost of Sales (COS) as % of Sales 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Sales, General & Admin. Exp. as

.1482 shares of its American Depository Shares3 for each outstanding common share of Baxalta in January 2016. At closing, Shire shareholders will own 66% of the combined firms and Baxalta shareholders the remainder, which appeared to preserve the tax status of the spinoff.4 M&A negotiations are by their

32 completely cede control. Consequently, the JV represented an opportunity to improve profitability in the U.S. market while retaining control over non-U.S. operations. completely cede control. Consequently, the JV represented an opportunity to improve profitability in the U.S. market while retaining control over non-U.S. operations. completely cede control. Consequently,

21 Selecting an alliance partner must be done judiciously to avoid competing with a firms own customers or partners, cannibalizing its own product offering, or unintentionally transferring proprietary information and technology. ____________________________________________________________________________________ Smartphones outsold personal computers for the first time in the fourth quarter of 2010. The

Chapter 15 Business Alliances: Joint Ventures, Partnerships, and Alliances Solutions to End of Chapter Discussion Questions 15.1 What is a limited liability company? What are its advantages and disadvantages? Answer: LLCs were first recognized for tax purposes in 1988. The LLC combines features of the corporation

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Assumptions: Sales Growth % 0 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 Cost of Sales (COS) as % of Sales 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Sales, General & Admin. Exp. as

21 tax free to P&G because it is an intracompany transfer. If the exchange offer had not been fully subscribed, P&G would have distributed through a tax-free spin-off the remaining shares as a dividend to P&G shareholders. The transaction agreement outlined the terms and conditions pertinent to completion

35 Answer: A breakup strategy is one in which a firms operations are offered for sale as independent, standalone entities. Following the divestitures of the firms operations, the after-tax proceeds from selling businesses that remain after repaying any outstanding liabilities held at the level of the parent are distributed

dependent on which provides the greatest present value for creditors and shareholders. To evaluate these options, the firm's management needs to estimate the going concern, selling price, and liquidation values of the firm. Patience and time had run out for Hostesss creditors. There were no serious strategic buyers for the

6. Speculate as to why investors for both firms responded so favorably when news of the deal was announced? Answer: The sharp jump in Forest Labs share price represented investors bidding up its share price to reflect the sizeable premium paid for Forest Labs. Actaviss share price increase

the repos were undertaken just prior to the end of a calendar quarter, their financial statements looked better than they actually were. The firms outside auditing firm, Ernst & Young, was aware of the moves but continued to pronounce the firms financial statements to be in accordance with generally accepted

renegotiated aircraft and other leases and earned $220 million in the second quarter of 2013 while in Chapter 11, its first profit in that quarter in 6 years. It was proposing to lease hundreds of new planes upon exiting bankruptcy. To make this deal happen, it was clear that

Chapter 2 The Regulatory Environment Answers to End of Chapter Discussion Questions 2.1 What factors do U.S. antitrust regulators consider before challenging a merger or acquisition? Answer: Regulators attempt to measure the likelihood of increased market power, i.e., the ability to raise prices resulting from a business

21 Answer: The answer to this question is rooted in whether boards are perceived to be acting in the interests of all shareholders or simply attempting to entrench themselves and current management. Once an unsolicited bid is initiated, the composition of a target firms shareholders moves from its long-term

35 Answer: Michael Capellas was formerly CEO of Compaq before it was acquired by HP. The severance package was part of the contract he signed when he agreed to be the CEO of MCI. Consequently, MCI is contractually bound to conform to the terms of the contract. Not to

21 All of these alternatives to the merger agreement would have required substantial amounts of time and resources to implement. Each had its own associated risks. None represented an obvious alternative to the merger agreement. According to SEC filings, the Dell Inc. boards special committee rejected the Icahn proposal

Chapter 3: The Corporate Takeover Market: Common Takeover Tactics, Anti-Takeover Defenses, and Corporate Governance Answers to End of Chapter Discussion Questions 3.1 What are the management entrenchment and shareholder interests hypotheses? Which seems more realistic in your judgment? Answer: Management entrenchment refers to the use of

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Assumptions: Sales Growth Rate % 0.508 0.450 0.400 0.400 0.400 0.350 0.300 0.250 0.200 0.150 0.100 Operating Margin % of Sales -0.02 -0.01 -0.01 0.02 0.04 0.08 0.1 0.12 0.15 0.15 0.15 Depreciation Exp. % of Sales 0.036 0.034 0.06 0.06 0.06 0.06

Chapter 3: The Corporate Takeover Market: Common Takeover Tactics, Anti-Takeover Defenses, and Corporate Governance Answers to End of Chapter Discussion Questions 3.1 What are the management entrenchment and shareholder interests hypotheses? Which seems more realistic in your judgment? Answer: Management entrenchment refers to the use of

Chapter 4 Planning: Developing Business and Acquisition PlansPhases 1 & 2 of the Acquisition Process 4.1 How does planning facilitate the acquisition process? Answer: Some individuals tend to shudder at the thought of following a structured process because of perceived delays in responding to both anticipated

21 Question: When does a business put itself up for sale? Answer: When it is unable to adapt to changing competitive conditions. That is exactly what the second largest US supermarket chain, Safeway, did in early 2014. Beset by slowing industry-wide sales and a daunting array of emerging rivals,

Chapter 4 Planning: Developing Business and Acquisition PlansPhases 1 & 2 of the Acquisition Process 4.1 How does planning facilitate the acquisition process? Answer: Some individuals tend to shudder at the thought of following a structured process because of perceived delays in responding to both anticipated and

33 channel for distributing toys is directly to consumers through catalogs. The so-called direct channels offered by the internet and catalog sales help Mattel reduce its dependence on a few mass retailers. Aging Population. Grandparents accounted for 14% of U.S. toy purchases in 1999. The number of

Chapter 5 Implementation: Search through ClosingPhases 3 to 10 Answers to End of Chapter Discussion Questions 5.1 Identify at least three criteria that might be used to select a manufacturing firm as a potential acquisition candidate. A financial services firm? A high technology firm? Answer: Selection criteria

21 Answer: Google is likely to experience exceptional double-digit growth in revenue for years to come driven by the ongoing shift of brick and mortar retailing and advertising to the Internet. Such additional traffic on the Internet will enable the firm to sell additional advertisement on its website and

Chapter 5 Implementation: Search through ClosingPhases 3 to 10 Answers to End of Chapter Discussion Questions 5.1 Identify at least three criteria that might be used to select a manufacturing firm as a potential acquisition candidate. A financial services firm? A high technology firm? Answer: Selection criteria

Chapter 6 Integration: Mergers, Acquisitions, and Business Alliances Answers to End of Chapter Discussion Questions 6.1 Why is the integration phase of the acquisition process considered so important? Answer: If done correctly, the integration process can help to mitigate the loss of key talent or managers and

2. What did HP learn by studying other mergers? Give examples. 3. Cite key cultural differences between the two organizations. How were they resolved? Integrating Supply Chains: Coty Cosmetics Integrates Unilever Cosmetics International In mid-August 2005, Coty, one of the world's largest cosmetics and fragrance manufacturers, acquired Unilever

campus similar to the P&G Cincinnati headquarters. Under this open layout concept intended to optimize communication, not even senior executives have doors on their offices. The new office complex in Boston has copious amounts of open or common space and world-class conferencing facilities to promote more face-to-face communication as a

Chapter 7: Merger and Acquisition Cash Flow Valuation Basics Answers to End of Chapter Discussion Questions 7.1 What is the significance of the weighted average cost of capital? How is it calculated? Do the weights reflect the firms actual or target debt to total capital ratio? Why?

8. The calculation of free cash flow to the firm includes all of the following except for a. Net income b. Marginal tax rate c. Change in working capital d. Gross plant and equipment spending e. Depreciation Answer: A Answer: A

9. The calculation of free cash flow to equity includes all of the following except for a. Operating income b. Preferred dividends c. Change in working capital d. Gross plant and equipment spending e. Principal repayments Answer: A Answer: A

18 Answer: With respect to the standalone valuation, it is assumed that both the valuation multiples are appropriate and that the firms selected for the peer group are very similar to St. Jude in terms of profitability, growth and risk. In addition, it is assumed that the valuation

18 6. What are the key valuation assumptions underlying this valuation of St. Jude Medical? Be specific. Answer: With respect to the standalone valuation, it is assumed that both the valuation multiples are appropriate and that the firms selected for the peer group are very similar

Chapter 8: Relative, Asset-Oriented, and Real Option Valuation Basics Answers to End of Chapter Discussion Questions 8.1 Does the application of the comparable companies valuation method require the addition of an acquisition premium? Why? / Why not? Answer: Yes. The use of multiples of comparable companies to

its EDS acquisition four years earlier. The write down amounted to a staggering 58% of what the firm had paid for EDS. What went wrong? Was it due to poor planning, a bad strategy, or poor execution? Probably each had a role. Could financial models have helped to

overpayment for EDS, HP announced in August 2012 that it would take an accounting charge of $8 billion related to its EDS acquisition four years earlier. The write down amounted to a staggering 58% of what the firm had paid for EDS. What went wrong? Was it due

Chapter 9: Financial Modeling Basics: Valuing the Target Firm Answers to End of Chapter Discussion Questions 9.1 What is financial modeling? How is it helpful in analyzing a firms financial statements? Answer: Financial modeling refers to the creation of a mathematical representation or model of the financial

The Anatomy of a Transaction: K2 Incorporated Acquires Fotoball USA 1. How did K2s acquisition plan objective support the realization of its corporate mission and strategic objectives? Answer: K2s overarching financial objective for an acquisition was to earn at least its cost of capital. This

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Assumptions: Sales Growth Rate % 0.508 0.450 0.400 0.400 0.400 0.350 0.300 0.250 0.200 0.150 0.100 Operating Margin % of Sales -0.02 -0.01 -0.01 0.02 0.04 0.08 0.1 0.12 0.15 0.15 0.15 Depreciation Exp. % of Sales 0.036 0.034 0.06 0.06 0.06 0.06

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Assumptions: Sales Growth % 0 1.03 1.03 1.03 1.03 1.03 1.03 1.03 1.03 Cost of Sales (COS) as % of Sales 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Sales, General & Admin. Exp. as

Deal Terms and Conditions Cash Portion of Offer Price (%) 0.174 Equity Portion of Offer Price (%) 0.826 Percent of Anticipated Synergy Shared with Target % 1.00 Specific Firm Data Acquirer Share Price ($/Share) 102.50Target Share Price ($/Share) 90.27Target Shares Outstanding (Millions) 64.40Acquirer Shares Outstanding, Pre-Closing (Millions) 44.60 Acquirer Share Price ($/Share) 102.50Target Share Price ($/Share)