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PwCs 16th Americas School of Mines


Driving Value from Acquisitions May 21-24, 2013 Los Cabos, Mexico

Agenda
1 2 3 4 5 6

M&A Activity Acquisition Overview Taking Control Full Integration Hostile Acquisition Conclusion

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 2

M&A Activity

M&A Activity

6/10/2013 3

Global Mining M&A Volume and Aggregate Value

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 4

Deal Activity by Resource

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 5

Buyers and Targets by Resource

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 6

The Making of a Successful Acquisition

62% - strategically successful


38% - financially successful 30% - operationally successful

Source: PwC M&A Integration Survey

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 7

M&A Activity

Acquisition Overview

6/10/2013 8

Typical Acquisition

Strategic Screen

Investigate

Execute

Integrate, Operate

Pre-close
Negotiation and Closing

Close

Short-Term
Execute 100 Day Plan

Longer-Term

Financial Diligence Evaluate Growth Strategy

Organization/Cultural Alignment

Operations and Systems Diligence

Integration Management Office Org. Design Governance/ Org Structure Project Team Structure Risk/Issue Management Cultural Alignment

Strategy Articulation

Comp./ Benefit Alignment

Facility Alignment

Analyze Target Markets

Tax, Legal and Regulatory

Operations Integration/Optimization Valuation and Structure Day 1 Plan and Execution Merger Communication Employee/ Customer Retention

Systems Integration/Optimization

Identify M&A Candidates

Synergies and Value Drivers


Synergy Planning and Realization Initial Integration Planning

Communication and Change Management

Transition Team Deployment

Customer Integration

Supplier Integration

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 9

Challenges Facing Acquirers


There are several common issues which diminish deal value for an acquirer. They tend to be additive and can impact the integration as a whole, but can be focused in the individual workstreams.
1.

Issues that Diminish Deal Value

Start too Late. Speed is critical to executing the transaction, integrating, and transitioning back to business as usual. Effective acquirers engage functional leaders early in the due diligence process to jumpstart the planning process.

Start too Late Failure to Address Soft Issues

2. Failure to Address the Soft Issues. Poorly run integrations typically focus only on tactical development and execution of workplans. Cultural, communication, and governance components are critical to a large-scale integration.
Working in Silos Lost in Details

Potential Deal Value

3. Working in Silos. Effective acquirers develop a single integration strategy that incorporates all functional areas. This ensures consistency of delivery, levelsets expectations, and provides complete visibility of execution across the enterprise. 4. Lost in the Details. Many organizations view integration as a tactical project, focused purely on workplan development and execution to integrate all business functions. Proper time should be spent rethinking the business model prior to executing a generic integration plan. 5. Closed Minded (We are the best at what we do). When executing large-scale mergers, effective acquirers take time to understand the target and collaboratively select the best people, processes, and technology to support the new business. 6. Market Awareness at the Lower Levels. For public companies, the market expects to see value in two quarters after a large acquisition. By educating and holding the integration team to these timelines, the success of the integration is much more likely to achieve shareholder objectives. 7. Delayed Decision-Making. Leadership and Executives need to take active involvement in the integration. Early in the process, regular involvement is critical to make decisions that will guide the overall planning and execution of the integration.

Closed Minded Market Awareness at Lower Levels Delayed Decision-Making

Value can be diminished by through the impact of multiple factors. While acquirers focus their efforts to address the most prevalent issues, they often lose focus of others.

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 10

Confirming Buycos Objectives for Targetco Acquisition


Improve Operating Performance of Targetco Assets Buyco has a reputation and has set an expectation in the market of increasing and/or accelerating production from the Targetco assets Improve Profitability Through Synergy Realization Buyco has set an expectation of synergies from integrating certain elements of the business (eg back office, procurement, tax efficiency). Demonstrate that the Acquisition of Targecto is Accretive When the above improvements are measured against the purchase price, the transaction must be viewed as accretive across a variety of to be determined metrics. Execute the Acquisition with Minimal Disruption to the Combined Operations The acquisition needs to be executed in a manner that does not disrupt the operations of Buyco or Targetco.

Potential Acquisition Issues



Environmental and health & safety risk Consistency of operations with Buycos code of conduct and ethics Control of board and management Access to site Vanishing assets Fraud, theft and corruption Legal complications Vandalism or sabotage Securing IT infrastructure and data

Personnel security and safety Management support Retention of key staff for continued operations Possible litigation claims against Buyco Communication with all stakeholders Labour unrest Supplier demands Data gathering for possible litigation Tax and financial reporting Change of control issues

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 11

Integration Fundamentals
A clear statement on the integration fundamentals will gain alignment of the leadership team and ensure appropriate direction is provided to integration workstreams

Governing principles What are the key principles by which the integration will be delivered?

Integration Fundamentals

Vision & merger rationale What is the vision for the combined organisation? Degree of integration and scope To what degree will various organisations integrate vs. remain separate?

Priorities & resources Integration priorities vs. business as usual and capacity to deliver change? Controlling & reporting What process will be used to monitor, control and report progress? Structure, roles & responsibilities What is the programme structure and who will assume key roles in the integration?

Sources of value How will integration synergies be identified and initiatives launched? Timetable & milestones What are the key integration milestones and what will be in place for Day One?

An agreed definition of what will be achieved, the structure employed, the processes implemented and timetable of deliverables
PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 12

Integration Considerations
Planning the degree of integration across functions and geographies and tailoring for the type of acquisition is critical to translating acquisition strategy into integration strategy.
Degree of Integration High Absorption Incorporate target into buyer infrastructure Best of Breed/Hybrid Partial Back-office Integration Front-end business remains as-is with back-office integration Standalone Take control and minimize risk; minimal integration of target into buyer infrastructure Choose best from buyer & target for combined business Approach High Considerations

Full

Risk of financial misstatement

Disruption to business

Similarity of business

Low Deal Type Transformative/ Industry Convergence Resource/Service Extension

Low

Geographic Expansion

Industry Consolidation

Control

Low to None

Intellectual 6/10/2013 Property & Other 13 Assets

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Synergies
Slide 13

Seven Tenets of Successful Integration


Based on our experience, we have identified common critical success factors that we address with our clients to ensure their long term success.
1. Accelerate the transition. There is no value in delay. It is critical to focus on obtaining bottom-line results as quickly as possible to maximize shareholder value. Prolonged transitions slow growth, diminish profits, destroy morale and productivity, and lead to missed opportunities and loss of market share. 2. Define the strategy first, then execute. Integration is a highly tactical effort. But the tactics must be implemented in ways that capture and protect the value of the deal. Integration priorities are easier to identify and execute when a clear integration strategy is well defined and communicated. 3. Focus on 20% of work that drives 80% of the value. Shareholder value must drive the allocation of resources for meeting those priorities. First, potential sources of value capture and value creation must be identified. Then, resources are allocated based on potential financial impact, probability of success, and timeline requirements.

Value Driver Selection

High Financial Impact

Low Low Probability of Success High

4. Prepare for Day One, then the larger Integration. Critical Day One tasks need to be identified early, before longer-term, more detailed planning commences. This allows for prompt identification of long-lead time items, well before they can turn into closing day surprises.

5. Communicate to all stakeholders. Communicate early and often with all stakeholders, including customers, employees, investors, suppliers/vendors, and the general. Communication should articulate the reasons driving the deal, Initiatives are ranked according to financial reveal timing for key actions, and be candid in nature about what is known and impact and probability of success. Those with the what is unknown. highest financial impact and highest probability of success receive resource priority. 6. Establish leadership at all levels. The transition is critical for minimizing
Value Drivers

uncertainty, assigning accountability, defining functional authority, and establishing role clarity. 7. Manage the integration as a business process. Large scale integration efforts require significant, high-quality resources including committed members of the executive team.
Slide 14

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

M&A Activity

Taking Control

6/10/2013 15

Taking Control is the foundation for delivering the value of your deal

Accelerating the de-risking of your investment

Aligning PEOPLE to the vision

Ensuring cost effective COMPLIANCE

Protecting the ASSETS and business operations

Establishing the degree of control and engaging the right teams

Mapping the regulatory requirements and establishing budgets

Validating the due diligence assumptions and implementing controls

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 16

Short-term consequences of failure to Take Control


Obstacles to access certain locations Delay in producing IP documents Inability to confirm asset register Loss of the most mobile assets IP loss Evidence of parallel management process Instances of decisions made without consultation Non-resolution of regulatory compliance issues Early days set the tone Irreversible course of action may be triggered

Lack of candour IT security breaches on IT access rights

Ownership initiation, asset protection


Large cash movements are executed without your approval Supply of goods is interrupted Inventory varies in unexpected ways Loss of cash Bad debt leading to write-offs Loss of sales WC requirements increase

Governance, compliance and internal control


Production of financial reports is late, inconsistent over time Parallel reports are used Information is not available Inability to evaluate progress versus plan and create a forecast Decisions have to be made without adequate information (eg capex spend)

Treasury, working capital ,cash and FX management

Failure to take control: symptoms and shortterm consequences

Financial / management reporting, planning, budgeting and forecasting

Effective management of people & culture


Sudden resignations Unexpected litigations Adversarial behaviours Productivity decreases Loss of key talent Loss of know how that runs the business Financial losses Inability to effect decisions

Post deal discovery/ diligence validation


New established facts keep emerging on a daily basis Unexpected disruption of operations Rapid deterioration of operational and financial performance Fire-fighting mode prevents strategic decision making and execution

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 17

Our approach provides a fast track to Taking Control within the first 100 days of ownership
Pre Close-Phase 1 Set the Course Define the key objectives Set up the Programme Management Office Develop communication plan

Phase 2

Longer Term

Day 1 plan for Taking Control


Determine critical activities required for ensuring

Execute plan for Taking Control


Execute critical activities for control Limit business disruptions

control along various key aspects: Assets Treasury Compliance Reporting People Secure resources and launch

Design the Future operating model Design functional and operational to be state Identify key initiatives
Programme Management Office (PMO)

Detailing initiatives Create action plan Assess resource requirements Monitor and address dependencies

Transition
Into other project

activities, or Daily operations


Normal business operations

Manage risks, issues, dependencies; deploy status reporting and synergy tracking; develop and execute communication plans;

Announcement

Deal Close

100 Days Post Close

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 18

M&A Activity

Full Integration

6/10/2013 19

Integration Blueprint
The PwC integration process follows a sequence of coordinated steps to focus resources and capital on the right activities at the right times.
Pre-Deal Assess synergies, costs, and risks Assess target operations, systems and supporting processes Assess the management team Identify and quantify costs and synergies Identify integration risks & opportunities Identify valuation opportunities to improve the bid Jumpstart the Integration Formulate an initial integration vision Engage resources to lead integration activities Deploy a structure to govern the integration process Capture key insights Obtain operational insights that impact /drive the deal value Identify operational risks that need to be addressed before integration Set the course Articulate the strategy for the combined company Determine the degree of integration and non-negotiables Identify and protect core operations out of integration scope Customize integration structure and approach Designate integration leadership at all levels and establish the Integration Management Office Develop communication plan and execute early communications Pre-Close First 100 Days Post Deal

Plan for Day One


Identify and execute Day One requirements across all functions Identify and resolve Day One risks Develop 100 Day Plan including quick wins Secure resources and implement retention plan Design the future state

Execute 100 Day plan

Deliver tactical integration projects Deliver quick wins

Create detailed integration plan

Design functional and operational "to be" states Identify, value, and prioritize key integration initiatives and synergies Develop leadership and organization structure Assess cultural differences and develop people change program

Consolidate all integration initiatives into an executable plan Ensure plan fits with core business and prioritize with other initiatives Assess resource capacity and requirements Align incentive arrangements with integration objectives Monitor and address dependencies

Maximize value through future state implementation Implement, track and monitor integration execution to ensure deal value capture

Integration Management Office (IMO): Manage risks, issues, dependencies; deploy status reporting and synergy tracking; develop and execute communication plans; monitor delivery against integration strategy. Target identification Announcement Deal close

Transition to steady state 100 days post close

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 20

Integration Blueprint
People and HR integration activities span the entire deal continuum.

Pre-Deal Assess synergies, costs, and risks Assess target operations, systems and supporting processes Assess the management team Identify and quantify costs and synergies Identify integration risks & opportunities Identify valuation opportunities to improve the bid Jumpstart the Integration Formulate an initial integration vision Engage resources to lead integration activities Deploy a structure to govern the integration process Capture key insights Obtain operational insights that impact /drive the deal value Identify operational risks that need to be addressed before integration Set the course

Pre-Close

First 100 Days

Post Deal

Change Management and Communications Planning and Execution Determine the degree of integration and non-negotiables
Identify and protect core operations out of integration scope Customize integration structure and approach Designate integration leadership at all levels and establish the Integration Management Office Develop communication plan and execute early communications Plan for Day One Identify and execute Day One requirements across all functions Identify and resolve Day One risks Develop 100 Day Plan including quick wins Secure resources and implement retention plan Design the future state Design functional and operational "to be" states Identify, value, and prioritize key integration initiatives and synergies Develop leadership and organization structure Assess cultural differences and develop people change program

Articulate the strategy for the combined company

Execute 100 Day plan Deliver tactical integration projects Deliver quick wins

People, Organization and HR Planning

Create detailed integration plan Consolidate all integration initiatives into an executable plan Ensure plan fits with core business and prioritize with other initiatives Assess resource capacity and requirements Align incentive arrangements with integration objectives Monitor and address dependencies

Maximize value through future state implementation Implement, track and

People, Organization and HR monitor integration execution to ensure deal Integration value capture

Integration Management Office (IMO): Manage risks, issues, dependencies; deploy status reporting and synergy tracking; develop and execute communication plans; monitor delivery against integration strategy. Target identification Announcement Deal close

Transition to steady state 100 days post close

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 21

Managing the People Aspects of an Integration


The people aspects of an integration cannot be handled in a silo, away from the rest of the effort. Human capital issues are critical to every work stream and must be managed with the same focus and discipline as issues of finance, operations, or information technology.

Research tells us that 75% of change initiatives do not fully reach expectations*
and the majority of reasons are related to people issues such as: Lack of change management skills in senior and middle management

Specific People Considerations for an integration: Engagement and sustaining business performance Keeping employees informed, engaged and focused on business as usual activities to minimize the performance dip during the transition period Management focus on the right things - Design senior management roles to take into account operational and governance needs and align management team members with common goals/vision Allocation of resources - Determining that key activities are prioritized and that the right resources to the short and long term actions are dedicated. Workforce retention Employees may be uncomfortable or experiencing significant anxiety about moving to a new company and may potentially leave. Ensure that high performers are given the right opportunities. Education and Training - Employees hired to staff the new Company will need time to understand current operations and potentially develop new processes, technology, and provide training and leadership to junior resources.

Inability of workers to adapt to change


Insufficient training and coaching Lack of acceptance of reasons for change

In addition, research shows other challenges to be: Lack of linkage between changes, benefits and measures of success Competing priorities Organizational inertia Insufficient cross-functional collaboration Resource constraints

*Findings are from interviews with 133 top executives of large, US based multinational businesses; PricewaterhouseCoopers Management B arometer

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 22

People Integration Methodology


Capturing M&A value by helping you focus the right people on the right things at the right stage in the integration to get the right results.

Focus on 7 imperatives across the 3 phases of integration


Stakeholder engagement & communication

People& culture integration strategy

Industrial & Employee relations

Reward & Performance Optimization

Communications and change management planning and execution

Training & on-boarding

Organization Realignment & HR Function Readiness

Workforce Planning: Assessment, Retention, & Restructuring

People, organization and HR planning

People, organization and HR integration

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 23

Buycoss Integration Team Structure


Typical Integration team structure
Acquisition Steering Committee (SC) Key executives

Provide overall vision and direction


Drive key decisions Commit appropriate resources Eliminate obstacles Address relevant change management issues

Program Management Office (PMO) Project office leadership and support Monitor project objectives and milestones Coordinate activities of functional project teams Assess and monitor resource needs, prioritize Acquisition Support Finance Accounting and Reporting Tax Treasury Forensics Define requirements for functional take control and discovery Identify risks and mitigate with planned actions Assign resources and team roles and drive team activities Develop functional organization design in short and medium term Identify significant change management issues Develop and execute Day One workplans PMO Support Teams Communications Culture and Change Management Synergy Tracking Provide regular Status Reports, issues, and dependencies to the PMO Provide tools, templates and protocols for teams Monitor results and report to the SC

Technology and Operations IT Mining Operations Security Procurement

Human Resources

Exploration

Sales & Marketing

Public Relations

Environmental

Health and Safety

Legal

Regulatory

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 24

Time Commitment
Large and complex acquisitions such as Targetco require significant resource commitments.

Steering Committee

Led by CEO (or C-Suite Sponsor) driving the deal; key members with decision level responsibility. (5-10% Buyco Time Commitment)

Program Management Office

Overall Program Manager named by the Steering Committee as the Project Lead; accountable for the day-to-day oversight, coordinating interdependencies, communicating status to the Steering Committee and overall execution of the planned activities. (100% Buyco time commitment)

Functional Team Leads

Functional Directors or Experienced Managers responsible for the planning and execution of activities for their specific function. (25 to 100% Buyco Time Commitment) Leads a broader group of functional sub-team members and coordinates with Target counterparts. Additional individuals within the same functions as the Functional Leads that help plan and execute initiatives at the working level (25 to 75% Buyco Time Commitment). Regularly report progress and issues to the Functional Lead. Part-time role with periods of high involvement.

Functional Sub-Teams

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 25

Critical Path Milestone Plan


The milestone template may be used cross functionally to plan and prioritize integration-related milestones and accompanying activities at a high-level.
Illustrative HR Example: Sub-Teams
Change Management
1Q XX

20xx
Develop Integrated Communications Strategy
Day One: Welcome to the Company 4Q XX - 1Q XX+1

20xx + 1

20xx + 2

Execute Integrated Change Management/Communication Strategy

Compensation & Incentive Processing

1Q XX

Compensation Analysis; Develop Incentive Program Strategy Communicate Day One Incentive Communication; Align CLs

Integration timeline. The timeline will be customized for each deal

Functional sub-team. The activities and milestones Payroll related to these sub-team initiatives are highlighted in the swim lane to the right

4Q XX - 1Q XX+1 2Q XX Conduct Payroll Gap Analysis Oversight - Vendors

Additional Incentive Reviews/Implementation; Salary Program Communication

1/1:System Migration 4Q XX Payroll Migration 1/1: Transition to Company Benefits

Specific one-time milestone to be achieved by the functional sub-team as part of the integration initiatives

Benefits Migration
1Q XX

Oversight - Vendors Conduct Benefits Gap Analysis Open Enrollment Benefits Communication

Solid line represents Day One of the acquisition

Policies

1Q XX

SBC Implementation / Communication


Day One 4Q XX Communicate the Companys policies Q XX Primary Activity

Day One

Primary activities necessary to complete the sub-team initiatives and achieve the specified milestones. Only key high-level activities should be captured on this milestone template; other activities will exist as well.

Milestone

Slide 26

Workplan Development
The workplan development process leverages the output from the Integration kickoff meeting to create detailed integration workplans by functional area, including required actions or deliverables.

Description

The integration workplans contain the required actions by function required for deal close, Phase I (45 days post-close), and longer-term. These workplans will help ensure: Value is preserved and shareholders interests are protected Immediate control is secured for required areas Statutory/contractual obligations can be fulfilled Significant risks/issues that must be addressed immediately post deal close are identified Each workstream develops a workplan that is monitored weekly by the Integration Management Office. Ensure critical, time sensitive integration activities across workstreams are identified and acted on by accountable individuals responsible for completion Ensure critical gaps are identified and functional dependencies identified Protect core business operations Functional teams identify and document critical actions, issues, dependencies, decisions required, information needed, and resources assigned to tasks IMO monitors and tracks progress against critical milestones Report to Integration Leader on integration status Integration Workstream Leaders, Team Members, Integration Management Office Started during the Integration Kickoff meeting and completed over a the following few weeks. What are the integration must haves for integration? What are the statutory requirements for Day One? What cross-functional dependencies exist for integration tasks? What critical requirements exist for 90 Days post-close?

Example Integration Workplan


ID FI FI.1.0 FI.1.1 FI.1.2 FI.1.3 FI.2.0 FI.2.1 FI.2.2 FI.2.3 FI.2.4 FI.2.5 FI.2.6 FI.2.7 FI.3.0 FI.3.1 FI.3.2 FI.3.3 FI.3.4 FI.3.5 FI.3.6 FI.3.7 FI.3.8 FI.4.0 Task Name Finance Strategy and Structure Establish and launch the Finance integration team Finalize department structure and accountabilities for Day 1 Determine the long term Finance department structure and accountabilities (i.e., complete the selection process, "internal" hiring, and terminations) Accounts Receivable - Billing Develop the combined invoicing process under NewCo Determine intracompany invoicing currency Update invoice stock for NewCo Generate an update letter for customers with NewCo name change. Coordinate with company announcement. Develop communication for sales team on invoicing practices Determine updated sales tax requirements Define returns and billing adjustment policies Accounts Receivable - Credit and Collections Understand differences in credit policies Review credit files and evaluate major creditors for any new exposures Evaluate credit limits for common customers and determine the combined company credit limit Standardize the credit approval and documentation process Identify differences in "account overdue" definition and standardize Identify differences in the collection process and standardize Consolidate credit collections agents Establish a consistent write off policy Cash Management Establish interim funding procedures (e.g., daily cash forecasting process, cash requisition process) in local entities Determine interim working capital needs in local entities. Develop plan for initial funding and working capital needs and link with banking requirements. Update and finalize Day 1 banking requirements Identify long-term cash management responsibility (signing, bank notification) and implement cash management functionality (bank, auto or manual) Perform capital expenditure requirements analysis Identify and understand any hedging used in target company, including size and policies Inventory all brokerage and investment accounts and update authorized signatures and account information Identify any 3rd party debt and payment requirements Perform a review of any company holdings and investments and link investment strategy with cash management process Task Owner Day 1? Dependency [Y/N] Duration Finish Date Comments/Guidance Y Y HR HR Y Y Y Y Y Y Y Y Y Y Communicate any new structure to HR Communicate any new structure to HR

Comm. Sales

Traditionally, the cash management function is provided by the OldCo parent. In a carve-out situation, new policies and procedures must be established.

FI.4.1

Y Y Y Determine if information flow will be automated or manual Y Y Y

Objectives

FI.4.2 FI.4.3 FI.4.4 FI.4.5 FI.4.6 FI.4.7 FI.4.8 FI.4.9

Process

Who When Key Questions

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 27

Status Report
During the first few weeks of the integration, the IMO will roll out integration management tools, templates and processes, such as status reporting, to ensure coordination across functions and geographies.
Overall Team Status Accomplishments / Decisions Made / Next Steps
Completed follow up confirmatory diligence meetings on Wed, Thursday, and Friday covering the following topics: Topic1, Topic 2, Topic3, Topic 4 Completed first pass draft of Integration work plan including the following sub-work streams: Sub-Stream 1, Sub-Stream 2, Sub-Stream 3 Decided to leave any integration activities related to TrialCos Division A business off our integration work plan Assigned resources to identified sub-work streams including: A Smith (Stream1), B Johnson (Stream2), P Milch (Stream3) Next Steps Schedule follow up meetings with TrialCos functional team to continue to answer open diligence items and continue to develop integration workplans - Tuesday: Onsite to cover Topic 1, Topic 2, Topic 3 - Wednesday: Telephone calls to cover: Topic 1, Topic 2, Topic 3 Incorporate IMO and executive feedback into draft Integration Work plans and make final edits Begin to populate Value Driver templates with expected synergies

Status as of: 10/27/2011 Team Lead(s): Axcan T. Walsh Eurand A. Smith PwC J. Thompson
HR ET Comms

Major Issues & Decisions Needed


1 2 3 4 What level of integration is expected with TrialCos Division A Need guidance from Purchasing team on potential process for re-negotiating vendor contracts Information flow into the dataroom has been limited to Topic1. Need to speak to IMO to accelerate the process Need guidance from Executives on Open Balance Sheet and Pension Disclosures

Assigned To
T Walsh John Doe M Shah M Shah

Need By
12/19/11 12/19/11 12/16/11 12/16/11

Complete?
N N N N

Critical Dependencies
Talent Assessment Guidelines and Process Consolidated systems to support a integrated AP function Day One calendar of key messages and medium

Upcoming Milestones
1 Integration Kickoff Workshop 2 Draft Integration workplans 3 Draft Value Driver cases

Due Date
12/09/11 12/19/11 1/1/12

Complete?
Y N N

Status
G Y G

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 28

Issue Log
An issue and dependency log will be used to track issues as they arise and their subsequent resolutions. Tracking critical dependencies ensures that all workstreams are coordinated and aware of the status of dependent activities.
Issue Resolution Log
Issue #
1.

Issue title
System Conversion Customer payment term rationalization Carrier selection procedure Vendor setup

Issue description
Determine if single/dual track approach will be implemented How to reconcile disparate payment terms when rationalizing customer records.

Proposed resolution
Hold meeting with RW Supply Chain, Finance, Cust Svc to discuss options. Business decision required by Commercial leadership team. Discuss when conducting UM conversation, since business leaders will be on the line.

Issue owner
T Jones

Status open/closed
Closed

Priority (H, M, L)
H

Date issue logged


4/7/12

Due date
4/18120

2.

A Doe

Closed

4/9/12

5/2/12

3.

Test system when carriers are Procedure to define which not assigned, what does that carrier to use mean for shipping group (Test Procedure) Confirm w/T Smith that Supply Chain will enter vendors for AP A/R conversion will occur after customer orders are entered. Orders will need to be reviewed to ensure none are on credit hold. Discuss resolution with K Thompson After orders are entered and A/R is converted, review sales orders to ensure none should be held due to credit holds. Review RS1 in-process test results report to ensure SystemX has sufficient capability. Possibility of creating new report depending on level of effort.

B Smith

Closed

4/9/12

6/20/12

4.

A Doe

Open

4/9/12

4/11/12

5.

Customer order hold confirmation

B Smith

Closed

4/9/12

4/25/12

6.

RS1 produces in-process RS1 in-process test result that may need reporting to be replicated in SystemX

B Smith

Closed

4/10/12

5/2/12

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 29

Value Driver Analysis


Capture opportunities to drive value, and indicate whether each opportunity is cost savings or revenue generating and the associated one-time costs.
Develop the bottoms up analysis and calculations using value driver template Provide detailed action items/plans to achieve calculations of estimates to enable understanding of the initiatives by a broad audience
Finance T. Johnson General Accounting A. Doe Activity Description Migrate all functional support activities to the Anytown, USA location Eliminate third-party supporting going forward and use Buyer process Centralize functions in to Anytown, USA Savings from consolidation of service contracts

Provide dates as to when these savings and costs will commence Identify an individual that will be responsible for tracking the results for each of the savings/costs initiatives
Financial Impact Summary FY11 FY12 FY13

Synergy Analysis Worksteam Workstream Owner Sub-Workstream Sub-Workstream Owner Key Activities Consolidate Organization Terminate Target Compliance Audit Eliminate Satellite Processing Center Third Party Service Consolidation

One Time Costs


One Time Saving Net One Time Recurring Costs Recurring Savings

(290)
200 (90) (45) 1195

(225)
200 (25) (50) 1200

Net Recurring
Net EBITDA impact Capex Potential Risks

1150
1060 (10)

1150
1125 (20)

Key Assumptions One additional resource will be required in Anytown, CA to support the additional volume XYZ Business Unit will remain standalone

Ensure consistent and seamless transition of functional support Employees critical to the integration depart earlier than required 4Q 11 1Q 12 (180) (80) 2Q 12 (80) (50) (30) 200 200 (15) (15) 265 250 15 (10) (10) 3Q 12 (30) (30) (15) (15) 465 450 15 4Q 12 (15) (15) 465 450 15 FY 12 (290) (130) (60) 200 200 (45) (45) 1195 1150 45 10 10 FY 13 (225) (225) 200 200 (50) (50) 1200 1150 50 (20) (20)

Financial Impact - Savings / (Costs)


Dept Finance Finance Finance Finance Finance Tech Ops SG&A Finance P&L Account Salaries Outside Svcs Outside Svcs Salaries Salaries Rent / Lease Supplies & Equipment Description One Time Costs Severance Recruiting for additional staff in Anytown, USA One Time Cost Savings Avoid TrialCo one-time Compliance audit Recurring Costs New Staff in Anytown, USA Recurring Cost Savings Personnel Costs Lease Expense for Anytown, USA Capital Expenses Equipment for new hire in Anytown, USA

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 30

Culture Assessment
A four-phased approach is recommended for rolling out a series of culture integration initiatives over the course of the integration. In order to accelerate the integration and leverage interdependencies, the phases would run concurrently.

Culture Integration Roadmap


Phase 1 - Strategy to Behaviors: Mobilize leaders and define strategic outcomes, critical success factors, and the desired behaviors Phase 2 - Communications Campaign: Communicate organization structure, departmental and individual roles and accountabilities Phase 3 - Localized Implementations: Align individual goals with organizational goals and behaviors Phase 4 - Coaching and Recognition: Provide cross functional training to assist in the adoption of desired behaviors

Culture Assessment
Research legacy cultures Identify key cultural attributes required for the future Analyze change impact

Align leaders to the vision


Analyze cultural compatibilities and differences Create culture integration roadmap Align Day 1 - Day 100 people initiatives and messages to the vision
Slide 31

Communications Plan
A well structured communications plan minimizes the unknown; keeping key stakeholders engaged and informed throughout the integration process.

External Communications
Global and N.A. Press Releases announcing deal Cascade of Internal and External Communications

Calls with Key Customers and Vendor Contacts

Global and N.A. Press Releases Global and N.A. announcing Close Press Releases Letters to all announcing customers regulatory approval Joint calls to Cascade of Internal common customers and External Communications

Analyst briefings Meetings with key accounts Planning meetings with vendors/JBRs/ Key Relationships Advertising, PR, updates to websites

Brand campaign Sustained marketing and advertising around combined products, services and people

Announcement Email to all staff with FAQs and Ask a Question button

Day 1

Day 30

Day 100

Interview select stakeholders Develop preDay 1 Comms and activities

Webcast for all employees Manager Briefings Start the Countdown to Day 1 campaign

Webcast Training for On-boarding buddies Townhall via webcast Leader and manager Briefings

New leaders virtual or video webcast Employees Townhall live and via webcast Cascade of employee communications Launch Microsite My First 100 Days

Focus groups or interviews with new employees Knowledge Sharing and Connectivity events Planning around Business Development opportunities New Joiner Survey and/or Pulse Check

Internal Communications

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 32

Synergy Tracker
Our proprietary Synergy Tracker tool is designed to monitor synergies to ensure targeted financial and non-financial benefits of the integration are delivered. It also identifies cash versus non-cash impacts indicates the ability to grow the business and reward the shareholders.
Synergy Tracker Tool Description
Capturing Deal Value Structures the collection of costs and savings by using standard templates and terminology Accumulates information from teams in a standardized format and allows central quality control Consolidates information and reports financial impact of integration activities Monitors progress of detailed integration tasks, creating accountability for achieving individual synergy targets Allows central quality control for accuracy of purchase accounting treatment, duplicate/missing tasks and standard assumptions Customizable for each integration based upon chart of accounts, report format, locations, value drivers, etc. Prepare financial model and identify potential costs and savings Assign functional ownership for synergy targets Revised synergy targets based on more detailed analysis Develop business cases for significant synergy initiatives Identify counterparts and validate synergy targets Include value driver business cases within integration workplans Deploy tool for tracking synergies Establish reporting cadence and communicate to owners Track progress of actual results versus targets

Process

Example Synergy Tracker Reports

Who When Key Questions

Value Driver initiative owners, Integration Management Office, Integration Leader, Executive Steering Committee Once synergy plans (Value Driver Business Cases) are developed How will results be tracked and reported? What reports does management need or desire? How will synergies be communicated to stakeholders?

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 33

M&A Activity

Hostile Acquisition

6/10/2013 34

De-Risking Hostile Acquisitions in Mining


Situation
Stakeholder Relations Fraud & Corruption People & Culture

Requirements

Financial & Management Reporting

Experience with taking control under hostile circumstances. Resources beyond what you have internally. Access to a talent pool that can deal with the unforeseen. Good understanding of the mining industry. A plan and resources that have the flexibility to deal with changing circumstances. A governance model that facilitates rapid communication and mobilization. Resources in the target territory that understand the local environment and culture sensitivities. Ability to get more done than what time would seem to allow.

Physical Security Regulatory Compliance

Level of Risk

Health & Safety Treasury & Cash Management

Business Disruption Environmental

In Transit Goods
Operating Assets

Intellectual Property & Information

Inventory

Level of Hostility
PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico Slide 35

Hostile Acquisition Blueprint


Planning Leading up to day 1 Setting the Course Define key objectives Set up Programme Management Office Develop communication plan Take Control Week of Day 1 Execute Taking Control Plan Clear jurisdictional legal hurdles to take control Establish security, gain support of local authorities Stabilize operations, minimize risks related to environmental or safety Secure transactional and process authorities Identify financial and reputational risk elements Discovery Phase 4 to 6 Weeks After Day 1 Integration To 100 days post close

Plan for Day 1 Taking Control Determine critical activities required to ensure control of various key areas: Operations (Enviro, Safety) Assets Treasury and banking Compliance Reporting People IT Address legal issues to gain control faster Secure Resources to Execute Identify nature of expertise required Determine location and timing of need Assess both internal and external resource options Develop clear plan of action for first few days

Initiate Forensics Investigation


Identify and secure physical and electronic assets Preserve electronic data

Due Diligence and Forensics


Undertake the necessary financial, operational and legal due diligence to assess the company Identify key attributes of value Conduct a forensic investigation into key financial records and electronic data

Launch Communication Plan

Execute communication plan to address stakeholder concerns


Address and manage risks as they emerge Monitor ongoing company operations Develop actions and execute to manage risks as they are identified

Develop and implement integration plan

Programme Management Office (PMO): Manage risks, issues, dependencies; deploy status reporting and progress tracking; develop and; monitor delivery against acquisition strategy. Prepare for close Take control Stabilize

Transition to steady state 100 days post close

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 36

Conclusion

Many acquisitions go bad upon execution rather than at a strategic level. Closing a transaction is the starting line not the finish line. A thoughtful and disciplined approach to post closing activities is imperative. Focus, measurement and accountabilities are all important to making a successful acquisition.

PwCs 16th Americas School of Mines May 21-24, 2013 Los Cabos, Mexico

Slide 37

Thank you

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

2013 PricewaterhouseCoopers, S.C. All rights reserved. PwC refers to the Mexico member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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