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M&A Outlook 2012


    Ennovance Capital LLC
    www.ennovance.com

    For queries please contact:
    Investment team:
    +1 (800) 901-1006
    bd@ennovance.com
2011 Global Recap
    • M&A activity exceeded 2010 levels, but 2011 was a
      relatively erratic year in terms of macroeconomic factors,
      which contributed to market volatility
        ▫ European debt crisis and political indecision, Japanese
          earthquake/tsunami disaster, U.S. political tension, sovereign credit
          downgrades
    • 2011 saw overall growth of 9% in Global M&A volume
      from 2010*
        ▫ Accelerated activity was seen in the first half of 2011, with a slowdown
          toward the end of the year which resulted in a moderate year-over-year
          increase
        ▫ volume slowed during the last three quarters
        ▫ Financial sponsor (PE) volume was up 29% from 2010
        ▫ Hostile (HF/activist shareholders) volume was down 38% from a year ago


*Bloomberg. 2012   Global M&A Outlook.
2011 Global Recap
 • 2011 saw ongoing growth in              in deal volume year-over-year*
   cross-border deal volume, with
   a 5.5% increase on the year*          • Europe experienced a 10% boost
                                           in activity (to $875 billion) on
 • Large deals experienced a               the year in the face of sovereign
   resurgence in 2011, with 145            debt issues*
   deals valued over $1 billion in
   North America* ; however, the         • 2011 had a total aggregate M&A
   number of $10 billion deals             deal volume of approximately
   increased from 14 to 20 in 2011         $2.15 trillion (compare to 2007
                                           peak exceeding $4T)*
 • The Asia/Pacific region saw     • Hostile activity of $168 billion
   only modest 7.7% growth in deal   was down 38% in 2011 vs. a year
   volume *
                                     ago and represented 6% of
 • China continues to expand         overall volume
   acquisitions with a 9% increase

*Bloomberg. 2012   Global M&A Outlook.
Advantages and Obstacles for 2012
• The Good:
 ▫ More cash availability
   means greater deal
   potential

 ▫ Plenty of attractive
   targets in Europe

 ▫ Corporate downsizing
   and breakups continue

 ▫ Depressed valuations
   exist

                               Source: Bloomberg
Advantages and Obstacles for 2012
• The Bad:                              European Debt as a Percentage of GDP
  ▫ Ongoing sovereign debt
    concerns                 Greece

  ▫ Lackluster economic        Italy
    growth perpetuates
    uncertainty              Ireland
  ▫ U.S. political scene is Portugal
    tumultuous and
    unpredictable, election
    approaching, tax code Germany
    questions
                             France
  ▫ New and complex
    financial regulations       UK
    complicate the process
                              Spain

                                       0%         50%          100%                   150%
                                                           Source: Senate Budget Committee
Private Equity Focus
• In America, private equity
  buyers were the most
  active acquirers last                  PE Deal Flow (United States)
  year, with over $138
  billion in deals*
     ▫ Year over year, this is a
       more than 40% increase

• Private Equity deals are
  growing in volume*
     ▫ 2011 saw seven deals
       announced with
       valuations over $5
       billion, compared to only
       one in 2010

• Plenty of divestiture in
  2011
     ▫ Six of the top ten PE deals
       last year were exits*

*Bloomberg.   2012 Global M&A Outlook.                         Source: Pitchbook
Private Equity Focus
 • North America                                Materials and
                                                 Resources
   (particularly the U.S.)                          5%
   remains the top region for
   private equity capital flow*          Financial       Energy
                                         Services         7%
                                            9%
 • In the U.S., PE investment                                                         Business
   is most prevalent in the                                                         Products and
                                                                                      Services
   business products and                                                                32%
   services, consumer
   products and                                  Healthcare
   services, IT, and                               12%
   healthcare industries**
                                                                          Consumer
 • Financial Services                                      IT            Products and
   experienced the greatest                               13%              Services
   reduction in PE                                                           22%
   investment in 2011**

*Bloomberg.                                                       **Pitchbook.   Private Equity Breakdown 2012.
              2012 Global M&A Outlook.
Considerations for Y2012
  • The middle market is the dominant segment in private equity
    ▫ In the first two quarters of 2011, 75% of PE deals were valued under $250
      million*
    ▫ Multi-billion dollar deals receive plenty of press attention, but in reality
      make up only a small percentage of all transactions
    ▫ Lending market is OK ($10+ million EBITDA) but cautious with greater
      financing availability for low margin, cyclical businesses
    ▫ Within the financial sponsor universe, nearly $500 billion of available
      capital and funds is beginning to expire

  • A massive amount of dry powder is available for investment
    ▫ As of October of last year, private equity firms were sitting on over $937
      billion in unused capital which will need to be invested in the next several
      years**
    ▫ Some financial sponsors (PE firms) are motivated to invest, instead of
      returning money to their investors/LPs
    ▫ Strategic acquirers have been very active in the market since early 2010 as
      they need acquisitions to supplement organic growth and expand EPS
      (large cash war-chests prompting more cash deals, moderate stock deals)

                                                            *Pitchbook   **Bloomberg
Considerations for Y2012
  • With ongoing economic woes and market
    uncertainty, choice of industry is crucial to
    investment success
    ▫ Industry contraction in sectors such as financial
      services has left investors desiring dynamic and
      flexible segments to get involved in

  • More cross border transactions and emerging
    market deals
    ▫ Non-cyclical segments are ripe for investment for the
      long-term; Natural Resources, Consumer, FIG are hot
    ▫ Emerging markets transactions represented 26% of
      global M&A volume in 2011 and cross border
      transaction accounted for $909 billion or 35% of all
      M&A activity in 2011 and was up 1% from a year ago
Considerations for Y2012
 • The broader chemical industry possesses the diversity and
   adaptability to present potential viable opportunities in the
   midst of 2012’s uncertainty
   ▫ A host of micro-segments within the broader industry each have
     unique trends and attributes with links to innumerable end user
     applications
   ▫ Such a broad range of chemical sectors creates distinctive non-
     cyclical investment opportunities free of macroeconomic stressors

 • Prominent end user chemical applications are showing signs of
   improvement, with plenty of room for near future growth
   ▫ Automobiles, construction, durable goods

 • Activist Investors/hostile bids
   ▫ Trend towards increasing dialogue with shareholders in bid
     situations
   ▫ More deals likely to be played out in public
Ennovance Capital: Chemical, chemical
related healthcare industry foscused private
equity investor.

             www.ennovance.com
                 +1(800) 901-1006


At Ennovance, we are in one business only — that of
making private equity investments and enhancing
our portfolio companies’ value. We are not in the
investment banking, brokerage, or advisory
businesses; we have no alternative agendas.

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M&A Outlook 2012

  • 1. Thoughts: M&A Outlook 2012 Ennovance Capital LLC www.ennovance.com For queries please contact: Investment team: +1 (800) 901-1006 bd@ennovance.com
  • 2. 2011 Global Recap • M&A activity exceeded 2010 levels, but 2011 was a relatively erratic year in terms of macroeconomic factors, which contributed to market volatility ▫ European debt crisis and political indecision, Japanese earthquake/tsunami disaster, U.S. political tension, sovereign credit downgrades • 2011 saw overall growth of 9% in Global M&A volume from 2010* ▫ Accelerated activity was seen in the first half of 2011, with a slowdown toward the end of the year which resulted in a moderate year-over-year increase ▫ volume slowed during the last three quarters ▫ Financial sponsor (PE) volume was up 29% from 2010 ▫ Hostile (HF/activist shareholders) volume was down 38% from a year ago *Bloomberg. 2012 Global M&A Outlook.
  • 3. 2011 Global Recap • 2011 saw ongoing growth in in deal volume year-over-year* cross-border deal volume, with a 5.5% increase on the year* • Europe experienced a 10% boost in activity (to $875 billion) on • Large deals experienced a the year in the face of sovereign resurgence in 2011, with 145 debt issues* deals valued over $1 billion in North America* ; however, the • 2011 had a total aggregate M&A number of $10 billion deals deal volume of approximately increased from 14 to 20 in 2011 $2.15 trillion (compare to 2007 peak exceeding $4T)* • The Asia/Pacific region saw • Hostile activity of $168 billion only modest 7.7% growth in deal was down 38% in 2011 vs. a year volume * ago and represented 6% of • China continues to expand overall volume acquisitions with a 9% increase *Bloomberg. 2012 Global M&A Outlook.
  • 4. Advantages and Obstacles for 2012 • The Good: ▫ More cash availability means greater deal potential ▫ Plenty of attractive targets in Europe ▫ Corporate downsizing and breakups continue ▫ Depressed valuations exist Source: Bloomberg
  • 5. Advantages and Obstacles for 2012 • The Bad: European Debt as a Percentage of GDP ▫ Ongoing sovereign debt concerns Greece ▫ Lackluster economic Italy growth perpetuates uncertainty Ireland ▫ U.S. political scene is Portugal tumultuous and unpredictable, election approaching, tax code Germany questions France ▫ New and complex financial regulations UK complicate the process Spain 0% 50% 100% 150% Source: Senate Budget Committee
  • 6. Private Equity Focus • In America, private equity buyers were the most active acquirers last PE Deal Flow (United States) year, with over $138 billion in deals* ▫ Year over year, this is a more than 40% increase • Private Equity deals are growing in volume* ▫ 2011 saw seven deals announced with valuations over $5 billion, compared to only one in 2010 • Plenty of divestiture in 2011 ▫ Six of the top ten PE deals last year were exits* *Bloomberg. 2012 Global M&A Outlook. Source: Pitchbook
  • 7. Private Equity Focus • North America Materials and Resources (particularly the U.S.) 5% remains the top region for private equity capital flow* Financial Energy Services 7% 9% • In the U.S., PE investment Business is most prevalent in the Products and Services business products and 32% services, consumer products and Healthcare services, IT, and 12% healthcare industries** Consumer • Financial Services IT Products and experienced the greatest 13% Services reduction in PE 22% investment in 2011** *Bloomberg. **Pitchbook. Private Equity Breakdown 2012. 2012 Global M&A Outlook.
  • 8. Considerations for Y2012 • The middle market is the dominant segment in private equity ▫ In the first two quarters of 2011, 75% of PE deals were valued under $250 million* ▫ Multi-billion dollar deals receive plenty of press attention, but in reality make up only a small percentage of all transactions ▫ Lending market is OK ($10+ million EBITDA) but cautious with greater financing availability for low margin, cyclical businesses ▫ Within the financial sponsor universe, nearly $500 billion of available capital and funds is beginning to expire • A massive amount of dry powder is available for investment ▫ As of October of last year, private equity firms were sitting on over $937 billion in unused capital which will need to be invested in the next several years** ▫ Some financial sponsors (PE firms) are motivated to invest, instead of returning money to their investors/LPs ▫ Strategic acquirers have been very active in the market since early 2010 as they need acquisitions to supplement organic growth and expand EPS (large cash war-chests prompting more cash deals, moderate stock deals) *Pitchbook **Bloomberg
  • 9. Considerations for Y2012 • With ongoing economic woes and market uncertainty, choice of industry is crucial to investment success ▫ Industry contraction in sectors such as financial services has left investors desiring dynamic and flexible segments to get involved in • More cross border transactions and emerging market deals ▫ Non-cyclical segments are ripe for investment for the long-term; Natural Resources, Consumer, FIG are hot ▫ Emerging markets transactions represented 26% of global M&A volume in 2011 and cross border transaction accounted for $909 billion or 35% of all M&A activity in 2011 and was up 1% from a year ago
  • 10. Considerations for Y2012 • The broader chemical industry possesses the diversity and adaptability to present potential viable opportunities in the midst of 2012’s uncertainty ▫ A host of micro-segments within the broader industry each have unique trends and attributes with links to innumerable end user applications ▫ Such a broad range of chemical sectors creates distinctive non- cyclical investment opportunities free of macroeconomic stressors • Prominent end user chemical applications are showing signs of improvement, with plenty of room for near future growth ▫ Automobiles, construction, durable goods • Activist Investors/hostile bids ▫ Trend towards increasing dialogue with shareholders in bid situations ▫ More deals likely to be played out in public
  • 11. Ennovance Capital: Chemical, chemical related healthcare industry foscused private equity investor. www.ennovance.com +1(800) 901-1006 At Ennovance, we are in one business only — that of making private equity investments and enhancing our portfolio companies’ value. We are not in the investment banking, brokerage, or advisory businesses; we have no alternative agendas.