Driving Strategic Impact “Mastering the Tools of Strategy Consulting” Class 4.2 RECOMMENDATIONS DEVELOPMENT

Driving Strategic Impact “Mastering the Tools of Strategy Consulting” Class 4.2 RECOMMENDATIONS DEVELOPMENT Deloitte Consulting LLP September 2022 Mergers & Acquisitions Strategy Case Workshop Copyright © 2020 Deloitte Consulting LLP. All rights reserved. Copyright © 2022 Deloitte Consulting LLP, All rights reserved. 3 Welcome to M&A Strategy at Deloitte The M&A strategy practice focuses on the pre-deal portion of the M&A lifecycle Deloitte M&A Strategy by region 37 21 49 With you today Mark Sirower New York Corporate and Business Unit Strategy (What? Where? How?) Mergers & Acquisitions White spaces Models Targets Deals Integration What is M&A Strategy? Organic Inorganic Internal M&A Strategy Denitsa Kosharova New York Mustafa Sarama Chicago Copyright © 2020 Deloitte Consulting LLP. All rights reserved. Copyright © 2022 Deloitte Consulting LLP, All rights reserved. Copyright © 2021 Deloitte Consulting LLP, All rights reserved. 4 Companies pursue M&A for many reasons… … All of these reasons have one thing in common — to help fulfill a company’s growth objectives New market segments ▪ Extend brand ▪ Enter new markets / product segments ▪ Acquire new capabilities Geographical expansion ▪ Enter new regions ▪ Increase regional depth ▪ Build scale New capabilities ▪ Gain competencies in key operational / technological areas ▪ Access alternative distribution channels or move forward in the value chain 20% 40% Market share ▪ Dominate segments ▪ Force competitors to scramble ▪ Consolidate fragmented industry, uneconomical small players ▪ Lower costs through economies of scale Economies of scale Copyright © 2020 Deloitte Consulting LLP. All rights reserved. Copyright © 2022 Deloitte Consulting LLP, All rights reserved. Copyright © 2021 Deloitte Consulting LLP, All rights reserved. 5 Some common terms used in M&A The lingo Acquirer → Target A comprehensive appraisal of a business performed by a prospective buyer to validate or assist their investment decision Due Diligence The purchase price is what an investor pays to acquire a business or portion of a business Purchase Price Benchmarks, macro trends Market Sizing Top-down - Bottom-up Granular data build-up and modeling A secure online repository for document storage and distribution Virtual Data Room (VDR) Research Primary - Secondary Interviews, surveys, store visits Desk research (reports, Google, etc.) Copyright © 2020 Deloitte Consulting LLP. All rights reserved. Copyright © 2022 Deloitte Consulting LLP, All rights reserved. 6 The M&A lifecycle Strategy Due Diligence Integration/Divestiture Execution Board or steering committee approval Completed letter of intent Term sheet Executed purchase agreement Transfer of ownership/ closing documentation Deloitte works across the entire M&A lifecycle from strategy to execution M&A Strategy ▪ M&A Strategy Planning Identify, evaluate, and prioritize strategies for achieving organic and inorganic growth ▪ Target Screening / Evaluation Review portfolio against strategic imperative and screen new targets ▪ Preliminary Due Diligence Conduct “outside-in” due diligence based on products, markets, reputation, technology, key personnel, and culture fit Due Diligence ▪ Commercial Due Diligence Validate assumptions on a target’s market position, financial stability, and growth potential. ▪ Operational Due Diligence Evaluate target attractiveness through operational assessments & risk mitigation strategies ▪ Synergy & Value Driver Quantification Quantify synergy / value drivers and develop integration / divestiture plans Execution ▪ Transaction Close Preparation Conduct definitive due diligence and negotiate final transaction ▪ Implementation Planning Establish operating model and overall integration / divestiture blueprints ▪ Closing and Execution Execute Day 1 plans as well as track synergy plans, while supporting change management and communications strategy Legal Steps For M&A Copyright © 2020 Deloitte Consulting LLP. All rights reserved. Copyright © 2022 Deloitte Consulting LLP, All rights reserved. Copyright © 2021 Deloitte Consulting LLP, All rights reserved. 7 Before any transaction, an acquirer does due diligence to validate their investment thesis. The type of due diligence required depends on the needs of the acquirer The due diligence phase follows after a target has been identified • Operational Due Diligence addresses the challenges, risks, and opportunities from acquiring a Target’s business operations What is it? Questions Answered • How are new products and services developed? • What is the Target’s manufacturing and distribution footprint? Is it adequate and scalable for intended growth? • What potential cost synergy exist from combining operations (if integrating)? Operational Due Diligence (ODD) Inside look: Assessment of a company’s operations and of costs associated with optimizing them Commercial Due Diligence (CDD) • Commercial Due Diligence helps to assess the commercial viability of the Target’s market and to specifically test management’s growth claims • What is the current market size? (i.e. growth rates: historical, projected, by segment) • What is the Target’s competitive positioning within the marketplace? (by product/service category) • Who are the Target’s current customers? What customer-related risks should be considered for the Target? Outside look: Assessment of a company’s competitive position in the market Focus of today’s case Copyright © 2020 Deloitte Consulting LLP. All rights reserved. Copyright © 2022 Deloitte Consulting LLP, All rights reserved. Copyright © 2021 Deloitte Consulting LLP, All rights reserved. 8 How a diligence project is typically run Develop hypotheses and initial assessment • Review Target’s data room • Perform secondary research • Develop commercial hypotheses around market growth, competition, and etc. Diligence projects are relatively short-term due