M

1
MA Mania, An Inside Look

• Amos Michelson
• BCTIA Presentation
• April 20th, 2006

2
Acquisitions Who Cleans After The Party Is Over?

• Goldman Sachs and the Scitex acquisition

3
Most Acquisitions Fail

• "Most mergers fail to add shareholder value.
  Indeed, post-merger, two-thirds of the newly
  formed companies perform well below the industry
  average." HARVARD MANAGEMENT UPDATE

4
Most Acquisitions Fail

• "70 percent of mergers fail to achieve their
  anticipated value" WEEKLY CORPORATE GROWTH
  REPORT

5
Most Acquisitions Fail

• "A Towers Perrin study of 150 mergers of
  financial-services firms found that 30 of deals
  substantially eroded shareholder value, and
  another 20 eroded shareholder value somewhat"
  BEST'S REVIEW/PROPERTY-CASUALTY INSURANCE EDITION
  

6
Most Acquisitions Fail

• Microsoft measurement criterion for
  acquisition success

7
Why Do Most Acquisitions Fail?

• Acquisitions done for the sake of size, ego, or
  hubris are doomed to fail
• Information asymmetries
• Investment bankers may have a conflict of
  interest
• Underestimating the cost of the acquisition, or
  overestimating the synergies, might result in
  overpaying for the acquired company and failure
• Acquisitions must have huge strategic value or
  synergies in order to be worthwhile.

8
When Might An Acquisition Make Sense?

• When it allows an organization to be faster,
  better, and/or cheaper
• Acquiring capabilities in RD, operations,
  manufacturing, marketing, or distribution
• Jumping entries barriers
• Acquiring proprietary technology and patents
• Acquiring installed base
• Overcoming nationalistic preferences
• Building higher profitability with scale and
  reduced competition

9
Creos Experience With Mergers And Acquisitions

• Creos history
• Creos acquisitions of
• Scitex- April 2000
• Carmel Graphics- June 2000
• Scenicsoft- Oct 2002
• First Graphics- Sept 2003
• Spectratech- Feb 2004
• Kodaks acquisition of Creo- June 2005

10
Key lessons Learned

• Integration generally takes much longer and
  cost much more than anticipated
• Cultures
• Processes, IT, ERP, and financial reporting
  systems, etc.
• Overlapping product lines
• Geographic allocation of all company activities
  such as RD and mfg
• Merging of sales, marketing and service
  organizations WW

11
Key lessons Learned

• Major issues to be aware of
• Quality of management and employees in the
  acquired company
• Retention of best people in the acquired and the
  acquiring company
• Merging of brands

12
Key Lessons Learned

• Prepare detailed plans in advance on how to
  handle
• Internal and external communication
• Selection process of key managers
• Retention of key employees
• Integration issues

13
Key Lessons Learned

• Key Ingredients for a successful acquisition
• A dedicated, strong acquisition team
• Business strategy team to identify potential
  acquisition targets
• Due diligence team
• Integration team
• Experience
• Total commitment to achieving the expected
  synergies
• Great examples GE, Cisco, Danaher, (Kodak)

14
Maintaining Visibility and Relevance in the
Community

• Ability to hire the best available people in a
  given community is key to the success of any
  company
• Special attention should be given to the
  community of the acquired company

15
Success at Danaher

• Success at Danaher doesn't happen by accident.
  We have a proven system for achieving it. We call
  it the Danaher Business System (DBS), and it
  drives every aspect of our culture and
  performance. We use DBS to guide what we do,
  measure how well we execute, and create options
  for doing even better -- including improving DBS
  itself.

16
Danaher share Performance
17

• Thank You For Listening