1. MERGERS & ACQUISITIONS Leonid Sopotnitskiy

2. Part 1 Restructuring a business

3. Restructuring activities AAcquisitions MMergers SStrategic alliances DDemergers DDivestitures Friendly Hostile Takeover Vertical Horizontal Congeneric Conglomerate Accretive Dilutive Joint Ventures Minor investments Franchising Licensing Spin-out Spin-off Disposal

4. Holding companies in M&A  Cheaper transaction  Gain control via majority stake  Triple taxation  Minority resistance  Ineffective managerial decisions + VS - 2 to 3 6 6 % I N E F F E C T I V E

5. ESOP (Employee Stock Ownership Plan) ESOP-Fund SPONSOR Creditor 1. L o a n 2. Guarantee 3. S h a r e s 4. F i n a n c e 5. I n t e r e s t

6. ESOP as an M&A-tool ESOP-Fund Parent Co. Creditor 1. L o a n 2. Guarantee 3. S h a r e s 4. F i n a n c e 5. I n t e r e s t “Shell” company Subsidiary SHARES

7. Part 2 Participants

8. Investment Bankers  Deal clarification  Consulting services  IPO

9. Lawyers  Corporate law  Antimonopoly law  M&A code  Tax law  Pension planning  Real-estate law  Securities  Court experts

10. Other participants  Accountants  Proxy-hunters  PR-agents  Institutional investors (pension funds, insurance companies, etc.)  Arbitrage traders (a.k.a. “Arbs”)

11. Arbitrage trading Long target Short “shark” Buy “shark” Sell target Takeover announcement Deal successful Shares converted t (1Q)(3Q) SPI 60 40 70 + 20 + 10

12. Part 3 HQ behind the scenes

13. Synergy OOperational effect FFinancial effect 1 + 1 = 3

14. Common stimuli  Market leadership  Strategy realignment  Taxes  Cross-selling  Empire building  Managers’ hubris  Diversification  Undervalued assets (q-ratio)

15. Why do M&A deals fail?  Overestimated synergy  Low integration tempo  Bad strategy  Cultural conflicts  Core-business conflicts  Oversized targets  Careless deal clearance (by investment bankers)  Financing errors

16. Part 4 Acquisitions & takeovers

17. Friendly acquisitions  Voluntary General Offering (VGO)  Deal through board negotiations  Willfulness of both parties  Late announcements  Lack of surprise  Preliminary SPI-growth risk + -

18. Hostile approach Premium per share Board Complement Equity structure Corporate regulations Defense analysis S U C C E S S Factor complexity

19. Black Knight in action  Dodging board negotiations  Direct shareholder contact  Proxy-fighting (becoming a trustee)  Preliminary press-release  Psychological pressure on the board directors  Various takeover strategies & tactics

20. Takeover strategies  “Bear hug”  Proxy battles  Pre-tender concealed buying spree  Tender offer  Toehold strategy

21. Takeover decision tree Friendly LOI YN Negotiations Refusal Aggressive actions Bear hug Negotiations Y N Proxy battle Open market Court Tender offer Complex Y N Renegotiate Fulfill offer

22. Reverse takeovers (APO)  Avoid IPO expenses  12-months’ procedure (i.e. time-saving tool)  Fundamental changes in business  Search for an effective floating mechanism

23. PIPE deals (Private Investment in Public Equity) PRIVATE INVESTOR PLC M A R K E T

24. Part 5 Defense mechanism

25. Possible measures  Poison pills  Shark repellents  Golden & silver parachutes  Green mail  Pac-man defense  White knight  ESOP  Leveraged recapitalization

26. “Poison pills”  Preferred stock plan  Flip-over rights plan (discount option)  Ownership flip-in plan (1:1 exchange option)  Back-end rights plan  Poison put

27. Preferred stock plan BLACK KNIGHT TARGET SSS SSS PPP 25%25%25% 25% M A R K E T 33%33% DEAL 1:1,06 1 000000 shares 1 000000 shares+ 500 000 P943 396 shares 1 943396 shares 74 % VS 26 % 8,3% 8,3% 8,3%33% 18,5%18,5%18,5% 18,5%

28. To be continued… Thank you!