1

M&A and Capital Raising in a Difficult EnvironmentFrom Heaven to Hell and back?

2

2007 – A Banker’s Dream

Extraordinary financing environment

M&A peak in the chemical industry

High valuation from significant demand by both strategic and financial buyers

Source: RSM EquiCo Capital Markets* Data as of March 17, 2008; subject to change pending future updates

42

54

30 3444

73 7281

22

40

$0

$20

$40

$60

$80

$100

'00 '01 '02 '03 '04 '05 '06 '07 '08 Pending

M&A Trough

Climb in M&A activity

CHEMICAL INDUSTRY M&A – DOLLAR VALUE ($ in billions)

3

Increasing Valuations

Chemical Industry and middle market valuations climbed from the dip in 2001 – 2002 time period Competitive bidding environment with financial buyers adding to the buyer pool Overall good economy

Source: RSM EquiCo Capital Markets* Data as of March 17, 2008; subject to change pending future updates

7.97.3 7.1

7.5 7.78.1

7.68.2

4 x

5 x

6 x

7 x

8 x

9 x

10 x

'00 '01 '02 '03 '04 '05 '06 '07

7.6 7.57.1 6.9

5.9

6.77 7.2

8.58.1

9.3

4 x

5 x

6 x

7 x

8 x

9 x

10 x

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 H12007

Source: Standard & Poor’s* For deals with EBITDA under $50 million

CHEMICAL INDUSTRY M&A VALUATION (EV/EBITDA) AVG. PRICE MULTIPLES PAID BY SPONSORS (EV / EBITDA)

4

M&A Activity Fueled by an Abundance of Funds

The current size of the entire bank loan market exceeds $1.5 trillion The institutional loan market represents slightly over $1 trillion

HISTORICAL GROWTH OF THE LEVERAGED LOAN MARKET

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07

Mar

ket s

ize

($ in

trill

ions

)

$0.0

$0.1

$0.2

$0.3

$0.4

$0.5

$0.6

$0.7

$0.8

New

leve

rage

d lo

an v

olum

e ($

in

trill

ions

)

Leveraged loan market size New leveraged loan volume

Includes US dollar-denominated noninvestment-grade bank debt (TL-a, revolver and institutional term loans).Source: Credit Suisse, LPC, as of 12/31/07

5

M&A Activity Fueled by an Abundance of Funds

Through the third quarter of 2007, $199.4 billion was raised by U.S. private equity firms, well ahead of the $154.1 billion raised in the first three quarters of 2006 (source: Private Equity Analyst)

In 2007, over $500 billion was raised by private equity firms worldwide

GLOBAL PRIVATE EQUITY CAPITAL RAISED ($ in billions)

$0

$100

$200

$300

$400

$500

$600

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: Thomson Financial, Private Equity Intelligence

6

However, the world changed in July…

Appetite for large leveraged loans dried

up suddenly as banks were overloaded

and sub-prime related troubles became

more apparent

In the first 6 months of 2007, $846.8

billion of transactions were conducted in

the U.S. while second half figures fell to

only $479.2 billion (source: Nixon

Peabody)

$300 billion in deals were overhanging

and are still being worked out

This number decreased to $180 billion in

April 2008

Alltel

US Borrowers

$23.2B

Amount Comment

- Transaction launch delayed

Cablevision $9.2B - Transaction launch delayed

Chrysler $12.0B - Pulled from market; bridge financing still in place

Clear Channel $22.1B - Transaction launch delayed

First Data $16.0B - Transaction launch delayed

Harrah’s Ent. $9.0B - Transaction launch delayed

Chrysler Financial $8.0B - Transaction still seeking clearing price/structure

Sallie Mae $16.5B - Transaction launch delayed

Alliance Boots £9.02B - £7.27B of Sr debt withdrawn; flexed jr capital

Maxeda €1.08B - Pulled from market

Springer Sci & Business Media

€1.77B - Pulled from market

Telenet €2.30B - Out to relationship banks; determining structure

Paroc €0.83B - Flexed: Increased margins & offering 50bps OID

phs €1.03B - Reduced amount of facilities. Flexed: Increased margins & offering 50bps OID

Camaieu €1.17B - Reduced amount of facilities during syndication

Zodiac €1.18B - Incr. Margins, added 100bps OID, tightened doc’s

European Borrowers

Expedia $3.0B - Share buy back reduced to $750MM

NOTABLE TRANSACTION’S PULLED/DELAYED

7

What happened by the end of 2007?

A rapid succession of events

The market was overheated

Hedge funds, which had become a source of senior sub and equity, disappeared; they were story-

friendly and aggressive

CLO’s disappeared

High yield market dried up

Banks were left with “Bridges to Nowhere” and immediately tightened their standards

The CP market froze

There were no significant transactions in August

The U.S. central banks intervened

Markets were hit on both sides of the Atlantic

8

What happened by the end of 2007? (continued)

The summer events were unusual in that it was liquidity and not credit quality which spooked the

market

At below 1%, the default rate was extremely low compared to 5% to 6% during the 2002 credit

crunch

In September, things looked better and we seemed to head towards normalcy

However, towards the end of 2007, the market experienced a second wave of pessimism which

continued into 2008

Further write offs and then Bear Stearns fails

9

2008 – A Banker’s Nightmare

Financing environment for mid to large-caps is very difficult

M&A for deals above $250 million are greatly impacted by financing difficulties

However, lower to middle market deals still healthy

$0

$50

$100

$150

$200

$250

1Q03

3Q03

1Q04

3Q04

1Q05

3Q05

1Q06

3Q06

1Q07

3Q07

1Q08

LEVERAGED LOAN ISSUANCE ($ in billions)

Source: Reuters LPC, Dealscan, LSTA

10

Back? Signs of Life

In April 2008, we started to see signs of life

– News that Citi is selling $10 billion of their leveraged loans and $2 billion of bond bridges has driven

market optimism

– High yield bond market is starting to gain momentum with 6 new issues priced in April

– Quarter-end amortization along with increasing repayments means cash is starting to build in investor

accounts

M&A activities are resuming

– May 2, 2008: Avista Capital Partners and Nordic Capital Fund VII agreed to acquire ConvaTec from

Bristol-Myers Squibb Company for approximately $4.1 billion

– April 28, 2008: Mars Inc., with financial support from Warren Buffett's Berkshire Hathaway Inc.,

announced plans to acquire The Wm. Wrigley Jr. Co. for $23 billion

– April 23, 2008: Liberty Mutual Group (“Liberty Mutual”) will acquire Safeco for approximately $6.2 billion

11

Middle Market: The Safe Harbor?

Lending activity dropped, but less dramatically than the large corporate market

There is no market risk and no syndication risk

Small is the sweetspot – the majority of the deals that will close in the next 12 months will be below

$500 million in value (source: Nixon Peabody survey)

Foreign buyers are now buying and out-bidding ‘local’ buyers constrained by debt capacity

As some people have said America is on sale and larger acquisitions can be afforded by foreign

buyers

12

Middle Market: The Safe Harbor? (continued)

There is bifurcation in the market

During 4Q07 there were 3339 deals worth $500 million or less and only 156 deals worth

greater than $1 billion

Usually there are 4 times as many large deals then small deals

13

Expectations in Today’s Debt Market

1) Source: Joint study from Oxford, Urbana Champaign and Stockholm Universities

Deal Component July 20071 September 20071 RSM’s Experience Today

Senior Debt (X EBITDA) 3.0 x – 4.0 x 2.5 x – 3.25 x 2.0 x – 3.0 x

Total Debt (X EBITDA) 4.5 x – 5.5 x 4.0 x – 4.5 x 3.0 x – 4.0 x

Sub Debt Pricing 12 – 16% 15 – 18% 11 – 14%

Warrants Feature Very Unusual Potentially Common

Toggle Feature (Cash / PIK) Potentially Very Unusual Gone

Minimum Equity Contribution 15 – 20% 25 – 30% 30 – 45%

Recap Liquidity Abundant Available Raises Red Flags

14

LIBOR’s Downward Trend

4.8%

5.2%4.9%

5.7%5.2%

3.9%

3.1% 3.1%2.5% 2.7%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

Sep-03

-07

Sep-20

-07

Oct-09

-07

Oct-26

-07

Nov-14

-07

Dec-03

-07

Dec-20

-07

Jan-0

9-08

Jan-2

8-08

Feb-14

-08

Mar-04

-08

Mar-21

-08

Apr-09

-08

EVOLUTION OF LIBOR

Launch Date Issuer Corp Ratings Implied Yield LIBOR Floor

8-Apr-08 Macrov ision Technologies' B3/B+ L+450 3.5% Libor Floor

1-Apr-08 Local Insight Yellow Pages B2/B L+550 3.75% Libor Floor

24-Mar-08 New port Telev ision - L+625 3.0% Libor Floor

24-Mar-08 Venture Transport - L+550 3.25% Libor Floor

17-Mar-08 Merisant Caa3/CCC L+875 3.5% Libor Floor

13-Mar-08 Abitabi-Consolidated B2/B- L+900 3.5% Libor Floor

Source: S&P Leveraged Commentary and Data, RBC Capital Markets

15

New Lenders Pick Up the Slack

LARGE MIDDLE MARKET INSTITUTIONAL LEAD ARRANGER VOLUME ($ in millions)

LARGE MIDDLE MARKET INSTITUTIONAL LEAD ARRANGER VOLUME ($ in millions)

$0$100$200$300$400$500$600

GECC

Barclay

s

Lehm

an

Wachovi

a CITBNP

Bank o

f Irela

ndHSBC MS

Capital

Source

1Q08

Source: Reuters Loan Pricing Corporation/DealScan

$0$500

$1,000$1,500$2,000$2,500$3,000

Credit S

uisse

Bank o

f Ameri

ca

JP M

organ

Goldman Sac

hs

Merrill L

ynch

Lehm

an

Wells Farg

o

Wachovi

aGECC

UBS

1Q06 1Q07

Jumbo LBOs struggled to syndicate in 1Q08 LBO lending fell 88% in 1Q08 to $5.4 billion from $45.9 billion in 1Q07 The largest LBO loan to clear market was just over $1 billion Make-up of lead arrangers shifts dramatically as Institutional volume declines New players are emerging as corporates now represent ~60% of new borrowers, up from ~20%

during Q1 2007:

16

Situation in Q1 2008

Banks were no longer liquid; for the first time the whole banking system was in doubt

Loan default is still relatively low

– 1.50% at the end of Feb.

– 1.83% through Mar.

But the mark to market of collateralized sub-prime loans triggered huge write-downs

This resulted in capital adequacy issues

This is being worked out as we speak through:

– Foreign investors

– Going to market by issuing preferred convertibles and equity

17

Summary

Financing is available under tighter conditions

The market has not dried out; overhang is being worked out; however, pricing is going up

Sponsored M&A lending declined 39% from the previous quarter and 60% from the first

quarter of 2007

With the continued availability of funds, what is happening to the M&A market and valuations?

18

2007 M&A Valuation & Volume

Good companies are still obtaining high multiples

Average EBITDA multiples for middle market companies declined from 6.5x in the first half of

2007 to 6.0x in the second half

In the $10 million to $25 million deal size, there was no appreciable decline in EBITDA multiple

which is holding at 5.7x

In the $25 million to $100 million deal size, EBITDA multiples dropped from 7.0x to 6.0x

Enterprise Value 1st Half 2007 2nd Half 2007

$10mm - $25mm 5.7x 5.7x

$25mm - $50mm 7.0x 6.0x

$50mm - $100mm 6.9x 6.0x

$100mm - $250mm 7.8x 7.4x

Total Enterprise Value/EBITDA

Source: Mergers & Acquisitions Magazine

VALUATION MULTIPLES

19

2007 Chemical M&A Valuation & Volume

Chemical industry transaction volume fell in Q3 2007

Backlog of pending transactions has picked up again this year and we expect the second half of

2008 to be another busy season for Chemical Industry M&A

# of Deals Avg. EV / EBITDA

Q1 2007 63 7.9x

Q2 2007 75 8.7x

Q3 2007 40 7.8x

Q4 2007 29 9.0x

Q1 2008 (Preliminary) 32 7.4x

Pending 52 10.1x

Source: RSM EquiCo

VALUATION MULTIPLES

20

2007 Chemical M&A Valuation & Volume (continued)

Average valuations will increase in the second half of 2008 as some large transactions close:– Agrium / UAP (closed May 7, 2008) – Carlyle / Neochimiki (closed May 9, 2008) – Incitec Pivot / Dyno Nobel – Henkel / ICI Electronic Materials

Sub-$100 million deals on average are discounted up to 2x EBITDA compared to deals $500 million and above

10.0

7.8

8.58.8 8.8

9.6

9.09.5

10.5

6.7

7.57.1 7.1 7.3

7.97.5 7.5

9.3

7.1

5.7

6.4

7.07.3 7.3

6.9

7.5

6.3

4x

5x

6x

7x

8x

9x

10x

11x

'00 '01 '02 '03 '04 '05 '06 '07 Pending

Deals >$500mm Deals $100mm - $500mm Deals <$100mm

VALUATION MULTIPLES

Source: RSM EquiCo

21

Closed Target Acquirer

Transaction Value

($mm) Revenue EBITDA

01/28/2008 Remaining 40% Stake in Mchem * Matrix Laboratories - $34.8 -

01/04/2008 FineTech Laboratories RxElite Inc. $19.2 $6.2 -

11/30/2007 Fine Chemicals (PPG) * ZaCh Systems $65.0 - $8.5

10/30/2007 SF Chem (Capvis) * CABB (AXA Private Equity) - $150.0 $22.5

07/02/2007 Ariane Orgachem (Aurangabad) & Ferico Laboratories (Navi Mumbai)

Albany Molecular Research Inc. $11.0 $5.0 -

06/18/2007 5 Fine Chemical Businesses * Argos Soditic - $105.8 -

06/14/2007 Particle and Coating Technologies KV Pharmaceutical - - -

01/09/2007 78.6% Stake in Group Novasep * Glide Buyout, Banexi & Management $544.0 $544.0 $85.0

12/31/2006 Remaining 39.9% Stake in Virbac Corp. * Virbac S.A. $44.0 $80.8 $10.5

12/02/2006 Be-Tabs Pharmaceuticals * Ranbaxy Labortoraies $70.0 $31.8 $9.1

10/25/2006 PLIVA D.D. Barr Pharmaceuticals, Inc. $2,418.7 $1,109.1 $268.6

10/22/2006 Connetics Corporation Stiefel Laboratories $625.0 $150.0 -

10/18/2006 Sharp & Dohme Ponders End, U.K. Plant * Aesica Pharmaceuticals - - -

09/07/2006 CarboGen-AMCIS (Solutia) * Dishman Pharmaceuticals and Chemicals $74.5 $68.0 $12.0

08/18/2006 Chemtec Leuna * Minafin - $15.0 -

07/30/2006 Biopharmaceutical Facility (Dow) Alexion Pharmaceuticals - - -

07/05/2006 West Coast Ingredients J.M. Huber Corporation - - -

06/26/2006 Fine Chemicals Business (Clariant) * TowerBrook Capital Partners $56.5 $169.4 $5.6

05/23/2006 Active Pharma Ingredient and Intermediates Business (Lubrizol)

Auctus Management $20.0 $30.0 -

03/13/2006 Novasep's Rohner Subsidiary (Rockwood Specialties)

* Arques Industries - - -

02/01/2006 RPS Custom Synthesis (Rhodia) * Shasun $0.0 - -$20.0

Avg. EV/EBITDA 8.6x

Transaction Details ($mm)

Fine Chemical Transactions

* Foreign BuyerSource: RSM EquiCo

22

What Will Happen?

Will M&A dry up?– No: Strategic buyers have very strong balance sheets, un-drawn lines of credit and very good stock

valuations and earnings

Will Private Equity decline?– In 2000 – 2002, total private equity deals averaged $30 billion in the U.S. and Europe

– In 2006 we saw figures of $233 billion in the U.S. and $151 billion in Europe

– There is $250 billion waiting to be invested and most PE firms are successfully raising larger funds

23

What Will Happen? (continued)

Private equity maintains its advantages

– Do not have to please the analyst community

– No tyranny of quarterly earnings

– No Sarbanes Oxley

– They have in some cases become “hybrids”

– They often have strategic horizons which are longer than traditional strategics

– They are very quick

Strategic buyers will probably regain some advantage

Private equity hybrid platforms allow them to generate the synergies to be competitive against

strategics (i.e. Hexion / Huntsman)

2002 to 2007: the “golden age” of private equity

24

Conclusion

There is evidence that lenders are redirecting funds to the middle market

– The banks to avoid syndication risk and still generate fees

– The mezzanine players who have been starved for the past year and have an abundance of funds

– BDC’s are canvassing the market with their “one-stop-shop” financing

Multiples have come down between ½ to 1 turn depending on the sector

– This means we are going back to 2006 which was an exciting year

– The froth is gone, sanity has come back

– We are open for business in the middle market

25

RSM EquiCo M&A Activity

TOTAL LIQUIDITY CREATED BY RSM EQUICO GROWTH IN RSM M&A ADVISORY ACTIVITY

618

24 2636

52 47

28

38

0

10

20

30

40

50

60

70

CY2001 CY2002 CY2003 CY 2004 CY 2005 CY 2006 CY 2007 CY 2008

$0

$500

$1,000

$1,500

$2,000

$2,500Pending

# Transactions

Deal Value

Tota

l Dea

l Val

ue (m

illion

s)

Source: RSM EquiCo as of 5/11/08

81 314283

513

792

1,657

5,2921,650

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

CY 2001 CY 2002 CY 2003 CY 2004 CY 2005 CY 2006 CY 2007 Total

Rank Financial Advisor Deals

1 Houlihan Lokey Howard & Zukin 632 Jefferies Group, Inc. 56

3 RSM Equico Capital Markets LLC 48

4 Citigroup, Inc. 47

5 UBS AG 42

6 Goldsmith, Agio, Helms & Co. 36

7 Goldman Sachs & Co. 35

8 Morgan Stanley 32

9 BB&T Corp. 31

9 Keefe, Bruyette & Woods, Inc. 31

TOP U.S. ADVISORS ($1 - $100m deal value)

26

RSM Global Presence

RSM Hemmelrath Gruppe(Germany)22 offices

1,000 employees

RSM Nelson Wheeler(Hong Kong)Four offices

100 employees

RSM Bird Cameron(Australia)30 offices

500 employeesRSM France

(France)23 offices

1,600 employees

RSM Audihispana(Spain)

14 offices615 employees

RSM McGladrey & McGladrey & Pullen

(U.S.)100 offices

4,000 employees

American ExpressTax & Business Services

2,500 employees

RSM EquiCo(U.S.)

Four offices150+ employees

RSM EquiCo(UK)

One officeFive employees

RSM EquiCo(India)

One office25 employees

RSM Hemmelrath Gruppe(China)

One Office200 employees

RSM Stone Forest(Singapore & China)

400 employees

RSM Bently Jennison(UK)

14 offices1,000 employees

RSM Brazil(Brazil)

6 offices

RSM Mexico(Mexico) 24 offices