braving the rapids with information management: mergers, acquisitions and divestitures

Braving the Rapids withInformation Management:

Mergers, Acquisitions and Divestitures

10.31.13Steve Erickson, Jacque Passino

Presenters

Steve Erickson

Vice President, Business Support Services

serickson@accesssciences.com

(713) 554-7570

@SEErickson

Jacque Passino

Senior Business Advisor

jpassino@accesssciences.com

(713) 554-7549

@jacquepassino

Agenda

Current State of Mergers, Acquisitions, and DivestituresImpact on Information Management (IM)Need for Early Involvement of Information Management in

M&A Transactions

The Current State of Mergers, Acquisitions, and Divestitures

Overview of U.S. M&A market◦Worldwide M&A activity of $978.8 billion through 2Q13 is down 9% YTD –

the slowest YTD period worldwide since 2009 ($900.8 billion) (RUETERS)

◦ North America represents more than 50% of all global M&A activity through 2Q13 (REUTERS)

◦ U.S. continues to outperform the global market even when times are uncertain and global activity declines

◦ U.S. M&A activity increased to $784.5 billion through 3Q13 from only $654.8 billion this time last year. (Deallogic/ Wall Street Journal)

◦ Predicted to be the global market for “would-be-deal-makers” (Ernst &Young)

◦ U.S. initiated 17% of all global M&A acquisitions and is one of the lead targets for cross-border acquisitions in 2013 (REUTERS)

Microeconomic fundamentals in the U.S. are ripe for M&A ◦ Large levels of cash on corporate balance sheets – over $1 trillion (PWC)

◦ Focus on organic growth rather than external growth◦ Fear of liquidity constraints in tough times◦ Tension between management and investors on how to spend cash

• Lower debt levels create greater capacity for debt, including M&A activity◦ Global net debt/EBITDA ratios are expected to fall 13% over the next 12

months (KPMG)

• Limited opportunities for organic growth• Forward P/E ratios for 2Q13 are 4% higher than 2Q12 and 14% higher on a

YTD basis (KPMG) – measure of capacity for M&A deal activity• Historically low short term and long term interest rates

Macroeconomic environment has been less supportive since the Fiscal Crisis 2007-2008

• Series of shocks to the markets◦ Demise of Lehman Brothers◦ Eurozone sovereign debt crisis◦Greece, Spain, Italy, Cyprus◦ Affordable Care Act◦ Regulatory and tax environment◦U.S. downgrade and debt ceiling issues◦U.S economic recovery is slow

• CEOs lost confidence in the market and focused on perceived less risky growth strategies

Confidence is rising though, on the macro outlook

• Growing optimism – 65% of executives world wide expect the global economy to improve over the coming year up from 22% a year ago (Ernst &Young)

• U.S. still posted solid growth rates in M&A activity this year in spite of the recent budget stalemate and government shut down

• Recent E&Y survey reports that executives world-wide expect to finance deals with debt and equity rather than relying on cash (Ernst & Young)

• Expanding geographic reach, looking for profitable operations and entering a new line of service – primary reasons to pursue M&A transaction (KPMG)

Largest U.S. deals announced in the month of September:

• Verizon Communications, Inc. acquiring Vodafone Group PLC ($130 B)

• Applied Materials, Inc. acquiring Tokyo Electron Ltd. ($9.3B)

• Microsoft Corp. acquiring Nokia Oyj’s device and service business ($7.2B)

• Koch Industries, Inc. acquiring Molex, Inc. ($6.9 B)

• Canada Pension Plan Investment Board and Ares Management LLC acquiring The Neiman Marcus Group, Inc. ($6 B) (FactSet)

Be ready for an up turn in M&A activity

Our Experience Shows

A merger, acquisition or divesture will test all aspects of information management.

Every weakness is quickly exposed, often without sufficient time for corrective action.

All Too Often…

Significant amount of effort will be placed on a merger, acquisition or divesture’s impact on people and physical assets…

…little effort will be placed on treating information and records

as an asset…until Day 1, when suddenly people realize they don’t have the information and records to operate efficiently and effectively.

Information Management Impact

• Large transactions force adjustments to:o Policies and Procedureso Retention Scheduleso File Planso Taxonomy / Classification Schemeso Metadata / Thesauruso Permissions / Security Models / Workflowso Electronic Content Management Systemso Physical Records Storage Processes

• Can add new level of complexity for legal/tax holdso Custodianship of appropriate records depends on ownership of

legal/tax risko Heavy reliance on thorough due diligence

• Requires coordination of multiple vendorso Transaction systemso Content management systemso Collaboration systemso Email systemso Offsite storage

• Impacts both the source and target of the transaction

• Broad organizational issues◦ Organization design

◦ Competency requirements

◦ Culture

• Drives changes to staffing levels and training requirements

Early Involvement is Critical

• Early Information Management involvement in merger/acquisition/divestiture planning is necessary to mitigate the impact of risks

• There is a role for Information Management at every stage of the transaction

Navigating the M&A Event

Assessment and

Planning

Due Diligence OperateExecution

Deal Negotiation

& Closing

Assessment & Planning

• Estimate M&A event timelines• Determine what will be

transferred/receivedo Physical records/informationo Electronic records/informationo On-site, off-siteo Back-up, archiveo Applications

• Identify who will be involved• Plan how transfers will be

executed• Determine how to address

audits, legal/tax holds• Conduct readiness assessment• Prepare an Information

Management Execution Plan

Assessment and

Planning

Deal Negotiation

& Closing

Due Diligence

Acquiring Organization• Prepare your organization to support

due diligence activities• Evaluate state of to-be-acquired IM/RM

programo Systems, processes, people, facilities

• Identify content/records to be inspected• Understand regulatory requirements

placed on to-be-acquired organization

To-Be-Acquired Organization

• Prepare your organization to support due diligence activities

• Locate, inventory, and indexo Physical recordso Electronic records

Assessment and

Planning

Deal Negotiation

& Closing

Deal Negotiation and Closing

• Proactively manage IM aspects of the negotiated contract terms

• Support legal agreement and contract negotiation from an IM point of view

• Agree on ownership, format, and handover of records, processes, procedures

• Agree on responsibility for records on hold

• Negotiate/agree on final timetable of IM/RM eventso Physical transfero Content/records/email

management systemso Collaboration environments

Assessment and

Planning

Deal Negotiation

& Closing

Execution

• Convert systems• Prepare physical space• Prepare/box/label/ship/ receive

physical records• Transfer electronic records• Cross-platform, cross-system

migration and reconciliation

Assessment and

Planning

Deal Negotiation

& Closing

• Make changes to :o Policies and procedureso Retention scheduleso Information governanceo Records Management Systems

• On-board and off-board employees and systems

• Provide training

Ongoing Operations

• Complete adjustments to:o Information governanceo Retention scheduleo Records management staffing levelso Records management system

investment

• Rationalize and consolidate systems

• Rationalize and consolidate vendors

Assessment and

Planning

Deal Negotiation

& Closing

Conclusions• Get involved early• Have a plan• Proactively participate in negotiations around information and

records• Manage expectations regarding elapsed time and level of effort• Get involved early

Contact Information

Access Sciences is ready to deliver the outcomes you need. We lookforward to demonstrating to your company why so many organizations trustAccess Sciences with their information assets.

Anne Tülek Tel: 713-554-7570 Email: atulek@accesssciences.com

Steve Erickson Tel: 713-554-7572 Email: serickson@accesssciences.com

John Rhoades Tel: 713-554-75xx Email: jrhoades@accesssciences.com

Jacque Passino Tel: 713-554-7566 Email: jpassino@accesssciences.com

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