pwc evan kelly school of mines presentation

8/22/2019 Pwc Evan Kelly School of Mines Presentation

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PwCs 16th AmericasSchool of Mines

Driving Value from Acquisitions

May 21-24, 2013 Los Cabos, Mexico

www.pwc.com


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Agenda

1 M&A Activity

2 Acquisition Overview

3 Taking Control

4 Full Integration

5

Hostile Acquisition6 Conclusion

PwCs 16th Americas School of Mines

May 21-24, 2013 Los Cabos, Mexico Slide 2


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36/10/2013

M&AActivity

M&AActivity


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Global Mining M&A Volume and Aggregate Value




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Deal Activity by Resource




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Buyers and Targets by Resource




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The Making of a Successful Acquisition

62% - strategically successful

38% - financially successful

30% - operationally successful

Source: PwC M&A Integration Survey




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86/10/2013

M&AActivityAcquisitionOverview


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Typical Acquisition

Short-Term Longer-TermPre-close

InvestigateIntegrate,

OperateExecuteStrategic

Screen

Str

ategyArticulation

EvaluateGrowth

Strategy

Analyze

Target

Markets

Identify

M&A

Candidates

Financial Diligence

Tax, Legal

and Regulatory

Valuation and

Structure

Synergies andValue Drivers

Operations and

Systems Diligence

Initial Integration

Planning

Close

Integration Management Office

Synergy Planning and Realization

Transition Team Deployment

Governance/

Org Structure

MergerCommunication

Risk/Issue

Management

Employee/

CustomerRetention

Project Team

Structure

Day 1

Plan andExecution

Negotiation

and Closing

Execute

100 Day Plan

Operations Integration/Optimization

Organization/Cultural Alignment

Cultural

Alignment

Comp./

Benefit

Alignment

Org.

Design

Customer

Integration

Supplier

Integration

Systems Integration/Optimization

Communication and Change Management

Facility

Alignment




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Challenges Facing AcquirersThere are several common issues which diminish deal value for an acquirer. They tend to be additive andcan impact the integration as a whole, but can be focused in the individual workstreams.

1. Start too Late. Speed is critical to executing the transaction, integrating, andtransitioning back to business as usual. Effective acquirers engage functionalleaders early in the due diligence process to jumpstart the planning process.

2. Failure to Address the Soft Issues. Poorly run integrations typically focusonly on tactical development and execution of workplans. Cultural,communication, and governance components are critical to a large-scaleintegration.

3. Working in Silos. Effective acquirers develop a single integration strategythat incorporates all functional areas. This ensures consistency of delivery, level-sets expectations, and provides complete visibility of execution across theenterprise.

4. Lost in the Details. Many organizations view integration as a tactical project,focused purely on workplan development and execution to integrate all businessfunctions. Proper time should be spent rethinking the business model prior toexecuting a generic integration plan.

5. Closed Minded (We are the best at what we do).When executinglarge-scale mergers, effective acquirers take time to understand the target andcollaboratively select the best people, processes, and technology to support thenew business.

6. Market Awareness at the Lower Levels. For public companies, the marketexpects to see value in two quarters after a large acquisition. By educating andholding the integration team to these timelines, the success of the integration ismuch more likely to achieve shareholder objectives.

7. Delayed Decision-Making. Leadership and Executives need to take activeinvolvement in the integration. Early in the process, regular involvement iscritical to make decisions that will guide the overall planning and execution ofthe integration.

Issues that Diminish Deal Value

PotentialDealValue

Start too Late

Lost in Details

Working in Silos

Failure to Address Soft Issues

Market Awareness at Lower Levels

Delayed Decision-Making

Closed Minded

Value can be diminished by through the impact of multiplefactors. While acquirers focus their efforts to address themost prevalent issues, they often lose focus of others.




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Improve Operating Performance of Targetco Assets Buyco has a reputation and has set an expectation in themarket of increasing and/or accelerating production from the Targetco assets

Improve Profitability Through Synergy Realization Buyco has set an expectation of synergies from integratingcertain elements of the business (eg back office, procurement, tax efficiency).

Demonstrate that the Acquisition of Targecto is AccretiveWhen the above improvements are measured againstthe purchase price, the transaction must be viewed as accretive across a variety of to be determined metrics.

Execute the Acquisition with Minimal Disruption to the Combined Operations The acquisition needs to beexecuted in a manner that does not disrupt the operations of Buyco or Targetco.

Confirming Buycos Objectives for Targetco Acquisition

Potential Acquisition Issues

Environmental and health & safety risk

Consistency of operations with Buycos code ofconduct and ethics

Control of board and management

Access to site

Vanishing assets

Fraud, theft and corruption

Legal complications

Vandalism or sabotage

Securing IT infrastructure and data

Personnel security and safety

Management support

Retention of key staff for continued operations

Possible litigation claims against Buyco

Communication with all stakeholders

Labour unrest

Supplier demands

Data gathering for possible litigation

Tax and financial reporting

Change of control issues




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Integration FundamentalsA clear statement on the integration fundamentals will gain alignment of the leadership team and ensureappropriate direction is provided to integration workstreams

Vision & merger rationale

What is the vision for the combined

organisation?

An agreed definition of what will be achieved, thestructure employed, the processes implemented and

timetable of deliverables

Sources of value

How will integration synergies be

identified and initiatives launched?

Governing principles

What are the key principles by which

the integration will be delivered?

Timetable & milestones

What are the key integration milestones

and what will be in place for Day One?

Structure, roles & responsibilities

What is the programme structure and who will

assume key roles in the integration?

Controlling & reporting

What process will be used to monitor,

control and report progress?

Integration

Fundamentals

Priorities & resources

Integration priorities vs. business as

usual and capacity to deliver change?

Degree of integration and scope

To what degree will various organisations

integrate vs. remain separate?




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Integration Considerations

136/10/2013

Deal Type

Transformative/IndustryConvergence

Resource/ServiceExtension

GeographicExpansion

IndustryConsolidation

IntellectualProperty & Other

Assets

Degree of Integration

Low to None

Full

Partial

High

Low

Considerations

High

Low

Approach

Best of Breed/Hybrid

Absorption

Standalone

Incorporate targetinto buyerinfrastructure

Back-office Integration

Choose best from

buyer & target forcombined business

Front-end businessremains as-is with

back-office integration

Take control andminimize risk;

minimal integrationof target into buyerinfrastructure

Riskoffinancialmisstatement

Disruptiontobusiness

Similarityofbusiness

Synergies

Control

Planning the degree of integration across functions and geographies and tailoring for the type of acquisitionis critical to translating acquisition strategy into integration strategy.




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Seven Tenets of Successful IntegrationBased on our experience, we have identified common critical success factors that we address with our clientsto ensure their long term success.

High

Low

Low HighProbabilityof Success

Financial

Impact

Value Drivers

Initiatives are ranked according to financialimpact and probability of success. Those with thehighest financial impact and highest probability ofsuccess receive resource priority.

1. Accelerate the transition. There is no value in delay. It is critical to focus on

obtaining bottom-line results as quickly as possible to maximize shareholdervalue. Prolonged transitions slow growth, diminish profits, destroy morale andproductivity, and lead to missed opportunities and loss of market share.

2. Define the strategy first, then execute. Integration is a highly tacticaleffort. But the tactics must be implemented in ways that capture and protect the

value of the deal. Integration priorities are easier to identify and execute when aclear integration strategy is well defined and communicated.

3. Focus on 20% of work that drives 80% of the value. Shareholder valuemust drive the allocation of resources for meeting those priorities. First,potential sources of value capture and value creation must be identified. Then,resources are allocated based on potential financial impact, probability ofsuccess, and timeline requirements.

4. Prepare for Day One, then the larger Integration. Critical Day Onetasks need to be identified early, before longer-term, more detailed planningcommences. This allows for prompt identification of long-lead time items, well

before they can turn into closing day surprises.

5. Communicate to all stakeholders. Communicate early and often with all

stakeholders, including customers, employees, investors, suppliers/vendors,and the general. Communication should articulate the reasons driving the deal,reveal timing for key actions, and be candid in nature about what is known and

what is unknown.

6. Establish leadership at all levels. The transition is critical for minimizinguncertainty, assigning accountability, defining functional authority, andestablishing role clarity.

7. Manage the integration as a business process. Large scale integrationefforts require significant, high-quality resources including committed

members of the executive team.

Value Driver Selection




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156/10/2013

M&AActivityTaking Control


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Taking Control is the foundation for delivering the value ofyour deal

Accelerating the de-risking of your investment

Aligning PEOPLE tothe vision

Ensuring cost effectiveCOMPLIANCE

Protecting theASSETSand business

operations

Establishing the degreeof control and engaging

the right teams

Mapping the regulatoryrequirements and

establishing budgets

Validating the duediligence assumptions

and implementingcontrols




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Short-term consequences of failure to Take Control

Inability to confirmasset register

Loss of the mostmobile assets

IP loss

IT security breaches

Obstacles to accesscertain locations

Delay inproducing IPdocuments

Lack of candouron IT access rights

Non-resolution ofregulatory

compliance issuesEarly days set the

tone

Irreversible courseof action may be

triggered

Evidence ofparallel

managementprocess

Instances ofdecisions made

withoutconsultation

Rapid deteriorationof operational and

financial

performance

Fire-fighting modeprevents strategic

decision makingand execution

New establishedfacts keepemerging on a

daily basis

Unexpecteddisruption ofoperations

Inability to

evaluate progressversus plan andcreate a forecast

Decisions have tobe made without

adequateinformation (eg

capex spend)

Production of

financial reportsis late,inconsistent overtime

Parallel reportsare used

Information isnot available

Loss of cash

Bad debt leading towrite-offs

Loss of sales

WC requirementsincrease

Large cash

movements areexecuted without

your approval

Supply of goodsis interrupted

Inventory variesin unexpected

ways

Loss of key talent

Loss of know howthat runs the

business

Financial losses

Inability to effectdecisions

Suddenresignations

Unexpectedlitigations

Adversarialbehaviours

Productivitydecreases

Ownershipinitiation, asset

protection

Governance,compliance andinternal control

Effective

management ofpeople & culture

Treasury,working

capital ,cashand FX

management

Financial /management

reporting,planning,

budgeting andforecasting

Post deal

discovery/diligencevalidation

Failure to takecontrol:

symptomsand short-

termconsequences




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Our approach provides a fast track to Taking Control withinthe first 100 days of ownership

Determine critical activities required for ensuringcontrol along various key aspects:

Assets

Treasury

Compliance

Reporting

People

Secure resources and launch

Programme Management Office (PMO)Manage risks, issues, dependencies; deploy status reporting and synergy tracking; develop and execute communication plans;

Define the key objectives

Set up the Programme Management Office

Develop communication plan

Set the Course

Day 1 plan for Taking Control Execute plan for Taking Control

Design functional and operational tobe state

Identify key initiatives

Design the Future operating model

Create action plan

Assess resource requirements

Monitor and address dependencies

Detailing initiatives

Announcement Deal Close 100 Days Post Close

Normal businessoperations

Pre Close-Phase 1 Phase 2 Longer Term

Execute critical activities for control

Limit business disruptions

Transition

Into other projectactivities, or

Daily operations




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196/10/2013

M&AActivityFull Integration


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The PwC integration process follows a sequence of coordinated steps to focus resources and capital on theright activities at the right times.

Integration Blueprint

Set the course

Articulate the strategy for the combined company Determine the degree of integration and non-negotiables Identify and protect core operations out of

integration scope Customize integration structure and approach Designate integration leadership at all levels and establish

the Integration Management Office Develop communication plan and execute early

communications

Plan for Day One

Identify and execute Day One requirements acrossall functions

Identify and resolve Day One risks Develop 100 Day Plan including quick wins Secure resources and implement retention plan

Design the future state

Design functional and operational "to be" states Identify, value, and prioritize key integration

initiatives and synergies Develop leadership and organization structure Assess cultural differences and develop people

change program

Execute 100 Day plan

Deliver tactical integration projects Deliver quick wins

Create detailed integration plan

Consolidate all integration initiativesinto an executable plan

Ensure plan fits with core business andprioritize with other initiatives

Assess resource capacityand requirements

Align incentive arrangements withintegration objectives


Announcement Deal close 100 days post close

Maximize valuethrough future stateimplementation

Implement, track andmonitor integrationexecution to ensure deal

value capture

Integration Management Office (IMO): Manage risks, issues, dependencies; deploy status reporting and synergy tracking; develop and execute communicationplans; monitor delivery against integration strategy.

Transition to steady state

Assess synergies, costs, and risks

Assess target operations, systems andsupporting processes

Assess the management team Identify and quantify costs and synergies Identify integration risks & opportunities Identify valuation opportunities to

improve the bid

Jumpstart the Integration

Formulate an initial integration vision Engage resources to lead

integration activities Deploy a structure to govern the

integration process

Post DealPre-Deal Pre-Close First 100 Days

Target identification

Capture key insights

Obtain operational insights that impact/drive the deal value

Identify operational risks that need to beaddressed before integration




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Set the course

Articulate the strategy for the combined company Determine the degree of integration and non-negotiables Identify and protect core operations out of

integration scope Customize integration structure and approach Designate integration leadership at all levels and establish

the Integration Management Office Develop communication plan and execute early

communications

Plan for Day One

Identify and execute Day One requirements acrossall functions

Identify and resolve Day One risks Develop 100 Day Plan including quick wins Secure resources and implement retention plan

Design the future state

Design functional and operational "to be" states Identify, value, and prioritize key integration

initiatives and synergies Develop leadership and organization structure Assess cultural differences and develop people

change program

Execute 100 Day plan

Deliver tactical integration projects Deliver quick wins

Create detailed integration plan

Consolidate all integration initiativesinto an executable plan

Ensure plan fits with core business andprioritize with other initiatives

Assess resource capacityand requirements

Align incentive arrangements withintegration objectives


Announcement Deal close 100 days post close

Maximize valuethrough future stateimplementation

Implement, track andmonitor integrationexecution to ensure deal

value capture

Integration Management Office (IMO): Manage risks, issues, dependencies; deploy status reporting and synergy tracking; develop and execute communicationplans; monitor delivery against integration strategy.


Assess synergies, costs, and risks

Assess target operations, systems andsupporting processes

Assess the management team Identify and quantify costs and synergies Identify integration risks & opportunities Identify valuation opportunities to

improve the bid

Jumpstart the Integration

Formulate an initial integration vision Engage resources to lead

integration activities Deploy a structure to govern the

integration process

Post DealPre-Deal Pre-Close First 100 Days

Target identification

Capture key insights

Obtain operational insights that impact/drive the deal value

Identify operational risks that need to beaddressed before integration

Change Management and Communications Planning and Execution

People, Organization and HR

Integration

People, Organization and HR Planning

Integration BlueprintPeople and HR integration activities span the entire deal continuum.




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Managing the People Aspects of an Integration

Specific People Considerations for an integration:

Engagement and sustaining business performance Keeping employees informed, engaged and focused onbusiness as usual activities to minimize the performance dipduring the transition period

Management focus on the right things - Design seniormanagement roles to take into account operational andgovernance needs and align management team members with

common goals/vision

Allocation of resources - Determining that key activitiesare prioritized and that the right resources to the short andlong term actions are dedicated.

Workforce retention Employees may be uncomfortableor experiencing significant anxiety about moving to a newcompany and may potentially leave. Ensure that highperformers are given the right opportunities.

Education and Training - Employees hired to staff the new

Company will need time to understand current operations andpotentially develop new processes, technology, and providetraining and leadership to junior resources.

and the majority of reasons are related to people issues suchas:

Lack of change management skills in senior and middlemanagement

Inability of workers to adapt to change

Insufficient training and coaching

Lack of acceptance of reasons for change

In addition, research shows other challenges to be:

Lack of linkage between changes, benefits and measures ofsuccess

Competing priorities

Organizational inertia

Insufficient cross-functional collaboration

Resource constraints

*Findings are from interviews with 133 top executives of large, US based multinational businesses; PricewaterhouseCoopers Management B arometer

Research tells us that 75% of change initiativesdo not fully reach expectations*

The people aspects of an integration cannot be handled in a silo, away from the rest of the effort. Humancapital issues are critical to every work stream and must be managed with the same focus and discipline asissues of finance, operations, or information technology.




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Capturing M&A value by helping you focus the right people on the right things at the right stage in theintegration to get the right results.

Focus on 7 imperatives across the 3 phases of integration

People, organization

and HR integration

People, organization and HRplanning

Communications and change management

planning and executionReward &PerformanceOptimization

Training &on-boarding

OrganizationRealignment

& HR FunctionReadiness

Industrial &Employee relations

Stakeholderengagement &

communicationPeople&

cultureintegration

strategyWorkforcePlanning:

Assessment,Retention, &Restructuring

People Integration Methodology




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Buycoss Integration Team StructureTypical Integration team structure

Provide overall vision and direction

Drive key decisions Commit appropriate resources

Eliminate obstacles

Address relevant change management issues

Monitor project objectives and milestones

Coordinate activities of functional project teams

Assess and monitor resource needs, prioritize

Provide tools, templates and protocols for teams

Monitor results and report to the SC

Define requirements for functional take controland discovery

Identify risks and mitigate with planned actions

Assign resources and team roles and drive teamactivities

Develop functional organization design in short

and medium term

Identify significant change management issues

Develop and execute Day One workplans

Provide regular Status Reports, issues, anddependencies to the PMO

Acquisition Steering Committee (SC)

Key executives

Program Management Office (PMO)

Project office leadership and support

Communications

PMO Support Teams

Human Resources Sales & Marketing

Procurement

Exploration

Technology and Operations

Public Relations

SecurityIT Mining Operations

Accounting andReporting

Finance

TreasuryTax Forensics

Acquisition Support

Health and Safety RegulatoryLegalEnvironmental

Culture and Change Management

Synergy Tracking




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Time CommitmentLarge and complex acquisitions such as Targetco require significant resource commitments.

Led by CEO (or C-Suite Sponsor) driving the deal; key members with decision levelresponsibility.(5-10% Buyco Time Commitment)

Overall Program Manager named by the Steering Committee as the Project

Lead; accountable for the day-to-day oversight, coordinatinginterdependencies, communicating status to the Steering Committee andoverall execution of the planned activities.(100% Buyco time commitment)

Functional Directors or Experienced Managers responsible for the planningand execution of activities for their specific function.(25 to 100% Buyco Time Commitment)

Leads a broader group of functional sub-team members and coordinateswith Target counterparts.

Additional individuals within the same functions as the Functional Leads that help plan andexecute initiatives at the working level (25 to 75% Buyco Time Commitment).

Regularly report progress and issues to the Functional Lead.

Part-time role with periods of high involvement.

SteeringCommittee

FunctionalSub-Teams

FunctionalTeam Leads

ProgramManagement Office




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Critical Path Milestone PlanThe milestone template may be used cross functionally to plan and prioritize integration-related milestonesand accompanying activities at a high-level.

1Q XX

1Q XX

1Q XX

1Q XX

2Q XX

Develop Integrated Communications StrategyChange Management

Compensation &Incentive Processing

BenefitsMigration

4Q XX - 1Q XX+1

DayOne

Compensation Analysis; Develop Incentive Program Strategy

Day One: Welcome to the Company

Oversight - Vendors

Communicate Day One Incentive Communication; Align CLs

Conduct Benefits Gap Analysis

Open Enrollment

Benefits Communication

Additional Incentive Reviews/Implementation; Salary Program Communication

Execute Integrated Change Management/Communication Strategy

1/1: Transition to Company Benefits

Policies SBC Implementation / Communication

Day One

4Q XX - 1Q XX+1

Payroll Conduct Payroll Gap Analysis

Oversight - Vendors

1/1:System Migration

Payroll Migration4Q XX

Q XXMilestone Primary Activity

Primary activities necessary tocomplete the sub-teaminitiatives and achieve thespecified milestones. Only keyhigh-level activities should becaptured on this milestonetemplate; other activities willexist as well.

Functional sub-team. Theactivities and milestonesrelated to these sub-teaminitiatives are highlightedin the swim lane to theright

Solid line represents DayOne of the acquisition

Specific one-time milestone tobe achieved by the functionalsub-team as part of theintegration initiatives

Integration timeline. Thetimeline will be customized for

each deal

Illustrative HR Example:

20xx 20xx + 1 20xx + 2Sub-Teams

Communicate the Companys policies4Q XX

Slide 26


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Workplan DevelopmentThe workplan development process leverages the output from the Integration kickoff meeting to createdetailed integration workplans by functional area, including required actions or deliverables.

Description The integration workplans contain the required actions by functionrequired for deal close, Phase I (45 days post-close), and longer-term.These workplans will help ensure: Value is preserved and shareholders interests are protected Immediate control is secured for required areas Statutory/contractual obligations can be fulfilled Significant risks/issues that must be addressed immediately post

deal close are identifiedEach workstream develops a workplan that is monitored weekly by theIntegration Management Office.

Objectives Ensure critical, time sensitive integration activities acrossworkstreams are identified and acted on by accountable individualsresponsible for completion

Ensure critical gaps are identified and functional dependenciesidentified

Protect core business operations

Process Functional teams identify and document critical actions, issues,dependencies, decisions required, information needed, andresources assigned to tasks

IMO monitors and tracks progress against critical milestones

Report to Integration Leader on integration status

Who Integration Workstream Leaders, Team Members, IntegrationManagement Office

When Started during the Integration Kickoff meeting and completed over athe following few weeks.

KeyQuestions

What are the integration must haves for integration? What are the statutory requirements for Day One? What cross-functional dependencies exist for integration tasks? What critical requirements exist for 90 Days post-close?

Example Integration WorkplanID Task Name

Task

Owner

Day1?

[Y/N]Dependency Duration

Finish

DateComments/Guidance

FI Finance

FI .1 .0 Stra tegyand Structure

FI.1.1 Establishandlaunch theFinanceintegrationteam Y

FI.1.2 Finalizedepartment structureand accountabilities forDay 1 Y HR Communicate any new structure to HR

FI.1.3Determinethe longterm Financedepartment structureandaccountabilities (i.e., completetheselectionprocess,

"internal" hiring, and terminations)HR Communicate any new structure to HR

FI.2.0 AccountsReceivable -Billing Y

FI.2.1 Developthe combinedinvoicingprocess underNewCo Y

FI.2.2 Determineintracompany invoicingcurrency Y

FI.2.3 Updateinvoicestock forNewCo Y

FI.2.4 Generatean updateletterfor customers withNewConamechange. Coordinatewithcompany announcement. Y Comm.

FI.2.5 Developcommunicationforsales team oninvoicingpractices Y Sales

FI.2.6 Determineupdatedsales tax requirements Y

FI.2.7 Definereturns andbillingadjustment policies Y

FI.3.0 AccountsReceivable -Creditand Collections

FI.3.1 Understanddifferences in credit policies Y

FI.3.2 Reviewcredit files andevaluatemajorcreditors forany new exposures Y

FI.3.3 Evaluatecredit limits forcommoncustomers anddeterminethe combinedcompany credit limit

FI.3.4 Standardizethe credit approval anddocumentationprocess

FI.3.5 Identify differences in"account overdue" definitionand standardize

FI.3.6 Identify differences inthe collectionprocess andstandardize

FI.3.7 Consolidatecredit collections agents

FI.3.8 Establisha consistent writeoffpolicy

FI.4.0 Cash Management Y

Traditionally, the cash managementfunction is

provided bythe OldCo parent. In a carve-out

situation, new policiesand proceduresmustbe

established.

FI.4.1Establishinterim fundingprocedures (e.g., daily cashforecastingprocess, cash requisitionprocess)inlocal

entitiesY

FI.4.2Determineinterim workingcapital needs in local entities. Developplanfor initial fundingandworkingcapital needs

andlink with bankingrequirements.Y

FI.4.3 UpdateandfinalizeDay 1 bankingrequirements Y

FI.4.4Identify long-term cashmanagement responsibility (signing, bank notification)andimplement cash management

functionality (bank, auto ormanual)Determineif informationflowwill beautomatedor manual

FI.4.5 Perform capital expenditurerequirements analysis

FI.4.6 Identify andunderstandany hedgingusedin target company, includingsize andpolicies Y

FI.4.7 Inventory all brokerageand investment accounts andupdateauthorizedsignatures andaccount information Y

FI.4.8 Identify any 3rdparty debt andpayment requirements Y

FI.4.9Perform areviewofany company holdings andinvestments andlink investment strategy withcash management

process




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Status Report

Upcoming Milestones Due Date Complete? Status

1 Integration Kickoff Workshop 12/09/11 Y

2 Draft Integration workplans 12/19/11 N

3 Draft Value Driver cases 1/1/12 N

Critical Dependencies

HR Talent Assessment Guidelines and Process

ET Consolidated systems to support a integrated AP function

Comms Day One calendar of key messages and medium

TeamLead(s):

AxcanT. Walsh

Eurand

A. Smith

PwCJ. Thompson

OverallTeamStatus

G

Status as of:10/27/2011

G

Y

G

During the first few weeks of the integration, the IMO will roll out integration management tools,templates and processes, such as status reporting, to ensure coordination across functions andgeographies.

Accomplishments / Decisions Made / Next Steps

Completed follow up confirmatory diligence meetings on Wed, Thursday, and Friday covering the following topics: Topic1, Topic 2,Topic3, Topic 4

Completed first pass draft of Integrat ion work plan including the following sub-work streams: Sub-Stream 1, Sub-Stream 2, Sub-Stream3

Decided to leave any integration activities related to TrialCos Division A business off our integration work plan

Assigned resources to identified sub-work streams including: A Smith (Stream1), B Johnson (Stream2), P Milch (Stream3)

Next Steps

Schedule follow up meetings with TrialCos functional team to continue to answer open diligence items and continue to developintegration workplans

- Tuesday: Onsite to cover Topic 1, Topic 2, Topic 3

- Wednesday: Telephone calls to cover: Topic 1, Topic 2, Topic 3

Incorporate IMO and executive feedback into draft Integration Work plans and make final edits

Begin to populate Value Driver templates with expected synergies

Major Issues & Decisions Needed Assigned To Need By Complete?

1 What level of integration is expected with TrialCos Division A T Walsh 12/19/11 N

2Need guidance from Purchasing team on potential process for re-negotiating

vendor contractsJohn Doe 12/19/11 N

3Information flow into the dataroom has been limited to Topic1. Need to speak toIMO to accelerate the process

M Shah 12/16/11 N

4 Need guidance from Executives on Open Balance Sheet and Pension Disclosures M Shah 12/16/11 N




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Issue Log

Issue Resolution Log

Issue#

Issue title Issue description Proposed resolutionIssue

ownerStatus

open/closedPriority

(H, M, L)Date issue

loggedDuedate

1.SystemConversion

Determine if single/dualtrack approach will beimplemented

Hold meeting with RW SupplyChain, Finance, Cust Svc todiscuss options.

T Jones Closed H 4/7/12 4/18120

2.

Customer

payment termrationalization

How to reconciledisparate payment terms

when rationalizingcustomer records.

Business decision required byCommercial leadership team.

Discuss when conducting UMconversation, since businessleaders will be on the line.

A Doe Closed M 4/9/12 5/2/12

3.Carrierselectionprocedure

Procedure to define whichcarrier to use

Test system when carriers arenot assigned, what does thatmean for shipping group (TestProcedure)

B Smith Closed L4/9/12

6/20/12

4. Vendor setupConfirm w/T Smith thatSupply Chain will enter

vendors for AP

Discuss resolution with KThompson

A Doe Open M4/9/12

4/11/12

5.Customerorder holdconfirmation

A/R conversion will occurafter customer orders areentered. Orders will needto be reviewed to ensurenone are on credit hold.

After orders are entered andA/R is converted, review salesorders to ensure none should

be held due to credit holds.

B Smith Closed M4/9/12

4/25/12

6.RS1 in-processreporting

RS1 produces in-processtest result that may needto be replicated inSystemX

Review RS1 in-process testresults report to ensureSystemX has sufficientcapability. Possibility ofcreating new report dependingon level of effort.

B Smith Closed M 4/10/12 5/2/12

An issue and dependency log will be used to track issues as they arise and their subsequent resolutions.Tracking critical dependencies ensures that all workstreams are coordinated and aware of the status of

dependent activities.




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Value Driver Analysis

Synergy Analysis

Worksteam

Workstream Owner

Sub-Workstream

Sub-Workstream Owner

Finance

T. Johnson

General Accounting

A. Doe

Financial Impact Summary FY11 FY12 FY13

One Time Costs - (290) (225)

One Time Saving - 200 200

Key Activities Activity Description Net One Time - (90) (25)

Consolidate Organization

Terminate Target Compliance Audit

Eliminate Satellite Processing Center

Third Party Service Consolidation

Migrate all functional support activities to the Anytown, USAlocation

Eliminate third-party supporting going forward and use Buyerprocess

Centralize functions in to Anytown, USA

Savings from consolidation of service contracts

Recurring Costs - (45) (50)

Recurring Savings - 1195 1200

Net Recurring - 1150 1150

Net EBITDA impact - 1060 1125

Capex - (10) (20)

Key Assumptions Potential Risks

One additional resource will be required in Anytown, CA to support the additional volume

XYZ Business Unit will remain standalone

Ensure consistent and seamless transition of functional support

Employees critical to the integration depart earlier than required

Financial Impact - Savings / (Costs)

Dept P&L Account Description 4Q 11 1Q 12 2Q 12 3Q 12 4Q 12 FY 12 FY 13

One Time Costs - (180) (80) (30) - (290) (225)

Finance

Finance

Salaries

Outside Svcs

Severance

Recruiting for additional staff in Anytown, USA

-

-

(80)

-

(50)

(30)

-

(30)

-

-

(130)

(60)

(225)

-One Time Cost Savings - - 200 - - 200 200

Finance Outside Svcs Avoid TrialCo one-time Compliance audit - - 200 - - 200 200

Recurring Costs - - (15) (15) (15) (45) (50)

Finance Salaries New Staff in Anytown, USA - - (15) (15) (15) (45) (50)

Recurring Cost Savings - - 265 465 465 1195 1200

Finance

Tech Ops SG&A

Salaries

Rent / Lease

Personnel Costs

Lease Expense for Anytown, USA

-

-

-

-

250

15

450

15

450

15

1150

45

1150

50

Capital Expenses - - (10) - - 10 (20)

Finance Supplies & Equipment Equipment for new hire in Anytown, USA - - (10) - - 10 (20)

Capture opportunities to drive value, and indicate whether each opportunity is cost savings or revenuegenerating and the associated one-time costs.

Develop the bottoms up analysis and calculations using value driver template Provide detailed action items/plans to achieve calculations of estimates to

enable understanding of the initiatives by a broad audience

Provide dates as to when these savings and costs will commence Identify an individual that will be responsible for t racking the results for

each of the savings/costs initiatives




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Culture Assessment

Culture Assessment

Research legacy cultures

Identify key cultural attributes required for thefuture

Analyze change impact

Align leaders to the vision

Analyze cultural compatibilities and differences

Create culture integration roadmap

Align Day 1 - Day 100 people initiatives andmessages to the vision

Culture Integration Roadmap

Phase 1 - Strategy to Behaviors: Mobilize leaders

and define strategic outcomes, critical successfactors, and the desired behaviors

Phase 2 - Communications Campaign:Communicate organization structure,departmental and individual roles andaccountabilities

Phase 3 - Localized Implementations: Alignindividual goals with organizational goals and

behaviors

Phase 4 - Coaching and Recognition: Provide

cross functional training to assist in the adoptionof desired behaviors

A four-phased approach is recommended for rolling out a series of culture integration initiatives over thecourse of the integration. In order to accelerate the integration and leverage interdependencies, the phases

would run concurrently.

Slide 31


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Communications Plan

A well structured communications plan minimizes the unknown; keeping key stakeholders engaged andinformed throughout the integration process.

Announcement Day 1

New leaders virtual orvideo webcast

Employees Townhall liveand via webcast

Cascade of employeecommunications

Day 100

Webcast Training forOn-boarding buddies

Townhall via webcast Leader and manager

Briefings

Focus groups or interviewswith new employees

Knowledge Sharing and

Connectivity events Planning around Business

Development opportunities New Joiner Survey and/or

Pulse Check

Day 30

Global and N.A.Press Releasesannouncing deal

Cascade of Internaland ExternalCommunications

Global and N.A.Press Releasesannouncing Close

Letters to allcustomers

Joint calls tocommon customers

Global and N.A.Press Releasesannouncingregulatory approval

Cascade of Internaland External

Communications

Email to allstaff with FAQsand Ask aQuestion

button

Analyst briefings Meetings with key

accounts Planning meetings with

vendors/JBRs/ KeyRelationships

Advertising, PR,updates to websites

Calls withKeyCustomersand Vendor

Contacts

Launch Microsite MyFirst 100 Days

Interviewselect

stakeholders Develop pre-

Day 1 Commsand activities

External Communications

Internal Communications

Webcast for allemployees

ManagerBriefings

Start theCountdown toDay 1campaign

Brand campaign Sustained marketing

and advertising aroundcombined products,services and people

PwCs 16th Americas School of MinesMay 21-24, 2013 Los Cabos, Mexico Slide 32


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Synergy Tracker

Synergy Tracker Tool

Description Capturing Deal Value Structures the collection of costs and savings by using standard

templates and terminology Accumulates information from teams in a standardized format and

allows central quality control Consolidates information and reports financial impact of integration

activities Monitors progress of detailed integration tasks, creating

accountability for achieving individual synergy targets Allows central quality control for accuracy of purchase accounting

treatment, duplicate/missing tasks and standard assumptions Customizable for each integration based upon chart of accounts,

report format, locations, value drivers, etc.

Process Prepare financial model and identify potential costs and savings Assign functional ownership for synergy targets Revised synergy targets based on more detailed analysis Develop business cases for significant synergy initiatives Identify counterparts and validate synergy targets Include value driver business cases within integration workplans Deploy tool for tracking synergies Establish reporting cadence and communicate to owners

Track progress of actual results versus targets

Who Value Driver initiative owners, Integration Management Office,Integration Leader, Executive Steering Committee

When Once synergy plans (Value Driver Business Cases) are developed

KeyQuestions

How will results be tracked and reported? What reports does management need or desire? How will synergies be communicated to stakeholders?

Example Synergy Tracker Reports

Our proprietary Synergy Tracker tool is designed to monitor synergies to ensure targeted financial andnon-financial benefits of the integration are delivered. It also identifies cash versus non-cash impacts

indicates the ability to grow the business and reward the shareholders.



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346/10/2013

M&AActivityHostile Acquisition


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De-Risking Hostile Acquisitions in Mining

Level of Hostility

Inventory

IntellectualProperty &

Information

Treasury &Cash

Management

Health& Safety

Fraud& Corruption

StakeholderRelations

Situation

Levelof

Risk

RegulatoryCompliance

PhysicalSecurity

Financial& Management

Reporting

People& Culture

Requirements

Experience with taking control under hostilecircumstances.

Resources beyond what you have internally.

Access to a talent pool that can deal with theunforeseen.

Good understanding of the mining industry.

A plan and resources that have the flexibilityto deal with changing circumstances.

A governance model that facilitates rapidcommunication and mobilization.

Resources in the target territory thatunderstand the local environment and

culture sensitivities.

Ability to get more done than what timewould seem to allow.

In TransitGoods

OperatingAssets

Environmental

BusinessDisruption



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Hostile Acquisition Blueprint

Execute Taking Control Plan

Clear jurisdictional legal hurdles to take control Establish security, gain support of local authorities Stabilize operations, minimize risks related to

environmental or safety Secure transactional and process authorities Identify financial and reputational risk elements

Initiate Forensics Investigation Identify and secure physical and electronic assets Preserve electronic data

Launch Communication Plan

Execute communication plan to address stakeholderconcerns

Due Diligence and Forensics Undertake the necessary financial,

operational and legal due diligence toassess the company

Identify key attributes of value Conduct a forensic investigation into key

financial records and electronic data

Address and manage risks as they emerge

Monitor ongoing company operations Develop actions and execute to manage

risks as they are identified

Take control Stabilize 100 days post close

Develop and implementintegration plan

Programme Management Office (PMO): Manage risks, issues, dependencies; deploy status reporting and progress tracking; develop and; monitor deliveryagainst acquisition strategy.


Setting the Course

Define key objectives Set up Programme Management Office Develop communication plan

Plan for Day 1 Ta king Control

Determine critical activities required toensure control of various key areas:

Operations (Enviro, Safety)

Assets Treasury and banking Compliance Reporting People IT Address legal issues to gain control faster

To 100 days post closeLeading up to day 1 Week of Day 1 4 to 6 Weeks After Day 1

Prepare for close

Secure Resources to Execute

Identify nature of expertise required Determine location and timing of need Assess both internal and external resource

options Develop clear plan of action for first few

days

IntegrationPlanning Take Control Discovery Phase



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Conclusion

Many acquisitions go bad upon execution rather than at a strategic level.

Closing a transaction is the starting line not the finish line.

A thoughtful and disciplined approach to post closing activities is imperative.

Focus, measurement and accountabilities are all important to making asuccessful acquisition.



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Thank you

This content is for general information purposes only, and should not be used as a substitute

for consultation with professional advisors.

2013 PricewaterhouseCoopers, S.C. All rights reserved. PwC refers to the Mexico member

firm, and may sometimes refer to the PwC network. Each member firm is a separate legal

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