Eat or be eaten

8 December 2010

2 © 2010 Deloitte

Education

• MBA, City University, London, 1996

• B.com., Copenhagen Business School, 1988

• The Yellow Book, London (IPOs at LSE), 1997

• The Blue Book, London (M&A UK Rules & Regulations), 1997

• Senior Credit Seminar, Citibank, London, 1988

• Intermediate Credit Training Programme, Bank of America, 1986

CVHans Henrik Pontoppidan – Partner, Denmark (Copenhagen)

Position

• Joined Deloitte Corporate Finance in Copenhagen in 2001. Current position is Partner

Previous employment

• Haburi.com, Copenhagen, CFO

• Damgaard, Copenhagen, Director, Investor Relations

• Sv. Handelsbanken, Executive Director

• Unibank, Copenhagen, London, HK & PRC, Vice President

• Bank of America NT&SA, Copenhagen, VP

• Hambro’s Bank Plc, London, Credit Analysis

Financial adviser to

• Capital raising for ChoosEV (Choose Electric Vehicle). Obtained the financing from the energy companies Syd Energy and SEAS-NVE

• Dansk Kapitalanlæg in the sale of Danfysik to the Swiss listed company LEM

• Naturgas Fyn in the sale of Switch.dk to Nordjysk Elhandel

• Roskilde Municipality in the sale of the electricity activities out of Roskilde Forsyning to SEAS-NVE

• Hillerød Municipality in the sale of the electricity activities out of Hillerød Energi to Energi Randers

• DONG Energy in the preparation of information memorandum in the sale of the gas storage facility at Lille Torup

• Altor Equity Partners in the acquisition of Wrist Group (bunker oil and ship chartering)

• The City of Copenhagen and Copenhagen Energy (Københavns Energi) in the sale of CE’s distribution and related activities including their 34% share in ENERGI E2 (power generation). Enterprise value of EUR 3.2bn

• SEAS-NVE in their swap of their 24.07% share in ENERGI E2 to DONG A/S

• Hilleroed, Elsinore and Roskilde Municipalities in the sale of their combined shareholdings in ENERGI E2

• Copenhagen Energy in the sale of KE Partner A/S to Eltel Networks Oy (part of Industri Kapital)

• ENERGI E2 and Narvik Energi AS in the combined 28% investment in Salten Kraftsamband AS, Norway

• ENERGI E2 in the acquisition of 33% of the shares in Narvik Energi, Norway

Eat or be eaten

Eat or be eaten

Way forward; buy or be bought

8 December 2010

4 Eat or be eaten © 2010 Deloitte

Capitalise on the next wave of M&ACross-border flow of funds – understanding the next wave of M&A

• Secure energy, resource and food supplies

• Infrastructure privatisation/acquisition

• Brand acquisition

• Global consolidation

• Shift in consolidation activity and power to emerging markets

• Exposure to high-growth economies for consumer business

# Source region Flow of funds Industries

1 China Outbound to Canada, Africa, South America (Brazil), Russia, Australia and South-East Asia

Energy and resources (incl. Food suppliers)

2 Middle East Petrodollars: outbound to rest of world Real estate, infrastructure, resources, telecom IT and manufacturing

3 US/Europe Outbound to China, India, and South-East Asia to improve cost delivery and infrastructure

IT and manufacturing

4 India Outbound to Europe and the US Pharmaceuticals, automotive and manufacturing

5 US and Europe/China, India and Brazil

Consolidating brands; two-way flow of funds Consumer goods FSI

Key “next wave of M&A” themes

5 Eat or be eaten © 2010 Deloitte

New global challengers in key emerging markets will be the future leaders of strategic M&A activity

• Chian Mobile

• China National Chemical Corporation (ChemChina)

• China National Offshore Oil Corporation (CNOOC)

• China National Petroleum Corporation (CNPC)

• China Petroleum & Chemical Corporation (Sinopec)

• China Shipbuilding Industry Corporation (CSIC)

• China Shipping Group

• COFCOCosco Group

• Dalian Machine Tool Group

• FAW Group

• Galenz Group

• Gree Electric

• Lenovo Group

• Li & Fung Group

• Midea Group

• Shanghai Automotive Industry Corp. (SAIC)

• Sinochem

• Sinomach (China National Machinery Industry Corp.)

• Sinosteel

• Sinowel

• Suntech Power

• Techtronic industries

• VTech Holdings

• Wanxiang Group

• ZTE

Argentina

• Tenaris

Brazil

• Camargo Correa Group

• Coteminas

• Embraer

• Gerdau

• JBS-Friboi

• Marcopolo

• Natura

• Odebrecht

• Pardigao

• Petrobras

• Sadia

• Vale

• Voterantim Group

• WEG

Chile

• CSAV

• Falabella

China

• Aluminium Corporation of China (Chalco)

• Baosteel Group

• BYD Group

• Chery Automobile

• China Communications Constructions Company (CCCC)

• China International Marine Containers Group (CIMC)

2009 BCG100 New Global Challengers

Hungary

• Gideon Richter

India

• Bajaj Auto

• Bharat Forge

• Cromto Greaves

• Dr, Reddy’s Laboratories

• Hindalco Industries

• Infosys Technologies

• Larsen & Toubro

• Mahindra & Mahindra

• Reliance Industries

• Suzion Energy

• Tata Chemicals

• Tata Communications

• Tata Consultancy Services (TCS)

• Tata Motors

• Tata Steel

• Tata Tea

• United Spirits

• Vendante Resources

• Videocon Industries

• Wipro

Indonesia

• Indofood Sukses Makmur

• Wilmar International

Kuwait

• Agility

Malaysia

• MISC Berhard

• Petronas

Mexico

• America Movil

• Cemex

• Femsa

• Gruma

• Grupo Bimbo

• Mexichem

• Nemark

Russia

• Basic Element

• Evraz Group

• Gazprom

• Lukoil

• Severstai

• Sisterma

Thailand

• Charoen Pokphan Group

• Thai Union Frozen Products

Turkey

• Koc Holding

• Sabanci Holding

United Arab Emirates

• Dubai World

• Emaar Properties

• Emirates Airline

• EtisalatSource: BCG 2009 New Global Challengers Report

6 Eat or be eaten © 2010 Deloitte

Capitalise on the next wave of M&AFinancial Advisory’s participation in the top global SWFs

Middle-East, Africa SWF AUM =

$1,326bn

North America SWF AUM = $56bn

Europe SWF AUM = $300bn

Asia SWF AUM = $829bn

South America SWF AUM = $32bn

Australia/New Zealand

SWF AUM = $50bn

Note: AUM is YE 2007

# Found name AUM$bn

1 Abu Dhabi Investment Council (AIDIA, ADIC, Mubadala) $875bn

2 Government of Singapore Investment Corporation (GIC) $330bn

3 Government Pension Fund Norway – Global $300bn

4 Kuwait Investment Authority (KIA) $250bn

5 China Investment Corporation (CIC) $200bn

6 Temasek Holding $159bn

7

Investment Corporation of Dubai (ICD)Dubai World – IstithmarDubai Holding - Dubai International Capital (DIC)

- Dubai Investment Group (DIG)

$81bn$13bn$6bn$5bn

8 Qatar Investment Authority (QIA) $50bn

999

Alaska Permanent FundAustralian Government Future FundLibyan Investment Authority (LIA)

$40bn$40bn$40bn

12 Stabilization Fund of the Russian Federation $32bn

13 Brunei Investment Agency $30bn

14 Malaysia Khasarah National $25bn

15 Korea Investment Corporation (KIC) $20bn

16 Kazakhstan National Oil Fund $18bn

17 National Development Fund – Venezuela $17bn

18 Alberte Heritage Savings Trust Fund $16bn

19 Taiwan National Stabilization Fund $15bn

20 Economic and Social Stabilization Fund (ESSF) – Chile $15bn

21 Bahrian Mumtelakat Holding Company $13bn

22 Iran Oil Stabilization Fund $10bn

23 Superannuation Fund – New Zealand $10bn

24 Pula Fund – Botswana $5bn

25 State General Reserve Fund – Oman $2bn

7 Eat or be eaten © 2010 Deloitte

Going...going...gone

7

Already lost

• “Fabless” chips

At risk

• DRAMs

• Flash memory chips

Already lost

• Lithium-ion, lithium polymer and NiMH batteries for cell phones, portable consumer electronics, laptops and power tools

• Advanced rechargeable batteries (NiMH and Li-ion) for hybrid vehicles

• Crystalline and polycrystalline silicon solar cells, inverters and power semiconductors for solar panels

At risk

• Thin-film solar cells (the newest solar-power technology)

SemiconductorsEnergy storage and

green energy production

Already lost

• Compact fluorescent lighting

At risk

• LEDs for solid-state lighting, signs, indicators and backlights

Already lost

• Desktop, notebook and netbook PCs

• Low-end servers

• Hard disk drivers

• Consumer-networking gear such as routers, access points and home set-top boxes

At risk

• Blade servers and midrange servers

• Mobile handset

• Optical-communication components

• Core network equipment

Lighting

Computing and communications

Already lost

• LCD monitors, TVs and handheld devices like mobile phones

• Electrophoretic displays for Amazon’s Kindle e-reader and electronic signs

At risk

• Next generation “electronic paper” displays for portable devices like e-readers, retail signs and advertising

Electronic displays

Already lost

• Advanced composites used in sporting goods and other consumer gear

• Advanced ceramics

• Integrated circuit packaging

At risk

• Carbon composite components for aerospace and wind energy applications

Advanced materials

Many high-tech products can no longer be manufactured in the US because critical knowledge, skills and suppliers of advanced materials, tools production equipment and components have been lost through outsourcing. Many other products are on the verge of the same fate.

Source: Harvard Business Review July-August 2009

8 Eat or be eaten © 2010 Deloitte

Source: Harvard Business Review, December 2009

Mergers and AcquisitionsDo not integrate your acquisitions, partner with them

Integration Partnering

Structure Absorb acquired company Keep acquired company separate

Activities Integrate core and supporting activitiesSelectively coordinate

a few key activities

Top executives Replace Retain

Autonomy None or very limited Near total

Speed of integration Rapid Gradual

9 Eat or be eaten © 2010 Deloitte

Source: Harvard Business Review, December 2009

Mergers and Acquisitions Who should partner?

Integration Partnering

What kind of resources do acquired company have? Similar resourcesComplementary, superior or unique

resources such as brands or technologies

What will create value after the takeover?Reduction of costs by combining assets and activities or gaining

economies of scale

Growth in revenues by entering new markets or products and sharing best

practices

What kind of company is the acquirer?Hierarchical, with a low tolerance for

ambiguity; a desire to teach; an emphasis on getting results

Collaborative, with a tolerance for ambiguity; a willingness to learn; a

long-term player

10 Eat or be eaten © 2010 Deloitte

Conventional approach to M&A Emerging giants’ approach to M&A

Rationale

The aim of a takeover is usually lower costs, though some companies use acquisition to obtain technologies,

enter niches or break into new countries

The aim is to obtain new technologies, brands and consumers in foreign

countries

Synergy levels

The acquirer and the acquisition usually have the same business

model. Even when a company takes over a start-up, the approach to the

market is the same

The acquirer is often a low-cost commodity player, while the acquisition

is a value-added branded-products company

Integration speed

The buyer makes several changes in the acquisition. Soon after the takeover it slows the quest for

synergies thereafter

Integration is slow-moving at first. After a while, the buyer starts pulling the

acquisition closer

Organisational fallout

High executive turnover and headcount reduction are likely at first. Culture clashes occur and productivity declines, but things settle down over

time

Little interference, executive turnover, or headcount reduction occurs right

after the acquisition. Although it is too soon to tell as of now, tension could

simmer over the long run and blow up

GoalsThe buyer has clear short-term aims

but may not have thought through long-term goals

The acquirer’s short-term objectives may be fuzzy, but the acquirer’s long-term vision for the acquisition is clear

Source: Harvard Business Review, May 2009

How emerging giants are rewriting the rules of M&ATwo approaches to M&A

Emerging giants use novel integration techniques and measure performance in light of long-term goals

11 Eat or be eaten © 2010 Deloitte

A better approach to China’s markets

Changchunharbin22m POP3.6% GDP9.3% proj. growth

Liao Central South22m POP34.3% GDP7.6% proj.growthJingjinji

45m POP10.8% GDP10.5% proj. growth

Shandong Byland49m POP9.0% GDP10.3% proj. growth

Nanjing24m POP4.8% GDP11% proj. growth

Hangzhou32m POP6.7% GDP10.5% proj. growth

Guangzhou30m POP6.6% GDP7.4% proj. growth

Shenzen16m POP4.3% GDP7.5% proj. growth

Nanchang12m POP1.7% GDP12.9% proj. growth

Hefei23m POP2.8% GDP13.3% proj. growth

Shanghai35m POP10.8% GDP8.7% proj.growth

Central31m POP3.8% GDP13.1% proj. growth

Yangtze Mid/Lower32m POP4% GDP12.1% proj. growth

Kunming10m POP1.1% GDP8.7% proj. growth

Chengdu27m POP3.2% GDP13% proj. growth

Chongqing11m POP1.8% GDP9.9% proj. growth

Huhehaote6m POP1.3% GDP9.9% proj. growth

Coast West31m POP4.2% GDP11% proj. growth

Different cluster, different consumers

People in the Shanghai cluster are less confident about the future, are less likely to prefer Chinese brands and view savings as more important

Established markets,up-and-comers

The Hefei cluster’s middle-class population is expected to explode by 2015

China’s 800-plus cities, 200 of them with population over 1 million are growing at different rates and changing in different ways

It is better to organise the markets as cluster groups of cities located within 300 kilometres of 1 or 2 hubs that each represents at least 1% of the country’s GDP

Source: Havard Business review March 2010

Hangzhou & Hefei

Shanghai & Central

12 Eat or be eaten © 2010 Deloitte

Contact details

Financial Advisory ServicesWeidekampsgade 62300 Copenhagen S

Mail to:P.O. Box 16000900 Copenhagen C

Tel: +45 36 10 20 30Fax: +45 36 10 20 40www.deloitte.dk

Hans Henrik PontoppidanPartnerCorporate Finance

Direct:Mobile:hpontoppidan@deloitte.dk

+45 20 20 04 81+45 36 10 34 81

Member of Deloitte Touche Tohmatsu Limited

This document has been prepared by Deloitte Financial Advisory Services. Unless stated in this document the following shall apply to the information. The information, in particular the figures, data and schedules, are preliminary and for discussion purposes only. We do not represent that such information is true, accurate or complete and it should not be relied upon as such. No independent verification exercise has been undertaken in respect of the information. All information, opinions and estimates in this document are Deloitte Financial Advisory Services judgment as at the date of this document and are subject to change without notice. While this information has been prepared in good faith, no representation or warranty, expressed or implied, is made. The information in this document is supplied on the condition that Deloitte Financial Advisory Services, and any partner or employee of Deloitte Financial Advisory Services, are not liable for any error or inaccuracy, whether negligently caused or otherwise, or for any loss or damage suffered by any person due to such an error, omission or inaccuracy as a result of such supply. This document is strictly for internal use and may not be reproduced, distributed or disclosed to any third party or referred to publicly without the prior written consent of Deloitte Financial Advisory Services.

Deloitte Touche Tohmatsu LimitedDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its Member Firms.

© 2010 Deloitte Financial Advisory Services A/S. Member of Deloitte Touche Tohmatsu Limited