German M&A:

Roundtable Discussion

Post-Crisis Deal Structures

Frankfurt
Q3 2009
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 02 german m&a:
Roundtable Discussion

post-crisis deal
structures

Contents

Speakers around the table 03

Transcription of the discussion 04
Duff & Phelps: Where the debt breaks 10
Latham & Watkins: Foreign investments under closer scrutiny - Recent changes
12
to the German Foreign Trade Act and the German Foreign Trade Regulation
Historical data 16
 03

Roundtable Discussion
Speakers around the table

Robert A. Bartell CFA Dr. Dirk Oberbracht

Managing Director Partner

Duff & Phelps Latham & Watkins LLP

Prof. Dr. Bernhard

Guy Street Schwetzler

Partner Chair of Financial

Management and Centre
for Corporate Transactions
Deloitte & Touche
GmbH HHL - Leipzig Graduate
School of Management

Catherine Raisig

Managing Editor

Remark, The
Mergermarket Group

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Roundtable Discussion

With current M&A and corporate finance related activity in Germany low, this roundtable event held
in Q3 2009 in Frankfurt examined the impact that the financial crisis has had on deal structuring.
The following is an edited transcript of the discussion.

Do you feel that deal structures have changed in

the course of the financial crisis and if yes, how?
Robert Bartell (RB):
RB: We see larger buyouts being replaced with more mid-sized buyouts. For the time being, we will not read about multi-billion
Euro transactions on the front page of the FT. Sponsors that were doing those deals are now very interested in transactions that are
between €100m to €500m. Furthermore, we have seen sponsors more interested in businesses and industries that have market
growth opportunities, even if they are traditional buyout funds. Obviously, one sector where there’s a big buzz is clean technology
and renewable energy, but there are other areas where even a buyout fund can participate if they believe there is a high potential for
growth, rather than just something that they can leverage assets against.

Dr. Dirk Oberbracht (DO): the first half of the year activity levels were down on those of 1995
DO: There has been a big change in deal structures due to the
lack of financing available to private equity firms. This has meant
that the way in which they approach investments has altered and
they are increasingly looking at doing more minority investments;
distressed M&A deals; or investing in debt instruments. We
are also seeing that they are looking at companies they were
interested in over the last couple of years, but that they may not
have been able to win at auction. Private equity firms are now
coming back and saying that these are great companies and
start investing to hold, or to own the company eventually. Some
of these investors have lots of cash or few, if any, difficulties
financing bigger transactions.
It is also a very good time for trade buyers and you see very big
transactions going on – in particular, in industries like software,
energy and the like.
Guy Street (GS): BS: From a theoretical perspective, I should add that it is not
GS: I think there are different environments for private equity
sponsors and trade buyers. For trade buyers, their situation is very
sector related and they are taking advantage of lower prices, but
I do not think seller’s expectations have decreased so much that
there is now a real boom in terms of M&A. With regards to private
equity related activity, the statistics here in Germany show that in
and there were no buyouts worth over €100m completed. In the
third quarter, I think we saw three or four such deals. Right now,
new debt is limited to packages of around €200m and constructing
a package is very difficult, so there’s virtually no syndication. Every
deal takes longer and you have to calculate considerable breakup
costs if you don’t complete a deal. Many sponsors have not really
been in the market; they’ve been looking at origination and have
been kept busy with their portfolios, searching for small niche
add-ons to ensure they are positioned, but being very selective
about what they actually look at.
It also makes a big difference if a sponsor’s raised a fund in the
last year or two, i.e. is the sponsor at the beginning of his fund, or
in the later stage of a previous fund, where perhaps he’s put a fair
bit of equity in portfolios that are now highly leveraged?
Prof. Dr. Bernhard Schwetzler (BS):
just the uncertainty that has been increasing and seriously
hampering businesses and transactions. Another factor is the
imbalance in the informational symmetry between the parties.
The perceived or actual difference in the information level of
the parties has proven to be one of the major deal breakers.
However, there are instruments such as earn-outs designed
exactly to bridge these gaps and I feel that in the current market
environment it is these instruments that are being applied.

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How are the buyers
of distressed assets
protected from
liabilities?
DO: The big theme here is how to get rid of debt. Obviously,
there are many companies with a debt burden accrued during
the era of cheap financing in the past years. These debts
now need to be restructured and that essentially raises the
question of how to get rid of the debt. On the back of this we
see debt-to-equity swaps, packed solutions wherein the equity
sponsor is working together with the senior syndicate to try
and get rid of mezzanine and second tier lenders, then bond
restructurings.

RB: I have been surprised to see sponsors working with senior

lenders to come up with strategies in a pre-pack to sort or
push out the mezzanine. We will see more of that as the
market improves and then the question of value in debt, and
where debt breaks, is only going to get more complex. I predict
that it will not be uncommon for some of these businesses
to be almost given away because they require either liability
assumptions and pensions, or they’re haemorrhaging money
and require significant investment in the next year. Most
businesses face severe pressure on the top line, regardless
of industry, whether they’re a law firm, advertising agency,
or in the automotive industry - everybody’s top line is really
pinched. As a consequence, trade players are very interested
in making deals happen because there is so much pressure to
grow revenues and earnings as a listed company today.

GS: We have seen waivers, resets and equity being topped up

by the sponsors who have been holding their positions. Banks
have been happy to do that, because normally the new equity
will want a write-down and that’s not really something the
banks have been eager to do, so accounting areas have been
playing a role there. As the economy picks up, you’ve still got
the equity hole there with these companies and, although the
ratios may look a little better, effectively, they are going to
be trading at a competitive disadvantage, which is going to
continue. As the markets brighten up, there will be a move
towards structured deleveraging and we’re going to see a lot
of new equity situations happening.

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BS: Something to keep in mind is that some major obstacles in

German bankruptcy law make it difficult to buy assets out of a “I feel it is
important that
distressed firm, or a firm that is in bankruptcy. One thing that we
see is that the tax loss going forwards is extremely difficult to get

the non-executive
used by other investors. This turns out to be a major obstacle in
buying assets or transferring assets out of a bankrupt company

team be an
in Germany, but that’s just a side effect.

What is the future of independent third

the LBO market? party providing an
RB: I would be surprised if there were any mega-buyouts in the
near future, since they require significant bank financing. The
objective analysis.”
deal you can get done today is modest compared to before, but
the fact of the matter is that even on a modest leverage - so

say that one third of an enterprise value is debt financed versus Robert A. Bartell
75% or more two years ago – the expected returns are still very
attractive, at around 15%, versus what public indices have done
historically. I know that right now many buyout funds and their
LPs are thinking, “this should be an asset class that does 25%”
and ultimately it will come back to that expectation, but if you
actually have very low leverage, getting a 15% or 17% return
is still pretty attractive. In addition, the probability of financial
distress is much lower and you actually have a balance sheet
that allows you to invest in the business and potentially make
acquisitions. We may even see an era where companies in the
private equity space are held for eight years, rather than three,
and they start to pay dividends to their investors. I think the look
and feel of how returns are realised may change.

DO: In all probability, I don’t think you will see mega-buyouts

because of the financing situation, which is very different from
the situation in 2006 and 2007. This trend will continue, but
I think banks will be more open to make acquisition finance
available in a syndicate. The pieces will be small, making it a
more burdensome effort to secure the debt. KKR, for example,
did collateral bond financing when they purchased a brewery
business in Asia. This means you may see very tailor-made
financing structures to complete a bigger investment, or
portfolio transaction where a private equity sponsor is using the
balance sheet of one of its portfolio companies to acquire the
business, for instance.

GS: Vendor financing is one deal structure being discussed

now. However, there are a number of issues around vendor
financing for the seller and, therefore, there has to be a sort

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Roundtable Discussion
of special situation that allows that to happen, but by using
vendor financing we will see deals getting above the €400-
€500m mark. So, there are a number of situations out there
where people are looking to see the logic of the deal and find
the structures that allow them to do it. But, unless you have a
business plan that you can actually really rely on, this should
not be attempted due to the complexities and amount of time,
and money, that you have to invest.

BS: We are seeing increasing numbers of small deals and

more sophisticated deals, using what I described earlier as
instruments designed to bridge the information asymmetries.
Having said that, I feel the current major challenge to private
equity firms is running their portfolio companies. Not in terms
of generating new business, but how to exit. Private equity firms
have to face the fact that they are stuck in their portfolio firms
and, for as long as they are, they have to somehow get deeper
into operating the business. They will have to deal with certain
things more directly, really running them. People working for
private equity companies come from the financing side and only
the minority are directly tied to the operating business.

Introduction to
Fairness Opinions
BS: Fairness opinions were not known in Germany, I believe,
until the very end of the 1990s. There are still many people out
there who believe that it’s just a new trick of the investment
banks to increase fees from their clients.

The breakthrough for fairness opinions came via a regulation

implemented in German takeover law and related to the target
company’s management making a statement on the fairness of
the takeover offer that it received. This was the starting point
for fairness opinions becoming a regular tool in capital market
transactional communication because, in many of the cases,
the manager hired an investment bank, or adviser, to write the
fairness opinion that supported the view of the management.

Up until 2005/2006, many fairness opinions were written by

small advising companies, or advisers with no clear standards
about the content; the disclosure rules; or how to deal with
conflicts of interest, since often the provider of the fairness
opinions were also involved in the transaction and sometimes
got a fee that depended on the success of the transaction. As a

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Roundtable Discussion

consequence, the German Association of Financial Analysts set

up an expert group and we developed guidelines and standards
to address the issues of conflicts of interest and disclosure
rules. One of the initial ideas was a recommendation that any
adviser involved in the transaction should not be allowed to
provide a fairness opinion. However, after some discussion, we
came to a more moderate view, saying that such a relationship
should be disclosed along with the fee structure and the fee
depended on the success of the transaction. We now annually
evaluate the disclosure quality of the fairness opinions and
we see that the quality is getting into the standards that we
developed.

Are fairness opinions

just a tool to make more
money for investment
banks?
RB: Relative to the size of the fee that big firms get, the fairness
opinion fee is a rounding error for many, so I do not buy into
the view that fairness opinions are being promoted to increase
revenues. They are instead intended to be delivered and relied
upon by the board of directors or the supervisory board, not
management. I feel it is important that the non-executive team
be an independent third party providing an objective analysis.
In many places, regulations have already been adopted, even
if they are not legally required. For example, in the US the
Financial Industry Regulatory Authority (FINRA), formerly the
National Association of Securities Dealers (NASD), has specific
requirements of investment banks issuing fairness opinions
necessitating them to disclose their fee structure and all
relations with the company. They have to specifically list out all
their assumptions, but most importantly, they also need to have
a different internal fairness opinion committee that accepts the
engagement and reviews it separately from the deal team that
works on it. Having said that, there are situations right now
in which it may be reasonable to sell a company at four times
EBITDA when comparables trade at six; similarly, there are
situations in which a public company has a takeover offer and
the premium isn’t 50%, which is obviously easier for a board to
recommend to its shareholders. In each of these cases, there
is an underlying story that has not been told that could be
explored more in fairness opinions.

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Is there a correlation
between having had a
fairness opinion and the
success of the deal?
GS: In my opinion, fairness opinions are a strategy for
management or supervisory boards and not really a driver
within deals. I feel that they are a necessary tick-the-box action,
but I do not think they will become a formal requirement since
they have become more or less best practice in situations in
which you actually need them. I do not see any kind of extra
deal certainty stemming from them.
BS: It is difficult to judge because in most of the cases
these fairness opinions are not published, so we cannot see
differences between deals which have had a fairness opinion
and those that have not. The cases I mentioned earlier are the
rare ones in which fairness opinion actually became public
because the management referred to, and attached it in, a
subsequent statement. I believe, however, that an increasing
portion of deals will have a fairness opinion attached to the
statement due to the legal protection that a fairness opinion
can offer.
DO: Fairness opinions are linked to people seeing risk
materialise where they never expected it to and so they
are trying to protect themselves more. There is a greater
willingness to spend some money on protecting oneself against
risk than there used to be, this could lead to an increase in
fairness opinions.
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Roundtable Discussion
Will the importance
of fairness opinions
change as we come out
of the financial crisis?
Could they become a
mandatory part of an
M&A transaction?
BS: Our strategy when developing these standards was
actually to hope for the regulators to make it a legal standard.
However, even without it being a legal requirement for an M&A
transaction, as transactions become riskier, informational
asymmetries are becoming more serious and as the liability
and risk of shareholder litigation increases, managers will be
drawn to this instrument. Government support would be nice
to have, but I believe that we will in fact not need it in order to
make fairness opinions the common standard in Germany.
GS: I do not believe there is any sense in the market that this is
something that is on the radar for the regulators and I think as
long as best practices are established, there will be no need.
It is one of those areas where unless there is some sort of
scandal, or crisis, I cannot imagine it coming on the radar.
RB: I think there is more potential regulation in the form of
a solvency opinion. In the UK, for example, there is already a
great emphasis on this, with pension trustees involved and
having some protection. This ensures that the company’s post
structure is able to make its contributions. I believe there
should be scrutiny of the reasonableness of the projections
to ensure that dividends, demergers or assets sales do not
impair unsecured creditors, pensions, landlords and passive
minority interest type creditors that are greatly harmed once
a buyout does not work. The protection of creditors in general
is something that’s going to be focussed on in the next wave of
transactions.
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Roundtable Discussion

Where the Debt Breaks

Robert A. Bartell, CFA (Managing Director, London)
and Dr. Christian Aders (Managing Director, Munich)

Income approach Market multiple approach

The income approach faces limitations in the current economic The market multiple approach has a multitude of questions as
environment, including: well:

• Challenges in estimating the Cost of Capital • Should a valuation use current, historical or projected
- Which risk-free rate should be used? multiples?
- What is the proper equity risk premium? • Is the current EBITDA appropriate for applying to the
- How did the collapse in the financial industry affect my multiple?
firm’s beta? • Will the historical peak-to-trough cycle of a company match
• Assessing the reasonableness of financial projections the future peak-to-trough?
- Are the projections aggressive or conservative given the
current environment? Valuation-driving market multiple selections are even more
- How do we treat the Net Operating Losses, a tax asset, of critical if the value falls within the ‘Red Zone’ in which slight
a company? adjustments could dramatically affect a conclusion.
- What is the amount of “new money” necessary for a
company to achieve its business plan?

The “Red Zone”

Positive Equity Value

Low Multiple High Multiple

Senior Debt Second Lien Term Loan / Mezzanine Debt Enterprise Value

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To assess the financial viability of a company, long-term Step 2: Cash Flows Assess Company Liquidity
projected performance needs to be reviewed in conjunction Can cash flows pay debt obligations?
with the current situation. Companies that look solvent today
EBITDA 250
may not be solvent tomorrow. A simple example comparing
two companies with similar free cash flow but different capital Capex: 10
structures demonstrates the importance of not only measuring Taxes 25
the current health of a company but also estimating its future FCF1 215
strength.
Principle Due: 200
Which company is in a Interest Due: 85

better position? Total Fixed Charges 285

Fixed Charge Coverage Ratio2: 0.75x

Step 1: Balance Sheet Assessing Where the Debt Breaks
Is enterprise value greater than outstanding debt?
EBITDA 250
Capex: 10
(€ in 000s)
Taxes 25
Company 1
FCF1 215
Enterprise Value €300,000
Debt Securities Principle Due: 100
Interest Due: 85
Senior Debt (125,000)
Total Fixed Charges 185
Second Lien Term Loan / Mezzanine Debt (100,000)
Aggregate Equity Value Surplus/(Deficit) €75,000 Fixed Charge Coverage Ratio2: 1.16x

1
Free Cash Flow “FCF” = EBITDA - Cash Taxes - Capital Expenditures
2
Fixed Charge Coverage Ratio = FCF/Fixed Charges
(€ in 000s)
Company 2 Step 3: Conclude Which Company is in Better Position?
Enterprise Value €140,000 In the first scenario, Company In the second scenario,
1’s enterprise value exceeds Company 2’s enterprise value
Debt Securities
the outstanding debt but is less than the outstanding
Senior Debt (125,000) Company 1 may not have debt but Company 2 should
Second Lien Term Loan / Mezzanine Debt (100,000) the ability to refinance in the have the ability to service
current environment. upcoming payments.
Aggregate Equity Value Surplus/(Deficit) -€85,000
Solvency Tests Solvency Tests
Balance Sheet: Pass Balance Sheet: Fail
Cash Flow: Fail Cash Flow: Pass

Duff & Phelps is well positioned to provide a debtor, creditor or security trustee an independent going concern business enterprise
value and expert testimony. We are confident in assessing and defending ‘where the debt breaks’ in connection with negotiations
amongst various stakeholders.

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Roundtable Discussion
Foreign Investments under Closer Scrutiny –
Recent Changes TO the German Foreign Trade Act
and the German Foreign Trade Regulation
Dr. Dirk Oberbracht and Dr. Wilhelm Reinhardt
Background
On 6 March 2009, the German Federal Council (Bundesrat)
approved the amendments to the German Federal Trade Act
(Außenwirtschaftsgesetz – AWG) and the German Foreign Trade
Regulation (Außenwirtschaftsverordnung – AWV) and were
adopted by the German Parliament. The new law will allow
stricter control of the acquisition of German companies by
foreign investors.
Current Legal Situation
Currently, legal transactions and acts in foreign trade may be
restricted to guarantee vital security interests of the Federal
Republic of Germany; to prevent a disturbance of the peaceful
coexistence between nations; or to prevent a major disruption
of the foreign relations of the Federal Republic of Germany,
e.g. restrictions on the import and export of weapons and
military equipment. The acquisition of, or participation of, a
German company that produces certain types of military and
intelligence products by a non-resident investor has to be
reported to the Federal Ministry of Economics and Technology
(Bundesministerium für Wirtschaft und Technologie – BMWi).
The BMWi may prohibit the acquisition where necessary
in order to safeguard the security interests of the Federal
Republic of Germany.
The Amendments to the
AWG and AWV
The recent amendments broaden the scope of the AWG and
the AWV. The BMWi is entitled to examine the acquisition of
holdings in German companies by foreign investors, regardless
of the industry sector in which the target company is active and
to prohibit the acquisition or issue formal directives. Foreign
investments may be restricted if the public safety and order
within the meaning of Articles 46 and 58 (1) of the EC Treaty are
threatened by the acquisition.
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1. Which transactions are
affected?
Affected are transactions by which a non-EU resident investor
acquires a direct or indirect holding in a resident company,
provided that the holding presents at least 25% of the voting
rights in such a company.
a) Resident company and non-EU investor
A resident company is a company with its registered office or
seat of management in the territory of the Federal Republic of
Germany.
A non-EU investor is an investor with its registered office or seat
of management outside the European Communities. Branch
offices and places of business in the EU of such investors are
also considered as non-EU offices. On the other hand, non-
EU investors from member states of the European Free Trade
Association (Iceland, Liechtenstein, Norway, Switzerland) are
treated as EU investors.
The BMWi may also examine the acquisition of a holding in a
resident company by an EU investor, if a non-EU investor owns
at least 25% of the voting rights in the EU investor and there are
indications that an abusive structure or a bypass transaction was
undertaken to avoid an examination.
Conversely, this means that acquisitions by EU investors that
are majority-owned by non-EU investors, in principle, should not
be under examination. This should also apply to private equity
investors, which often use acquisition vehicles with registered
seats in the Netherlands or Luxembourg that are owned by non-
EU entities. This structure is often chosen for tax reasons and
not to avoid an examination pursuant to the AWG.
b) Investment threshold
Investments may only be examined, if the non-EU investor holds
25% or more of the voting rights in the resident company after
the acquisition of the holding. Not only is the acquisition of a
direct holding subject to the new regulation, but also indirect
acquisitions. An indirect holding exists, for example, when a
non-EU investor acquires a resident company, which holds
shares in another resident company. Also, transactions outside
Germany - similar to merger control according to anti-trust law
- may fall under the new regulation, e.g. the acquisition of a US

company holding more than 25% of the voting rights in a German
company. As such, a transaction is usually subject to foreign law
and it is doubtful whether the prohibition of the transaction by
the BMWi will lead to the nullity of the transaction and whether
the BMWi may enforce the reversal of the transaction. At least,
the BMWi should be able to install measures such as to restrict
the exercise of voting rights in the resident company in order to
enforce the prohibition. Similar cases are known in anti-trust law.
Furthermore, in calculating whether the non-EU investor
reaches the relevant 25% voting rights threshold, voting rights in
a resident company held by a third company are attributed to the
non-EU investor, if the investor owns 25% or more of the voting
rights in such other company or, if the non-EU investor has
entered into an agreement on the joint exercise of voting rights
with such other company.
c) Public safety and order
A transaction may only be prohibited if it poses a threat to
public safety and order. In addition, such threat has to be factual
and significant enough to affect a basic interest of the society.
According to the German legislator’s explanation, the terms
public safety and order are to be construed narrowly and each
individual situation needs to be reviewed carefully taking into
consideration the case law of the European Court of Justice
(ECJ). In order to meet concerns that the new rules may violate
European law, in particular free movement of capital and
freedom of establishment, a reference to Articles 46 and 58 (1)
of the EC Treaty was incorporated in the new Section 7 (1) no.
4 AWG late in the drafting process, thereby making reference
to the ECJ case law with respect to Articles 46 and 58 (1) of the
EC Treaty. So far, the ECJ has ruled that public order may be
affected in the areas of telecommunication and electricity, or the
guarantee of services with strategic importance.
2. Examination Procedure
a) Competency and review period
The BMWi has the right to choose to examine a transaction
and to prohibit the acquisition. There is no requirement for the
investor to notify the BMWi of a planned acquisition. However, the
German Federal Financial Supervisory Authority (Bundesanstalt
für Finanzdienstleistungsaufsicht – BaFin) and the German
Federal Cartel Office will transmit information on transactions
with which they are concerned to the BMWi. The BMWi will
inform the acquirer via an administrative act of the decision to
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Roundtable Discussion
examine the transaction within a period of three months from
the execution of the share purchase agreement or, in takeover
cases, the publication of the announcement to make a public
tender offer or of the acquisition of control. Should the BMWi not
exercise this right within the three month period, it is excluded
from a prohibition or issuance of formal directives under the
AWG/AWV at a later point in time.
The examination procedure has two phases: (1) In a first step,
the BMWi decides to exercise its examination right within three
months from the execution of the purchase agreement or, in
takeover cases, the publication of the announcement to make
a public tender offer or of the acquisition of control. (2) In case
the BMWi decides to examine the transaction within this period,
the BMWi will notify the acquirer who is then obliged to submit
a complete documentation regarding the acquisition. Which
documents will have to be provided is to be published by a
circular form placed by the BMWi in the German Federal Gazette
(Bundesanzeiger). Within two months from the submission of
the complete documentation, the BMWi will decide whether
it prohibits the acquisition or issues formal directives, to the
extent that this is necessary in order to guarantee public safety
and order in the Federal Republic of Germany. In any case, the
prohibition or issuance of formal directives requires the consent
of the German Federal Government.
b) Voluntary application
In order to have legal certainty at an earlier point in time,
the acquirer may apply for a clearance certificate from the
BMWi stating that the acquisition poses no concerns. In the
application for the planned acquisition, the acquirer and its field
of business have to be described in general terms. The clearance
certificate is deemed as having been issued if the BMWi does
not open the examination procedure within one month from
receipt of the application. It is to be expected that the closing of
M&A transactions will often be made subject to the condition
precedent that such a clearance certificate has been issued.
3. Legal Consequences
Transactions that may be subject to an examination procedure
can be executed. The underlying contracts are valid, but remain
subject to a subsequent condition until the expiration of the
examination procedure. In case of a prohibition, the transaction
has to be reversed which means that the acquired participation
has to be retransferred to the seller.
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Violations of the prohibition or formal directives may be punished

by a fine of up to €500,000.

4. Issuance of Formal
Directives
In order to enforce a prohibition, the BMWi may order the
necessary measures. In particular, the BMWi may restrict the
exercise of voting rights by the acquirer in the acquired company,
or nominate a trustee for the reversal of the transaction.

Conclusion
In comparison to the original draft, the final version of the
amendments has materially been mitigated. Originally,
investments by any foreign investor, including EU investors, could
have been subject to an examination.

Given the final version of the amendments, it can be expected

that the BMWi will only examine transactions in a few cases. In
any case, the bar for a prohibition of a transaction is set quite
high. Also, investors face only little administrative efforts due
to the amendments of the AWG, as acquisitions do not have to
be notified to authorities and the formalities of the application
for a clearance certificate should be manageable and similar to
the documentation provided in connection with an application
for merger control clearance. It is a major improvement that
investors can now achieve transaction security within one month
in straightforward cases. This tool may also be useful for sellers
in an auction process in order to select the bidders.

As regards to transaction documentation, it is recommended

that the share purchase agreements or public takeover offers
provide for the condition precedent that the clearance certificate
has been issued; or is deemed to have been issued; or that the
relevant examination periods have expired. Furthermore, the
agreements could contain detailed provisions on the reversal
of the transaction in cases where the transaction has been
prohibited.

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Roundtable Discussion

“as transactions become riskier,

informational asymmetries are becoming
more serious and as the liability and risk of
shareholder litigation increases, managers
will be drawn to [FAIRNESS OPINIONS]”

Prof. Dr. Bernhard Schwetzler

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Roundtable Discussion

HISTORICAL DATA
Top 20 German M&A transactions, Q1-Q3 2009
Ranking Announced Status Target company Target Target Bidder Bidder Seller Seller Deal
date sector country company country company country value
(€m)

1 Jun-09 C Hypo Real Estate Financial Germany SoFFin Germany 2,960

Holding AG (81.00% stake) Services
2 Mar-09 C Daimler AG (9.10% stake) Industrials & Germany Aabar Investment PJSC United Arab 1,954
Chemicals Emirates
3 Jan-09 C Commerzbank AG (25.00% Financial Germany SoFFin Germany 1,770
stake) Services
4 May-09 P VNG-Verbundnetz Gas AG Energy, Germany EnBW Energie Baden- Germany EWE AG Germany 1,200
(47.90% stake) Mining & Wuerttemberg AG
Utilities
5 Jun-09 P E.ON AG (13 hydro power Energy, Germany Oesterreichische Austria E.ON AG Germany 1,000
plants in Bavaria) Mining & Elektrizitaetswirtschaft
Utilities AG
6 Jan-09 C RWE Westfalen Weser Energy, Germany RWE AG Germany Municipal Germany 800
Ems AG (20.03% stake) Mining & communities
Utilities (Germany)
7 Feb-09 C Danisco Sugar A/S Consumer Germany Suiker Unie Netherlands Nordzucker AG Germany 730
(Anklam factory)
8 Feb-09 C Mitteldeutsche Energy, Germany J&T Finance Group AS; Czech NRG Energy Inc; USA 404
Braunkohlengesellschaft Mining & Severoceske Doly Republic URS Corporation
mbH Utilities
9 Jul-09 C IDS Scheer AG TMT Germany Software AG Germany 401
10 Aug-09 C Deutsche Schiffsbank AG Financial Germany Commerzbank AG Germany HypoVereinsbank Germany 400
(12.00% stake) Services AG
11 Aug-09 C Porsche Automobil Industrials & Germany Qatar Holding LLC Qatar Piech family Germany 390
Holding SE (5.00% stake) Chemicals (private investors);
Porsche family
(private investors)
12 Apr-09 P Stadtwerke Bremen AG Energy, Germany EWE AG Germany Freie Hansestadt Germany 360
(25.90% stake) Mining & Bremen (City of
Utilities Bremen)
13 Apr-09 C DAWAG Real Estate Germany Meravis Wohnungsbau- Germany Vereinte Germany 360
und Immobilien GmbH Dienstleist-
ungsgewerkschaft
14 Sep-09 C BRAHMS AG Pharma, Germany Thermo Fisher USA HBM BioVentures Switzerland 330
Medical & Scientific Inc AG
Biotech
15 Jun-09 P Stadtwerke Bremen AG Energy, Germany EWE AG Germany Freie Hansestadt Germany 320
(25.10% stake) Mining & Bremen (City of
Utilities Bremen)
16 Sep-09 P Easycash GmbH Business Germany Ingenico SA France Warburg Pincus USA 290
Services LLC
17 Jun-09 C RMG Group Industrials & Germany Honeywell USA Triton Partners United 286
Chemicals International Inc Kingdom
18 Feb-09 C Hanseatische Verlags- TMT Germany Verlagsgesellschaft Germany Axel Springer AG Germany 263
Beteiligungs AG (23.00% Madsack GmbH &
stake); Kieler Nachrichten Co KG
(24.50% stake); Leipziger
Verlags-und Druckerei
GmbH & Co. KG (44.90%
stake); Luebecker
Nachrichten GmbH
(49.00% stake)
19 Jul-09 P Infineon Technologies AG TMT Germany Golden Gate Capital USA Infineon Germany 250
(Wireline Communications Technologies AG
business)
20 Aug-09 C Kalle GmbH Industrials & Germany Silverfleet Capital United Montagu Private Germany 213
Chemicals Partners LLP Kingdom Equity GmbH
C = Completed; P = Pending; L = Lapsed

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 17

Roundtable Discussion
Top 20 private equity buyout and exit transactions,
Q1-Q3 2009
Ranking Announced Status Target company Target Target Bidder Bidder Seller Seller Deal
date sector country company country company country value
(€m)

1 Sep-09 C BRAHMS AG Medical, Germany Thermo Fisher USA HBM BioVentures Switzerland 330
Pharma & Scientific Inc AG
Biotech
2 Sep-09 P Easycash GmbH Business Germany Ingenico SA France Warburg Pincus USA 290
Services LLC
3 Jun-09 C RMG Group Industrials & Germany Honeywell International USA Triton Partners United 286
Chemicals Inc Kingdom
4 Jul-09 P Infineon Technologies AG TMT Germany Golden Gate Capital USA Infineon Germany 250
(Wireline Communications Technologies AG
business)
5 Aug-09 C Kalle GmbH Industrials & Germany Silverfleet Capital United Montagu Private Germany 213
Chemicals Partners LLP Kingdom Equity GmbH
6 Aug-09 P Aleo Solar AG Industrials & Germany Robert Bosch GmbH Germany HANNOVER Germany 192
Chemicals Finanz GmbH;
Marius Eriksen
(private investor)
7 Jul-09 C LEWA GmbH Industrials & Germany Nikkiso Co Ltd Japan Deutsche Germany 172
Chemicals Beteiligungs AG;
Quadriga Capital
Services GmbH
8 Jun-09 P Neumayer Tekfor GmbH Industrials & Germany AXA Private Equity; USA 172
Chemicals Barclays Private
Equity Ltd; Fifth Third
Bancorp; Gartmore
Direct Fund II Scottish
LP; ING; Landesbank
Baden-Wuerttemberg;
Nationwide Private
Equity Fund LLC; NIBC
Bank NV
9 Apr-09 P TMD Friction Holdings Industrials & Germany Pamplona Capital United TMD Friction Luxembourg 100
GmbH Chemicals Management LLP Kingdom Luxembourg Sarl
10 Aug-09 C Actebis Holding GmbH Business Germany Droege Capital GmbH Germany ARQUES Germany 93
Services Industries AG
11 Jul-09 C CeDo Folien und TMT Germany Rutland Fund II United Delton AG Germany 61
Haushaltsprodukte GmbH Kingdom
12 Jan-09 C ddp Deutscher Industrials & Germany BLUO SICAV SIF Luxembourg ARQUES Germany 30
Depeschendienst GmbH; Chemicals Industries AG
Evotape S.p.A; Rohner AG;
The BEA Group
13 Aug-09 P Hallhuber GmbH Consumer Germany Change Capital Fund II United Stefanel GmbH Italy 25
LP Inc Kingdom
14 Apr-09 C Heinrich Berndes Consumer Germany Palace Park United CFC Industrie Germany 23
Haushaltstechnik GmbH & Investments Ltd Kingdom Beteiligungen
Co. KG (34.30% stake) GmbH & Co KGaA
15 Jul-09 C Samas GmbH & Co KG Consumer Germany Innovation Change Germany Samas NV Netherlands 20
(94.00% stake) GmbH; Samas GmbH &
Co KG (MBO Vehicle)
16 Mar-09 C innovatis AG Pharma, Germany Roche Diagnostics Ltd Switzerland Ventizz Capital Germany 15
Medical & Partners Advisory
Biotech AG
17 Feb-09 C Integrata AG (91.04% Business Germany Cornerstone Equity USA Logica plc United 15
stake) Services Investors Kingdom
18 Sep-09 P EliteMedianet GmbH TMT Germany Tomorrow Focus AG Germany Burda Digital Germany 13
(36.93% stake) Ventures GmbH;
EliteMedianet
Beteiligungs GbR
19 Mar-09 C Pro2 Anlagentechnik Industrials & Germany Deutsche KWK- USA Alkane Energy plc United 9
GmbH Chemicals Gesellschaft mbH Kingdom
20 Jan-09 C Meade Instruments Consumer Germany Bresser GmbH Germany Meade USA 9
Europe GmbH & Co. KG Instruments
Corporation
C = Completed; P = Pending; L= Lapsed
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 18
Roundtable Discussion

German M&A trends

All German M&A German buyouts
Period Volume Value(€m) Avg. deal size Period Volume Value(€m) Avg. deal size
(€m) (€m)
Q1 2004 132 11,591 88 Q1 2004 22 1,276 58
Q2 2004 157 16,455 105 Q2 2004 28 6,886 246
Q3 2004 140 10,359 74 Q3 2004 28 5,806 207
Q4 2004 183 19,066 104 Q4 2004 40 5,250 131
Q1 2005 134 14,810 111 Q1 2005 25 2,596 104
Q2 2005 149 38,950 261 Q2 2005 33 8,293 251
Q3 2005 183 13,670 75 Q3 2005 40 5,702 143
Q4 2005 196 26,740 136 Q4 2005 44 8,911 203
Q1 2006 155 26,375 170 Q1 2006 41 2,178 53
Q2 2006 151 10,428 69 Q2 2006 44 4,663 106
Q3 2006 177 18,720 106 Q3 2006 40 5,609 140
Q4 2006 198 27,641 140 Q4 2006 58 14,605 252
Q1 2007 173 14,693 85 Q1 2007 38 6,213 164
Q2 2007 156 31,450 202 Q2 2007 35 7,124 204
Q3 2007 174 24,943 143 Q3 2007 38 4,058 107
Q4 2007 174 12,215 70 Q4 2007 39 2,105 54
Q1 2008 143 4,983 35 Q1 2008 34 1,566 46
Q2 2008 154 16,886 110 Q2 2008 48 10,831 226
Q3 2008 155 48,384 312 Q3 2008 37 3,242 88
Q4 2008 113 14,271 126 Q4 2008 17 193 11
Q1 2009 115 6,616 58 Q1 2009 16 63 4
Q2 2009 96 7,411 77 Q2 2009 17 303 18
Q3 2009 92 3,662 40 Q3 2009 17 662 39
Total 3,500 420,319 Total 779 108,135

German exits German M&A all

Period Volume Value(€m) Avg. deal size
(€m) sector analysis YTD 30
Q1 2004
Q2 2004
12
9
3,322
3,325
277
369
September 2009
Q3 2004 15 1,397 93
Q4 2004 17 3,240 191 Sector Value Sector Volume
Q1 2005 18 4,329 241 (€m)
Q2 2005 16 1,708 107 Financial Services 5,489 Industrials 90
Q3 2005 16 3,995 250 Energy, Mining & Utilities 4,530 Consumer 47
Q4 2005 16 3,211 201 Industrials 3,601 Business Services 36
Q1 2006 16 847 53 Consumer 1,115 TMT 35
Q2 2006 15 3,185 212 TMT 969 Energy, Mining & Utilities 27
Q3 2006 19 3,571 188 Business Services 968 Financial Services 26
Q4 2006 29 7,617 263 Pharma, Medical & Biotech 462 Pharma, Medical & Biotech 19
Q1 2007 25 7,203 288 Real Estate 393 Construction 7
Q2 2007 26 7,647 294 Construction 142 Leisure 6
Q3 2007 21 5,502 262 Defence 20 Transportation 6
Q4 2007 23 3,253 141 Leisure Real Estate 2
Q1 2008 11 1,348 123 Transportation Defence 1
Q2 2008 24 4,088 170 Agriculture Agriculture 1
Q3 2008 20 2,045 102 Total 17,689 303
Q4 2008 5 147 29
Q1 2009 9 52 6 Notes:
Based on announced deals, excluding lapsed and withdrawn bids
Q2 2009 10 317 32
Based on dominant geography of target being Germany
Q3 2009 10 1,303 130 Based on dominant sector of target
Total 382 72,652 YTD 2009 is from 01 January to 30 September

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 19

Roundtable Discussion
GERMan M&a trends German private equity
German M&A trends
buyout trends German private equity buyout trends
250 60,000 70 16,000

60 14,000
50,000
200
12,000
50
40,000

value of deals ( m)

value of deals ( m)
number of deals

10,000

number of deals
150
40
30,000 8,000
30
100
6,000
20,000
20
4,000
50
10,000
10 2,000

0 0 0 0

volume value( m) volume value( m)

fesgusfgs

German M&A sector German M&A sector

split by volume, split by value,
Q1 2004-Q3 2009
German M&A sector split by volume, Q1 2004-Q3 2009 Q1 2004-Q3 2009
German M&A sector split by value, Q1 2004-Q3 200
<1%
<1%
2% <1% 2%
<1% <1%
2% 2% 3%
Industrials Financial Services
5%
6% Consumer
5% Energy, Mining & Utilities
29% Business Services 32%
TMT Industrials
9%
Energy, Mining & Utilities 6% Consumer
Financial Services
TMT
Pharma, Medical & Biotech
Business Services
9% Construction
Leisure Pharma, Medical & Biotech

Transportation Real Estate

Real Estate 20%
Construction
Defence
12% 16% Defence
Agriculture
26%
12%

German private equity exit trends

German private equity exit trends
35 9,000

8,000
30

7,000
25
6,000
value of deals ( m)
number of deals

20 5,000

15 4,000

3,000
10
2,000

5
1,000

0 0

volume value( m)

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