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5. Career at Citigroup
1. Citigroup at a Glance
The Worlds Largest Financial Services Provider
Key Facts Largest Financial Institution as to Market Cap (in bn)
y Worlds largest financial service provider Citigroup 194.9
Bank of America 191.9
y Operations in more than 100 countries
HSBC 171.1
y More than 294,000 employees, of which 6,856 work in Germany JPMorgan 129.5
y More than 6,000 branches, of which 330 in Germany Mitsubishi UFJ 106.6
y Highest placement capacity of all financial service provider; more than UBS 103.7
200 million customers Wells Fargo 96.2
y Founded in 1812 and since 80 years present in Germany Banco Santander 84.9
BNP Paribas 79.7
y Largest foreign bank in Germany
ING Group 76.4
Mizuho 73.2
Net Income Contribution of Business Segments (2005) Barclays 68.5
Morgan Stanley 63.7
Alternative Goldman Sachs 63.5
Investment HBOS 61.6
Global Wealth 7% Merrill Lynch 60.8
Management
Credit Suisse 58.1
6%
American Express 54.8
Deutsche Bank 51.1
Global U.S. Bancorp 47.5
Corporate & Consumer
Lloyds TSB 47.1
Investment 53%
Fannie Mae 45.4
Banking
34% 0 50 100 150 200 250
Citigroup Main Competitors Investment Banking
(1) As of 31/12/05; Euro values calculated on exchange ratio of 1.2 US$/; Source: Datastream as of 30/10/06; Euro values calculated on exchange ratio
Equity including trust securities. of 1.2 US$/.
1 Citigroup at a Glance
with a Broad Range of Offered Services
Equity Research Global Corporate & Investment Bank Global Investment Global Consumer
Management Group
y Independent
research division
reporting directly
to the CEO of
Citigroup
y Global sector Capital Markets Global Banking
based coverage
Fixed Income Equities Investment Banking Corporate Banking
y Debt capital markets y Corporate broking y Financial advisory services, y Capital raising & lending
y Ratings advisory services y Equity capital markets in particular M&A y Risk management
y Asset-backed finance y Equity-linked y Acquisition finance y Transaction services
y High yield y Equity-based derivatives y Capital raising, i.e. IPO y Leasing
y Sales & trading operations y Sales & trading operations y Cash management
y Fixed income derivatives y FX and futures
y Capital structuring, project y Investment services
finance, securitisation y Trade finance & services
y Corporate credit cards
2 Citigroup at a Glance
an Exceptional Global Presence
y Citigroups expansive footprint provides its clients unique access to opportunities in over 100 countries around the globe
y Citigroups unparalleled market expertise, customer relationship commitment and integrated solutions, combined with its global
accessibility, make it the premier investment bank for all corporate finance needs anywhere
3 Citigroup at a Glance
and a Superior Track Record to Serve Our Clients Needs
Germany Announced M&A Ranking YTD European Announced M&A Ranking YTD
Rank Value Mkt. Number Rank Value Mkt. Number
Advisor (bn) Rank Share of Deals Advisor (bn) Rank Share of Deals
Deutsche Bank 109.7 1 52.9% 28 Citigroup 340.6 1 35.6% 134
Citigroup 104.1 2 50.5% 20 JP Morgan 307.0 2 32.1% 150
JP Morgan 88.9 3 42.9% 18 Morgan Stanley 292.3 3 30.6% 118
Merrill Lynch 78.5 4 37.8% 13 Merrill Lynch 274.7 4 28.7% 82
Lehman Brothers 65.6 5 31.8% 10 Goldman Sachs 260.2 5 27.2% 107
BNP Paribas 61.4 6 29.9% 5 Deutsche Bank 241.8 6 25.3% 107
HSBC 61.2 7 29.7% 5 BNP Paribas 228.2 7 23.9% 77
Morgan Stanley 53.2 8 25.4% 18 UBS 220.3 8 23.0% 122
Credit Suisse 47.5 9 23.0% 19 Rothschild 210.4 9 22.0% 215
Goldman Sachs 37.3 10 17.9% 19 HSBC 177.1 10 18.5% 51
Industry Total 207.9 - 100.0% 1,683 Industry Total 956.6 - 100.0% 9,414
Source: Thomson Financial, as of September 30, 2006. Source: Thomson Financial, as of September 30, 2006.
Pending 2006 Pending 2006 Pending 2006 Pending 2006 Pending 2006
has announced its intention to sell has announced its intention to sell its has announced its intention to has announced its intention to
stake in has announced its intention to sell merge its networks business merge with
its division Bayer Healthcare- group with the carrier related
Germany - Internet Diagnostic to operations of
to
to five investors advised by
J.C. Flowers in a transaction valued
for 675 million for 1.25 billion for 4.2 billion Undisclosed amount 565 million
Citigroup acted as financial Citigroup acted as financial Citigroup acted as financial Citigroup acted as financial Citigroup acted as financial advisor
advisor to Time Warner advisor to WestLB advisor to Bayer advisor to Nokia to MobilCom
Pending 2006 July 2006 June 2006 May 2006 May 2006
for 47.5 billion for 16.3 billion 4.5 billion for 3.3 billion for an undisclosed amount
Citigroup acted as defence advisor Citigroup acted as financial Citigroup acted as financial Citigroup acted as financial Citigroup acted as financial advisor to
to Endesa advisor to Bayer advisor to Bertelsmann advisor to Volkswagen Investcorp
4 Citigroup at a Glance
2. Concept of Leveraged Buyouts
LBO Concept
In a Leveraged Buyout the purchase price is primarily financed through different debt instruments that are paid down
with future operating cash flows of the acquired company.
Equity
Debt Layer 4 Debt Layer 4 Debt Layer 4 Debt Layer 4
Debt Layer 5 Debt Layer 5 Debt Layer 5 Debt Layer 5 Debt Layer 5
y Entry & y Management participates to achieve full motivation y Exit & Refinancing
Refinancing y Sponsor provides management expertise and potentially raises synergies with other y IRR: 25%-30%
y Capital Structure companies in his portfolio y Proceeds for
75% Debt y All cash flows to repay debt; no dividends demanded management
25% Equity and sponsor
1. Leverage on acquisition and subsequent debt pay 2. Increased firm value through EBITDA growth
down between time of investment and exit
y Maximising of free cash-flow through strict capex, y Sustainable earnings growth (internal growth and via
R&D and working capital discipline cheap acquisitions)
y Enhanced organic growth outlook y Trade off between time to exit, total proceeds and
IRR
y Improved equity capital market conditions
y Term: 5+ years
Revolving Credit
y Size: 5%-15% of total
y Interest: Prime plus 2.0%-2.5%. Cash interest only. Credit spread tied to level and
quantity of current assets as well as to financial performance and risk measures
y Seniority: Senior secured claim against assets. Usually secured by inventory and
accounts receivable (the most liquid operating assets)
(Senior) Term
Debt
y Main Lenders: Commercial banks, commercial paper investors
y Uses: Used to finance investments in working capital, capital expenditures, general
liquidity support
(Subordinated) y Flexibility: Rather flexible, tailor-made loan contracts with varying collateral and
High-Yield and covenant packages
PIK Notes
y Other: Restrictive covenants; pre-payable at par
Equity
Acquisition financing
Revolving Credit
y Size: 25%-50% of total
y Interest: Prime plus 2%-3%. Credit spread tied to the appraised fair market value
of the land and building, enterprise value as well as the liquidation value of
machinery and equipment
y Seniority: Senior Term debt is usually the second-lowest-cost financing because
(Senior) Term it is secured by assets and is structurally senior to other debt layers and equity
Debt
y Main Lenders: Commercial and Investment banks, mutual funds, structured
investment funds, finance companies
y Uses: Issued to finance property and equipment as well as other long-lived
(Subordinated) assets (land, machinery, etc.), acquisitions, buyouts, redemptions, stock
High-Yield and repurchases
PIK Notes
y Flexibility: Tailor-made loan contracts with varying collateral and covenant
packages, as well as amortization schedules
y Other: Several tranches, consisting of amortising debt and bullet payment at
Equity maturity
Acquisition financing
Revolving Credit
y Size: 20%-40% of total
y High-Yield debt if structured with yearly payment of interest and repayment of
principals at maturity
y PIK notes are structured with repayment of principal and accrued interest at
maturity. PIK notes may include an upside participation
(Senior) Term
Debt
y For both instruments credit spreads are tied to cash flows
y Interest: Prime plus 4%-7%. PIK notes may include an upside participation
(equity-linked instruments), giving higher overall returns. More expensive than
Senior debt due to greater degree of risk
(Subordinated)
High-Yield and y Seniority: Subordinate to Senior debt in rights and remedies
PIK Notes
y Main Lenders: Pension funds, insurance and finance companies, debt and
mutual funds, hedge funds, other institutional and private investors. High-Yield
debt usually publicly traded
y Flexibility: Flexible instrument, can be structured as a debt security with a fixed
Equity
coupon and equity-linked features (e.g. warrants)
Acquisition financing
Revolving Credit
y Exit Strategy: 3-7 years
y Composition of Equity: 2/3 shareholder loans, 1/3 shareholders equity
y Equity holders preserve voting, dividend, control, and information rights in the
company
(Senior) Term y Dividend and liquidation rights are subordinated to the interests of the debt
Debt
lenders
y Management often invests in the equity together with an LBO sponsor
y Sponsors will typically seek a 25%-30% compounded annual total return over
(Subordinated) five years
High-Yield and
PIK Notes
Equity
Acquisition financing
: 9
GR environment
200 C A
182
y Significant capital inflow from outside the USA and Europe
159 (Petro-Dollars)
150
123 y Restructuring of conglomerates in Europe focus on core
competencies
97 102
94
100 89
76
84
77 y Recovery in the equity markets since 2002
65
54
50
0
1999 2000 2001 2002 2003 2004 2005
USA Europe
Source: SDC.
Note: Target as well as acquiring companies are included in regional split.
13 Leveraged Buyouts in Practice
LBO Market Development (contd)
Established 25 years ago, Leveraged Buyouts started as a niche product and developed to a mainstream instrument.
% of Global Volume
600 522.6
Volume (US$bn)
15.7% 20%
500 13.4%
12.2% 15%
400 4.9%
4.6% 6.5% 292.6
300 10%
167.3 108.9 185.2
200 151.1 147.2
5%
100
0 0%
1999 2000 2001 2002 2003 2004 2005 2006YTD
Source: SDC. LBO Volumes in % of Global M&A Volume
Comments
y LBOs contributed about 26% of global M&A volume in 3Q 2006, lifting its share of 2006YTD volume to an all-time high of c.22%
y Sponsor-related deals in 2006 spanned a wide range of sectors, but in particular Healthcare, Technology, Consumer, Industrials
y Recently, sponsors have been targeting companies outside the U.S. and Europe in greater frequency
Market Trends
y In the 1980s, Leveraged Buyouts were based on acquiring undervalued, undercapitalised and stable companies
y In the early 1990s, sponsors started to actively encourage or intervene to achieve improved operative performance
y In the late 1990s, sponsors are more and more looking for growth stories
y And today?
# LBO Transactions
6
4
5 3 3
4 3
3 3 2
3 2 2
2 No Mega LBOs No Mega LBOs 1 1
1 1
0 0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
YTD YTD
>$5bn, <$10bn >$10bn >$5bn, <$10bn >$10bn
Top 10 US LBO Deals 2006 YTD Top 10 Europe LBO Deals 2006 YTD
Value Value
Acquirer / Target Industry (US$bn) Acquirer / Target Industry (US$bn)
Bain, KKR, ML Global Equity / HCA Healthcare 32.1 Ferrovial, GCI, Caisse de Depot / BAA Transportation 30.1
Mgmt, GS, AIG, Carlyle, Riverstone / Kinder Morgan Power 27.5 KKR, Blackstone, TH Lee, Carlyle / VNU Media 11.6
Apollo, TPG / Harrahs Entertainment Recreation 25.6 Osprey Acquistions / AWG Utility 10.4
Blackstone, Carlyle, Permira, TPG / Freescale Technology 17.5 KKR, Silverlake, AlpInvest, Bain, / Philips Semi Technology 9.5
SuperValu, CVS, Cerberus / Albertsons Consumer 17.4 GS, Borealis / Associated British Port Holdings Industrial 6.1
Saban, Madison, Providence, TPG, TH Lee / Media 13.4 Nordic Capital / Altana Pharma Unit Healthcare 5.8
Univision
KKR, GS Capital Partners / Kion Industrials 5.1
Mgmt, JPM, Warburg, TH Lee, GS / ARAMARK Consumer 8.2
Cerberus / GMAC Fin. Institutions 7.9 EQT, Investor AB / Gambro Healthcare 4.6
Bain, Blackstone / Michaels Stores Consumer 6.0 Babcock & Brown Capital / Eircom Telecom 4.6
Blackstone / CarrAmerica Realty Real Estate 4.8 Henderson Fund Mgmt Plc / John Laing Industrials 4.0
Source: SDC.
(1) The US$31bn RJR/Nabisco transaction, completed in 1989, is the exception.
15 Leveraged Buyouts in Practice
Factors Driving Larger LBO Transactions
Developments on the equity and the debt capital markets in the last three to four years led to favourable environment
for larger Leveraged Buyouts.
Volume (US$bn)
238
250
120% 20.6%
200
100% 150 130
93 92
80% 100
50
60% 0
Jan-02 Oct-02 Aug-03 May-04 Mar-05 Dec-05 Oct-06
2002 2003 2004 2005 2006E
S&P 400 MidCap Russel 2000 Dow Jones Industrials Total Funds Raised
less Equity Required ... and more Debt as well as Lower Cost of Debt
# LBOs 68 80 117 158 86
Credit Statistics
30%
4.0x 3.2x 3.5x 3.5x
32% 3.1x 3.0x
20% 34% 33%
33% 31%
2.0x
10%
7% 3% 3% 1% 2%
0% 0.0x
2002 2003 2004 2005 1H 2006 2002 2003 2004 2005 1H 2006
Contributed Equity Retained Earnings / Vendor Financing Debt / EBITDA EBITDA / Cash Interest
Selected Transactions
[] BC Partners has bought industrial and specialty chemicals distributor Brenntag from Bain Capital for an undisclosed sum []. A source
close to the matter said the deal was worth slightly more than 3 billion euros. [] It is a quick turnaround for Bain, which bought Brenntag
from Deutsche Bahn in 2004, funding the buyout with 1.2 billion euros of debt. Since then, Brenntag has been a regular visitor to the debt
markets, first with a deal to fund a 200 million euro dividend payment in November 2004, then with a 1.89 billion euro recapitalisation [].
That recapitalisation allowed for a further dividend payment to the owners of about 450 million euros.
Reuters, 25 July 2006
Doughty [Hanson & Co.] buys Moeller from Advent [] on a secondary buyout that values the company at 1.1 billion [].
Advent bought the company with a 50 million investment and got the 19 creditor banks to roll over existing debt. It injected a further $50
million equity [...] Strategic disposals generated an additional 100 million of cash.
The Deal.com, 21 July 2005
Blackstone has already earned back the $650 million it invested in Celanese in 2004, when it took the company, [], private in a $4.0
billion leveraged buyout. [].
All told, Blackstone has raked in about $2.3 billion, or about 3.5 times its original money. Including its remaining unrealised stake, the
investment has in increased in value fivefold. The Deal.com, 11 May 2006
Source: Factiva.
17 Leveraged Buyouts in Practice
Strong Management Incentives in LBOs
as well as the management of the target companies
62 Stock options
142 56
49
50 Restricted stocks / stock units
37 29 18 22
Company plan bonus
25 26 31 12
11
0 Retention / success fee
SunGuard Select AMC Transdigm PanAmSat
Medical Entertainment
1,003
600 10.0%
-4Q -3Q -2Q -1Q +1Q +2Q +3Q -4Q -3Q -2Q -1Q +1Q +2Q +3Q
0.0x 0.0%
-4Q -3Q -2Q -1Q +1Q +2Q +3Q -4Q -3Q -2Q -1Q +1Q +2Q +3Q
Increasing importance in the M&A market LBO Contribution to the M&A Market
y Private equity accounts for c.23% of global M&A volume (in 3Q 30%
y 2005 was marked as The Year of the Giant LBO, with 2006
already exceeding 2005 level Mega-Fundraising
y In 2007, buyouts of around $40bn - $50bn are expected 22 20.0
Timeline
Outside-in
1st Round Bid Due Diligence 2nd Round Bid Closing
Valuation
Research
y Industry analysis
y Peer group analysis
y Press / news searches
Valuation / Modelling
y Comparable companies y Leveraged Buyout y Fundamental valuation
y Comparable transactions y Discounted cash flow adjustments
y Analyse market research y Sum-of-the-parts
y Operational benchmarking
Work Flow Management
y Communication with Leverage Finance y Organise internal / client meetings y Tombstones
department y Organise internal / client y Closing diner
y Communication with relevant industry conference calls
group y Internal administration
Processing
y Presentation building y Due diligence y Presentation building
y Timetable y Dataroom analysis y Client meetings
y Client meetings y Site visits
y Expert meetings
21 The Analysts Role in a Leveraged Buyout
5. Career at Citigroup
Citigroup Application Process
Every year we advise on the biggest mergers & acquisitions globally. Do you want to be a part of it?
y Citigroup is inviting applications for our analyst programme within the Investment Banking Division in Frankfurt
and London
y We are looking for highly motivated individuals with a very good academic performance, strong communication
and interpersonal abilities as well as outstanding quantitative skills
y Key attributes of a qualified candidate are the ability to work independently and in a team, strong organisational
skills, a high degree of self-motivation and initiative, with leadership potential
y We devote considerable time and resources as we regard it as an invaluable way to get to know you
y It also gives you the chance to explore whether you would enjoy a career in Investment Banking and particularly
with Citigroup
22 Career at Citigroup
Citigroup Application Process (contd)
We currently offer opportunities for both full-time positions and internships.
y Frankfurt: Throughout the whole year however early applications are recommended
Internship Application
Recruiting Contacts
All applications must be submitted online via the website www.citigroup.com. Please follow the careers link.
23 Career at Citigroup
Business Contacts
For any questions, please do not hesitate to contact us.
24 Career at Citigroup
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