Mergers Acquistions PDF

CONFIDENTIAL
M&A at Milliken
Intro to M&A at Milliken
Corp Dev Team
M&A at Milliken
Your M&A Team
M&A is a specialized function, where experience drives performance; our M&A team
is compromised
M&A isofa four core members
specialized who
function, have worked
experience onperformance
drives a combined 100+ M&A
transactions over their careers to date
Professional Experience Prior Professional Positions Education
Scott Hile, • 15+ years of cross- • Commercial and M&A • J.D. (1999) Univ. of
VP – Corp border M&A and Counsel at Milliken South Carolina School of
Strategy and transactional • General Counsel and Law
experience, including Corporate Secretary at • IMBA/MIBS (1999) Darla
M&A experience with over 75 American & Efird Moore School of
M&A and Joint Venture (Charlotte) Business, Univ. of South
transactions (40+ • Associate attorney at Carolina
closed, lead on 30+) Hunton & Williams • Cert. in French &
(Charlotte) European Business
• Associate attorney at (1998) Ecole
Cooley Godward (Palo Européenne des Affairs –
Alto) Paris
• Associate attorney at • B.A. in Economics
Poyner Spruill (1995) Davidson
(Charlotte) College; 1993 Academic
• Stagiaire at Van Bael & semester at Oxford
Bellis (Brussels) University
©2015 Milliken & Company All International Rights Reserved Private & Confidential 2
M&A at Milliken
Your M&A Team
is compromised of four core members who have worked on a combined 100+ M&A
Brian Trauth, • 11+ years of global • Principal at The Capital • MBA (2007) HEC Paris
Director – business experience Corporation (Greenville) • B.S. in Business (2001)
Corp • 7+ years in strategic • Vice President at Darla Moore School of
advisory and M&A Lehman Business, Univ. of South
Strategy and transactions (25+ Brothers/Nomura Carolina Honors College
M&A mandates) (London)
• 4 years in operations, • Senior Analyst at
including post- Accenture
acquisition integrations • Management Trainee at
GE
Brad • 5+ years of equity • Senior Analyst at Duff & • M.S. in Investment

Westendorf, valuation and M&A Phelps (Boston) Management (2012)
Sr. Analyst – transactions experience, • Associate Portfolio Boston Univ. School of
including experience Manager Kelley Management
Corp with over 20 M&A Financial (Cincinnati) • B.S. in Business (2007)
Strategy and transactions Richard Farmer School
M&A of Business, Miami Univ.
M&A at Milliken
Your M&A Team
is compromised of four core members who have worked on a combined 100+ M&A
Hope Lewis, • 3+ years of M&A • Associate at Croft & • B.S. in Finance (2011)
Analyst – transactions and Bender (Atlanta) Clemson Univ.
M&A advisory experience • Senior Analyst at
Raymond James (St.
Petersburg)
Kasel Knight, • 13+ years of M&A, • Commercial Counsel at • J.D. (2001) Duke Univ.
Commercial including experience Milliken School of Law
Counsel with over 50 M&A and • Associate attorney at • A.B. in English and
transactions (40+ Parker, Hudson, Rainer French (1998) Duke
closed) & Dobbs LLP (Atlanta) Univ.; 1996-1997
• Associate attorney at Academic year
Sullivan & Worcester Universite de Paris VII
LLP (Boston)
• Associate attorney at
McKenna Long &
Aldridge LLP (Atlanta)
M&A at Milliken
M&A Playbook
M&A is a central element of growth of high return companies and they utilize M&A
playbooks to manage those transactions
Our M&A Playbook is:
A Path to
Success
combining A Clearly
A Programmatic strategy setting Defined Set of
A Toolkit
Approach to with roles,
active deal maintained by
opportunity responsibilities
making Corp Dev
sourcing and a and decision-
clearly defined making
screening
process
M&A at Milliken
M&A Playbook Highlights
A few highlights from Milliken’s M&A Playbook
• Bi-weekly meetings w/ BU managers and strategy leads

active in M&A
BU Pipeline Review • Purpose:
Meetings • Review BU strategy & potential M&A target list
• Discuss outreach tactics
• Review active acquisitions & integrations
• Purpose:
M&A Review • Strategic alignment between the C-office and
Divisions on growth initiatives
Committee • Update committee on current outreach activities
• Review active transactions and all open integrations
Integration • A toolkit to assist the integration manager and various

functional areas in pre-close planning and post-close
Playbook execution
Integration • Dashboard of KPI’s related to individual deal

• Created by integration manager and reviewed by top
Scorecard management each period
M&A at Milliken
M&A Lunch & Learn Topics
Schedule for the M&A Learning Series
1. Introduction to M&A and Milliken’s M&A Process
2. Business Growth Strategy and Pipeline Scorecards
3. The Who/What/When/Why/How of Target Outreach
4. Confidentiality: When Loose Lips Sink Ships
5. Synergies: What Types Exist and How We Find Them
6. Integration: Where Acquisitions Succeed or Fail
7. Assumptions and Valuations: The BU’s Role
8. Lessons From the Trenches: Diligence Overview
9. Lessons From the Trenches: HR issues in Diligence and Integration
10. Lessons From the Trenches: Legal Issues in Diligence
11. Pro Formas and Business Plans
12. M&A Panel Discussion
M&A at Milliken
Common Third Parties
Types of intermediaries that are commonly engaged during an acquisition
• Advise buyers and sellers throughout transaction

Investment banks • Source of acquisition target ideas
• Assist in target outreach
• Integral in transaction diligence and risk management

• Assist in negotiation of purchase agreement and other
Law firms transaction documents
• Aid in structuring transaction
• Integral in transaction diligence and risk management

Accounting firms • Assist in post-close valuations
Environmental • Support diligence of target sites for various

consultants environmental concerns
M&A at Milliken
Types of Strategic Opportunities
Unfamiliar There are four general buckets of strategic opportunities
Venture
Platform
New technologies
Delivery of new product
New customer
and market access
bases
Risk Profile
Limited
Bolt-On
Scale advantages, Adjacency
cost effectiveness New segments with familiar
Familiar
and customer customer attributes

visibility
Mostly Cost Access Mostly Option

(Early Capture) (3 – 5 years) (5+ Years)
Source of value (Expected timing)
M&A at Milliken
Examples of Strategic Opportunities
What Do We Mean By “Strategic Opportunities”?
Type Examples
• Pipe Wrap (composites)

• Edge (composites)
• Westex (FR fabrics)
Acquisitions of Entire • Kasbar National (automotive nonwovens/quilting)
Companies, Specific Asset • GeoTree Technologies (infrastructure repair)
and Technology Acquisitions • WebCore (wind composites)
• Constantine Carpet (floor covering)
• SiVance (specialty silicones)
• Rebus (colorants)
• SSZ Camouflage technology

• Tegris
Technology Licensing • Concrete Cloth
• Maxcell
• Pursued, but none closed

Strategic Investments
• Where Milliken would make an investment of money and/or
(e.g. Joint Venture) assets in return for less than 100% ownership in a company
M&A at Milliken
Opportunity Deal Funnel
To grow as desired through M&A, we must work to actively manage our deal funnels
through the various stage gates, starting with a robust pipeline
We should screen 20-100 targets per year if we hope to achieve 1-5 deals . . .
Build Target
Pipeline
(20-100) Evaluate
Top Targets
(10-30) Transaction Process
for Selected Target
(5-10) Closing
(1-5)
Stage Gates: • Approve strategic • Based on initial • Final go/no go decision

Fit by Division or BU evaluation of target, by Division and C-Office
• Check of predefined obtain Division and C- to submit a binding offer
deal criteria/no-go Office approval to
before investing in submit initial bid/enter
process negotiations
M&A at Milliken
M&A Process Overview
M&A is a multi-phase process, success is determined through thoughtful
planning and coordination of responsibilities
Phase 1 – Pipeline & Planning Phase 2 – Diligence & Negotiation Phase 3 - Integration
Approvals & Checkpoints Approvals & Checkpoints Checkpoints
Strategy Pre-LOI Signed Investment Finance Board Signed Integration
LOI Reviews Committee PA Scorecard
Target ID & Diligence Integration

Planning Execution
Preliminary Integration Planning

Diligence
LOI Negotiation PA Negotiation & Closing
Key High Level Roles & Responsibilities in M&A Process

Division / Business Unit Corporate Development M&A Review Committee
• Strategy creation • Outreach strategy • Strategy approval/alignment
• Initial target prioritization • Valuation • Outreach review &
• Preliminary diligence • LOI & PA negotiation prioritization
• Business plan assumptions • Diligence & integration • Transaction review/approval
• Business plan execution coordination • Integration review
M&A at Milliken
M&A Process Phase 1
The Divisions have ownership of driving their strategy
and Corp Dev takes the lead once outreach begins
Division / M&A
Functional Integr
M&A Process Step Business CorpDev Review Legal
Areas Mgr.
Unit Comm.
Determine growth strategy & review landscape Own Support Approve

Target ID and
Planning
ID multiple targets & prioritize initial target list Own Support Approve
Investment thesis & preliminary diligence Own Support Support
Determine & execute best outreach approach Support Own
Negotiate & sign confidentiality agreement Own Support
Preliminary
Diligence
Request & analyze target business information Support Own

Create preliminary valuation model Support Own
Identify & approve Integration Manager Support Support Approve HR (Own)
LOI Negotiate & execute LOI Own Approve Support
M&A at Milliken
Phase 1 Summary – Real World Example
The Phase I process flow is based on real world case history
Step 1: Step 2: Step 3:
• Nonwovens drafted its • BU Owner and Corp Dev • Corp Dev led the initial due
Strategy during 1st half of prepared initial investment diligence visits
2013 theses for the identified
Targets • Corp Dev led refinement of
• ANW identified multiple investment thesis
potential M&A targets • Corp Dev began preparing
valuation models (that • Corp Dev and BU Owner
• Internal BU resources include hypothesized reaffirmed support by
initially vetted options synergies) Division President
• BU prioritized the targets • Corp Dev approached the • Corp Dev and Division
and got on Corp Dev’s targets and arranged initial President led approval by
“radar” meetings to discuss C-Office to move forward
interest in a potential
transaction • With one Target, the
process quickly moved into
Phase 2 with negotiation of
a Letter of Intent
M&A at Milliken
M&A Process Phase 2
Corp Dev coordinates business and functional area resources throughout diligence
and negotiation, integration planning is done simultaneously
Division / M&A
Functional Integr
Areas Mgr.
Unit Comm.
Conduct financial review & engage 3rd parties Support Own Support Support
Conduct legal review & engage 3rd parties Support Own Support Support
Diligence
Conduct functional review & site visits Support Own Support Support
Develop business plan/assess synergies & risks Own Support Support Support
Prepare investment & valuation review decks Support Own Approve Support Support Support
Coordinate functions using Integration Playbook Support Support Support Support Own
Integration
Planning
Create plan to achieve synergies & pro forma Support Support Support Support Own
Prepare integration plan review materials Support Support Approve Support Own
Negotiate & execute Purchase Agreement (PA) Own Approve Support
PA
Prepare finance committee & board decks Support Own Approve Support Support Support
M&A at Milliken
M&A Process Phase 3
The Integration Manager has the responsibility of leading the integration, so the
business unit can focus on day-to-day running of the consolidated business
Division / M&A
Functional Integr
Areas Mgr.
Unit Comm.
Coordinate & execute integration plan Support Support Own

Integration
Execution
Coordinate & execute business plan Own Support Support

Prepare Integration Scorecard Support Support Support Own
Communicate integration performance to SLT Support Own Review Support
M&A at Milliken
Wrap-Up
Questions?
M&A at Milliken
Appendix
M&A at Milliken
Sample Accounting Diligence Request List
General/Financial Statement Analysis
1 Copies of summary monthly financial statements (balance sheet, IS) in excel -- all in one tab
2 Trial balances (if possible all months in one excel tab)
3 Audited financial statements and acess to auditor to arrange read of audit work papers
4 Financial statements of each business acquired or proposed to be acquired, not fully reflected in the Audited
financial statements in request 3 above.
5 Consolidating financial statements
6 Listing of officers and directors
7 Management organization chart
8 Structure chart or schedule containing the name, state of organization and ownership of each of the Business’s
subsidiaries.
9 Detail of any off-balance sheet commitments or contingencies
10 Confidential informational memorandum or management presentation, if any
11 Cash flow and working capital analysis as of FY2014, 2013, and 2012
12 Pricing Policies, including commission and rate schedules
13 To the extent not described in the footnotes to the applicable financial statements, a brief description of any
change in accounting policies or procedures within the past five years.
14 Reports, studies and projections prepared by management with respect to the Business’ business, financial
condition, or planned operations, including business plan.
15 Reports and studies prepared by outside consultants with respect to the Business’ business, or financial
condition.
16 Financial reports and related materials prepared for the Business’ board of directors or a committee thereof.
17 Significant correspondence with independent public accountants, including management letters concerning
internal accounting controls in connection with audits
18 Foreign currency exposure, if any, on ongoing purchases.
M&A at Milliken
Government contract compliance

19 Three most recent incurred cost submission audit reports.
20 Three most recently submitted, but not audited, incurred cost submissions.
21 CAS disclosure statement.
22 Detail of cost disallowances from incurred cost audits by type and amount by year for the last three incurred
cost audits.
23 Detail of costs segregated as unallowable for financial reporting purposes for FY2014, 2013 and 2012
Quality of Earnings and Working Capital

24 Detailed schedule of any normalizing EBITDA and working capital adjustments
25 Supporting documentation for all Management EBITDA and working capital adjustments
Revenue
26 Contract revenue summary for FY2014, 2013 and 2012, detailing contract type (fixed-price, cost reimbursable,
T&M), revenues, costs, and margin for the recent fiscal year period and inception to date
27 Estimates to complete (ETCs) for significant fixed price contracts as of the most recent interim period
28 Most recent backlog report detailing contracting agency, type of award, type of contract, and estimated award
date
COGS & SG&A

29 Breakout of COGS and SG&A accounts (may be covered by trial balance)
30 Statement of indirect expenses broken down by component for FY2014, 2013, and 2012
M&A at Milliken
Accounts Receivable
31 Detailed receivable aging sub-ledgers and information on calculation of allowance for doubtful accounts.
Reconciliation to A/R ledger if required.
32 Unbilled accounts receivable detail broken down by component (Retainage, retentions, rate variance, withheld
fees, and currently billable amounts)
33 Description of policy for charging bad debt expense for uncollectible receivables. Discuss any changes in the
policy during the last three years.
34 Roll forward of ADA for last three years including bad debt write-offs and original sale period for each item written
off.
35 Detail of contract and compliance related reserves (disallowed costs, rate variances, etc.) for the last three
fiscal years.
36 Detail of other receivables
37 Product return rate analysis for FY 2014 and FY2013
Inventory
38 Inventory aging schedule by item as of FY2012, FY2013 and FY2014, reconciled to the balance sheet
39 Inventory valuation methodology, including the determination of reserves/obsolescence and lower of cost or
market assessment methodologies.
40 Schedule of consigned inventory as of FY2012, 2013, and FY2014
41 Copies of the Business’ policies for providing for obsolete and slow-moving inventory and summary of
obsolescence write-offs and provisions for slow-moving inventory for FY2014
42 Description of the Business’ methods of inventory control
43 Calculations related to costing methodology (with amounts and treatment of variances if applicable)
44 Plant capacity and actual usage or production levels
45 Provide quarterly roll-forward of inventory reserves for FY2014, 2013, and 2012.
M&A at Milliken
Fixed assets
46 Consolidated fixed asset roll forward by asset type from Dec 31, 2012 through December 31, 2014. Include
listings of additions and disposals in FY2012, FY2013 and FY2014 and quantify any gains/losses realized on
disposals. Provide a high level comparison between PPE, asset additions, retirements during the historical
period.
47 Capitalization and depreciation policies.
48 Capital expenditure programs for FY2014, 2013, and 2012 broken down between maintenance vs. growth
49 Schedule of current lease commitments by type (i.e. capital or operating) with future minimum rental payments
by year for the next five years
Accounts Payable
50 Aged accounts payable report, reconciled to general ledger if required
Accrued expenses and other current liabilities

51 Schedule of components of accrued expenses and miscellaneous accrued expenses, reconciled to the balance
sheet.
52 Provide a summary of any contingent liabilities, pending litigation or other potential liabilities not recorded on the
balance sheet.
M&A at Milliken
Other/General
53 Legal entity organizational chart
54 Bank reconciliations for the period end date
55 Schedule of material prepaid or deferred income or expenses and “other assets” as of FY2014, 2013, and 2012
56 Budget for the FY 2014 (together with variance from budget), and future years’ forecast with significant
assumptions
Customers and vendor agreements

57 Provide contracts and purchase arrangements including terms with top 5 vendors including terms on vendor
discounts.
58 Provide contract copies with top 10 customers (i.e. MSA or similar).
M&A at Milliken
Sample Management Meeting Diligence Items
1. Background c) Internal control environment

a) Accounting environment i. Cash processing
i. Accounting and Finance support ii. Customer Invoice processing
i. Use of contractors iii. Vendor invoice processing
ii. Systems iv. Payroll processing
i. Infor/Infinium v. Operating metrics
ii. Kronos System vi. Management letter?
iii. Birst System
iii. Accounting close timeline d) Use of legal and professional advisors
i. Accounting period is last Sunday of month
ii. Consolidation
iv. Changes over Historical Period 2. Budgeting / forecast process
i. Closed facilities: Canada, China
v. Financial audit (Grant Thornton) – adjustments? 3. Other
vi. Related parties (Sun Capital) a) Open items on request list
vii. Recipients of financial information? i. High priority items include:
1) Monthly financial statements by entity and
b) Differences between interim and year-end accounting policies and consolidated (P&L and balance sheet) for
practices? FY13, FY14 and YTD March 2015. It
i. Accounts with significant judgment – bad debt reserve, appears the dataroom schedule 2.3.1
inventory reserves, contingencies, commitments, product Monthly P&L includes the forecasted
warranty periods for August 2014 through March
ii. Revenue recognition 2015.
i. Discounting, sales returns 2) Detailed monthly trial balances by entity,
ii. Non-standard contracts including consolidated trial balance for
iii. Inventory Accounting FY13, FY14 and 3m15.
i. Overhead allocation b) Access to audit workpapers
ii. reserves c) Access to tax advisor
iv. Incentive compensation
i. Employee bonus
ii. Commissions
iii. Deferred compensation
v. Vendor rebates
vi. Capitalization of expenses
vii. Accruals process
i. Settlements?

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CONFIDENTIAL

Professional Experience Prior Professional Positions Education

Professional Experience Prior Professional Positions Education

Brad • 5+ years of equity • Senior Analyst at Duff & • M.S. in Investment

Professional Experience Prior Professional Positions Education

Our M&A Playbook is:

A few highlights from Milliken’s M&A Playbook

• Bi-weekly meetings w/ BU managers and strategy leads

Integration • A toolkit to assist the integration manager and various

Integration • Dashboard of KPI’s related to individual deal

Schedule for the M&A Learning Series

1. Introduction to M&A and Milliken’s M&A Process

2. Business Growth Strategy and Pipeline Scorecards

3. The Who/What/When/Why/How of Target Outreach

4. Confidentiality: When Loose Lips Sink Ships

5. Synergies: What Types Exist and How We Find Them

6. Integration: Where Acquisitions Succeed or Fail

7. Assumptions and Valuations: The BU’s Role

8. Lessons From the Trenches: Diligence Overview

9. Lessons From the Trenches: HR issues in Diligence and Integration

10. Lessons From the Trenches: Legal Issues in Diligence

11. Pro Formas and Business Plans

12. M&A Panel Discussion

Types of intermediaries that are commonly engaged during an acquisition

• Advise buyers and sellers throughout transaction

• Integral in transaction diligence and risk management

• Integral in transaction diligence and risk management

Environmental • Support diligence of target sites for various

Unfamiliar There are four general buckets of strategic opportunities

and customer customer attributes

Mostly Cost Access Mostly Option

What Do We Mean By “Strategic Opportunities”?

• Pipe Wrap (composites)

• SSZ Camouflage technology

• Pursued, but none closed

Stage Gates: • Approve strategic • Based on initial • Final go/no go decision

Target ID & Diligence Integration

Preliminary Integration Planning

LOI Negotiation PA Negotiation & Closing

Key High Level Roles & Responsibilities in M&A Process

Determine growth strategy & review landscape Own Support Approve

Request & analyze target business information Support Own

The Phase I process flow is based on real world case history

Step 1: Step 2: Step 3:

Coordinate & execute integration plan Support Support Own

Coordinate & execute business plan Own Support Support

Government contract compliance

Quality of Earnings and Working Capital

COGS & SG&A

Accrued expenses and other current liabilities

Customers and vendor agreements

1. Background c) Internal control environment

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