Merger integration ASEAN hub

1 Our point of view

2 Our offering

3 Why EY

4 Key contacts

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2

5

6

1Merger Integration ASEAN hub |

1Our point of view

Too many companies across the world find themselves tinkering with change by focusing on organic growth and operational improvements. However, organic growth and cost cutting has its limitations. Companies should invest more effort in structural actions like acquisitions or divestments if they desire to achieve

breakthrough growth. Companies in Asia are focusing on building scale in its core market through acquisitions and shedding non-core part to fund the ambition.

But are we prepared?

Failure in strategy

Failure in M&A deal

Failure in integration

Reas

ons

for l

oss

of d

eal v

alue

” Value is lost from failure of execution, not strategy. Firms need to ‘de-risk’ the investment, capture value through synergies and control the process through strong governance and control.”

66% of all merger failures can be attributed to failure in integration

66%

20%

14%

• Lack of deal strategy or low strategic fit

• Synergies not achieved

• Lack of integration plan or philosophy

• Failure to de-risk the asset

• Lack of communication

• Organization misalignment

Deal rationale

“ M&A rebounds strongly to drive corporate growth in Southeast Asia.”

“ Think Big and Act Bold.” Vikram Chakravarty The Business Times

17 March 2015

Growth Market expansion or entry

Scale Top 2 players have two-third of the profit pool

Synergies Value through M&A

Capability Gaining access to new technologies, skills, patents and people

DefenceStrategic stakes to offset threat, future bargaining power

EY Capital Confidence Barometer Survey 2014

Source: EY analysis

Vikram Chakravarty EY Merger Integration Lead, Asia-Pacific

2 | Merger Integration ASEAN hub

2EY offering

“ The lack of clear integration philosophy and plan leads to destruction of value.”

Vikram Chakravarty EY Merger Integration Lead, Asia-Pacific

“ Planning for integration should begin once you identify the target and continue throughout the deal process.”

Yew-Poh Mak EY Merger Integration Lead, Greater China and Hong Kong

a. Integration vision: Strategy and control

Integration philosophy and guiding principles

Typical Asian non-negotiables

1 Control over people, brands, IP etc.

2 Establish control over cash and treasury operations to de-risk the investment

3 Establish governance, compliance and controls to comply with company policies e.g., FCPA

4 Establish financial and executive reporting requirements

5 Early announcement to key stakeholders

6 Adapt a softer approach in integration. E.g., no headcount reduction

Complete autonomy

Run as a standalone entity

Soft approach on people side

No change in business model

Replace target management

Fully integrate

Large synergies planned through lay-offs

Optimize business model of the target

E.g., Replace the CFO, COO

E.g., Full integration of back-office

E.g., Reduce headcount

E.g., New supply chain model

Due to the complexity associated with Asian mergers, it is imperative to define the integration vision and strategy early in the deal process. Define integration guiding principles and non-negotiables before the launch of the integration process.

3Merger Integration ASEAN hub |

Back office Procurement and suppliers Manufacturing and supply chain Sales and marketing Customers

Cross-sell additional volumes

New customers

Centralization of back-office (HR, IT, finance, procurement)

Procurement leverage

Capacity optimization

Quality improvements

Supply chain optimization - reduce logistics costs through a more efficient utilization of the combined network (transportation contracts, supply chain, warehouse space)

Quality improvements

Working capital optimization

Consolidate sales office locations and facilities

Cost to serve for customer portfolio

Restructuring - review target locations and assets

Restructuring - review manufacturing assets and facilities

Restructuring - target sales office assets

CAPEX review CAPEX review CAPEX review

Back office Procurement and suppliers Manufacturing and supply chain Sales and marketing Customers

“ Seasoned acquirers prioritize on key value drivers and allocate adequate resources to ensure success.”

Konstantinos Dimitriou EY Merger Integration Specialist

“ At EY we have detailed understanding of where the synergy can be found by deal and industry type.”

Karambir Anand EY Merger Integration Partner

b. Generate value: SynergiesR

even

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sCA

PEX

S1 S2

S3

S12S7

S4.1

S5.1

S6.1 S6.2

S5.2

S8

S4.2

S6.3

S5.3

S11

S10

S9

Longer term Medium term Quick wins

Achieved cost synergies as % of target’s revenue Announced cost synergies as % of target’s revenue

Sources: Capital IQ, ThomsonONE, company filings, press releases and investor presentations, EY analysis

Shareholders have rewarded successful acquirers in the past for realizing synergies from the deal. Acquirers should identify synergies and value drivers well in advance and validate it during the due diligence process.

Considering the complex business landscape in Asia, identified synergies should be tied to executable plans and should be tracked and reported on a regular basis.

Typical Asian synergy opportunities

Average announced cost synergies as a percentage of target’s revenue

The average per industry realized cost synergies range from 4% - 18% of target’s revenue

9%

18%

6% 6%4%

15%

8%

15%

5%6% 6%

14%

CPG Pharmaceuticals Oil and Gas Chemical Utilities Brokerage

4 | Merger Integration ASEAN hub

Fina

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c. Fitting it together: De-risking

“ We have helped clients in de-risking the investments and prevent value loss.”

Abhay Bangi

EY Merger Integration Specialist

“ Managing cultural difference proactively is critical for deal success in ASEAN.”

Ashutosh Deshmukh

EY Merger Integration Specialist

EY tools: Springboard and Merger Integration Playbook

1 Tools and templates (by phase)

Illustrative

2 Tools and templates (functional areas)

Cross teams

Value realization

Customer experience

Employee experience

Functions

StableFlexible

Mission

Adap

tability

Cons

isten

cy

Involvement

78

88

92

88

81

96

37 58

80

7438

50

Organizational

learning

Custom

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focus

Crea

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Empow

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Team

orientation

Capability developmentCore values

Coor

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Agreem

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Strategic direction and intent Goals and

objectives

Vision

Beliefs andassumptions

Internal focus

External focus

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Internal focus

External focus

Organizational

learning

Custom

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Crea

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Empow

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Team

orientationCapability development

Core values

Coor

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tion

and

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Agreem

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Strategic direction and intent Goals and

objectivesVision

StableFlexible

79

Beliefs andassumptions

70

47

8

1922

32

49

47

50

82

15

Mission

Adap

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Cons

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Involvement

Pare

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Operational analysis and diligence

Integration readiness and mobilization

Integration planning and analysis

Integration execution

Organization culture analysis tool Company comparison report

There is a need to de-risk the merger event due to many instances of value leakage in Asia. Detailed functional integration planning and proactive risk mitigation ensures taking control of the target and business continuity post-close.

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Involvement

In this organization...

Empo

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Most employees are highly involved in their work

Decisions are usually made at level where the best information is available

Cooperation across different parts of organization is actively encouraged

Authority is delegated so that people can act on their own

Information is widely shared so that everyone can get the information he or she needs when it’s needed

People work like they are part of a team

The “bench strength” (capability of people) is constantly improving

Everyone believes that he or she can have positive impact

Teamwork is used to get work done, rather than hierarchy

There is continuous investment in skills of employees

Business planning is ongoing and involves everyone in the process to some degree

Teams are our primary building blocks

The capabilities of people are viewed as important source of competitive advantage

Work is organized so that each person can see the relationship between his or her job and goals of the organizations

Problems often arise because we do not have the skills necessary to do the job

5Merger Integration ASEAN hub |

3Why EY

Select experience

3. Merger specialists — ASEAN hub

Experienced 30+ merger integration specialists in Southeast Asia (SEA), 100+ in Asia-Pacific and 900+ globally

4. Industry focus (Merger integrations)

Industry Global SEA

Financial Services 100+ 10+

Oil and Gas 70+ 15+

Consumer Products and Resources 80+ 20+

1. Leaders in M&A integration

2. End-to-end approach

Value creation

Turnaround

Restructuring

Integration and divestitures

Corporate finance strategy bu

sin

ess modeling

Valuationdue diligence

Financial

Transaction

evaluation

Transaction

tax

M&AtransactionInvestment strategy

• Growth strategy • Portfolio

rationalization

Transaction evaluation • Due diligence• Carveout and

integration diligence and planning

Value creation• Revenue growth• EBITDA margin

improvement – cost reduction

• Multiple expansion – improving exit value

• Cash flow and working capital

M&A strategy Due diligence Integration management office Synergy Functional

Integration of two top banks in Philippines √ √ √ √ √

Integration of European bank and local bank √ √ √ √ √

Integration of an Oil Field Services (OFS) player by European major √ √ √ √

Asset integration of utility company √ √

Integration of Thai LPG company by Korean Player √ √

HR due diligence and integration planning for refinery in Vietnam √ √ √

Integration by a US Oral Care company in Myanmar √ √ √ √ √

Palm plantation integration √ √ √ √

Dairy business post-merger integration √ √ √ √ √

Involved in top 30/50 deals in Asia

EY | Assurance | Tax | Transactions | Advisory

About EYEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

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© 2015 Ernst & Young Solutions LLP. All Rights Reserved.

APAC no. 12000441ED None.

Ernst & Young Solutions LLP (UEN T08LL0784H) is a limited liability partnership registered in Singapore under the Limited Liability Partnerships Act (Chapter 163A)

In line with EY’s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

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Key contacts

ASEAN merger and divestment hub

Vikram Chakravarty Partner, Asia-Pacific Merger Integration Leadvikram.chakravarty@sg.ey.com

Led 15+ merger integrations and is a well-known strategy expert in industry. Extensive experience in consumer goods, retail, commodities, oil and gas and financial services sector.

Karambir Anand Partner, Merger Integration karambir.anand@sg.ey.com

Led 10+ merger integrations. Synergy and value capture champion for M&A initiatives. Extensive experience in oil and gas, resources and commodities sector.

SingaporeSwee Cher ChooPartner, Transaction Advisory Servicesswee-cher.choo@sg.ey.com

IndonesiaDavid RimboPartner, Transaction Advisory Servicesdavid.rimbo@id.ey.com

MalaysiaGeorge KoshyPartner, Transaction Advisory Servicesgeorge.koshy@my.ey.com

ThailandPiyanuch Nitikasetrsoonthorn Partner, Transaction Advisory Services piyanuch.nitikasetrsoonthorn@th.ey.com

PhilippinesRenato GalvePartner, Transaction Advisory Servicesrenato.j.galve@ph.ey.com

MyanmarAndre TohPartner, Transaction Advisory Servicesandre.toh@sg.ey.com

VietnamJason DoanDirector, Transaction Advisory Servicesjason.doan@sg.ey.com

Industry Leaders Financial ServicesVishrut JainPartner, Transaction Advisory Servicesvishrut.jain@sg.ey.com

Oil and Gas and ResourcesKarambir AnandPartner, Transaction Advisory Serviceskarambir.anand@sg.ey.com

Consumer ProductsJoongshik WangPartner, Transaction Advisory Services joongshik.wang@sg.ey.com

Life SciencesAbhay BangiDirector, Transaction Advisory Servicesabhay.bangi@sg.ey.com