1. Global M & A: Strategic Overseas Growth and Exits Options
Overseas Growth and Exit Opportunities for Utah Businesses, PEs, and VCs

2. Agenda
I. Speakers
i. Michael Gibbons – Chairman of Global M & A
ii. Faisal Alsayrafi, ASA, CEO of Financial Transaction House (fka Andersen M & A Worldwide)
iii. Pablo Rion
iv. Saul Zeigen
v. Roberto H Castro
II. Why Pursue a Merger, Joint Venture, or a Strategic Alliance?
i. Overview
ii. UT and International Trade
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3. Agenda
III. Do Emerging Markets Offer greater return potential? Do we forgo Mature Markets?
IV. Tax Issues: US Taxation of US Entities Abroad: an Overview of US International Tax
V. Corporate Governance and Compliance Issues
VI. Conclusions
VII. Supplemental Material – Colombia and Saudi Arabia
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4. I. Speakers
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5. Michael Gibbons, Chairman of Global M & A
Brown Gibbons Lang & Company is a leading independent investment bank serving middle market companies and their owners throughout the U.S. and internationally. BGL’s professionals are experts in mergers & acquisitions, debt & equity placements, and financial restructurings. The firm has over 35 experienced professionals from diversified backgrounds, all of whom have an appreciation for the unique cultures and complexities of middle market businesses and the financial institutions that support them. Founded in 1989, BGL has remained true to its mission of delivering corporate finance solutions to companies with enterprise values between $50 and $500 million. Although BGL’s professionals have skills applicable to companies in a broad range of sectors, the firm has developed specialized expertise and publishes periodic research in a number of key industries, including metals & metals processing, healthcare, business services, chemicals, and food & beverage. BGL is the U.S. partner in Global M&A, one of the world’s leading partnerships of independent middle market financial advisory firms focusing on cross-border transactions with values between $25 and $500 million.
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6. Pablo Rión
Pablo Rión y Asociados, S.A. de C.V. Mergers / Acquisitions / Corporate Finance Mr. Rión is an investment banker with more than 20 years of experience in Mexico. His firm is specialized in middle market transactions. As founder and managing partner of Pablo Rión y Asociados, the firm is the exclusive partner of Global M&A for Mexico. Pablo Rión y Asociados has closed more than 100 transactions in 20 years, with an accumulated value of that exceeds USD $1.5 Billion.
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7. Faisal Alsayrafi, ASA, MBA – CEO of Financial Transaction House (FTH)
FTH founded in 1994 to function as the regional corporate finance arm of Arthur Andersen’s financial advisory services subsidiary. FTH has operated as a licensed independent corporate finance advisory firm since 2002 with a GCC and North Africa focus.
Work Experience:
FTH has provided corporate financial advisory services in more than 100 transactions with a total value exceeding $4 billion USD; including the $1.9 billion USD acquisition of a commercial bank, a $220 million USD IPO (Al-Jazeera News), and numerous private placements ranging up to $85 million USD.
FTH serves as financial advisor to certain members of the Saudi Royal Family, Board Members for Saudi Holding Companies, and Saudi Arabian Private Equity funds and regional banks involving small to middle market company transactions, with a focus on recapitalizations, capital raises, acquisitions, formation of Joint Ventures and strategic alliances.
FTH also provides valuation advisory services to start-ups and mature firms in connection with acquisitions, Fairness Opinions, and financial reporting (Purchase Price Allocation, Goodwill Impairment Testing).
FTH’s investment banking services include Feasibility studies, Exit and Succession Planning, the issuance of Solvency Opinions, Reorganizations, and litigation support services.
Industry focus: Real estate, media and entertainment, financial services, petrochemicals, health care, agriculture, and basic materials or sectors focused on the infrastructure.
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8. Saúl Zeigen
Saúl Zeigen is a Director at Nogal Asesorías Financieras, Global M & A’s Colombia partner. Prior to joining Nogal, Mr. Zeigen worked for 13 years with Citgroup and Rothschild’s investment banks.
Mr. Zeigen’s M & A experience includes numerous “going private” transactions involving sales by both Colombian Government and private sector companies.
Significantly, Mr. Zeigen’s experiece includes the privatization process of over 20 electricity companies in Colombia, as well as in transactions in the water, sewage, and telecommunications sectors.
His private sector M & A and JV experience project financing in the financial sector, oil & gas sector, steel, toll roads, consumer goods and airports concessions, among others.
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9. Roberto Castro
Roberto Castro is a Draper, UT resident. He is Managing Director of Wasatch Business Valuation and M & A Consultants, LLC, based in Sandy, UT. Wasatch Business Valuation and M & A is focused on US business valuation for tax and financial reporting purposes, litigation support, and investment banking engagements.
He serves as Advisor to Faisal Alsayrafi, ASA, CEO of FTH. His latest non-U.S. projects involve:
Feasibility Study of a Substantial Mixed Commercial Property Development in the Middle East
Private Placement involving a hospital operated as a Joint Venture
Purchase Price Allocation involving an acquisition by a UAE of Saudi-based telecom company
Valuation of a bank owned four star Cairo, Egypt hotel
In the US, where he recently opened his office, his work has included providing valuation advisory services and Exit planning services to small business owners, including use of an ESOP, buy-sell agreements for professional service companies in the healthcare and law sectors, valuation of start-ups, IP, and intangible assets.
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10. Why Pursue a Merger, Joint Venture, or a Strategic Alliance?
Timing Issues
“Five crucibles of change will restructure the world economy for the foreseeable future. Companies that understand them will stand the best chance of shaping it.” McKinsey Quarterly, (June 2010)
1. The great rebalancing – the rise of the middle class in emerging markets impacts product design, market infrastructure, and value chains
2. The productivity imperative – developed countries need to focus on innovation to create jobs
3. The global grid – the rise of global networks
4. Increased demand for commodities and the emergence of clean tech industries
5. Challenge of governments providing a safety net to maintain stability and balancing growth initiatives
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11. Why Pursue a Merger, Joint Venture, or a Strategic Alliance?
Global M & A’s view
The sooner Board’s and management commit to a global strategy the better, while markets continue to change, the best markets and opportunities will always go to firm’s that planned, identified the market leaders, and devised controls to build and protect shareholder value
Diversify sales base
Commit to Product Innovation
Secure IP
Use multiple channels to build and protect the brand
Identify trends and respond
Identify competitors and competitive forces early-on
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12. UT and International Trade
Utah Governor’s Office of Economic Development is focused on job creation within the state and targeted clusters, but it is also committed “[t]hrough the International Trade and Diplomacy Office, conducts activities such as trade missions to encourage expansion of international business opportunities for Utah companies and attract foreign investment.”
Largest international trade partners: UK, Canada, Mexico, China, and India
Active Trade in Industries: commodities/mining, electronics, medical equipment, industrial machinery, aerospace equipment, auto parts, and cosmetics
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13. Tax Issues: US Taxation of US Entities Abroad: an Overview of US International Tax
DISCLAIMER The following are issues that—in our experience—arise with US-based clients and operations. We are investment bankers, not attorneys. Accordingly, neither this section nor anything in this presentation is intended to serve as legal advise. Each firm is strongly encouraged to consult with qualified international business, IP, and/or tax counsel!
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14. US (International) Tax Regime
History of Tax Acts impacting Foreign Income
Income Tax Act of 1913 (imposed a 1% tax on the worldwide net income of US citizens)
Revenue Act of 1918 (credit against US tax liability for foreign taxes paid)
Revenue Act of 1921 (limit of foreign tax credit imposed on an overall basis)
Revenue Act of (foreign tax credit limitation imposed on the lesser of a per country or overall basis. In addition, sec. 367 extended non-recognition-of-income rules under subchapter C to certain ‘extraordinary’ transactions involving a foreign corporation (e.g., the transfer of a parent’s patent rights to a foreign subsidiary in exchange for shares in a foreign subsidiary)).
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15. US (International) Tax Regime
History of Tax Acts impacting Foreign Income (cont.)
International Revenue Code of 1954 (overall limitation on the foreign tax credit repealed, leaving a per country limitation as the sole limitation and the deemed-paid credit extended to second- and third-tier foreign subsidiaries.
Revenue Act of 1958 (allowed for the carry-back and forward of excess foreign tax credits. This remained in effect until 2005 when The American Jobs Creation Act (AJCA) of 2004 reduced the carry-back period but extended the carry-forward period to 10 years)
HR 0087 (1960) (the overall FTC reenacted as an optional method, but if elected, cannot use the per-country method)
Revenue Act of 1962 (Subpart F enacted, this eliminated the deferral taxation of passive foreign subsidiary income in situations deemed abusive (e.g., FPHC income (e.g.. US citizens w/tax haven company that earned passive income in the form of dividends, interest, rents, and royalties), Foreign Base Company Sales income, Foreign Base Company Services Income (e.g., a tax haven company providing marketing, engineering, or accounting services to a related corporation)).
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16. US (International) Tax Regime
History of Tax Acts impacting Foreign Income (cont.)
Foreign Investors Tax Act of 1966 (replaced the force-of-attraction with the effectively connected income. Significantly, the pre-1966 exemption from US taxation for the foreign source income of a US branch was repealed, but the Foreign Tax Credit was allowed for foreign-sourced income)
Tax Reform Act of 1969
Revenue Act of 1971 (DISC created)
Tax Reduction Act of 1975
Tax Reform Act of 1976
Tax Reform Act of 1984 (sec. 367(d) introduced governing outbound transfers of intangible property, such as patents, copyrights, trademarks, and trade secrets; such a transfer to a foreign company was treated as giving rise to a stream of royalty payments over its useful life, rather than recognition of gain upon the transfer)
Tax Reform Act of 1986 (significantly reduced the FTC; baskets of income, each with its own foreign tax credit limitation)
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17. US (International) Tax Regime
History of Tax Acts impacting Foreign Income (cont.)
OBRA 1993 (new anti-deferral provisions added to the Code (sec. 956A) subjecting accumulated active business profits of CFCs that were not reinvested in active business assets to US taxation)
Small Business Job Protection Act of 1996 (repealed sec. 956A since the law provided incentives for CFCs to make foreign investments, enter into transactions, and engage in reorganizations to avoid the tax … it discouraged investment in the US
Tax Payer Relief Act of 1997
November 2000; Congress repealed the FSC structure and replaced with the Extraterritorial Income Exclusion Act; this Act provided a partial territorial system proving relief from double taxation for both exports and foreign production; declared illegal in 2002 by WTO
American Jobs Creation Act of (among other things it enacted provisions aimed to stop abusive corporate inversion transactions)
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18. US (International) Tax Regime
History of Tax Acts impacting Foreign Income (cont.)
More recent activity
The Education Jobs and Medicaid Assistance Act of 2010 (new provisions target the foreign tax credit planning, with an emphasis on indirect credit planning by US multinationals)
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19. US (International) Taxation
The US employs a credit system and taxes U.S. persons on their worldwide income. §§61 and 901. “U.S. persons: includes U.S. citizens, resident aliens, and domestic corporations.
Exception: The U.S. credit system contains a deferral wherein the U.S. does not tax foreign-source income earned by a U.S. person through a foreign corporation until those profits are repatriated by the domestic shareholder through a dividend distribution.
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20. US (International) Taxation
Strategic Planning considerations will include tax planning too.
There will be situations where the taxpayer (U.S. corp.) will be in an excess limitation position (that is when the foreign tax rate is lower the U.S. tax rate) and in an excess credit position (that is when the foreign tax rate is higher than the U.S. rate)
Eliminate the excess credit by increasing the percentage of taxpayer’s total taxable income (buy more of the foreign entity or arrange to have title—when inventory is sold—pass in the foreign country. Another option is cross-crediting (blend low- and high tax foreign source income).
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21. US (International Taxation)
Subpart F (Code secs ) was enacted in 1962 to close a perceive loophole (a U.S. multinational corp.'s foreign-source income earned through a foreign source was not taxed until the sub repatriated the dividend through a dividend). Prior to 1962, this was one of many reasons for cross-border M & A (Code driven)
Subpart F requires U.S. shareholders of a CFC to include in income a deemed dividend equal to a pro rata share of the CFC’s Subpart F income. Sec A foreign corp. is a CFC if the U.S. shareholders own more than 50% of the stock of the foreign corp., either by vote or value.
Effective for tax years after 2006, sec. 954(c)(6) treats DIRR accrued or earned from a related CFC to be outside the FPHCI (Foreign Personal Holding Company Income). This placed US multinationals on par with foreign multinationals.
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22. Mergers and Acquisitions
Developed Markets v. Emerging Markets
Global M & A sees more M & A in emerging markets as opposed to developed markets.
Liquidity and Exits are more readily available in the developed markets where Private Equity funds compete, as do strategic purchasers
Emerging Markets M & A are picking-up, however, the activity is regional and with known competitors. Liquidity and exits are available provided management is patient.
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23. Merger and Acquisitions
In the US, Mergers are usually pursued –in lieu of building from scratch--to:
Boost economies of scale
Generate greater sales revenue
Build market share within existing or new markets
Broaden or diversify the customer and/or product base, and
Increase tax efficiency
Cross-border M & A’s share these same reasons and are pursued by US firms that have worked with the target, understand local customs, management, and believe the target market is relatively efficient and ready for growth.
Michael and Faisal share their views on why US firms seek to Merge or acquire and discuss challenges ranging from integration (range of integration), corporate governance, capital sources to sustain operations once the firm is a subsidiary, and Exit strategies for firms post-merger.
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24. What is the trend in cross-border M & A
What is the trend in cross-border M & A? Taxable or Non-taxable transactions?
On January 23, 2006 the Treasury issued final regulations that allow for certain mergers (A Reorgs, sec. 368(a)(1)(A)) with foreign entities to qualify as tax-free reorganizations.
Treas. Reg. Section (b)(1)(i) expands the ability of certain foreign and disregarded entities to qualify under Section 368(a)(1)(A) as statutory mergers, only if two events occur simultaneously at the effective time of the transaction. Those events are (1.) All of the assets and liabilities of the transferor become assets and liabilities of one or more of the members of one other combining unit; and (2) the combining entity of each transferor unit ceases its separate legal existence for all purposes..
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25. What is the trend in cross-border M & A
What is the trend in cross-border M & A? Taxable or Non-taxable transactions?
The IRC favors “A” reorg’s. involving foreign entities.
The language in the regulations suggests that forward triangular reorganizations fall within the tax-free exchange, but not reverse triangular mergers.
But how common are “A” reorg’s.
Review: An “A” reorg. Combines two separate legal entities into one (consolidation or merger)
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26. What is the trend in cross-border M & A
What is the trend in cross-border M & A? Taxable or Non-taxable transactions?
A Reorg – considered the most flexible; no limitation on the type of consideration involved; Target shareholders may receive cash, voting or nonvoting common or preferred shares, notes or real property. At least 40% of the purchase price must be acquiring company stock to ensure the Continuity of Interests’ requirement is satisfied.
B Reorg – stock-for-stock and no “boot”. Can replicate using a reverse triangular merger (“E” Reorg) that allows some boot.
C Reorg – stock-for-assets reorganization; “substantially all” assets of the Target “solely” for voting stock of Acquirer
D Reorg – “Forward Triangular Merger” and divisive reorg’s
E Reorg – “Reverse Triangular Merger” (common in the US but not a good option for cross-border M & A
“Double Dummy” – more common in the US (sec 351 followed by a Reverse Triangular Merger) but problematic w/cross-border M & A
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27. Joint Venture: Definition
There is no fixed legal definition.
It is generally understood that it encompasses an:
Undertaking by two existing businesses;
That share risks (liabilities and losses);
Profits;
Control; and/or
Management
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28. Global M & A’s experience with US firms pursuing a foreign Joint Venture
Classic Form
Other
Two parties (or more) form a corporation
In the case of 2 businesses, they each take a share in the business,
Both entities manage the operations; and
Key person (from the US side) monitors compliance and reports to the US CEO.
Buy a 50% +/- share in an existing foreign business or where IP involved, form a JV in a tax haven (to protect IP and have that entity enter a licensing agreement with foreign “partner”)
One of the Joint Venturers takes a lead role managing operations (usually the foreign “partner”)
Key US person (from the US side) monitors compliance and reports to the US CEO.
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29. Global M & A’s experience with US firms pursuing a foreign Joint Venture
The form of Joint Venture often reflects the intensity of cooperation.
Equity JVs typically require a greater commitment and a more hands on approach
Equity JVs require more than just termination of the contractual agreement, it requires a liquidity event. The liquidity event can involve: an acquisition, merger with a portfolio firm (meaning a sale to a foreign or US PE or VC)
Contractual JVs (where the JV enters into a licensing or distribution agreement with the foreign partner)
Easier to unwind, less costly, less risky and limited to no upward potential besides what the channels developed.
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30. Joint Ventures: Get to know the market and minimize the downside risk
The Cass School of Business recently conducted a study where it compared the frequency of use of Joint Ventures v. Strategic Alliances and it found that: “the activity of both joint ventures and strategic alliances during our sample period. It is clear from the exhibit that strategic alliances in most years are the most common alliance type. However, joint venture activity rises in frequency after a major downturn (indicated with circles), whereas strategic alliances show no such correlation to these crises.”
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31. Joint Ventures: IRC sec. 902 – Applies if you are a 10/50 corporation
If you own more than a 10% interest in the “JV”, but own 50% or less, then this interest is called a “Non-controlled” foreign corporations subject to IRC § 902. It is referred to as a “10/50 corporations.”
See IRS Notice (consult with counsel)
As long as the U.S. corporation owns at least 10 percent of the voting stock of a foreign corporation, it is deemed to have paid an allocable share of foreign income taxes paid by the foreign corporation on earnings distributed as a dividend. (It became easier in 2003 to get the Foreign Tax Credit.)
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32. Joint Venture
Capital sources remain cautious and Global M & A believes that will continue to be the case for the next few years. Research undertaken by academia in the UK confirms this impression: “the activity analysis … uncovered another important finding: relative joint venture activities increased significantly after the last credit crisis in the early 1990s. An explanation could be that the constraint of capital in the years during and immediately following the crisis significantly changed the relationship in activity between the two deal types, as one fundamental component in an acquisition is the acquirer’s access to capital. In joint venture deals, the capital requirement is typically significantly less.”
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33. Global M & A’s experience with US firms pursuing a foreign Joint Venture
Why Joint Ventures
Enter a new market or a new business segment
Risk averse
Limited capital (resources for an M & A are limited)
Limited personnel
Risks exists:
In the case of technology, control is partially lost;
Management efficiency can improve or be compromised;
Future resource allocation/focus can change
Forms Seen
R & D JV(ideal for VCs), Production of goods, distribution, sale of products, marketing, property development JV, e-commerce
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34. Legal Form and Capital Structure
Partnership
Corporation
LLC
Capital Structure
Remarks regarding multiple classes of preferred stocks and convertible debt instruments (sometimes these cannot be used at all or are so rarely used that there is little local experience with them and it would be unwise to use them)
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35. Exits and Terms of the JV: Global M & A’s Experience
Exits events take several forms
Based on a term of years (time)
Termination of a Project (a government project; example a project where US firm enters via World Bank, US AID)
Terms in a JV Agreement
Interest-transfer provisions are critical and challenging
Common ownership transfer provisions
Right of First Refusal
Right of First Offer
Drag-Along Rights
Tag-Along Rights
Russian Roulette/Texas-Shoot-out/Dutch Auction Arrangement
Forced Sale
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36. Mexico: Asociacion en Participacion (akin to a JV in Mexico- an unincorporated partnership)
The “Asociación en Participación” is described in MX’s General Corporation Law as “the contract by which one person shares capital profits or loss with others that provided goods of services within a commercial relation or one or several commercial transactions.”
Considerations involving Mexico
Antitrust laws, Foreign Investment Law, General Corporation Law, NAFTA and other Treaties (US – MX Tax Treaty)
Choice of law
Dispute Resolution Methods (arbitration is recognized)
Importation (import duties ad satisfaction of non-tariff requirements)
Intellectual Property and Licensing (if MX is distributor, need to register the license agreement with MX IP authorities)
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37. Strategic Alliances: Test the Waters and Minimize the Upfront Risk
“When to think alliance”
“In some circumstances, the market seems to reward alliances more richly than mergers and acquisitions. Maybe it knows something that many managers don’t.”
McKinsey Quarterly,
November 2000
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38. Strategic Alliances: Tax Issues
U.S. companies that export their products through independent distributors will not have a taxable presence within the importing country and, therefore, foreign tax reduction planning is a considered a moot issue.
Generally, a U.S. exporter will be subject to host country taxation only if it has a permanent establishment within the host country.
Once the U.S. exporter establishes a foreign sales office it must decide whether to structure the foreign sales operations as either a branch or a subsidiary.
An unincorporated foreign branch is considered an extension of the domestic corporation, as opposed to a separate legal entity. The foreign branch is subject to the U.S. tax at the regular corporate rate with a FTC. The foreign subsidiary arrangement has historically enabled those foreign corps to defer payment. A foreign sub may receive local tax incentives—a tax holiday—and more control over the timing of income.
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39. Strategic Alliance(s)
The term “Strategic Alliance” is also undefined.
As a general rule, they entail less upfront costs, but also a lot of risk; this is often the least expensive way to enter a market.
Profit potential is capped, as are losses. You get to learn about the target market, companies in the market, and your staff’s talents. Shareholders tend to like it b/c it does not involve the transfer of an equity stake and in non-dilutive.
Global M & A’s experience:
Works well with firms with limited capital and access to finances
Enables smaller firms to learn, build relationships, and either form a JV, acquire an interest in the foreign partner and have a greater say, or establish a new business relationship with a (former) competitor in the new market.
Tricky issues: who owns the IP rights developed pursuant to the strategic alliance? What about capital infusions?
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40. Do Emerging Markets Offer greater return potential
Do Emerging Markets Offer greater return potential? Do we forgo Mature Markets?
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41. 2010 World Bank Ranking: Business Friendly Countries
Economy
Ease of Doing Business Rank ▲
Starting a Business
Dealing with Construction Permits
Registering Property
Getting Credit
Protecting Investors
Paying Taxes
Trading Across Borders
Enforcing Contracts
Closing a Business
Singapore 1 4 2 15 6 13
Hong Kong SAR, China 56 3
New Zealand 5 26 28 9 16
United Kingdom 17 22 10 23 7
United States 27 12 62 20 8 14
Denmark 30
Canada 29 37 32 41 58
Norway 33 65 46 18
Ireland 11 38 78
Australia 63 35 59 48
Saudi Arabia
140
Georgia 61
105
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42. Discipline and Experience … are needed to Succeed in both Developed and Emerging Markets
Source: Financial Times, 16 December 2010 article entitled “Reason for concern over emerging markets inflows, says Vanguard”. The article quotes Jeff Molitor, Vanguard’s Cjief Investment Officer in Europe whom expressed concern over the record inflows into Vanguard’s MSCI ETF. Molitor (addressing the above) stated that Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. to buy additional rights or use this link to reference the article - “[o]ur analysis shows that the average cross-country correlation between long-run GDP growth and long-run stock returns has been effectively zero.” This suggests that emerging markets stocks are pricing growth and that caution and a disciplined approach is needed not only investing in publicly held shares but also identifying strategic growth prospects.
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43. Wall Street Journal, 3 January 2011
“With this stronger foundation, coupled with new confidence about the global economy, corporations are looking to expand. Many are focusing on the faster-growing economies of Asia, Latin America and Africa, rather than the sluggish markets of Europe and the U.S. Others plan to enlarge existing operations through new equipment, products, factories and research labs.” “Big Firms Poised to Spend Again” by James R. Hagerty and Dana Mattioli
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44. MarketWatch, 3 January 2011
The current growth rate of 2% to 2.5% makes this the most anemic recovery since World War II. At this rate, it could take us another three or four years just to get back to the employment level we had prior to the start of the recession, and that does not account for the added jobs we need for normal population growth, immigration and returning veterans if we withdraw from the Middle East. * * * Now, the world’s manufacturing axis is shifting to Asia, and it is not coming back to the United States except in a more efficient form that uses less labor to be globally competitive. We have expanded government and services at all levels beyond our ability to support them without further damaging competitiveness. The Long Road to Recovery by Robert Mittelstaedt, Dean of the W.P. Carey School of Business at Arizona State University
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45. The Outlook: Emerging Markets Lead in GDP Growth – Stability, Pro-business environment, and emergence of a Middle Class
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46. Views on entering a new market by way of M & A, JV, or a Strategic Alliance
Michael Gibbons, CEO of Global M & A
Faisal Alsayrafi, ASA, CEO of FTH
Strategic Alliances offer the best opportunity to enter and assess the GCC markets (especially where Intellectual Property is involved).
Private Equity in the Middle East usually buys a minority interest—that can change—and look for an IPO as the preferred exit. Within the firm, constructive advise and involvement is critical.
Returns are high and US Private Equity is beginning to enter the GCC and Egypt market, usually in a recap or sale of portfolio company not ready for an IPO.
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47. Views on entering a new market by way of M & A, JV, or a Strategic Alliance
Pablo Rión, Pablo Rión y Asociados, S.A. de C.V.
Instead of entering alone, it is better to do enter into a joint venture with a local market because of :
Know who and know how are critical
Understand market trends, opportunities, risks, and weaknesses
Seek and Retain Experience in managing local personnel
Due Diligence: Ensure contacts with key customers and suppliers exist and assess the quality of these
Retain competent legal to assist in the JV and address any and all regulatory issues
Saul Zeigen, Nogal Asesoria Financieras S.A.
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48. Conclusions:
1. Expanding the business into new markets has always been an attractive option to achieve growth for well-established firms. Whether the expansion is geographical or in terms of boosting the product line, the need for expertise and knowledge of unexplored areas is of vital importance. Cass School of Business
2. Joint Ventures and Strategic Alliances enable firms to enter new markets and learn. They require patience and commitment and are usually a precursor to M & A.
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49. Conclusions: 3. Think and act Regionally and Globally
Emerging Markets: Beyond The Big Four -- Egypt, Mexico, Poland, South Africa, South Korea, and Turkey are investor-friendly and boast strong growth, too The biggest, fastest-growing economies of the Third World are Brazil, Russia, India, and China. But while the Big Four, also known as BRICs, have attracted the most investor attention in recent years, there are also opportunities in less prominent but more promising emerging markets such as Egypt, Mexico, Poland, South Africa, South Korea, and Turkey. They may not have the buzz of billion-plus population markets, but their growth is impressive -- and their stocks, in many cases, can offer s
superior value.
BusinessWeek article (2005)
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50. Conclusion
We invite you to visit Global M & A at To learn more about Global M & A and/or explore M & A, JVs, or Strategic Alliances within our network please contact: Roberto H Castro, JD, MST, MBA, AVA at
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51. Global M & A: Contact Information
Thank you for attending the UT Global M & A presentation. For further information and/or comments regarding Global M & A and any of the parnters, please contact us through: Roberto H Castro, JD, MST, MBA, AVA (801) (office) (801) (c) (801) (fax)
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52. Investment Banking – Global Partners
Industrialized Countries
Emerging Markets
United States United Kingdom France Canada Italy Austria Sweden Switzerland Spain Denmark Germany Hungary Netherlands Belgium Australia Luxembourg Japan Norway Israel Poland
Mexico Guatemala Costa Rica GCC & Yemen India (Mumbai) China (Beijing) China (Shanghai) Brazil (Porto Alegre) Brazil (Sao Paolo) Turkey Russia Chile Argentina Colombia Peru
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53. Industries Served
Business Sector – Logistics, Security, Facilities Management
Chemicals – Agricultural, Specialty, Paintings and Coatings, Rubber and Plastics, Consumer Chemical
Construction and Real Estate – including Hotels, Commercial Mixed Use
Consumer Products – Home furnishings, food and beverage, health and personal care, lawn and garden
Energy and Mining – oil and gas (services), coal, precious metals, rare earth, green energy, water, utilities
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54. Industries Served (cont.)
Financial Services & Insurance – commercial banks, asset lending, private banking
Healthcare and Pharmaceutical – healthcare services (hospitals, ASC, out-patient surgery centers), medical devices and equipment (patented and subject to approvals by either FDA or the EMA (European Medicines Agency)), pharmaceutical, and biotechnology (Phases I to III)
Industrials – automotive components, hydraulics and fluid power, instrumentation, and power generation, conversion, distribution, and transmission
Information Technology - software to hardware to communication
Leisure and Retail
Media, Marketing & Entertainment
Packaging
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55. Global M & A Services
Mergers & Acquisitions – over 1,500 transactions closed with an aggregate deal value of over €30 billion
Small-to-Middle Market focus
Assist PE funds, VC firms, and Angels to identifying potential Exit options
Formation of Joint Ventures and Strategic Alliances as a precursor to M & A
Succession Planning
Recaps
Identification of International Financial Buyers, particularly Private Equity funds (as buyers)/Auctions
Identification of International Strategic Buyers (as purchasers)/Auctions
Restructurings and Turnarounds
IPOs: US and foreign countries (UK’s AIM, NASDAQ Dubai)
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56. Global M & A Recent Transactions
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57. Sampling of Recent Transactions by Global M & A Partners
Germany – Healthcare (sale of hospital group w/8,000 beds)
Saudi Arabia – Private Placement for hospital (a operated as a Joint Venture SAR 220,000,000)
Saudi Arabia – Private Placement (tourism company focused in the promotion of Middle East destinations SAR 175,000,000)
Denmark – Sale to Norwegian company of off-shore crane installer)
Chile – sale of vineyard and several recaps
Israel – Purchase by Polish firm of leading Israeli IT comp
Mexico – Sale to Kimberly Clark of diaper company
US – Sale of Georgia firm (specialty metals)
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58. Colombia’s Global M & A Partner
Supplemental Material
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59. Colombia Macroeconomic Highlights
January 2011

60. Colombia As An Investment Destination
Colombia General Information and Location
Official name: República de Colombia
Population (2010): 45.5 million
Capital: Bogotá (2010), Population: 7.4 million
GDP nominal (2009): US$ million*
GDP per cápita (2009): US$ 4.676
GDP growth (2010): 4,0%; (2009): 0,4%
Inflation (2010): 3,2%;
Exports (FOB) (2010): US$ million **
Imports (FOB) (2010): US$ million***
Foreign Direct Investment (2010): US$ million
Literacy rate: 92,8%
Currency: Peso colombiano
Current Exchange rate: $1.914 pesos per US$1 dollar (31/12/2010)
*Estimated
** November 2010
***October 2010

61. Colombia As An Investment Destination
Colombia has become one of the major investment destinations in Latin America due to several aspects:
Emerging Markets 
Emerging markets are driving the world’s GDP growth, becoming recipients of the investments once directed to developed countries.
Macroeconomic
Stability 
Colombia's GDP has grown steadily over the Latin American average and has kept inflation within the single digits.
Increased FDI (Foreign Direct Investment) 
Foreign Direct Investment has been growing steadily over the past decade, rising from USD $ 2,134 million in 2002 to $ 10,600 million in 2009.
Colombia is ranked within the top 10 countries for doing business in Latin America, according to "Doing Business Report" Part of this progress is due to the issuance of new legislation that improves its business platform standards positions were modified during and 2010.
Investor incentives:
Free Zones.
Legal stability contracts.
Income tax deductions.
Private investment Stimulus
Increased levels of security 
Safety is the central government’s primary objective evidenced by improved safety level indicators.

62. Evolution Of Macroeconomic Indicators
During the past years, Colombia has maintained a steady GDP growth and has kept inflation within the single digits, positioning the country as one of the region’s most solid economies with significant growth prospects:
Colombia´s Historical Inflation
Colombia ‘s GDP Growth
8.8%
7.7%
7.0%
6.5%
5.5%
4.9%
4.5%
5.7%
2.0%
3.2%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2.2%
2.5%
4.6%
4.7%
5.7%
6.9%
7.5%
2.4%
0.4%
3.6%
4.0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
QIII
(E)
Source: Banco de la Republica
Source: Banco de la Republica
The country's sustained growth has taken place in a healthy manner and is based on several aspects:
2009 GDP: Colombia Vs. Other Countries In The Region
Increased commodity demand from emerging economies.
Gradual diversification of the market.
Appropriate fiscal and monetary policy.
Security.
Stability.
Source: Banco de la Republica and International Monetary Fund

63. Sovereign Rating and Foreign Direct Investment
Sovereign Ratings Latinamerica
Foreign Direct Investment (USD$ MM)
2,134
1,720
3,016
10,252
6,656
9,049
10,600
7,261
5,466
2002
2003
2004
2005
2006
2007
2008
2009
2010* A+
USD$ M
SAB Miller Investment
BBB+
Brazil
BBB-
BBB-
BB+
* Figures for August 2010
BB-
Source: Proexport and Banco de la República
Investment Grade B-
Foreign Direct Invesment by industry 2009 (USD$ MM)
Mining
Oil
Agriculture
Public Services
Commerce
Financial
Manufacturing
Transportationl
Other*
Source: Standard & Poors
Colombia is one notch below the investment grade level. Standard & Poors expects a rating improvement based on:
Improvements in the flexibility of economic policy.
Increased size of the local financial market.
Improved safety standards.
Increased economic strength.
Prudent fiscal management.
Increased investment in infrastructure.
Regardless of the non-investment grade level, debt and capital resources have increased over the last decade.
* Other includes construction and communal services.
Source: Banco de la Republica
FDI growth has been supported by:
Decrease in the country´s risk premium.
Increase in the international commodity prices .
Higher local interest rates compared to local rated AAA economies.
Source:Standard & Poors`

64. Increased Confidence Levels
Consumer Confidence Index
M&A Colombia (USD$ MM)
Telecom: 33%
Prodeco: 28%
Bavaria: 65%
BP: 39%
Avianca and Coltabaco: 68%
Low investor confidence
Source: Fedesarrollo
Source: Capital IQ
Transaction proportion to year total
Financial crisis
Banco de la Republica Intervention Rate
The continuing decline in inflation, during the last decade, combined with sustained economic growth (GDP), lower interest rates and increased foreign direct investment reflect the higher levels of consumer confidence.
The increase confidence levels will result in increased investment flows, mergers and acquisitions, reflecting the economy´s dynamism.
Source: Banco de la República

65. Doing Business in Colombia: Conclusions
Most stable democracy in the neighborhood
Consistently stable regulatory framework
Oil and Gas sectors strongly growing: High Capital Expenditures levels in Exploration & Production
Infrastructure sector outrageous potential growth
Oil and Gas transportation networks needed
Appropriate macroeconomic scenario: inflation, interest rates and devaluation under control
Private Equity Funds entering Colombia
Infrastructure and Hydrocarbon funds have been set to boost new projects
Banks strongly willing to finance projects in infrastructure sectors
Colombian companies willing to become regional players
Improved security

66. Saudi Arabia: Global M & A’s Partner
Supplemental Information
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67. Financial Transaction House Company Profile and Credentials
M & A and Financial Advisory Services
Financial Transaction House
Company Profile and Credentials
Strictly Confidential

68. INTRODUCTION TO FTH
Financial Transaction House was established by Mr. Faisal Alsayrafi, ASA, MBA, who serves as FTH’s President and CEO. FTH is as an investment banking firm based in Jeddah, Saudi Arabia. FTH was started in 1994 and was previously the corporate finance arm of Andersen M & A Worldwide in the Middle East. FTH provides a wide range of corporate finance advisory services to a diversified client base in the Middle East, the base is comprised of strategic and financial investors.
FTH continues to offer its clients a complete and integrated solution from structuring M & A transactions, reorganizations, recapitalizations, business valuations, including business valuations for IFRS financial reporting purposes, establishment of JVs, and litigation support services.
Our focus on the Middle East and our knowledge of the local business context and culture has helped us establish close relationships with senior management of top companies, as we help them address the challenges they face in an increasingly complex, global and competitive business environment.

69. Financial Transaction House (FTH) is the 3rd licensed firm by the Capital Market Authority (CMA)
Financial Transactions House receives License 28 June 2005 According to the Subject (6/A-18) of the Capital Market Authority issued by Royal Decree number (M/30) dated (2/6/1424H) and subject (7) of the Capital Market Authority by decision number dated H, 28/6/2005, the Capital Market Authority has approved applications of Financial Transaction House and granted it the license to operate as a transaction manager and offer advisory services for Capital Market engagements.

70. Financial Transaction House (FTH) – Services Offered.
Financial Advisory Services
Business Valuations
IPO & Private Placements
Mergers
& Acquisitions/JV
Local & International Strategic Partnership
Structuring Financial Instruments
Debt Syndication
Fairness Opinions
Corporate
restructuring

71. INTRODUCTION TO FTH - Continued
(FTH) Currently became the Global M&A Partner for the Gulf Region and Yemen. Global M&A is widely recognized as one of the world's leading partnerships of independent merger and acquisition houses. Its prime purpose is to provide cross-border support and opportunities for clients who wish to complete acquisitions, company sales, buy-outs and buy-ins, fund raising and other corporate finance transactions. Global M & A is comprised of over 30 partner firms; its partners are in the U.S., UK, Western and Eastern Europe, Russia, Hong Kong, Japan, India, Mexico, Argentina, Colombia, Chile, Brazil, and Turkey. The partnership's focus is on mid-market transactions, valued at between €20 million and €250 million, and each partner has been carefully selected as 'best of breed' in their own local territories. Global M&A's success in delivering outstanding results for its clients is borne out by its recent track record: over 700 completed transactions with an aggregate deal value of over €15 billion since For more details about Global M&A, please visit

72. Equity Research Department
Equity Research Department is a key support to the FTH arranging and advisory services
Create a Complete Saudi Market Database which Covers:
State of the economy and related news
General Stock Market news
All corporate actions pertaining to listed companies including earning reports, stock splits, financial statements and ratios
Historical market data on all companies
CMA news and announcements.
Support Technical department with equity research data
Market Reports:
Prepare and issue a weekly market coverage report which covers the technical aspects of selected companies and also for the market as a whole

73. SELECTED TOMBSTONES . SAR 97,845,000 In progress Private Placement
Taif Investment & Tourism Co.
In progress
Private Placement
Najran Holding Co. (Under Establishment)
Undisclosed
Private Placement
Al Aton Steel Industry
SAR 450,000,000
2010
Business valuation
Magrabi Hospitals & Centers
2010
Restructuring
Saudi Bell Co.
2010
Valuation
Sell side mandate
Sami Mufti Est.
SAR 10,000,000
2009
Business Valuation
Global Arabian For Modern Application LTD
2009
Business Valuation
Al Rajwa Est.
2009
Anaam International Holding Group
Capital Restructuring
2009
Business Valuation
Global Distribution Co. Ltd.
2009
Advisory Valuation
Information Memorandum
Al Hajerah Est.
2008
Information
Memorandum
National Experimental Establishment
(Mutawaffy HujjajSouth Asian Countries)
2008
Al Banawi Industrial Group
Business Valuation
2006
Buy side Mandate
2008
Al Raya Foodstuff Est

74. Managing Director & CEO
FTH Team
Mr. Alsayrafi founded FTH in 1994 as the regional corporate finance arm of Andersen, and has operated as an independent corporate advisory firm since 2002, offering a wide range of corporate finance advisory services to a diversified client base in the Middle East. Faisal, responsible for reviewing technical aspects of transactions and ensuring quality advisory, has directed the development of relationships and managed high profile transactions in the real estate, media and entertainment, financial services, petrochemical and general industrials sector, working with client organizations in Saudi Arabia, Egypt, UAE, Lebanon, Bahrain, Yemen, Qatar, UK and USA.
Mr. Alsayrafi’s experience includes his role as managing partner of Andersen’s Global Corporate Finance practice in the Middle East, a senior management position with one of the region’s largest food manufacturers, and numerous international and regional finance and strategy roles, leading to an exceptionally strong network of regional and local contacts in finance, business and government.
Faisal holds an MBA from the University of Vermont and an MS in Accounting from the University of New Haven. He is a Registered Financial Consultant (RFC), Saudi Arabia, and an Accredited Arbitrator by the GCC Association for Arbitration. In addition, Faisal holds the following qualifications from the United States; American Society of Appraisal (ASA), CFC, RFC, CFE, CVM, CVA, CM&E, CM&A, CPES, as well as being a Master Financial Professional and a Certified Senior Business Analyst. Faisal has also earned the prestigious ASA designation conferred by the American Society of Appraisers and is an Accredited Senior Appraiser (ASA). Mr. Alsayrafi is the first and only Arab investment banker to complete and pass the ASA’s stringent experience and examination requirements.
Faisal Alsayrafi
Managing Director & CEO