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1 Institute of Chartered Accountants in Ireland, October 2007 Institute of Chartered Accountants in Ireland CRH Acquisition Success Myles Lee Finance Director.

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Presentation on theme: "1 Institute of Chartered Accountants in Ireland, October 2007 Institute of Chartered Accountants in Ireland CRH Acquisition Success Myles Lee Finance Director."— Presentation transcript:

1 1 Institute of Chartered Accountants in Ireland, October 2007 Institute of Chartered Accountants in Ireland CRH Acquisition Success Myles Lee Finance Director CRH plc October 2007

2 2 Institute of Chartered Accountants in Ireland, October 2007 CRH Origins 1970 merger of Cement & Roadstone formed Cement Roadstone Holdings, later CRH Rapid Irish growth in 1970s but CRH a big fish in small pond – 95% of business in Ireland Experienced and ambitious management team with strong cash flow to deploy Strategy evolved - invest at home to be the low cost producer; grow by acquisition o/seas In late 1970s – began to actively seek opportunities outside Ireland

3 3 Institute of Chartered Accountants in Ireland, October 2007 CRH Growth 1970s €26m €43m 16 acqs €43m 16 acqs €325m 62 : 33 : 5 Sales Acquisition Activity Sales % Balance* IRL:Europe:US * Basis: Sales# 2000 – H1’2007 1980s €325m €440m 49 acqs €440m 49 acqs €1.3Bn 19 : 64 : 17 1990s €1.3Bn €3.8Bn 189 acqs €3.8Bn 189 acqs €6.7Bn 9 : 36 : 55 2000s €6.7Bn €10.9Bn # 402 acqs €10.9Bn # 402 acqs Now €20Bn+ 7 : 41 : 52 M&A part of CRH DNA

4 4 Institute of Chartered Accountants in Ireland, October 2007 Delivering Superior Performance …. Growth Index: 1989 = 100 PBT +20% EPS +17% DPS +12% 20% CAGR in Total Shareholder Return since 1970

5 5 Institute of Chartered Accountants in Ireland, October 2007 International Building Materials Group; Market Cap c.€14bn; Top 6 in sector Now in 30 countries; 3 continents; 3,300+ locations; 80,000+ people Annualised Sales over €20bn focussed on three core businesses  Primary materials  Value-added building products  Building materials distribution Evenly balanced across geographies, products and sector end-use Listed Dublin (CRH.I), London (CRH.L), NYSE (CRH); Eurotop 300 stock CRH Today

6 6 Institute of Chartered Accountants in Ireland, October 2007 Three Core Businesses – Focused Diversity 2006 Sales €7.7Bn Cement/RMC/ Concrete Products31% Aggregates/Asphalt 36% Contracting Revenues33% Primary Materials 2006 Sales €4.2Bn B Merchants - Europe47% DIY - Europe19% Specialist Dist - US 34% Distribution 2006 Sales €6.8Bn Concrete Products 60% Clay Products 9% Glass Fabrication9% Insulation 6% Const Accessories6% Building Envelope 10% Building Products

7 7 Institute of Chartered Accountants in Ireland, October 2007 Geographic Presence Broadly 50/50 balance between Americas & Europe 30 Countries All 50 US States 30 Countries All 50 US States

8 8 Institute of Chartered Accountants in Ireland, October 2007 Development Strategy Strategy

9 9 Institute of Chartered Accountants in Ireland, October 2007 Clear Strategy Stick to core businesses in building materials - but broad Invest at “home”; be the low cost market leader Develop “overseas”; create platforms for future growth Generally mid-sized deals with some larger transactions Negotiate deals that meet sellers needs... and our needs Rigorous approach to evaluation, approval and review Objective is to maintain and develop a balanced portfolio All underpinned by strong governance, prudent financing, transparent reporting Twin imperatives... performance and growth

10 10 Institute of Chartered Accountants in Ireland, October 2007 Development Teams Multiple development teams embedded within existing operating units Each team has a mix of professional skills and operational experience Reporting to and directed by long-serving senior line managers Responsible for identifying, evaluating, concluding and integrating opportunities “Living with the consequences” drives rigorous evaluation Central HQ-based team targets new regional and product opportunities

11 11 Institute of Chartered Accountants in Ireland, October 2007 Devolved process - but rigorous and controlled Acquisition Approach Integration Approach tailor-made for each deal Implement CRH MIS, reporting, budgeting, cash and capex controls Transition to CRH Best Practice And then pursue growth plans Integration Approach tailor-made for each deal Implement CRH MIS, reporting, budgeting, cash and capex controls Transition to CRH Best Practice And then pursue growth plans Evaluation Rigorous qualitative operational review process and due diligence Evaluation based on prudent margin, cash flow, term value assumptions Strict Board approval process, with subsequent 3 year look back Evaluation Rigorous qualitative operational review process and due diligence Evaluation based on prudent margin, cash flow, term value assumptions Strict Board approval process, with subsequent 3 year look back Courtship/negotiation Patient approach recognising evolving owner circumstances Deals tailored to meet varying owner (and our) needs Upfront clarity with regard to post- acquisition priorities Courtship/negotiation Patient approach recognising evolving owner circumstances Deals tailored to meet varying owner (and our) needs Upfront clarity with regard to post- acquisition priorities Identifying deals Ongoing contact with extensive 25 year+ target database Each deal done opens doors to further opportunities CRH scale ensures access to all larger industry transactions Identifying deals Ongoing contact with extensive 25 year+ target database Each deal done opens doors to further opportunities CRH scale ensures access to all larger industry transactions

12 12 Institute of Chartered Accountants in Ireland, October 2007 Acquisition Process - Key Guidelines Seek well managed businesses with good market positions Maintain continuity of contact with potential targets Communicate upfront CRH post-acquisition objectives Set realistic timeframe and targets – no blue skies Maintain control of process and advisers …….Always remember #1 priority is to create shareholder value ……. ……. Post acquisition - Above all don’t make it worse …….

13 13 Institute of Chartered Accountants in Ireland, October 2007 Americas Materials Strategy in Action Americas Materials Strategy in Action

14 14 Institute of Chartered Accountants in Ireland, October 2007 Americas Materials – Growth Story First US acquisition in 1978 in concrete products in Western states Though US aggregates/asphalt sectors a natural focus given Irish expertise Took till 1985 to find a suitable entry point with acquisition of Callanan Significant position in Albany region of Upstate NY, sales US$77m Production of 2m tons aggregates with 289 employees

15 15 Institute of Chartered Accountants in Ireland, October 2007 Americas Materials – 20 Years of Growth Mt Hope NJ Tilcon New England NY/NJ Thompson McCully Michigan Shelly Ohio US Aggregates West/Central Mountain Companies Kentucky # of Deals 1 101000124664815171620101213 Callanan NY SE Johnson Ohio/Michigan 1985 – 2005: 137 acquisitions at a cost of US$4.3Bn

16 16 Institute of Chartered Accountants in Ireland, October 2007 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 New England $0.6 Bn Sales Since 1988 New England $0.6 Bn Sales Since 1988 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 Central $1.2 Bn Sales Since 1993 Central $1.2 Bn Sales Since 1993 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 New England $0.6 Bn Sales Since 1988 New England $0.6 Bn Sales Since 1988 West $1.4 Bn Sales Since 1995 West $1.4 Bn Sales Since 1995 Central $1.2 Bn Sales Since 1993 Central $1.2 Bn Sales Since 1993 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 New England $0.6 Bn Sales Since 1988 New England $0.6 Bn Sales Since 1988 Americas Materials – End-2005 Sales $3.9Bn from 4 regional divisions; strong market shares and aggs reserves Vertically integrated; highway construction activities as an outlet for aggs/asphalt New England $0.6 Bn Sales Since 1988 New England $0.6 Bn Sales Since 1988 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 Central $1.2 Bn Sales Since 1993 Central $1.2 Bn Sales Since 1993 West $1.4 Bn Sales Since 1995 West $1.4 Bn Sales Since 1995 2005 Volumes Aggs 147mt Asphalt 37mt RMC6.5m m 3 2005 Volumes Aggs 147mt Asphalt 37mt RMC6.5m m 3

17 17 Institute of Chartered Accountants in Ireland, October 2007 Americas Materials – APAC Opportunity APAC was a division of Ashland Inc, primarily focussed on chemical sector Ashland commenced a silent auction process in late ’05 / early ’06 We engaged and signed a exclusivity agreement in mid-June 2006 Then mobilised CRH resources and undertook extensive due diligence Concluding CRH’s largest ever acquisition by end-August 2006

18 18 Institute of Chartered Accountants in Ireland, October 2007 At AcquisitionNet of Disposals Consideration$1.3 billion$1.1 billion Sales (LTM June 2006)$2.9 billion$2.4 billion EBITDA (LTM June 2006)$220 million$190 million APAC – New Americas Materials Platform Major expansion into midwestern and southern US states Significantly increased US aggregates and asphalt positions Substantial scope for administrative, operational and purchasing synergies With selective disposals to increase the materials focus … … and aggregates/other downstream acquisitions over time

19 19 Institute of Chartered Accountants in Ireland, October 2007 New England $0.6 Bn Sales Since 1988 New England $0.6 Bn Sales Since 1988 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 Central $1.2 Bn Sales Since 1993 Central $1.2 Bn Sales Since 1993 West $1.4 Bn Sales Since 1995 West $1.4 Bn Sales Since 1995 Americas Materials – End-2006 Annualised sales now c.$7Bn across 5 regional divisions 1985 to 2006 – 157 deals at a combined cost of $5.7Bn New England $0.6 Bn Sales Since 1988 New England $0.6 Bn Sales Since 1988 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 Central $1.2 Bn Sales Since 1993 Central $1.2 Bn Sales Since 1993 West $1.4 Bn Sales Since 1995 West $1.4 Bn Sales Since 1995 ‘05 Vols + APAC Aggs 176mt Asphalt 65mt RMC7.3m m 3 ‘05 Vols + APAC Aggs 176mt Asphalt 65mt RMC7.3m m 3 APAC $2.4 Bn Sales Since 2006 APAC $2.4 Bn Sales Since 2006 New England $0.6 Bn Sales Since 1988 New England $0.6 Bn Sales Since 1988 NY / NJ $0.7 Bn Sales Since 1985 NY / NJ $0.7 Bn Sales Since 1985 Central $1.2 Bn Sales Since 1993 Central $1.2 Bn Sales Since 1993 West $1.4 Bn Sales Since 1995 West $1.4 Bn Sales Since 1995

20 20 Institute of Chartered Accountants in Ireland, October 2007 2006 Development Spend APAC just one element of a record €2.1Bn 2006 development spend Also completed 68 other deals across CRH operations €BnEuropeAmericasTotal Materials0.10.20.3 Products0.30.40.7 Distribution0.10.10.2 Total0.50.71.2

21 21 Institute of Chartered Accountants in Ireland, October 2007 H1 2007 Development Spend Further €1Bn spend on 35 transactions in H1 2007 across CRH operations €BnEuropeAmericasTotal Materials0.2<0.10.3 Products0.10.20.3 Distribution0.4<0.10.4 Total0.70.31.0 And c.€0.3Bn announced to-date H2’2007 for 4 Americas Materials businesses

22 22 Institute of Chartered Accountants in Ireland, October 2007 Going Forward

23 23 Institute of Chartered Accountants in Ireland, October 2007 Acquisitions Market Today Recent trends and challenges  Large Industry transactions and Private Equity interest in sector …  … drove higher acquisition multiples over recent years, however, …  … M&A appetites and multiples have cooled with recent market turbulence CRH Going Forward  Changing market backdrop likely to lead to increased opportunities  Still lots to achieve in our existing markets and products …  … plus opportunities in developing regions

24 24 Institute of Chartered Accountants in Ireland, October 2007 Overall Sustained focus on operational performance is the foundation for growth CRH Development Strategy continues to evolve and deliver ….. …. our clear and consistent strategic vision …. “to be a leading international building materials group delivering superior performance and growth performance and growth ”

25 25 Institute of Chartered Accountants in Ireland, October 2007 Institute of Chartered Accountants in Ireland CRH Acquisition Success Myles Lee Finance Director CRH plc October 2007


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