NSPD on Bematech`s M&A process: a management tool proposal October, 2010 GA

Company snapshot Name: Bematech S/A Foundation: 1989 Headquarters: Curitiba, PR, Brazil Employees: +1,500 International subsidiaries: USA, Argentina, Germany, Taiwan and China. Value proposition: integrated solutions (hardware, software, services and training) focused on the small and medium retail and hospitality segment Market share (Brazil) % market share in fiscal printers % market share in retail management systems Sales channel: +3,000 resellers Presence : more than 415,000 points-of-sale in 37 countries Main customers: Overview MarketFinancials Portfolio

Background Corporate Strategy: Carry out new acquisitions on a selective basis; 80 companies analyzed and 7 acquisitions done and aggressive acquisition guidance to investors ; Conflict of interest: guidance to investors + short term goals + 1 team accountable 4 out 7 acquisitions destroyed value so far; First acquisition (Hardware company) IPO $~80MM allocated to new acquisitions 2009: 5 acquisitions : 2 acquisitions Acquisitions timeline

Background Source: Accenture, 2006 Testing Ideation

Elimination funnel and Development Pipeline: assumptions Scope: Tool for internal process with high impact in the corporation (Acquisitions Funnel); Product: Acquisition of assets and IT companies Assumptions: Limited companies available; Success of the funnel depends also from external factors: “ the sellers”; Guidance to investors influenciate the prioritization;

Elimination funnel and Development Pipeline - PROPOSAL Target mapping Investment thesis Due diligence Integration planning Financial valuation Approach Closing

Elimination funnel and Development Pipeline: Roles and responsibilities Phases Sub-Phases M&A / Business Development team Cross functional team Executive team Board of Directors EliminationFunnel Ideation Target mapping LAI- Surface evaluation Approach LAI- Detailed evaluation Financial valuation LAAI Development pipeline Cross funct. Development Investment thesis ALAI Testing Due dilligence ALAA Deployment Integration planning ALAA Launching/post launching Closing LAAA L=Phase leader A=should approve I=shoud be informed Marketing HR Finance Operations Legal R&D

Elimination funnel and Development Pipeline: Economic Sub-Thinking Accumulated OPEX (US$ thousands)

Elimination funnel: ideation PhaseDescriptionScreenScreen broad criteria Ideation  Target mapping: identification of potential targets for acquisitions, based on corporate strategy and segmentation framework; Ideation Screen Does the company have: solid customer bases or established distribution channels? Complementary business and technology? Will this company maintain or expand Bematech market share, increase its profitability and competitive position?

Elimination funnel: ideation Segment priorization: retail automation penetration x market size Company priorization: market share Segmentation Framework

Elimination funnel: expansion & surface evaluation PhaseDescriptionScreenScreen broad criteria Surface Evaluation/  Approach: Targets personally contacted and in case of interest from the target side;  A standard RFI (request for information) report is sent to the target company for the next phase; Surface evaluation NDA signature; Target accepts provide detailed information for the next phase;

Elimination funnel: detailed evaluation PhaseDescriptionScreenScreen criteria Detail ed evaluation  Valuation: Financial information modeling;  Investment thesis draft produced;  First alignment with cross functional; Detailed evaluation screen Financials present consistency and match with the company expectations? Target information confirms previous assumptions on company fit to the acquisition strategy? Acquisition model defined?

Elimination funnel: detailed evaluation Economy assumptions Market assumptions Operating assumptions Premissas Financial assumptions Discounted cashflow Taxa de Desconto WACC Economic Value Financial info The Financial Valuation

Development pipeline: Cross functional development PhaseDescriptionScreenScreen criteria Cross –functional development  Investment thesis: Synergies tracked and assigned and draft of the integration objectives is provided; Cross-functional development Gate MoU signed External audit is hired to conduct the due diligence

Development pipeline: testing PhaseDescriptionScreenScreen criteria Testing  Due diligence:  Financial information is confirmed by the audits;  Liabilities tracked ;  Adjustments on valuation;  Final negotiation is conducted  Integration team building Testing Gate Target owners agrees on final negotiation terms and audit results; Integration team assigned;

Development pipeline: deployment PhaseDescriptionScreenScreen criteria Deployment  Integration Planning Deployment Gate How do we create value? What is the integration model? How the integration will be managed? What is the HR strategy?

How we create value? How integrate? How manage the integration? What HR strategy needed? What should be preserved to leverage this deal (sinergies)? What should be redesigned, adapted and eliminated? What shouf be integrated immediately? What can we wait? Absorb, integrate, create or attach? Which company culture should prevail (Bematech or acquired)? Does this model applies to the local management? Who will manage the company post-acquisition? How do we keep the company performance while we integrate pursuiting synergies? How aggressive should be the integration? How do we create the integration team? What is their scope? What would be the new decision structure of the company acquired? What will be the cultural impact of the integration? How do we identify, select and retain strategic resources from the acquired company? How do we assure the employees motivation during the integration process? Source: Booz Allen & Hamilton (adapted) Development pipeline: deployment

Development pipeline: Launch/Post launch review PhaseDescriptionScreenScreen criteria Launch / Pos launch review  Definition on integration goals, modeling and HR strategy, PLR Gate Integration plan approved by committee;

Conclusions Methodology: can be applicable to internal NPSD as a leadership and management function Elimination funnel “Doing more with less”: increase accuracy and speed through a better screening criteria A more dynamic elimination process also gives condition to accelerate opportunistic acquisitions ; Improve criteria on detailed evaluation: finance valuation is the critical point Development pipeline Mitigate risks of bad acquisitions: improve approval process (gate keepers) reducing conflict of interest Ensure commitment and accountability of the teams, specially at the Testing phase (due diligence)