Sample Release Forms When Selling High Risk Items by xyg18168

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Sample Release Forms When Selling High Risk Items document sample

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									  Corporation / Acquired
Integration Planning Launch
          DATE
         Location
Acquired is the perfect match for
Corporation

•   Reduces industry overcapacity
•   Provides hard synergies
•   Forms world’s second largest pump company
•   Broadens products, markets, territories
•   Adds to installed base
•   Is perfectly timed
•   Creates significant shareholder value
•   Etc
Removes Excess Capacity

                     Pump Industry Capacity vs. Demand
120
                                                              Demonstrated Capacity
100
                                                        Capacity Overhang
80

60                                                                        Chemical

                  Demand
40                                                                          Refinery

20

  0
      1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001


Sources:   Bank of America, Salomon Smith Barney, Oil Industry Outlook & Company Reports
Provides Hard Synergies

• Headquarters -- about $15 million
• Sales force coverage overlap (calls to same customers, bid
  costs, travel, etc.)
   – Corporation pump sales force - 300*
   – Acquired sales force - 700*
• Plant/service center and product overlaps exist
• Etc




 *Approximate number of sales personnel
   Forms Second Largest Pump Company
   ($ millions)
                              Company Rankings by 1998 Pump Sales
$ 2,000



 1,500


 1,000


   500


     0
                                                             Weir
                                      KSB




                                                       IDP




                                                                                                                      IDEX
                                                                                           Sulzer




                                                                                                            Pentair
                                                                                                    Cardo
                                                                                Sterling
                              Ebara




                                            Grundfos
                  Flowserve




                                                                    Flowserve
          ITT



                  Pro Forma




     Sources:   Pumps: World Market 1999-2004; The McIlvaine Company,
                November 1998. Acquired and Corporation sales adjusted for actual results.
Broadens Products
Key Corporation product gains include:
•   Comprehensive – ANSI, ISO, API
•   Diffuser
•   Solids – slurry – abrasive
•   Rotary: gear, screw, progressive cavity
•   Reciprocating
•   Specialty for niche markets: decoking systems, concrete
    transfer, fire, marine/navy
   Broadens Markets
  Corporation                                                         Combined
                   Other *
                    10%                                               Market Mix
General Industry 4%
    Water 4%

     Power                   Petroleum
                                39%                                   Other *
      11%                                                               9%
                  Chemical                                 General
                    32%                                    Industry
                                                             12%
                                                                                  Petroleum
                  Other *                                                            38%
                    8%                                  Water
  Acquired                                               8%
       General
       Industry              Petroleum
         24%                    36%                          Power
                                                              13%
                                                                           Chemical
                                                                             20%
                       Power
             Water      15%        Chemical
             12%                     5%

                                         *Other includes Navy, Mining, Food and
                                         Beverage, and Pharmaceutical.
Broadens Territories

                                   Combined
Corporation                      Geographic Mix
               Other
   Asia Pacific 10%
       6%
                    North            Asia
         Europe/ME America          Pacific
            26%     58%              10%
                               Latin
                              America
                               10%
                                               North
              Other                           America
Acquired      10%                              50%
    Asia Pacific              Europe/ME
        15%          North       30%
                    America
             Europe/ 41%
               ME
              34%
   Adds to Installed Base

                           Installed Base

       Units   360,000           750,000

               Corporation                     Acq
                    *                          uire
                                                d
                              Sales Mix

Corporation*         55%                         45%

   Acquired       40%                          60%

               Aftermarket          Original Equipment
                    *Pumps and pump services
Is Perfectly Timed

   Power                                              Oil and Gas
                                                       (E&P) and
                                                        Pipelines



                                    Accelerating   Decelerating
                                      Decline        Decline

      Accelerating   Decelerating
        Growth        Growth




                                    Oil and Gas        Chemicals
                                     (refinery)
Creates Significant Shareholder Value

• Is significantly EPS accretive
• Is neutral to slightly dilutive in 2000
• Provides net hard synergies run rate
   – $35 million by year end 2000
   – $75 million by year end 2001
• Estimated rationalization costs of $150 million
Overview of Corporation / RED

• Corporation (ABC)
   –   1997 merger of XYZ and BWC
   –   NYSE: ABC
   –   1999 net sales: $1.1 billion
   –   > 40% of sales outside US
   –   Approx. 7,000 employees
   –   Operations in 28 countries
• Equipment Division (ED)
   – 1999 net sales: $353 million
   – 1999 focus on cost reduction
   – Significant growth opportunities
Overview of Acquired

• Formed in 1992 joint venture between PumpCo and
  Pumps R’Us, is #5 global supplier of pumps
• Has 5,000 employees, 42 manufacturing, repair and
  parts distribution facilities in 15 countries and operates
  in 27 countries
• Produces broadest range of pump configurations in
  industry, including centrifugal, reciprocating and rotary
  pumps
Summary

• Catapults Corporation to pump industry leadership
  position
• Has substantial hard synergies
• Fills product gaps
• Expands markets
• Provides opportunity for significant shareholder value
  creation
Call to Action

• Potential to create $800 million in shareholder value
   – Need for urgency – time is the enemy of integration
   – Need for focus – highest value proposition available
     over the next 24 months
   – Need for decisiveness – delayed actions (and decisions)
     cost money
   – Need for speed – early capture of synergies brings
     exponential cash flow to the bottom line
Transaction Summary
($ millions)

Purchase price:
Asset purchase:                             $775
                                      8.2 x 1999
Financing (banks and bonds):   Adjusted EBITDA
Estimated closing:                        $1,425
                                      April 2000
Pro Forma Sales
($ millions)



         2,076    2,145
                          2,061



          865      907     838    Acquired

          59       155     161
                                  Division
                                  ABC
         1,152    1,083   1,061




        1997      1998    1999
Pro Forma EBITDA       (before special items)
($ millions)



          265    269

                                   220
          84     95

           6     10                94           Acquired
                                                Division
                                   12
          175    164                            ABC
                                   114



        1997    1998             1999
Pro Forma Cost Savings Opportunities   ($
millions)


                           103


                  76


                           75
                  48

                                 Acquired
            18
                   8       8     Division
            12    20       20    ABC
             6
        2000     2001    2002
  Scenarios (excluding special items*)
                                           2000                      2001                     2002
1. No growth
       EPS                             $      1.20              $       1.59              $       2.04
       EBITDA ($MM)                            227                       295                       322
       Debt/capital                           78%                       75%                       69%
2. Conservative growth
       EPS                             $      1.31              $       2.00              $       2.72
       EBITDA ($MM)                            237                       325                       360
       Debt/capital                           77%                       72%                       64%
3. Higher growth
       EPS                             $      1.54              $       2.46              $       3.72
       EBITDA ($MM)                            252                       353                       408
       Debt/capital                           76%                       68%                       54%
                 1. At 1999 EBIT.
                 2. 2% revenue growth each year; 1% margin growth for ABC and 0.5% for Acquired in
                    2000; 0.5% margin growth for both in 2001.
                 3. 4% revenue growth each year; 1.5% margin growth for ABC and 1% for Acquired in
                    2000;
                  * 1% margin growth for both in 2001 and 2002. $150MM working capital reductions.
                    Synergy costs $150 million: 65% goodwill, 11% restructure/write-offs, 24% integration -
                    $25 million in 2000, $11 million in 2001.
  Potential Growth Scenario
  P&L (excluding special items*)

$ millions except per share             2000                 2001                  2002
Prior Year EBIT: *                    $   159              $    171              $    245
Growth – net **                             11                   17                     8
Cost saves                                  18                   58                    27
New goodwill                              (12)                   (6)                    --
Timing                                     (5)                     5                    --
EBIT                                      171                   245                   281
Interest/financing fees                     93                  125                   115
Pre-tax income                              78                  120                   166
Taxes                                       28                   43                    60
Net income                            $     50             $     77              $    106
Shares outstanding                       38.0                  38.5                  39.0
EPS                                   $  1.31              $   2.00              $   2.72
              * Special items include restructure, integration costs, asset impairments
                and deferred financing fees.
             ** Revenue growth 2% in each year. Margin improvement for ABC 1% and
                Acquired 0.5% in 2000; 0.5% for ABC and Acquired in 2001 and no
                improvement in 2002. Net of Corporation costs.
  Potential Growth Scenario
  Sources/Uses of Cash
$ millions                             2000                 2001               2002
EBIT                               $     169            $      245           $     281
Depreciation + amortization                68                   80                  80
EBITDA                                   237                   325                 360
Synergy/restructure cash                 (96)                 (54)                   --
Interest expense                         (88)                (120)               (110)
Tax refund (payment)                       19                 (18)                (53)
Capital expenditures                     (50)                 (50)                (50)
Free cash flow *                   $       22           $       83           $     147

Net debt/EBITDA                           4.6                  3.1                 2.4
EBITDA/interest                           2.7                  2.7                 3.3
Debt/capital                             77%                  72%                 64%


                     * Before asset sales and working capital improvements
PRITCHETT



• Corporate integration specialists
Objectives

•   Organization
•   Focus
•   Prioritization (80/20 rule)
•   Responsibility/accountability
•   Coordination and linkage
•   Bottom-line rationale
M&A Risk Statistics
• 83% of deals are disappointing or outright failures
• 50% overall drop-off in productivity in first 4-8 months
• Upon announcement of merger or acquisition, a company’s stock
  price rises only 30% of the time
• 77% of all acquisitions fail to earn their cost of capital
• On average, management grades the financial performance of their
  integration alliances as a “C minus”
• Lack of integration speed and “people problems” cited as the top
  integration failure factors by a sample of 45 CFOs from Fortune
  500 companies who have recently merged/acquired




                        Sources: CFO Magazine, Business Week, Fortune, Independent Research
Seven Deadly Sins of Integration

• Lack of integration speed
• Dilatory decision-making protocols (pursuit of the
  perfect answer)
• Poor internal and external communications
• Lack of integration focus and prioritization
• Inadequate senior executive participation
• Poor due diligence (financial only, no “soft goods”)
• Inattention to critical retention issues (disregard for the
  “me issues”)
   Integration, like war, must be waged
   • Relentless pursuit of speed
   • Rapid fire decision-making
   • Focus on results (i.e., meeting the integration timeline,
     identifying and capturing synergies)
   • Comprehensive due diligence and planning
   • Command-and-control integration focus and
     management
   • Ruthless prioritization and integration discipline
   • Strong internal and external communications
   • Manage people issues
“Understanding and managing M&A ambiguity and workload can
be counter-intuitive to accepted business practices and tenets.”
Caveats

• Important to use discretion in communicating with
  employees outside of this meeting
   – We’re going to present information that needs to be evaluated
   – We’re here to evaluate options
   – This work does not represent final decisions
               Acquisition Value Drivers
                                        Corporate Financial / Asset
                                              Managem ent


                                  Corporate      Corporate         Corporate
                                 Integration    Restructuring   Cash Flow / Debt
                                  Synergies         Cost          Reduction


                                   Supply Chain Management        Supply Chain
                                                                  Management

                                                                Cash Management
                                                                   Campaign

                                                                  Real Estate




Corporate Administration /
                                                                                        Operations Issues
   Soft Goods Issues



     HQ               HQ                                                    Division          Division
                                                                                                                   Division
 Integration     Restructuring                                            Integration       Restructuring
                                                                                                                Sales Retention
  Synergies          Cost                                                  Synergies            Cost



                                                                                            Plant Closures
        IDP HQ Closure
                                                                                         Sales Reorganization

                                                                                          R&D Consolidation

                                                                                             Seals Sales
                       Integration Team Structure




Approved by Howie Wynn on 3/9/00.
Production Operations & Plant Consolidation
                                                                                              Plant & Operations
                                                                                               Integration Lead
                                                                                                Frans Burgers
                                                                                                    Fullt-time



                                                                          Products Sourcing                        Operations
                                                                              Bob Ross                              Ken Bell
                                                                               Full-time




                                                                              Team Member                             Eng. Team
                                                                             Hassan Jennaoui                         Snehal Bhatt
                                                                                  Full time                              Full time




                                Sample
                                                                              Advisor                             Plant Consl.
                                                                              Bill Ord                           Kyle Shaminski
                                                                               Full time                             Full time



                                                                            Staff Advisor
                                                                           George Pieters




   Phillipsburg      Huntington/Vernon     Taneytow/Tulsa     Brantford                Gateshead/Etten Leur              Dayton/Cheasapeake         Petit Rechain/Newark   Buenos Aires/Mendoza   Service Centers
 Brian Bohunicky       Frans Burgers        Joe Marenghi        TBD                      George Pieters                   Harry Schimmoller                Bill Dube          Frans Burgers        Rich Grauvogl
     Part time            Full time            Full time                                      Temporory Leader                       Full-time            Full-time               Full time           Full-time




    Team Member          Team Member         Team Member                                         Team Member                      Team Member           Team Member              Team Member         Team Member
    Kyle Shaminski        Bill Schaeffer      Don MCort                                         Hassan Jennaoui                  Gary McClimmons        Robert Stanbury              TBD              Bob McKay
         Full-time           Part time            Part time                                          Part time                          Part time              Staff                                      Full-time


                                                                                                 Team Member
                                                                                                                                                                                                     Team Member
                                                                                                   Ruddick?
                                                                                                                                                                                                      Snehal Bhatt
                                                                                                                                                                                                         Part-time


                                                                                                                                                                                                     Team Member
                                                                                                                                                                                                      Larry Avery
Sales


            Sales Integration Team Leader
                       Bill Ord
                          Full time




        Sample
         Staff Advisor
        John Donatiello
            Part-time




         Team Member                IDP Member
          Bob Lendahl             Hassan Jennaoui
             Full time                 Full-time
R&D


                   R&D Consolidation
                      Dr. Gopal
                         Full-time



       Staff Advisor


      Sample
      Robert Stanbury



      IDP Team Member                Team Member
         Trygve Dahl                 Roger Turley
           Full-time                    Full-time
Marketing


              Marketing Team Leader
                   John Wood
                        Full-time




       Staff Advisor


     Sample
      Robert Stanbury



       Team Member               Team Member
       Wilson?/Quain?           Hassan Jennaoui
            Full-time                Full-time
Seal Sales




              Team Leader
              Howie Wynn


      Sample Team Member
             John Donatiello
Real Estate & Non-core Assets




                  Team Leader
                   Mark Dailey


     Sample
     Team Member
      Bob McKay
                                Team Member
                                 John Nanos
Human Resources

                        HR Team Leader
                         Jim McMann
                              Full-time




     Sample
            Flowserve HR                  Flowserve HR
            Dave Stephens                  Carlos Lima
                  Part-time                   Part-time


               I.R. HR                      I.D.P. HR
             Sue Toronto                   Dan Dolphin
               As needed                      Part-time


                                           I.D.P. HR Intl.
                                          Phil McMenemy
                                              Part-time
   Finance/Accounting/Treasury


                                                          Team Leader
                                                        Renee Hornbaker
                                                                  Part-time



                                       Team Member
                                        Phil Schlom




                Sample
                                          Part-time




        Accounting/Payroll               Treasury/Payroll/Risk                    Tax        Cash Mgmt Campaign
          Rick Johnson                           TBD                           Mike Dunn            TBD
               Part-time                                                         Part-time         Full-time




Team Member            Team Member           Team Member                      Team Member
 Tom Greene           Randy Bingman              I.R.                             I.R.
   Part-time               Part-time                  Part-time                  Part-time
Legal, Risk Mgmt & Liberty Corners



                              Team Leader
                               Ron Shuff
                                 Part-time




        Sample
Team Member
               Team Member
               Art Fruchtman
                  Part-time




               Team Member              Team Member      Team Member
  J. Nanos      R. Roberts                S. Wilson        M. Young
   Part-time       Part-time                 Part-time      Part-time
  Information Technology



                               Team Leader
                              Rory MacDowell
                                  Part-time



               Team Member



       Sample
              George Tabback
                  Part-time




Team Member    Team Member                    Team Member   Team Member
    TBD            TBD                            TBD           TBD
Supply Chain Management




                Team Leader
                 Mark Dailey
                      Full-time




     Sample     Team Member
                Mark Dorman
                      Full-time
   Integration Timeline (sample)
                                                                            Day 1         Integration
Objective                           Project                     IAT
                                                                            Action         / Synergy
                                                                                                            Executive                          Post-              Six
                                    Launch                    Launch                                         Summit            Target         Close              Month
Milestone                                                                   Team             Team
                                                                                                                               Close:         Review             Review
                                                                            Review           Review
 Events                                                                                                                         4/15




Objective                                                                                                                                     Weekly
                                 Complete                   3/22–3/24        4/3 (0r         4/24–4/25         TBD                                              Month 6-9
 Status                                                                       4/5)                                                          (approx. 4
                                                                                                                                            wks); then
                                                                                                                                             monthly

                             Week 1           2         3               4          5            6             7            8            9


              •Contracts and             •Planning                •Finalize Day        •Finalize         •Executive                •Review Day 1         •Review
              decision making            interviews /             1 plans (incl.       synergy /         Summit                    issue execution       status of all
                                         meetings                 linkages,            integration       Preparation:              and next steps        integration
              •Strategy and
                                                                  recomm., and         action plan                                                       actions
              economics                  •Launch                                                         Day 1 event              •Review
                                                                  Day1 impl.           (incl.
                                         preparation:                                                    finalization              integration /         •Review
              •Soft-goods issues                                  cost                 synergy /
                                                                                                                                   synergy action        synergy
              management                 Drivers                 summary)             cost detail       Change
                                                                                                                                   initiatives           realization
                                                                                       by month)         management
              •The Call to Action        Metrics                 •Day 1 plan                                                                            and tracking
                                                                                                         issue ID and              •Finalize org.
    Key       •Integration               Constraints
                                                                  review /             •Synergy /
                                                                                                         planning                  and personnel         •Red flag
                                                                  approval             integration
Initiatives   planning
                                         IAT structure /         meetings             plan review /     Newco exec
                                                                                                                                   selection             issues
              (synergy review,           membership               (3/30-3/31)          approval          personality               •Review synergy       •Re-
              integ. mgmnt., integ.                                                    meetings          profiling, team           status                prioritize
                                         Timeline                •Launch Day
              milestones, launch                                                       (4/6-4/7)         building and                                    actions
                                                                  1 impl.                                                          •Review timeline
              Comm, HR and IT            Checklists/data                                                engagement
                                                                  campaign             •Launch                                                           •Re-focus
              IATs, and initiate                                                                                                   •Red flag issues
                                         Incentives                                   synergy /         Transitioning                                  effort
              integ. functional                                   •Synergy
                                                                                       integration       the functional            •Re-prioritize
              discovery)                 Presentations           planning
                                                                                       campaign          integration               actions
                                         template
              •Project admin.
                                                                                                                                   •Re-focus effort
                                         Invites/logistics
Integration Commitment Petition
We the undersigned, individually and collectively, commit our “best
  efforts” to the success of the Corporation / Acquired corporate
  integration. We recognize the need for speed in executing the
  integration plan and the importance of realizing the synergies
  associated with combining the two companies. We acknowledge
  that we may be presented with or asked to deal with information
  or decisions involving either companies business or personnel
  that is highly confidential. We further recognize that the pre-
  mature release of such information could negatively impact the
  success of this project to which we are committed. Accordingly,
  we pledge to maintain the confidentiality of the information and
  actions contemplated throughout the integration process and
  agree that we shall not share such information with anyone in
  either organization until such information is approved for release
  within the integration project.

NAME:                            AFFILIATION/STATUS:
Integration Performance Metrics

• Three measures of integration success:
   1.   Realized synergies (run rate)
   2.   Cash savings (captured cash flow)
   3.   Restructuring costs (costs)
Integration Performance Metrics


Realized Synergies (run rate):
  - the annualized savings from future costs that have
  been removed (but not yet realized) from the combined
  companies as of a snapshot point in time.

  Example: 1 terminated employee = annual salary + annual
  benefits as a realized synergy as of date of termination.

  Regardless of termination date: $60,000 salary + 30% burden rate =
  $78,000 of Realized Synergies, annual cost removed from combined
  companies.
Integration Performance Metrics

Company minimum realized synergies:


   – Success:         $106,000,000
   – By:              June 30, 2001
Integration Performance Metrics


Cash savings (captured synergies):
  - the cumulative cash that has been captured (“taken to
  the bank”) from realized synergies as of a snapshot
  point in time.

  Example: 1 employee terminated January 1, 2001 will provide 6
  months of salary and benefits savings (cash that we did not spend)
  on June 30, 2001.

  01/01/01 term date: $60,000/12 x 6 mos = $30,000 of cash
  savings
Integration Performance Metrics

Company minimum cash savings (captured synergies):


   – Success:         $60,000,000
   – By:              June 30, 2001
Integration Performance Metrics


Restructuring costs (costs):
  - the costs (cash outlays) directly associated with taking a synergy
   action.

   Examples: Severance pay, equipment relocation, contract labor, capital
   investment.
Integration Performance Metrics

Company maximum restructuring costs (costs):


   – Success:          $146,000,000
   – By:               June 30, 2001
Integration Performance Metrics
• Company success:               • Team success:

   – Synergies:       >             – Synergies:       >$
     $106,000,000                     Team target

   – Cash:    > $ 60,000,000        – Cash:    > $ Team target

   – Cost:    < $146,000,000        – Cost:    < $ Team target

     achieved by June 30, 2001        achieved by June 30, 2001
             Preliminary Synergy Cash Capture ($ millions)
                      for the period 4/1/00 - 6/30/01
                                                             St. Louis to Little Rock
80.00
                                                             Kansas City to Tulsa
70.00
                                      106                    Seatle to Oklahoma City

60.00                                                        England to Belgium

                                                             Pittsburg
50.00
                                                             Ohio to Mass
40.00                                                        Division 1

                                                             Mexico to Mendoza
30.00
                                                             Statesville
20.00
                                                             Service Ctrs

10.00                                                        North Carolina

                                                             Sales Reorganization
 0.00
    Q2-00   Q3-00        Q4-00         Q1-01         Q2-01   Washington to Dallas
            Preliminary Synergy Cash Capture ($ millions)
                     for the period 4/1/00 - 6/30/01
                                                        St. Louis/Little Rock
80.00
                                                        Kansas City/Tulsa
70.00
                                                        Seatle/Oklahoma City

60.00                                                   England/Belgium
                                        60
                                                        Pittsburg
50.00
                                                        Ohio/Mass

40.00                                                   Division 1

                                                        Mexico/Mendoza
30.00
                                                        Statesville
20.00
                                                        Service Ctrs

10.00                                                   North Carolina

                                                        Sales Reorganization
 0.00
    Q2-00    Q3-00      Q4-00       Q1-01       Q2-01   Washington to Dallas
 Synergy Scorecard                                                                                               3/15/00 - 6/31/01
                                                              Captured Cash Flow :                     Maxim um Restructuring Costs:                 Realized Synergies (Forw ard Run Rate):
                                                  Targeted:        Actual:       Variance:       Targeted:           Actual:         Variance:         Run Rate:       Actual:       Variance:


I. Corporate Responsibility:
 A.   IDP HQ Integration:
      HR                                               2,554                           (2,554)          (139)                               (139)           2,554                          (2,554)
      Legal                                            2,554                           (2,554)          (139)                               (139)           2,554                          (2,554)
      Finance/Acct/Treasury:                           2,554                           (2,554)          (139)                               (139)           2,554                          (2,554)
      Info. Technology:                                2,554                           (2,554)          (139)                               (139)           2,554                          (2,554)
      IDP HQ Facilities:                               2,554                           (2,554)          (139)                               (139)           2,554                          (2,554)


 B.   Supply Chain:                                           0                              0               0                                   0                 0                              0


 SUBTOTAL:                                          $12,768              $0          ($12,768)         ($693)                  $0          ($693)        $12,768             $0          ($12,768)




II. Rotating Equipment Division Responsibility:
 A. RED/IDP Integration:
      Plant closures:
              Huntington Park to Vernon:               2,481                           (2,481)        (8,476)                             (8,476)           9,924                          (9,924)
              Taneytow n to Tulsa:                     5,840                           (5,840)       (10,350)                            (10,350)           9,240                          (9,240)
              Brantf ord to Tulsa:                     1,143                           (1,143)        (2,726)                             (2,726)           3,428                          (3,428)
              Gateshead to Etten Leur:                 2,897                           (2,897)        (3,724)                             (3,724)           8,692                          (8,692)
              Phillipsburg:                            1,377                           (1,377)       (11,450)                            (11,450)          16,044                         (16,044)
              Dayton to Cheasapeake:                   3,988                           (3,988)        (9,726)                             (9,726)           7,976                          (7,976)
              Petit Rechain:                           1,859                           (1,859)        (2,651)                             (2,651)           2,788                          (2,788)
              Buenos Aires:                             224                              (224)        (1,291)                             (1,291)             896                              (896)
              Statesville:                              414                              (414)          (275)                               (275)             552                              (552)
              Service Ctrs:                            2,333                           (2,333)          (950)                               (950)           4,000                          (4,000)
              North Carolina:                                 0                              0               0                                   0                 0                              0


      Plant Closures Sub-Total:                      22,556                  0        (22,556)       (51,619)                   0        (51,619)          63,540                0        (63,540)


      Sales:                                         24,709                           (24,709)        (2,499)                             (2,499)          30,036                         (30,036)


      Products:                                               0                              0               0                                   0                 0                              0


      Seal Sales                                              0                              0               0                                   0                 0                              0


      R&D Consolidation:                                      0                              0               0                                   0                 0                              0


 SUBTOTAL:                                           47,265                  0        (47,265)       (54,118)                   0        (54,118)          93,576                0        (93,576)




 TOTAL:                                              60,033                  0        (60,033)       (54,811)                   0        (54,811)        106,344                 0       (106,344)
Integration Performance Metrics

•    Incentive plan design will be based on June 30, 2001
     performance:


    1. Trigger #1: Achieving company synergy, cash and
       cost targets.
    2. Trigger #2: Achieving team synergy, cash and
       cost targets.
    3. Value accelerator: Maximizing cash in excess of
       $60 million.
Integration Performance Metrics


•   Incentive plan design to be finalized in the next two
    weeks. Key features will include:

    –   No awards if company targets are not met
    –   No awards if team targets are not met
    –   Meaningful awards if targets are met
    –   Increasingly substantial awards for exceeding cash
        target of $60 million
Acquired Project
 Synergy Bonus
     Plan
Acquired Project Synergy Bonus Plan

• Eligibility: assigned members of the Acquired
  Integration Team whose participation is approved by
  Steering Committee Chairman.


   –   Participants will include employees and external contractors
   –   Two categories of participants; Full-time & part-time
   –   Full-time: 100% integration
   –   Part-time: 25-50% integration + “day job”
   –   Executive Officers will not be eligible to participate
 Acquired Project Synergy Bonus Plan

• Proposed Incentive Plan:


   – The term of the plan is 01/01/2000 through 06/30/2001
   – Participants maintain their current base salary and target
     incentive opportunity
   – The plan provides significant upside opportunity for meeting
     or exceeding project cash savings.
Acquired Project Synergy Bonus Plan

• Proposed Incentive Plan cont.:
   – All or a portion of the target incentive (depending on team
     status--dedicated or part-time) will be tied to achievement of
     Acquired synergies as specified below:


                   Corporate            Division
                                               Operating      IDP
     Team Status      EPS      Net Profit      Cash Flow   Synergies

    Dedicated                                                100%

    Part-Time        15%        30%                15%       40%
 Acquired Project Synergy Bonus Plan

• Proposed Incentive Plan cont.:
   – Payout of project incentives will be contingent upon achievement
     of the following threshold performance levels:

       • Cash Flow              >= $60,033,000
       • Realized Synergies             >= $106,344,000
       • Restructuring Costs            <= ($146,000,000)


   – Payout of project incentives for part-time team members will also
     be contingent upon receiving a “met expectation” rating or better
     for non-project related responsibilities in their March, 2001
     performance appraisal
 Acquired Project Synergy Bonus Plan
• Proposed Incentive Plan cont.:


    – Full-time participants: 300% of target bonus, plus roughly
      3% of target bonus for each 1% of additional cash savings above
      $60 million.
            – Example: If base = $100k and target bonus = 40%, and company and
              team targets are met then:


                » 40% x 300% =120% x $100,000 = $120,000

                » if cash target exceeded by 10% ($66 million):


                » 40% x 30% = 12% x 100,000 = $12,000
 Acquired Project Synergy Bonus Plan
• Proposed Incentive Plan cont.:


    – Part-time participants: 300% of 40% of the prorated target
      bonus, plus roughly 3% of target bonus for each 1% of additional
      cash savings above $60 million.
            – Example: If base=$100k and target bonus =40%, and company and
              team targets are met then:


                » 40% x 40% x 300% = 48% x $100,000 x 1.5 =
                  $72,000; plus remaining prorated bonuses for
                  normal 2000 and 2001 plans;

                » if cash target exceeded by 10% ($66 million):


                » 40% x 40% x 30% = 4.8% x 100,000 = $4,800
            Preliminary Synergy Run Rates ($ Millions)
                   for the period 4/1/00 - 6/30/01

120.0
                                   106
                                                    Huntington Park/Vernon
100.0                                               Taneytow n/Tulsa
                                                    Brantford/Tulsa
 80.0                                               Gateshead/Etten Leur
                                                    Phillipsburg
                                                    Dayton/Cheasapeake
 60.0
                                                    Petit Rechain
                                                    Buenos Aires/Mendoza
 40.0
                                                    Statesville
                                                    Service Ctrs
 20.0
                                                    North Carolina
                                                    Sales Reorganization
  0.0                                               Liberty Corners to Dallas
    Q2-00      Q3-00    Q4-00     Q1-01     Q2-01
            Preliminary Synergy Cash Capture ($ millions)
                     for the period 4/1/00 - 6/30/01
                                                         St. Louis/Little Rock
80.00
                                                         Kansas City/Tulsa
70.00
                                                         Seatle/Oklahoma City

60.00                                       60           England/Belgium

                                                         Pittsburg
50.00
                                                         Ohio/Mass
40.00                                                    Division 1

                                                         Mexico/Mendoza
30.00
                                                         Statesville
20.00
                                                         Service Ctrs

10.00                                                    North Carolina

                                                         Sales Reorganization
 0.00
    Q2-00    Q3-00      Q4-00       Q1-01        Q2-01   Washington to Dallas
           Synergy Scorecard                                                                                     3/15/00 - 6/31/01
                                                              Captured Cash Flow :                     Maxim um Restructuring Costs:                 Realized Synergies (Forw ard Run Rate):
                                                  Targeted:        Actual:       Variance:       Targeted:           Actual:         Variance:         Run Rate:       Actual:       Variance:


I. Corporate Responsibility:
 A.   IDP HQ Integration:
      HR                                               2,554                           (2,554)        (1,386)                             (1,386)           2,554                          (2,554)
      Legal                                            2,554                           (2,554)        (1,386)                             (1,386)           2,554                          (2,554)
      Finance/Acct/Treasury:                           2,554                           (2,554)        (1,386)                             (1,386)           2,554                          (2,554)
      Info. Technology:                                2,554                           (2,554)        (1,386)                             (1,386)           2,554                          (2,554)
      IDP HQ Facilities:                               2,554                           (2,554)        (1,386)                             (1,386)           2,554                          (2,554)


 B.   Supply Chain:                                           0                              0               0                                   0                 0                              0


 SUBTOTAL:                                          $12,768              $0          ($12,768)       ($6,932)                  $0        ($6,932)        $12,768             $0          ($12,768)




II. Rotating Equipment Division Responsibility:
 A. RED/IDP Integration:
      Plant closures:
              Huntington Park to Vernon:               2,481                           (2,481)       (13,216)                            (13,216)           9,924                          (9,924)
              Taneytow n to Tulsa:                     5,840                           (5,840)       (20,032)                            (20,032)           9,240                          (9,240)
              Brantford to Tulsa:                      1,143                           (1,143)        (8,209)                             (8,209)           3,428                          (3,428)
              Gateshead to Etten Leur:                 2,897                           (2,897)       (14,501)                            (14,501)           8,692                          (8,692)
              Phillipsburg:                            1,377                           (1,377)       (55,986)                            (55,986)          16,044                         (16,044)
              Dayton to Cheasapeake:                   3,988                           (3,988)        (9,726)                             (9,726)           7,976                          (7,976)
              Petit Rechain:                           1,859                           (1,859)        (2,651)                             (2,651)           2,788                          (2,788)
              Buenos Aires:                             224                              (224)        (2,663)                             (2,663)             896                              (896)
              Statesville:                              414                              (414)          (275)                               (275)             552                              (552)
              Service Ctrs:                            2,333                           (2,333)        (5,027)                             (5,027)           4,000                          (4,000)
              North Carolina:                                 0                              0          (855)                               (855)                  0                              0


      Plant Closures Sub-Total:                      22,556                  0        (22,556)      (133,141)                   0       (133,141)          63,540                0        (63,540)


      Sales:                                         24,709                           (24,709)       (16,083)                            (16,083)          30,036                         (30,036)


      Products:                                               0                              0               0                                   0                 0                              0


      Seal Sales                                              0                              0               0                                   0                 0                              0


      R&D Consolidation:                                      0                              0               0                                   0                 0                              0


 SUBTOTAL:                                           47,265                  0        (47,265)      (149,224)                   0       (149,224)          93,576                0        (93,576)




 TOTAL:                                              60,033                  0        (60,033)      (156,156)                   0       (156,156)        106,344                 0       (106,344)
Integration Performance Metrics

•    Incentive plan design will be based on June 31, 2001
     performance:


    1. Trigger #1: Achieving company synergy, cash and
       cost targets.
    2. Trigger #2: Achieving team synergy, cash and
       cost targets.
    3. Value accelerator: Maximizing cash in excess of
       $60 million.
Integration Performance Metrics


•   Incentive plan design to be finalized in the next two
    weeks. Key features will include:

    –   No awards if company targets are not met
    –   No awards if team targets are not met
    –   Meaningful awards if targets are met
    –   Increasingly substantial awards for exceeding cash
        target of $60 million
The Next 3 Days
• Day 1:
   – Overview of deal (economics, timeline, structure)
   – Short-term mission critical issues planning
• Day 2:
   – Synergy action planning
• Day 3:
   – Synergy action planning
   – Presentation of plans
   – Next steps
Anti-Trust Guidelines for
Pre-Merger Information Sharing

•   There are two anti-trust issues associated with
    negotiating and closing transactions

    1. Specific pre-closing coordination/information sharing between
       parties that may violate the Hart-Scott-Rodino Act

    2. Joint activities by the parties prior to close will be subject to
       review under Section 1 of the Sherman Act which prohibits all
       contracts, combinations or conspiracies that unreasonably
       restrain trade
Anti-Trust Guidelines for
Pre-Merger Information Sharing
• You cannot discuss
   – Current/future pricing plans
   – Costs
   – Strategic plans of the existing business
   – Confidential/proprietary information re market share and/or selling
     practices
   – Specific customer information
• You can discuss
   –   How the merger/acquisition will be structured
   –   What the anticipated efficiencies will be
   –   Vision for new corporate culture
   –   How you envision motivating the new workforce (e.g., goals, metrics,
       etc.)
• In addition, you can
   – Form integration/transition teams
   – Prepare for post-closing implementation
   – Retain an independent third-party consultant to receive/escrow
     competitively sensitive information
Integration 101

• Execute on short-term mission critical for seamless
  Newco transition
• Drive synergies to bottom line as quickly as possible


               Only after this is achieved




• Turn attention to incremental
  process/infrastructure/functional improvements
Short-Term Mission Critical
• Critical actions that must be executed in the short-term in order to:
    – Ensure a seamless customer transition (e.g., customer
      communications, order entry, field service, sales representative
      clarification, etc.)
    – Allow employees to maintain focus on day-to-day operations and
      protect productivity (e.g., employee communications, organization
      structure, contact lists, employee benefits, business cards, etc.)
    – Produce necessary financial reporting and optimal legal / tax position
      (e.g., purchase accounting, beginning Newco balance sheet, legal
      entity structure, etc.)
    – Supply information connectivity to support baseload operations and
      critical decision-making (e.g., vmail/email, consolidated reporting,
      etc.)
• Day 1 – Day 90
Breakout #1
(1 hour)


• Within each function, identify core business processes
  which are mission critical to seamless operation in
  short-term
• Using checklists and pre-work as a reference, identify
  and prioritize Day 1 risks
• Outcome: Identification and prioritization of critical
  liabilities/barriers to seamless Day 1 operation
    Breakout #1
Day 1 Issues/Risks Matrix
Objective: List all of your function’s core business processes (or special
projects) that are mission critical for Day 1 operation. Next, using the issue
checklists as a reference, identify and prioritize the constraints/barriers to timely
Day 1 completion.

                                                                                           Impact



             Core Business Process      Day 1 Constraints/Barriers   External/Customer (Low or      Internal/Employee (Low
                                          to Timely Completion                 High)                        or High)




            Core Business Process #1
Breakout #2
(2 hours)


• Map out short-term mission critical action plans
   –   Key actions
   –   Timing
   –   Primary responsibility
   –   Linkages
   –   Decisions required
• Team presentations
• Outcome: Draft short-term integration plan of attack
 Breakout #2
Short-Term Integration Action Planning
Objective: Using the results from Breakout #1, create your team’s skeletal
Mission Critical Integration Action Plan. Please include start and completion
dates for key actions, assign a team member or functional contact
responsibility for the completion of the action item, capture linkages to other
teams or functional areas, and specify any executive decisions required for
completion of the action within the specified timeframe. You may complete
your preliminary plan using either the MS Word or the MS Project template
on diskette. MS Project is preferred, as it is the standard we will be using
going forward.
     Short-Term                                             Start   Comple      Primary       Linkages     Decisions
 Barriers/Constraints     Key Action Description (Plan of   Date     tion    Responsibility   With Other   Required
                                     Attack)                         Date    (Action Team     Teams or
                                                                              Member or       Functions
                                                                              Functional
                                                                               Contact)

     Constraint #1            Key Action #1




                              Key Action #2




                        Achievability Assessment for This Action Plan (1-100%):
Day 1 Wrap Up

• Q&A and Recap of Day 1
• Dinner
  Corporation / Acquired
Integration Planning Launch
           Date
          Location
Day 2 Overview

• Synergy action planning
   – Minimum synergy event planning and risk assessment
   – Stretch synergy targets, actions and compressed cash savings
     timing
             Preliminary Synergy Cash Capture ($ millions)
                      for the period 4/1/00 - 6/30/01
                                                             St. Louis/Little Rock
80.00
                                                             Kansas City/Tulsa
70.00
                                    106                      Seatle/Oklahoma City

60.00                                                        England/Belgium

                                                             Pittsburg
50.00
                                                             Ohio/Mass
40.00                                                        Division 1

                                                             Mexico/Mendoza
30.00
                                                             Statesville
20.00
                                                             Service Ctrs

10.00                                                        North Carolina

                                                             Sales Reorganization
 0.00
    Q2-00   Q3-00        Q4-00         Q1-01         Q2-01   Washington to Dallas
            Preliminary Synergy Cash Capture ($ millions)
                     for the period 4/1/00 - 6/30/01
                                                         St. Louis/Little Rock
80.00
                                                         Kansas City/Tulsa
70.00
                                                         Seatle/Oklahoma City

60.00                                                    England/Belgium
                                            60
                                                         Pittsburg
50.00
                                                         Ohio/Mass
40.00                                                    Division 1

                                                         Mexico/Mendoza
30.00
                                                         Statesville
20.00
                                                         Service Ctrs

10.00                                                    North Carolina

                                                         Sales Reorganization
 0.00
    Q2-00    Q3-00      Q4-00       Q1-01        Q2-01   Washington to Dallas
Preliminary Synergy Model by Team

• Preliminary synergy charts (cash and run rate)
• Preliminary synergy assumptions
• Excel worksheets
Breakout Session #3
(3 hours)
• Map out preliminary synergy action plan
   – Review preliminary synergy model and assumptions for your
     team
   – Assess the achievability (0 – 100%) of preliminary synergy
     model
   – Based on model, map out necessary timing for synergy actions
   – Based on these milestones, backfill synergy action plan (incl.
     actions, timing, responsibility, estimated costs/synergies/cash
     by month, linkages, and decisions required)
• Outcome: Preliminary synergy action plan and
  achievability assessment
  Breakout #3
Synergy Action Plan Development
Objective: Using the Integration metrics/targets for your team, backfill a Synergy
Action Plan by supplying the information requested below. For each synergy
project and supporting key action, include date key actions must be completed by,
include any constraints/actions required to remove constraints, assign a team
member or members responsibility for the execution of the action item, note the
dollar value of estimated cost, synergy run rate or synergy cash capture
associated with the action by month (using the separate Excel file), capture
linkages to other teams or functional areas, and specify any executive decisions
required for completion of the action within the specified timeframe.
                                                                               Actions         Primary
                                                                              Required to   Responsibil
                                                     Timing        Key         Remove        ity (Action   Linkages     Decisions
                                                   (Completed   Constraints   Constraints       Team       With Other   Required
                                                       By)                                  Member or      Teams or
                                                                                            Functional     Functions
                                                                                              Contact)
  Synergy Project         Key Action Description




       Synergy             Key Action #1
  Project #1




                            Key Action #2



                    Achievability Assessment for This Action Plan (1-100%):
  Synergy Cash Capture Risk Rating Model
  (Sample)
          150



          120


 Cash
          90
Capture                         Stretch
  by
6/30/01
          60
 ($M)


          30




            100%          50%              0%
                      Achievability
Breakout Session #4
(3 hours)

• Develop synergy scorecard – to John Doe ASAP
• Continued development of synergy action plans
   – Short-term plans review (4/7)
   – Synergy plans review (4/24 - 4/25)
• HR/IT linkage meetings:
   – Mfg group from 4p to 4:30p
   – Sales and Mktng from 4:30p to 5:00p
Day 3 Overview

• Team presentations
   –   Issues
   –   Linkages
   –   Data request
   –   Decisions required
• Return updated disks (w/ planning work) to John Doe
  for consolidation
• Overview of next steps
Issues Inventory
Next Steps
• Short-term action planning and execution
   – Urgent identification/recommendations re Day 1 issues (“hot”
     decision issues/recommendations to MAP consultant each
     Friday; Greer/Wynn issue resolution meetings every Monday
     @ 10a)
   – Finalization and implementation of Day 1 plan
   – Integration Action Team Day 1 review: 4/7
• Synergy action planning and execution
   – Develop synergy action plan (enter into MS Project)
   – Develop project budget
   – Integration Action Team Synergy review: 4/24 – 4/25
Meeting Objectives

• Clear focus on speed (sense of urgency) and synergy realization
• Understanding of key metrics
• Buy-in of the Synergy Bonus Plan as integration action team
  driver
• Development and understanding of the financial measurement
  system
• Validation of synergies, cash flow and costs
• Development and understanding of the Synergy Scorecard
• Prioritization of “Day One” issues
• Prioritization around synergy “buckets” and cash flow drivers
• Staying on time

								
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