Goldman Sachs Investment Banking Pitch Book
Goldman
Sachs
Current EV /
FY2014 EBITDA
Strategic Party
4.9x
Opal³: 2.6
Illustrative Spin-Merger Analysis
Based on 9/21 Case Financial Projections | Strategic Party Based on IBES
(In US$)
A spin-merger between Client and Strategic Party has the potential to result in Opal shareholder value enhancement assuming:
Multiple uplift of Client business if New Strategic Party (pro forma Client + Strategic Party) trades in-line with Strategic Party current standalone multiples
Potential revenue and cost synergies through a combination of Client and Strategic Party
Enterprise business multiple re-rating in line with Enterprise peer trading multiples
- Other unquantified potential tax and structuring benefits related to New Strategic Party (e.g. foreign jurisdiction for new company)
PRELIMINARY CONFIDENTIAL DRAFT-SUBJECT TO CHANGE AFTER FURTHER DILIGENCE AND REVIEW
INVESTMENT BANKING
DIVISION
However, issues around execution, timing and post-transaction trading performance are some of the uncertainties in a spin-merger transaction, including those in
a straight spin transaction
Illustrative Summary¹
Summary Synergy and Dissynergy Assumptions
New Strategic Party Equity Stake
Enterprise Equity Stake
Illustrative Total Value
Illustrative After-tax Separation Costs
Illustrative Adjusted Total Value
Opal S/H 50.1 %
% Own.
55.0%
in NQ
60.0 %
Illustrative Value
% Own. Per Share
50.1% $6.65
100.0 %
9.33
$5.66
6.22
6.78
$15.98
Illustrative Ownership Sensitivity Analysis
Value to Opal S/H of New Strategic Party equity stake
New Strategic Party
EV/FY2014 EBITDA'
3.9 x
4.9 x
$6.65
7.30
7.96
(0.45)
$15.52
5.9 x
$ 7.63
8.38
9.14
The illustrative spin-merger analysis make a number of assumptions regarding potential operational,
financial and transaction-related synergies and dissynergies, including:
- No revenue synergies and 50 bps of combined EBITDA margin improvement at New Strategic Party
-
$580 million of annual dissynergies at Enterprise related to sourcing (-2.7% of Enterprise revenue
and 5.5% of ESG revenue)
$100 million of additional annual corporate and public company costs at Enterprise
$1 billion of one-time transaction-related separation costs
Does not assume any DFS related-financial impact
35% tax rate on repatriation of offshore cash balances for deleveraging purposes
Lower leverage capacity as a result of lower pro forma EBITDA related to operational dissynergies
Illustrative Multiple Sensitivity Analysis
Enterprise
EV/FY14
EBITDA
5.0 x
7.0x
9.0 x
New Strategic Party
EV/FY2014 EBITDA
3.9 x
4.9 x
$12.00 $ 12.99
14.53 15.52
17.07 18.05
5.9 x
$ 13.97
16.51
19.04
Illustrative Synergy Sensitivity Analysis
Assumes New Strategic Party trades at 4.9x FY2014 EBITDA
1 Assumes Enterprise trades at 7.0x FY2014 EBITDA
New Strategic Party EBITDA
Margin Improvement
0.5%
N. Strategic
Party
Revenue
Synergies
1.0%
(2.5) % $ 14.62 $15.16 $15.69
14.99
15.52
16.06
15.35
15.88
16.42
2.5%
Source: Management, company reports and Wall Street research
Note: Assumes a spin-merge transaction occurs at fiscal year end 2013 and Opal shareholders' ownership in New Strategic Party of 50,1% Strategic Party's current public market equity
valuation
For illustrative purposes, assumes no combined revenue synergies and a 0.5% EBITDA margin improvement relative to the blended pro forma EBITDA margin.
Assumes a 21% tax rate.
*New Strategic Party and Strategic Party based on Strategic Party's March fiscal year end. Enterprise based on Opal's January fiscal year end.
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