2019 Financial Modeling Competition Stephen Scales Merger Acquisition

2019 Financial Modeling Competition Stephen Scales Merger & Acquisition Capital Services, LLC.

Table of Contents Investment Recommendation Summary Business Overview 3 4 5 Target Overview 6 Industry Overview 7 Strategic Rationale 8 Transaction Summary 9 Merger Model: Assumptions & Output 10 Merger Model: Sensitivity Analysis 11 financialmodeling. org | © Corporate Finance Institute, all rights reserved.

Investment Recommendation

Recommendation Summary Recommendation Consumers Capital Advisory accessed three potential acquisition targets and have concluded that Mandelzar Cookies Inc. is the most appropriate target based on Nestlé's Investment Thesis and the projected accretive value from our merger model. Strategic Rationale Mandelzar Cookies offers the opportunity for Nestle to enhance the company’s current growth strategy by offering a fast and cost-effective way to embrace new capabilities through its geographic footprint and synergetic opportunities. Transaction Summary 100% Cash acquisition of Mandelzar at a purchase price of 25% premium of the current market value of $2. 52 billion creating a projected ~$300 million in value creation. Next Steps If the management team at Nestle is interested in moving forward with the acquisition of Mandelzar Cookies, Consumers Capital Advisory would draft a Letter of Intent (LOI) to be delivered to the intended target. If accepted, we would assist in the followed due diligence process until a successful closing. 1 2 3 Investment Recommendation Business Overview Transaction Summary financialmodeling. org | © Corporate Finance Institute, all rights reserved.

Business Overview

Target Overview Target Company Overview Target Revenue & Return-on-Equity Forecast (Base Case) Mandelzar Cookies Inc. is a leading European food company that specializes in cookies & crackers (C&C), but also has some confectionary exposure in its brand portfolio. The company was founded in 1907 in Toulouse, France, and earns most of its revenue from Western Europe (France, Spain, Netherlands, etc. ) and North America. Mandelzar prides itself on its rich history of delicious, highquality snacks that have become a staple for many households in Western Europe. Its products can be found in retail chains, supermarkets, and small neighborhood stores next to other famous ookies & crackers such as Nabisco’s Graham and Oreo brands. The company’s brands include its flagship assortment of “Mandelzar” cookies and crackers, that include biscuits, wafers, and the company’s signature “Mandelzar” cookie. This portion of the company’s brands accounts for 90% of their total revenue. Mandelzar also owns a Belgian confectionary company, “Les Meilleurs Friandises” (translating to, “The Best Treats”) that specializes in local Belgian chocolates and desserts which make up the rest of Mandelzar’s remaining revenue. The company sources its ingredients from a variety of countries including the United States, China, India, and France. 1 Investment Recommendation financialmodeling. org | © Corporate Finance Institute, all rights reserved. $ 1, 200 19. 0% 18. 2% 18. 3% $ 18. 3% 1, 097 17. 4% $ 1, 100 18. 3% $ 1, 112 18. 3% $ 1, 128 18. 3% $ 1, 074 $ 1, 051 17. 0% $ 1, 025 16. 6% $ 1, 000 $ 974 15. 9% $ 929 $ 951 $ 905 $ 900 15. 0% 2014 A 2015 A 2016 A 2017 A 2018 A Revenue 2019 A 2020 A 2021 A EBITDA Margin Market Value vs Intrinsic Value (Base Case) Rate of Return Target Price Upside Internal Rate of Return (IRR) Market Value vs Intrinsic Value Market Value Upside Intrinsic Value 67. 7% 7. 6% $ 3. 06 2. 07 $ 5. 13 2 3 Business Overview Transaction Summary 2022 A 2023 A 2024 A

Industry Overview Largest Global C&C Markets - 2019 § The cookies and crackers market (C&C) has been defined by sweet baked goods such as cookies, crackers, and gingerbread. (by Revenue in billion $USD) 40 § The total global C&C revenue is $126 billion USD and the C&C Market is expected to grow globally by a CAGR of 4. 5% until 2023. 30 Eastern Asia 140 145 150 China 17. 6 Northern America United States Central & Western Europe All Other 6% 3% 2% 2020 (by Revenue in billion $USD) 7% 2021 2022 30 Growth Rate (%) Global Revenue ($USD bln) 133 4% 2019 14. 2 Largest Global C&C Countries - 2019 5% 2018 18. 2 - C&C Market - Revenue Growth YOY 126 20. 7 10 § In relation to total population figures, the average revenues person earned from C&C sales is US$17. 05 in 2019. 118 25. 4 20 § The largest markets for C&C are in China and the United States, which are Nestlé’s two largest markets in terms of global sales. 160 140 120 100 80 60 40 20 - 29. 7 25. 4 25 18. 2 20 15 10 1% 5 0% - 6. 3 China 2023 United States India 4. 6 France Brazil Source: Statista, last update: 2019 -07 1 Investment Recommendation financialmodeling. org | © Corporate Finance Institute, all rights reserved. 2 3 Business Overview Transaction Summary

Strategic Rationale Of the intended targets, Mandelzar best aligns with Nestlé's Investment Thesis of growth opportunities and offering a fast and costeffective way to embrace new capabilities. Growth Opportunities Accretive Acquisition Competitive Strengths § Geographic Expansion: Mandelzar earns majority of its revenue from Western Europe, which was Nestlé's least profitable segment in 2018. The largest C&C market is China where Nestle already has a presence and could lever Mandelzar products though. § Core Market Expansion: Nestlé sees opportunities to incorporate Mandelzar’s cookie and confectionary products into some of Nestlé existing chocolate and confectionary, ice cream, and baby food products which respectively ranked 6 th, 3 rd, and 2 nd in Nestlé's global sales categories. § Undervalued: at its current levels Mandelzar is undervalued relative to its intrinsic value by $2. 07 or 67. 7% in its base case scenario. § Strong Balance Sheet: Mandelzar has a strong balance sheet with a quick and current ratio of 6. 1 and 1. 6, respectively in 2018. § Synergies: Nestle has identified Mandelzar with the highest potential synergies from utilizing some of the same distribution networks in Europe and North America as well as being able to produce some Mandelzar products in Nestlé’s existing facilities. § Profitability: Of the intended targets, in 2018, Mandelzar had the highest Net Profit Margin (7. 1%), EBITDA Margin (18. 3%), and Return-on-Equity (5. 4%). § Product Quality: founded in 1907, Mandelzar has a rich history of delicious, high-quality snacks that have become a staple for many households in Western Europe. 1 Investment Recommendation financialmodeling. org | © Corporate Finance Institute, all rights reserved. 2 3 Business Overview Transaction Summary

Transaction Summary

Merger Model: Assumptions & Output Merger Model Assumptions Merger Model Output Transaction Pricing Rationale: Offer Price $4. 38 Premium 25% § Closing Price as of 11/22/2019: $3. 50 § Average M&A Premiums range 20 – 30% Source: statista. com Deal Mix Cash Consideration § Nestle has enough dry powder to acquire Mandelzar outright and 100% maintain a strong balance sheet. § Nestle pays a set dividend per share that would become progressively Stock 0 Debt $434 million dilutive as more shares are issued and also, Nestle is slightly underpriced based on the base case DCF valuation, in which the company should retain its equity position incase of price appreciation. § Upon closing, it is assumed Nestle would retired the outstanding debt of Mandelzar of $434 million at 8. 0% and raise senior A debt for the same amount at a lower rate of 5. 5% Value Created $299 Net Synergies $1, 265 Synergies Nestlé has identified potential revenue and cost synergy opportunities with Mandelzar’s brands and supply chain network. Nestlé sees opportunities to incorporate Mandelzar’s cookie and confectionary products into some of Nestlé existing chocolate and confectionary, ice cream, and baby food products. The company also identifies potential cost synergies from utilizing some of the same distribution networks in Europe and North America as well as being able to produce some Mandelzar products in Nestlé’s existing facilities. Revenue Enhancement Fully Achieved by Revenue $ 950 million 2022 COGS Savings $250 million 2022 Distribution Savings $30 million 2022 Marketing & Admin Savings $30 million 2022 Research & Development Savings $5 million 2022 Cost Savings 1 Investment Recommendation financialmodeling. org | © Corporate Finance Institute, all rights reserved. Price Paid $3, 150 Stand Alone Value $2, 202 2 3 Business Overview Transaction Summary

Merger Model: Sensitivity Analysis 2020 EPS Accretion/(Dilution) (Base Case) EPS Accretion / (Dilution) of Base Case 5. 0% 3. 9% 4. 0% 2. 8% 3. 0% 2. 0% 1. 6% 4. 2% 3. 9% 4. 1% 3. 8% 4. 1% 3. 1% 2. 0% Takeover Premium 0% 15% 20% 25% 30% $ 3. 00 1. 5% 1. 4% Bear Target 3. 50 1. 5% 1. 4% Base Share Price 4. 00 1. 4% 1. 3% 4. 50 1. 4% 1. 3% 5. 00 1. 4% 1. 3% 1. 2% Bull 1. 0% 0. 0% 2020 E 2021 E 2022 E 2023 E 2024 E Cash Flow per Share Accretion / (Dilution) of Base Case Implied Share Price Change (Base Case) 4. 0% $ 1, 250 2. 8% 3. 0% 2. 0% 1. 4% 1. 6% 2. 9% 2. 7% 2. 0% 2. 1% Bear Bull 0. 0% 2020 E 2021 E 2022 E 2023 E 1 Investment Recommendation financialmodeling. org | © Corporate Finance Institute, all rights reserved. 0% 15% 20% 25% 30% 6. 3% 6. 1% 6. 0% Revenue 1000 5. 1% 5. 0% 4. 9% 4. 8% Enhancement 950 4. 9% 4. 7% 4. 6% 500 2. 8% 2. 6% 2. 5% 2. 4% 250 1. 6% 1. 4% 1. 3% Base 1. 0% Takeover Premium 2024 E 2 3 Business Overview Transaction Summary