2020 Financial Modeling Competition CocaCola MA Case Joshua

2020 Financial Modeling Competition Coca-Cola M&A Case Joshua Pilgreen, CMA, FMVA

Table of Contents Investment Recommendation 3 Coca-Cola Strategic Considerations 4 Recommendation Summary 5 Business Overview 6 Target Overview 7 Industry Overview 8 Strategic Rationale 9 Transaction Summary 10 Merger Model: Assumptions & Output 11 Merger Model: Sensitivity Analysis 12 financialmodeling. org | © Corporate Finance Institute, all rights reserved.

Investment Recommendation

Coca-Cola Strategic Considerations Coca-Cola Global Sales, Market Segment Key Considerations • The acquire of Streamline can help Coca-Cola diversify their current revenue Target 1 5. 0% Revenue & EV/Revenue Evaluation Accretion(1) Current: $2. 81 2, 000 30 Revenue EV/Revenue (5. 0%) 20 Streamline Efficiency (15. 0%) Zone NA Zone APAC Bottling Investments Group Growth % YOY Zone EMEA Zone LA Global Ventures 2 2, 000 4. 0 x EV/Revenue Fury Boost 2. 0 x 68. 8% 3 40% 2, 000 17. 7% 10% Superhot Water Industry: Tea & Coffee 7. 6% 3. 9% 2. 0% Market size: USD 2, 365 m 0% JDP SSD T&C W&S Revenue financialmodeling. org | © Corporate Finance Institute, all rights reserved. 2022 E: 8. 0% 2023 E: 11. 1% . . EV/Revenue 4. 0 x 1, 000 2. 0 x - 0. 0 x Global Ventures (1) Assuming base case forecast and synergy assumptions, 20. 0% takeover premium 1 2021 E: 6. 2% Current: $2. 15 30% 2023 E: 10. 9% 2. . . 2. 2. . . 0. 0 x. . - Market size: USD 2, 096 m 60% 50% 2022 E: 8. 6% . . 2. . . Revenue Industry: Beverage/Energy Drinks 70% 2021 E: 6. 4% Current: $3. 38 Global Unit Sales Volume of Coca-Cola 2019, by Product Category 80% 10. 0 x 8. 0 x 6. 0 x 4. 0 x 2. 0 x 0. 0 x 2. . . Market size: USD 1, 855 m 2019 2. 2018 . . 2017 2. 2016 . . (25. 0%) 2015 2. 0 Industry: Artificial Intelligence 2. 10 2. All targets are likely to have accretive potential — though Streamline Efficiency provides the most accretion of the three targets 40 . . • Our preliminary analysis of the targets suggest Streamline Efficiency to have the greatest accretive impact on Coca -Cola’s EPS consistent with Coca-Cola’s strategic objectives 15. 0% 2. • Coca-Cola is actively looking to grow through acquisitions which are earnings accretive and further strengthens its core competencies 50 201 5 A 201 6 A 201 7 A 201 8 A 201 9 A 202 0 A 202 1 A 202 2 A 202 3 A 202 4 A 202 5 A • Overview of acquisition options for Coca-Cola 2 3 Business Overview Transaction Summary 2021 E: 3. 2% 2022 E: 5. 0% 2023 E: 8. 7%

Recommendation Summary Recommendation Strategic Capital Advisory accessed three potential acquisition targets and have concluded that Streamline Efficiency, Inc. is the most appropriate target based on Coca-Cola's Investment Thesis and the projected accretive value from our merger model. Strategic Rationale Streamline Efficiency, Inc offers the opportunity for Coca-Cola to enhance the company’s current growth strategy by offering a fast and cost-effective way to embrace new capabilities through its technology and synergetic opportunities. Transaction Summary 100% Cash acquisition of Streamline Efficiency, Inc at a purchase price of 20% premium of the current market value of $1. 85 billion, using all debt. Next Steps If the management team at Coca-Cola is interested in moving forward with the acquisition of Streamline Efficiency, Strategic 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) Streamline Efficiency, Inc. (referred to as "Streamline" or "Streamline Efficiency") is a company focused on improving operational efficiencies through artificial intelligence (AI). Based in the United States, this company was founded in 2017 and primarily works with smaller clients. Streamline focuses on cutting costs through automation ("RPA" or “Robotic Process Automation”), resulting in simple and redundant tasks being executed seamlessly. This increases employee productivity (due to time saved), improves the integrity of the organization (due to the reduction of errors), improves scalability, as well as other notable perks shared in the "Synergies and Purchase Considerations" section. Market Value vs Intrinsic Value (Base Case) Streamline Efficiency has a proprietary application called "SE Automation". Clients only need to purchase it once to gain lifetime access (there are no subscription costs). Streamline has a dedicated, well-trained team which help locate potential process improvements in its client's operations. Most of its revenue is generated from implementing the automation. 1 Investment Recommendation financialmodeling. org | © Corporate Finance Institute, all rights reserved. 2 3 Business Overview Transaction Summary

Industry Overview Largest Global AI Markets - 2020 § The market size of global information technology (IT) services was approximately $1. 06 trillion in 2019, with the main segments being: outsourcing ($491 Bn), support and training ($160 Bn), and project oriented ($406 Bn). 120 100 80 § By 2030, it is predicted that AI will contribute the most to the GDP of China (26. 1%) and North America (14. 5%), which are two of the larger regions for Coca. Cola in terms of sales 60 40 20 § It is estimated that consumer goods, accommodation, and food services will experience a 9% increase in GDP due to product enhancements, and an additional 6% due to productivity improvements. 2014 1, 000 928 913 938 979 2017 2018 2019 Europe 2020 Asia-Pacific 2021 2022 1, 084 1, 057 1, 113 1, 142 1, 172 1, 234 1, 202 1, 266 1, 299 Latin America N. America 6. 0% 5. 0% 2. 0% 1. 0% 400 0. 0% 200 -1. 0% - -2. 0% 2016 Outsourcing 2017 2018 2025 2026 2027 Middle East & Africa 2019 2020 Support and Training 2021 Largest markets for AI are the US and China which are Coca-Cola’s two of three largest markets by sales • The acquisition provides significant cross-border advantages for both companies including: • Immediate cost cutting Greater China 3. 0% 600 2015 2024 • 4. 0% 800 2014 2023 Largest Projected Areas of Expansion 1, 400 1, 028 2016 North America AI Market - Revenue Growth YOY 1, 200 2015 2022 2023 Project Oriented 2024 2025 2026 2027 • Leveraging existing distribution networks • Integration of brands Growth (% change YOY) 1 Investment Recommendation financialmodeling. org | © Corporate Finance Institute, all rights reserved. 2 3 Business Overview Transaction Summary

Strategic Rationale Of the intended targets, Streamline best aligns with Coca-Cola’s Investment Thesis of growth opportunities and offering a fast and costeffective way to embrace new capabilities. Growth Opportunities Accretive Acquisition Competitive Strengths § Core Market Expansion: The AI market is projected to grow faster in terms of revenue in North America, China, and Europe where Coca-Cola already has a presence and could lever Streamline services including to its current distributors. § Geographic Expansion : Coca-Cola sees opportunities to incorporate Streamline’s services into some of Coca-Cola’s existing market in slower projected countries (Middle East, Latin America) which could help Streamline grow faster than market projections § Undervalued: at its current levels Streamline is undervalued relative to its intrinsic value by $6. 50 or 231% in its base case scenario. § Strong Balance Sheet: Streamline has a strong balance sheet with a current and quick ratio of 34. 3 and 24. 9, respectively in 2019. § Synergies: Coca-Cola has identified Streamline with the highest potential synergies of the three potential targets utilizing the technology throughout its distribution centers globally. § Profitability: In 2019, Streamline had a Net Profit Margin of 7. 1%, EBITDA Margin of 36. 9%, and Return-on-Equity 15. 1%. § Great Product & Service: Streamline Efficiency has a proprietary application called "SE Automation". Streamline has a dedicated, well-trained team which help locate potential process improvements in its client's operations 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 Transaction Pricing Offer Price: Premium: $3. 37 20% Rationale Synergies § Closing prices as of 10/23/2020 $2. 81 § Average M&A Premiums 20 -30% statisa. com Revenue Enhancement COGS Selling & Distribution Marketing & Administration R&D § Coca-Cola has a strong balance sheet and is forecasted strong in most scenarios § Issuing stock would dilute current Stock: 0% shareholders § Coca-Cola has low Debt/EBITDA and can Debt: $2, 226 m afford to take on more debt Debt preferred over cash due to lower depleted future reserves Cash Consideration: Equity Composition: • Coca-Cola has substantial cash and short-term investments reserves totalling USD 5. 9 billion • Coca-Cola is forecasted to deplete cash; and run out of cash reserves in bear case Description Debt A: 100% Cash Suitability • Coca-Cola is able to secure low rate senior debt • Interest can be serviced by Streamline-generated FCFs • Use of debt enables Coca-Cola to maintain more cash if bear forecast becomes reality • 0% cash • 100% total debt Uses: 100% of MC’s shares Refinance debt: USD 2, 556 m Fees: USD 69 m • • Pros Cash Key Considerations • Although it will dilute Coca-Cola’s existing shareholders use of equity will help Coca-Cola maintain cash in bear scenario • • • 1 Investment Recommendation financialmodeling. org | © Corporate Finance Institute, all rights reserved. $450 m $750 m $125 m $10 m $9 m 2024 2024 Potential acquisition financing structures Cons Financing 100% Fully Achieved by B: 100% Cash Composition: • 41. 6% cash • 58. 4% total debt Uses: • 100% of MC’s shares • Refinance debt: USD 1, 302 m • Fees: USD 48 m Stand Alone Low cost of debt. Value for senior • Low Cost of debt issuances (2. 85 -3. 25%) • No dilution to existing $2, 202 shareholders C: 60% Stock + 40% Cash Composition: • 60. 0% total debt • 40. 0% stock Uses: 100% of MC’s shares Refinance debt: USD 1, 302 m Fees: USD 51 mm • • • Preserves cash reserves Less risk of financial distress and bankruptcy • Dilutes current shareholders New shareholders may not be aligned with Coca-Cola shareholders Incremental increase to Coca-Cola net debt/EBITDA: 4. 7 EBITDA/Interest still low • • Liquidity balance will fall below historical average Could run out of cash if bear scenario happens 2 3 Business Overview Transaction Summary •

Merger Model: Sensitivity Analysis EPS Accretion / (Dilution) of Base Case 2021 EPS Accretion / (Dilution) (Base Case) Cash Flow per Share Accretion / (Dilution) of Base Case 1 Investment Recommendation financialmodeling. org | © Corporate Finance Institute, all rights reserved. Implied Share Price Change (Base Case) 2 3 Business Overview Transaction Summary