Insights Into Cross Border MA By Yuval Berman

Insights Into Cross Border M&A By: Yuval Berman Managing Director Genesis-U. V. B, IMAP Israel The 1 st Israeli - French Conference In Memory of Adv. Jonathan Bach, La Plagne, January 2006 1

Topics • Global Overview of Cross Border M&A • Cross Border M&A for Israeli Cos` • M&A – A Growth Engine • Key Factors to Successful M&A • Questionnaire & Q&A 2 “Hey, What about a Merger? ”

Who We Are? • The Israeli member of IMAP • The world’s largest M&A group; since 1971 • 60 firms in 25 countries • Cross border IB advisory • Middle market focus • $10 billion done deals in the past 3 years • Blue chip clients: Tel Aviv- 25, NASDAQ & NYSE 3

M & A: Basics 1 + 1 > 2 • Merger • Acquisition • Daimler. Chrysler 4 • Investment /Acquisition • De-Merger, Spin-off, Divestment • M&A – a general term

M&A: Basics (Cont. ) 5

M&A - More Than You Think $ 2, 900, 000, 000! Global M&A transaction in 2005 * Data Source: Dealogic 2005 6

Merger Mania… 7

2005 Global Performance (in $Tri) 8

Europe’s Catching Up • • $1. 1 trillion European deals 49% rise Beating the US for the 1 st time Strong Economy EU benefits Telefonica (S) - O 2 (UK): $31 billion cash! Gas Natural (S) - Endesa (S): $51. 7 billion 9

2005 - “Mega Deals” 10

Dog-cat Swap… “HP acquires Compaq in a stock swap worth about $25 billion”(WSJ, September 3 , 01) rd 11

Cash is King 12

Israelis on Wall St. 2005 • • • $9 billion aggregate transactions Teva – Ivax: $7. 4 billion 30% acquired targets (56% rise of 2004) 53% cross border deals (52% U. S. ) Frequent buyers: Retalix, Nice, Mercury, Ness, Verint, ECI Comverse Technology - CSG Systems ($251 m) Amdocs - DST Innovis ($238 m) Checkpoint - Sourcefire ($225 m) • Share-Price Performance: - Acquirers: 12. 7% Non-acquirers: 2. 7% rise - 55% of acquirers show share price rise 13

Investors love Israeli Acquirers… Top 5 Israeli Acquirers on “Wall St. ” 2005 Acquirer Target Location $M NICE Systems Dictaphone USA 38. 5 62 EFI VUTEk, Inc USA 281 56 Zoran Corp. Oren Semicon’ Israel 44. 6 51 TEVA IVAX USA 7, 400 50 Rad. Vision First Virtual USA 7. 15 30 14 Share Price Increase %

Champion M&A Law Firms Top 10 European Legal M&A Advisers for – 2005: • Clifford Chance – total value: $235. 5 bn - 241 deals • Linklaters - $214. 2 bn - 168 deals • Allen & Overy - $178. 3 bn - 173 • Sullivan & Cromwell - $160. 6 bn - 129 • Freshfields - $156. 5 bn - 134 • Simpson Thacher - $95. 8 bn - 30 • Skadden, Arps - $87. 7 bn - 58 • Herbert Smith - $79. 7 bn - 83 • Gibson Dunn - $77. 5 bn - 37 • Cleary Gottlieb Steen - $75. 7 bn - 60 15

Why M&A? M&A a Growth Engine – in good times & bad: A. Fast external growth (“revenue side”) 1. Growing competition for market share (Ebay-Skype; Strauss) 2. “Defensive acquisition” (Supermarkets) 3. Globalization (Bank Hapoalim, Leumi) 4. Time to market (Lucent-Chromatis) B. Efficiency (“cost side”) 1. Economies of scale (EXXON – MOBIL, Car Makers) 2. Gaining technology/know-how (SAP-Top Tier) 3. Increasing costs to obtain new technologies (Banks) 4. Stock market demands/Management incentives 16

Economies of Scale… 17

Key Factors Driving Global M&A Activity in 2005 • • • 18 Consolidating industries (Health Care, Energy) Cheap financing / Strong stock prices Momentum: PE & Hedge Funds Strong Economy / profit recovery Improved CEO confidence Weakened take over defenses

Seller: Survival M&A 19 “Our employees are our greatest asset – I say we sell them. ”

Seller: M&A – The Answer to Your Prayers? 20 “Gentlemen, It is my sad duty to report that as of this date your company still has not been subject to a Takeover attempt. ”

Seller: Making M&A Work 1. Getting the timing right 2. Face-lifting prior to the sale: 1. 2. 3. 4. 5. Short term approach (increase margins; sales) Clean B/S; divestment of non-core activities Reinforcing long term contracts with clients Organizing legal status prior to DD: contracts, permits Following general accounting principles 3. Consensus among shareholders 4. Confidentiality 21 5. Hiring investment bankers!

Management time commitment Cross Border M&A - Process Commence Marketing 0 Kick off after completing a “face lift” plan (6 -12 months) 22 1 -2 Appointing an Investment Banker Strategic Plan Information Memorandum Valuation Potential Purchaser List 3 D. D; Exchange and Completion Receive Indicative Offers 4 -5 Initial Meetings with Potential Purchasers 6 7 -8 Draft Heads of Agreement 9 -10 Months

Buyer: Due Diligence Considerations 1. Tax 2. Labor relations (“works council” approval) 3. Privacy - disclosure of personal data (EU Directive 95/46/EC; for employees, customers) 4. Environmental regulation (EU “REACH” regulations) 5. Financial reporting requirements 6. Antitrust compliance 7. Sarbanes-Oxley legislation 23

The End. Thank you! “The Takeover seems to be going smoothly enough”… 25