Danaher Corporation

Serial Acquirer Case Study: Danaher Corporation

August 2010

New York One Penn Plaza, 36th Floor New York, NY 10119

• Despite the claim that acquisitions destroy value certain companies excel as acquirers and deliver outstanding value for shareholders. • We studied the relationship between long term total shareholder returns (TSR) and different acquisition strategies and a variety of deal characteristics. – The only trait that consistently has a strong positive relationship with long term TSR across each industry is acquisition frequency. • We call them Serial Acquirers and many generate outstanding results by being better at planning, executing and integrating acquisitions than their peers. • Danaher Corporation is one of the world’s best serial acquirers

• Even during the Danaher's Fundamental Performance downturn in 2008 and $1,600 16% 2009 Danaher delivered Cash Flow in excess of the required $1,200 12% return on all capital

$800 8% • This strategy creates value for shareholders and demonstrates the $400 4% benefits of continuously

$0 0% redeploying capital

into positive returns

1997 1999 2001 2002 2003 2004 2006 2008 1996 1998 2000 2005 2007 2009

Acquisition Residual Cash Earnings Acquisition Residual Cash Margin

Source: Fortuna Advisors Analytics, using CapitalIQ Data Note: Acquisition Residual Cash Earnings (ARCE) is EBITDA + Rent + R&D Less Taxes Less Capital Charge Including Goodwill & Intangibles Acquisitions Residual Cash Margin (ARCM) is ARCE as a % of Revenue 3 Copyright 2010 Fortuna Advisors LLC. All Rights Reserved. Danaher Creates Value Through Superior Returns and Growth

Residual Cash Margin • Danaher’s M&A 25% Residual Cash Margin Acquistion Residual Cash Margin strategy relies on 20% being able to operate 15% the target company in 10% a more efficient way 5%

0% • The Company’s 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Residual Cash Margin 60% Revenue Growth (with and without 40% intangibles) has been 20%

0% consistently positive -20% and relatively stable 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Danaher • When a business is Tektronix MDS Analytical 1,400% S&P 500 Technologies 1,200% S&P 500 Machinery ChemTreat run this efficiently, 1,000% Sybron Dental 800% Maconi Data Systems American Precision Molecular Applied growth is 600% Devices Biosystems Fluke Hach Kollmorgen Kavo Dental 400% Pacific Scientific tremendously 200% Radiometer 0% valuable -200%

Source: Fortuna Advisors Analytics, using CapitalIQ Data Note: Residual Cash Margin (RCM) is EBITDA + Rent + R&D Less Taxes Less Capital Charge (Acquisition RCM includes Goodwill and Intangibles in the Capital Charge 4 Copyright 2010 Fortuna Advisors LLC. All Rights Reserved. The Danaher Business System (DBS) Focuses Management on the Relentless Pursuit of Efficiency

Gross Business Return

70% Gross Business Return Acquisition Gross Business Return Required Return • DBS is a culture 60% 50% where every 40% employee from CEO 30% 20% to the shop floor is 10% 0% responsible for 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 findings ways to improve the way EBITDAR Margins 30% work gets done 25% 20% 15% • Danaher has held 10% 5% margins stable 0% despite the recent 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 downturn Asset Intensity 0.8x • More remarkable is 0.6x the Company’s 0.4x ability to maintain

0.2x low levels of Asset

0.0x Intensity 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Fortuna Advisors Analytics, using CapitalIQ Data Note: Gross Business Returns is Gross Cash Earnings (EBITDA + Rent + R&D Less Taxes) Divided by Gross Operating Assets (NWC, Gross PP&E, Capitalized Rent and R&D) Asset Intensity is Gross Operating Assets Divided by Revenue 5 Copyright 2010 Fortuna Advisors LLC. All Rights Reserved. Danaher Tends to Acquire Lagging Companies in Attractive Sectors

Sector Profitability and Competitive Landscape 35% Medical Technology: 27% Young Innovations (YDNT), Schein Henry Competitively Sector Median (HSIC), Sybron Dental (SYD), Patterson (PDCO), Dentsply (XRAY). Disadvantaged

30%

HSIC YDNT XRAY Electronic Test: 23% Visual Networks (VNWK), Microtest

(MTST), Fluke (FLK), Mettler Toledo SYD

25% (MTD), Ametek (AME), Fisher Scientific PDCO

VNWK (FSH), Roper Industries (ROP), Tektronix

(TEK).

TEK

FSH

FLK

AME ROP

MTD Motion: 20% MTST 20% Kollmorgen (KOL), Pacific Scientific

(PSX), American Precision (APR), Joslyn

SXS

KOL PSX PH

APR BEZ ROK JOSL (JOSL), Baldor Elect. (BEZ), Spectris

(SXS), Parker-Hannifin (PH), Rockwell HACH

CUNO Automation (ROK).

15%

PLL ESE

LIFF ION PNR Environmental: 15% Ionics (ION), Pall Corp (PLL), Hach (HACH), Lifschultz (LIFF), Esco Tech Competitively (ESE), Cuno (CUNO), Pentair (PNR). 10%

Advantaged LFY LFY Sector Median GrossBusiness Return

5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% LFY Company Gross Business Return Note: Danaher acquired Gendex from XRAY not the entire company Source: Fortuna Advisors Analytics, using CapitalIQ data

EBITDARR Gross SG&A % of Asset Gross Business Enterprise Value Residual Cash Danaher Acquired Companies Time Period Margin Margin Sales Intensity Return to Gross Asset Margin Tektronix 2007 36% 60% 31% 1.56x 21% 1.12x 18% Sybron Dental Specialties 2005 25% 56% 37% 0.81x 26% 3.63x 13% Visual Networks 2004 28% 70% 48% 1.58x 18% 0.72x 12% Lifschultz Industries 2000 18% 49% 34% 0.88x 22% 1.25x 11% Kollmorgen Corporation 1999 12% 29% 22% 0.89x 14% 1.09x 3% American Precision Industries 1998 14% 31% 22% 0.96x 12% 0.89x 3% Hach Company 1998 26% 49% 28% 1.43x 14% 1.11x 7% Fluke Corporation 1997 25% 54% 35% 1.39x 15% 0.72x 7% Pacific Scientific Company 1996 13% 31% 22% 1.07x 12% 1.19x 2% Acquired Target Median 25% 49% 31% 1.07x 15% 1.11x 7%

Danaher Peer Median 2009 18% 27% 20% 0.95x 19% 1.69x 8%

Danaher 2009 25% 48% 27% 0.54x 41% 3.68x 16%

Source: Fortuna Advisors Analytics, using CapitalIQ data Danaher Peers includes Textron, Tyco, 3M, Ingersoll-Rand, Illinois Tool Works, Honeywell, and United Technologies 7 Copyright 2010 Fortuna Advisors LLC. All Rights Reserved. Like an Astute Value Investor Danaher has Demonstrated the Ability to Buy Companies Trading at a Discount

5.0x

4.5x

4.0x Post –Transaction Announcement Pre–Transaction Announcement Sybron 3.5x Dental “Long term market

3.0x norm”

2.5x

2.0x Danaher Percent of Targets at a Discount Enterprise Value to Gross Assets Gross to EnterpriseValue 91% 1.5x Pre-Announcement Joslyn Kollmorgen Median Target Premium/Discount Lifschultz -40% 1.0x Hach Pre-Announcement Pacific Tektronix Scientific Visual Networks Median Target Premium/Discount 0.5x Fluke -21% American Post-Announcement Precision Microtest 0.0x 0% 5% 10% 15% 20% 25% 30% 35% 40%

Gross Business Return

Source: Fortuna Advisors Analytics, using CapitalIQ data. Note: “Long-Term Market Norm” based on the historical relationship between Gross Business Returns and Market Multiples for the 1,000 largest non-financial US Companies

Gregory V. Milano Managing Partner, Founder & CEO • 25 years of experience including 17 years in value based management as Partner and President of Stern Stewart & Co., and Managing Director and Co- Head of the Strategic Finance Group at Credit Suisse • Industry thought leader and advisor to senior executives on business and financial strategies designed to increase share prices, financial management processes to support value based strategies and a strong focus on behavioral economics to align the interests of managers with those of shareholders. John R. Cryan Partner & Co-Founder • 10 years of experience including value management at Credit Suisse and Accenture • Extensive experience in Enterprise Performance Management, developing and implementing value-based strategies into financial management and decision making processes

Steven C. Treadwell Partner • 15 years of experience including 9+ years of value management experience at HOLT and Credit Suisse • Extensive work with some of the largest companies in the retail, consumer products and industrial sectors incorporating shareholder insights into the client’s strategic decision process

A View from the Diagnostic Internal Capitalism Investors’ Shoes Audit

Strategic Advice Process Enhancement

Strategic Plan Capital Deployment Value Based Capital Allocation Evaluation Strategy Strategic Planning Approvals

Business Strategic M&A Performance Budgeting and Unit/Portfolio Planning & Measures & Key Forecasting Evaluation Valuation Value Drivers

Investor Incentives to Training & Strategy Alignment Communication & Simulate Development Targeting Ownership

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