M&A Report HDAX 110 Activity and Focus 2005–2014 2 Contents 5 Objective and Key Observations 6 Overview 12 Sector Analysis – Basic Materials 16 Sector Analysis – Consumer Goods 20 Sector Analysis – Consumer Services 24 Sector Analysis – Finance, Real Estate and Insurance 28 Sector Analysis – Industrials 32 Sector Analysis – Information Technology 36 Sector Analysis – Pharma & Healthcare 40 Sector Analysis – Telecommunications 44 Sector Analysis – Utilities 48 Appendix 1 – Methodology 49 Appendix 2 – HDAX composition and transactions 52 Appendix 3 – HDAX transactions per region and sector 54 About Deloitte 56 Glossary of Terms 58 Contacts M&A Report – HDAX 110 Activity and Focus 2005 – 2014 3 4 Objective and Key Observations Report objective The most active sector is Financial Services • The objective of this report is to provide the reader • The Finance, Insurance and Real Estate (FSI) sector with insights into historical transaction activity by the reported the highest transaction levels; however, 110 companies included in HDAX as at 30 September since the majority of transactions were in real estate, 2014. no direct comparison with M&A activity in other • The report gives a summary of HDAX as a whole, as sectors can be made. well as an analysis of deals at the level of the nine • While the Pharma & Healthcare and IT sectors had a “supersectors” defined by Deutsche Börse AG. clear focus on acquisitions, disposal activity was par- • The analysis covers activity trends and focus areas for ticularly high within the regulated Telecommunications different transaction types, key dealmakers and key and Utilities sectors. regions. • The analysis is based on the number of M&A transac- tions, acquisitions and disposals with a stake >25%, undertaken by these companies in the period from January 2005 to September 2014. Overall year-on-year activity was particularly low in 2009 and 2013 • The peak in 2007 was followed by a sharp decline in Recently, M&A activity among overall activity in subsequent years. • The lowest activity levels occurred in 2009 and 2013. HDAX companies has been • Overall activity picked up in the twelve months to Sep- tember 2014. • The fourth quarter tends to be the most active. increasing as a result of higher Activity has shifted from acquisitions to disposals disposal activity. • Historically, transaction activity was mainly driven by acquisitions. • In recent years, there has been a trend towards higher disposal activity. The regional focus is on European and North American companies • While 69% of overall transaction targets were located in Europe, 17% were based in North America and only 6% in BRICS countries. M&A Report – HDAX 110 Activity and Focus 2005 – 2014 5 Overview | HDAX Summary Chart 6 (Pie) Lorem ipsum dolor 2 Composition Fig. 1 – HDAX – Composition2% by DAX Type and Sector • The HDAX combines the 110 companies listed on DAX, (Number of companies / 30Sep14) MDAX and TecDAX. • As at 30 September 2014, the Industrials Sector, which consists of 21 companies, is the most dominant sector DAX 5 11 TecDAX within the HDAX by total number of companies, fol- 30 30 lowed by the Information Technology Sector with 18 16 10 companies and the Pharma & Healthcare Sector with 16 companies. 110 12 18 Transaction Type and Regional Focus • In the period under review, acquisitions clearly out- weighed disposals with 3,260 versus 2,671. 21 15 • The key regional focus was the German market, fol- lowed by the rest of Europe. North America was the primary driver within the remainder of the world, while MDAX activity within BRICS countries was comparatively low. 50 • On a net basis, i.e. acquisitions less disposals, activity shows a shift away from Germany (158 net disposals) Basic ChartMaterials 6 (Pie) Consumer Goods Consumer Services to other European (410 net acquisitions) as well as to Utilities Industrials Telecommunication Finance, Insurance and Real Estate other regions (337 net acquisitions). Pharma & Healthcare Information Technology InformationTecDAX TechnologyFinance, Insurance and Real Estate Pharma & Healthcare MDAX Industrials TelecommunicationsConsumer Services Utilities Year-on-Year Activity DAX Consumer Goods Basic Materials • Overall activity peaked in 2007, with acquisition activity Data < 5% is not labeled on the charts. significantly outweighing disposals. • A recovery in overall activity could be observed in 2010 Fig. 2 – HDAX – Transaction Type and Regional Focus and 2011, although it was driven by a higher amount (Number of transactions / Jan05 – Sep14) of disposals. • With a trough in acquisitions, activity slowed in 2013 and has experienced a period of recovery still character- ized by a high level of disposals. Disposals 746 819 Acquisitions 2,671 3,260 Fig. 3 – HDAX – YoY Activity 948 Chart(Number 3 (Line) of transactions) 5,931 1,358 800 700 977 600 1,083 500 400 300 Acquisitions Germany Acquisitions Rest of Europe (excl. Russia) Acquisitions Other regions Disposals Germany 200 Disposals Rest of Europe (excl. Russia) Disposals Other regions 100 RoW EUR 0 GER Acquisitions RoWDisposals Disposals EURAcquisitions (100) GER 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM14 Acquisitions Disposals Net acquisitions Total activity 6 Net acquisitions Total activity Disposals Acquisitions Overview | HDAX Transaction Type and Index Activity Activity Overview Fig.HDAX 4 – Activity HDAX – Overview Activity Overview • The total amount of transactions peaked in 2007, (NumberNumber of transactions) of transactions mainly driven by acquisitions. This level could not be 800 745 713 Net acquisitions reached again in the research period. 626 633 616 617 543 563 • Total transactions in the last twelve months (from Sep- 600 508 506 453 Total Transactions p.a 398 tember 2013 to September 2014) were 24% lower 367 358 400 319 Total transactions 288 304 305 278 than in 2007. However, total activity increased by 11% 161 256 200 108 Acquisitions in LTM14 compared to 2013. 83 83 68 67 21 6 Disposals • The activity level was very low in 2009 and 2013. 0 While in 2009 the amount of both acquisitions and (8) (7) disposals decreased as a result of the financial crisis, 200 220 238 250 259 292 275 298 285 the dip in activity in 2013 was driven by the lower 400 315 312 volume of acquisitions. • In 2007, acquisitions accounted for 61% of total 600 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM14 transactions, but since 2010, the number of disposals has been roughly equal to acquisitions. Acquisitions Disposals Total transactions Net acquisitions Average transactions p.a. Activity by Index • DAX companies conducted 64% of total transactions in the research period, followed by MDAX companies (29%). The share of transactions carried out by TecDAX companies (7%) was comparatively low and focused on Information Technology and Pharma & Healthcare. • Total disposals activity by DAX companies slightly ex- ceeded their acquisition activity. M&A activity among MDAX and TecDAX companies was generally driven by acquisitions, with 64% and 74% of total transactions 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM14 Acquisitions respectively. • The increase in acquisitions in 2007 was primarily driven2005 by 2006MDAX2007 companies.2008 2009 2010 2011 2012 2013 LTM14 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM14 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM14 Fig.HDAX 5 – HDAXActivity – Activityby Index by Index (Number of transactions) Number of transactions 462 454 500 436 DAX MDAX TecDAX 500 410 393 Acquisitions 354 371 400 400 330 320 348 230 300 300 205 205 237 243 180 177 181 171 200 234 215 145 117 147 185 200 166 163 168 167 45 46 61 43 37 46 41 44 100 137 149 125 128 32 39 94 110 108 116 95 100 76 87 0 36 39 43 33 27 30 28 32 34 21 (100) 0 Disposals 9 7 18 10 10 16 13 11 7 10 (200) 51 41 100 80 63 70 69 77 65 60 76 (300) 200 169 162 199 195 183 199 (400) 228 211 227 208 300 (500) 400 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM14 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM14 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM14 Acquisitions Disposals Total transactions Net acquisitions Net acquisitions 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM14 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM14 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM14 M&A Report – HDAX 110 Activity and Focus 2005 – 2014 7 Overview | HDAX Top Players Fig. 6 – HDAX – Most Active Companies Most Active Companies (Number and % share of transactions) • The most active company in the HDAX was Deutsche Focus of Transactions in Europe Bank AG, which accounted for 11% of total transac- Acquisitions 237 234 243 215 185 166 163 168 137 140149 tions settled by HDAX companies from January 2005 100% to SeptemberOther 2014. Deutsche Bank AG was also par- 80% 50 ticularly activeEON SE in the last twelve months, conducting 60 58 61 62 52 53 54 58 63 BASF SE 60% 80 transactions. This exceeds the average of 67 trans- Allianz SE 40% actions per year. 14 12 14 Simens AG 22 10 22 • Siemens AG accounted for 7% of all transactions con- 20% 12 10 11 14 Deutsche Bank 21 11 12 12 13 11 19 18 14 14 ducted in the observation period. On average, Siemens 0 14 14 AG settled 41 transactions per year, however, in the 18 20 18 23 24 25 25 25 20% 10 last twelve months, only 29 transactions were identi- 12 13 17 15 12 12 Other 40% 11 10 fied, most of which were disposals (23). EON SE 12 • Allianz SE, BASF SE and E.ON SE followed with 5%, 60% BASF SE 56 55 53 51 49 48 49 4% and 3% of total activity respectively.