European Toner

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European Toner Inkjet Remanufacturers
Association
Mergers ltgt Acquisitions ltgt Cooperations in
the European Cartridge Remanufacturing
Industry Strategy and Process Development by
Friedrich W. Becker-Birck / Senior Partner /
BECKER-BIRCK CONSULTING PARTNER GbR
Hofheim/Germany ETIRA Conference Frankfurt
25th January 2005
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European Toner Inkjet Remanufacturers
Association
Outline

• Scenario
• Consolidation Cooperation / Acquisition /
  Mergers-JV
• Search for Pearls and Snips
• Golf Course Deals vs. Professional Approach
• Structured Process
• Selection Process
• Evaluation of Alternatives
• Negotiations / Closure / Transaction
• Conclusion

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European Toner Inkjet Remanufacturers
Association
Scenario

• Market growth will continue / attracts
  newcomers in Europe and from Far East
• Battle stronger among OEM, Remanufacturers,
  Private Label
• New trends within distribution channels
  commercial vs. retail
• Increasing, harsh competion EURO
  revaluation prices, margins, profits decline
• Consolidation of a fragmented remanufactoring
  industry
• Key factors for survival and growth profit
  level, cost leadership, advanced, high speed RD
  and production technology, distribution,
  branding

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European Toner Inkjet Remanufacturers
Association
Consolidation

• Cooperation
• - Lowest degree of consolidation, engagement
  no marriage
• - Joint resources, e.g. RD, production,
  logistics, receycling or
  distribution
• - Only, if strong synergies
• - Disadvantage gt transfer of sensitive
  information
• gt considerable conflict potential
• - Advantage good test period for marriage

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European Toner Inkjet Remanufacturers
Association
Consolidation

• Acquisition
• - Requires long-term strategy and strong
  financial resources
• - Different solutions gt share deal / 100 or
  stake / cross-sharing
• gt asset deal (properties, accounts,
  patents)
• - Direct marriage, no testing or engagement
  period, risk to fail
• - Total influence on future development
• - Better realisation of synergies
• - Important gt business plan must show a clear
  return on investment

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European Toner Inkjet Remanufacturers
Association
Consolidation

3. Mergers Joint Ventures ( JV ) - Merging
2 or more companies and found a bigger, stronger
one - Mergers are excellent consolidators -
Merger merge capital and business / give up
full autonomy - Merger , if no survival, no
successor / shared autonomy - JV start-up
by 2 or more existing companies / investors -
JVs establish additional players / companies /
no consolidation - JVs are mainly established
for new businesses or new markets - JVs could
be usefull for receycling of empty cartridges
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European Toner Inkjet Remanufacturers
Association
Search for Pearls and Snips

• We are facing currently a dramatic restructuring
  process in Europe
• Large conglomerates concentrate on core business
  and divest side business
• Banks liqidate industrial parcels of shares and
  participations
• Family owned medium-sized companies are sold
  because there is no successor
• No good climate for IPOs
• This development has brought Venture Capital and
  Private Equity
• Investors into the market. In order to get the
  best return they are
• searching only for pearls and snips.

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European Toner Inkjet Remanufacturers
Association
Search for Pearls and Snips / continued

• VC and PE Companies are mainly American and
  British
• Blackstone ( USA )
• Morgan Stanley ( USA )
• Permira ( GB )
• Terra Firma ( GB )
• 3i ( GB )
• 3i has invested VC in various European companies
  of the IT and OP
• industry. The engagement is limited to approx. 5
  years and leads to
• an IPO or sale of their shares to other investors.

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European Toner Inkjet Remanufacturers
Association
Golf Course Deals vs. Professional Approach

• Golf Course Deals often based on private
  contacts
• Advantage vital decisions are taken by
  handskake, low cost, fast
• Disadvantage gt driven by private motives for
  growth or suvival
• gt superficial evaluation of effects
  and r.o.i. gt no examination of
  alternatives
• Professional Approach gt involve external
  expert gt market insider
  and/or analyst gt higher cost and
  fees gt structured
  process, time-consuming
  gt evaluation of alternatives gt
  minimisation of risk for investment