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Everything You Always Wanted To Know About LBOs

Investment Banking

November 09, 2006


Table of Contents
1. Citigroup at a Glance

2. Concept of Leveraged Buyouts

3. Leveraged Buyouts in Practice

4. The Analysts Role in a Leveraged Buyout

5. Career at Citigroup
1. Citigroup at a Glance
The Worlds Largest Financial Services Provider
Key Facts Largest Financial Institution as to Market Cap (in bn)
y Worlds largest financial service provider Citigroup 194.9
Bank of America 191.9
y Operations in more than 100 countries
HSBC 171.1
y More than 294,000 employees, of which 6,856 work in Germany JPMorgan 129.5
y More than 6,000 branches, of which 330 in Germany Mitsubishi UFJ 106.6

y Highest placement capacity of all financial service provider; more than UBS 103.7
200 million customers Wells Fargo 96.2

y Equity exceeding 95.0bn; total assets exceeding Wachovia 88.0


1,261bn; net income of 20.5bn(1) RBOS 87.9

y Founded in 1812 and since 80 years present in Germany Banco Santander 84.9
BNP Paribas 79.7
y Largest foreign bank in Germany
ING Group 76.4
Mizuho 73.2
Net Income Contribution of Business Segments (2005) Barclays 68.5
Morgan Stanley 63.7
Alternative Goldman Sachs 63.5
Investment HBOS 61.6
Global Wealth 7% Merrill Lynch 60.8
Management
Credit Suisse 58.1
6%
American Express 54.8
Deutsche Bank 51.1
Global U.S. Bancorp 47.5
Corporate & Consumer
Lloyds TSB 47.1
Investment 53%
Fannie Mae 45.4
Banking
34% 0 50 100 150 200 250
Citigroup Main Competitors Investment Banking

(1) As of 31/12/05; Euro values calculated on exchange ratio of 1.2 US$/; Source: Datastream as of 30/10/06; Euro values calculated on exchange ratio
Equity including trust securities. of 1.2 US$/.

1 Citigroup at a Glance
with a Broad Range of Offered Services

Equity Research Global Corporate & Investment Bank Global Investment Global Consumer
Management Group
y Independent
research division
reporting directly
to the CEO of
Citigroup
y Global sector Capital Markets Global Banking
based coverage
Fixed Income Equities Investment Banking Corporate Banking

y Debt capital markets y Corporate broking y Financial advisory services, y Capital raising & lending
y Ratings advisory services y Equity capital markets in particular M&A y Risk management
y Asset-backed finance y Equity-linked y Acquisition finance y Transaction services
y High yield y Equity-based derivatives y Capital raising, i.e. IPO y Leasing
y Sales & trading operations y Sales & trading operations y Cash management
y Fixed income derivatives y FX and futures
y Capital structuring, project y Investment services
finance, securitisation y Trade finance & services
y Corporate credit cards

2 Citigroup at a Glance
an Exceptional Global Presence

y Citigroups expansive footprint provides its clients unique access to opportunities in over 100 countries around the globe
y Citigroups unparalleled market expertise, customer relationship commitment and integrated solutions, combined with its global
accessibility, make it the premier investment bank for all corporate finance needs anywhere

M&A Advisory Loan Syndications


Restructurings Working Capital Facilities
Hostile Defenses Asset Management
Joint Ventures Asset Securitisation
Minority Investments Structured Finance
Divestitures Venture Capital
Initial Public Offerings
Asset Backed Finance
Secondary Equity Offerings
Structured Lending & Leasing
Block Trades
Real Estate Finance
Investment High Yield Debt
Asset Finance
Preferred Stock
Commercial FX
Convertible Preferred
FX Options
Liability Management
FX Derivatives
Hybrid Bonds
144A Offerings Equity / Fixed Income Derivatives

Acquisition Finance Integrated Hedging

Liquidity Management Cash Management


Pension Fund Management Cross- Border Collections
Retail Brokerage Securities Services
Trade Services
Private Banking

3 Citigroup at a Glance
and a Superior Track Record to Serve Our Clients Needs
Germany Announced M&A Ranking YTD European Announced M&A Ranking YTD
Rank Value Mkt. Number Rank Value Mkt. Number
Advisor (bn) Rank Share of Deals Advisor (bn) Rank Share of Deals
Deutsche Bank 109.7 1 52.9% 28 Citigroup 340.6 1 35.6% 134
Citigroup 104.1 2 50.5% 20 JP Morgan 307.0 2 32.1% 150
JP Morgan 88.9 3 42.9% 18 Morgan Stanley 292.3 3 30.6% 118
Merrill Lynch 78.5 4 37.8% 13 Merrill Lynch 274.7 4 28.7% 82
Lehman Brothers 65.6 5 31.8% 10 Goldman Sachs 260.2 5 27.2% 107
BNP Paribas 61.4 6 29.9% 5 Deutsche Bank 241.8 6 25.3% 107
HSBC 61.2 7 29.7% 5 BNP Paribas 228.2 7 23.9% 77
Morgan Stanley 53.2 8 25.4% 18 UBS 220.3 8 23.0% 122
Credit Suisse 47.5 9 23.0% 19 Rothschild 210.4 9 22.0% 215
Goldman Sachs 37.3 10 17.9% 19 HSBC 177.1 10 18.5% 51
Industry Total 207.9 - 100.0% 1,683 Industry Total 956.6 - 100.0% 9,414
Source: Thomson Financial, as of September 30, 2006. Source: Thomson Financial, as of September 30, 2006.

Pending 2006 Pending 2006 Pending 2006 Pending 2006 Pending 2006

has announced its intention to sell has announced its intention to sell its has announced its intention to has announced its intention to
stake in has announced its intention to sell merge its networks business merge with
its division Bayer Healthcare- group with the carrier related
Germany - Internet Diagnostic to operations of
to
to five investors advised by
J.C. Flowers in a transaction valued
for 675 million for 1.25 billion for 4.2 billion Undisclosed amount 565 million

Citigroup acted as financial Citigroup acted as financial Citigroup acted as financial Citigroup acted as financial Citigroup acted as financial advisor
advisor to Time Warner advisor to WestLB advisor to Bayer advisor to Nokia to MobilCom

Pending 2006 July 2006 June 2006 May 2006 May 2006

has launched a public offer for has sold has sold


has acquired
has bought back a 25.1% stake
held by
to to

for 47.5 billion for 16.3 billion 4.5 billion for 3.3 billion for an undisclosed amount
Citigroup acted as defence advisor Citigroup acted as financial Citigroup acted as financial Citigroup acted as financial Citigroup acted as financial advisor to
to Endesa advisor to Bayer advisor to Bertelsmann advisor to Volkswagen Investcorp

4 Citigroup at a Glance
2. Concept of Leveraged Buyouts
LBO Concept
In a Leveraged Buyout the purchase price is primarily financed through different debt instruments that are paid down
with future operating cash flows of the acquired company.

Entry Value Creation Exit


Year 1 Year 2 Year 3 Year 4 Year 5

Debt Layer 1 Debt


Deb
t Rep
Debt Layer 2 Debt Layer 2 a ym e
nt t
hro
ug hO
CF
Debt Layer 3 Debt Layer 3 Debt Layer 3

Equity
Debt Layer 4 Debt Layer 4 Debt Layer 4 Debt Layer 4

Debt Layer 5 Debt Layer 5 Debt Layer 5 Debt Layer 5 Debt Layer 5

Equity Equity Equity Equity Equity

y Entry & y Management participates to achieve full motivation y Exit & Refinancing
Refinancing y Sponsor provides management expertise and potentially raises synergies with other y IRR: 25%-30%
y Capital Structure companies in his portfolio y Proceeds for
75% Debt y All cash flows to repay debt; no dividends demanded management
25% Equity and sponsor

5 Concept of Leveraged Buyouts


Key Return Drivers of Financial Investors
The key return drivers can be categorised in four main groups.

1. Leverage on acquisition and subsequent debt pay 2. Increased firm value through EBITDA growth
down between time of investment and exit
y Maximising of free cash-flow through strict capex, y Sustainable earnings growth (internal growth and via
R&D and working capital discipline cheap acquisitions)

y Typical financing structure using up to 75% debt to y Cost control


finance deal
y Possibly restructuring upside or synergies with other
companies in the portfolio of the financial investor

3. Increased firm value through multiple expansion 4. Limited duration of investment


between time of investment and exit

y Evolving industry fundamentals (e.g. cyclicality of y Willing to buy in weak markets


industry)
y Exit during robust M&A and equity market within a
y Quality of asset 3-7 years period

y Enhanced organic growth outlook y Trade off between time to exit, total proceeds and
IRR
y Improved equity capital market conditions

6 Concept of Leveraged Buyouts


LBO Capital Structure: Revolving Credit Facility
Revolving Credit Facility is a flexible debt financing instrument and normally undrawn at closing.

y Term: 5+ years

Revolving Credit
y Size: 5%-15% of total
y Interest: Prime plus 2.0%-2.5%. Cash interest only. Credit spread tied to level and
quantity of current assets as well as to financial performance and risk measures
y Seniority: Senior secured claim against assets. Usually secured by inventory and
accounts receivable (the most liquid operating assets)
(Senior) Term
Debt
y Main Lenders: Commercial banks, commercial paper investors
y Uses: Used to finance investments in working capital, capital expenditures, general
liquidity support

(Subordinated) y Flexibility: Rather flexible, tailor-made loan contracts with varying collateral and
High-Yield and covenant packages
PIK Notes
y Other: Restrictive covenants; pre-payable at par

Equity

Acquisition financing

7 Concept of Leveraged Buyouts


LBO Capital Structure: Senior Term Debt
Senior Term debt is the main financing source in Leveraged Buyouts.

y Term: 5-10 years

Revolving Credit
y Size: 25%-50% of total
y Interest: Prime plus 2%-3%. Credit spread tied to the appraised fair market value
of the land and building, enterprise value as well as the liquidation value of
machinery and equipment
y Seniority: Senior Term debt is usually the second-lowest-cost financing because
(Senior) Term it is secured by assets and is structurally senior to other debt layers and equity
Debt
y Main Lenders: Commercial and Investment banks, mutual funds, structured
investment funds, finance companies
y Uses: Issued to finance property and equipment as well as other long-lived
(Subordinated) assets (land, machinery, etc.), acquisitions, buyouts, redemptions, stock
High-Yield and repurchases
PIK Notes
y Flexibility: Tailor-made loan contracts with varying collateral and covenant
packages, as well as amortization schedules
y Other: Several tranches, consisting of amortising debt and bullet payment at
Equity maturity

Acquisition financing

8 Concept of Leveraged Buyouts


LBO Capital Structure: High-Yield and PIK Notes
High-Yield debt / PIK note financing is an additional, but more expensive source if senior debt financing is used up.

y Term: 6-10 years. Matures after Senior debt

Revolving Credit
y Size: 20%-40% of total
y High-Yield debt if structured with yearly payment of interest and repayment of
principals at maturity
y PIK notes are structured with repayment of principal and accrued interest at
maturity. PIK notes may include an upside participation
(Senior) Term
Debt
y For both instruments credit spreads are tied to cash flows
y Interest: Prime plus 4%-7%. PIK notes may include an upside participation
(equity-linked instruments), giving higher overall returns. More expensive than
Senior debt due to greater degree of risk
(Subordinated)
High-Yield and y Seniority: Subordinate to Senior debt in rights and remedies
PIK Notes
y Main Lenders: Pension funds, insurance and finance companies, debt and
mutual funds, hedge funds, other institutional and private investors. High-Yield
debt usually publicly traded
y Flexibility: Flexible instrument, can be structured as a debt security with a fixed
Equity
coupon and equity-linked features (e.g. warrants)

Acquisition financing

9 Concept of Leveraged Buyouts


LBO Capital Structure: Equity
Usually the Equity stake in a LBO comprises 20% to 40% of total capital.

y Size: 20%-40% of total

Revolving Credit
y Exit Strategy: 3-7 years
y Composition of Equity: 2/3 shareholder loans, 1/3 shareholders equity
y Equity holders preserve voting, dividend, control, and information rights in the
company
(Senior) Term y Dividend and liquidation rights are subordinated to the interests of the debt
Debt
lenders
y Management often invests in the equity together with an LBO sponsor
y Sponsors will typically seek a 25%-30% compounded annual total return over
(Subordinated) five years
High-Yield and
PIK Notes

Equity

Acquisition financing

10 Concept of Leveraged Buyouts


LBO Capital Structure: Parties Involved and Interests
The capital structure of a Leveraged Buyout is impacted by unequal interests of the parties involved.

Parties Involved Interests Financing Operations


Debt Equity NWC / Capex
y Try to get as much cheap debt as possible
Secured debt sources
High-Yield and PIK instruments
Sponsors
y Try to minimise companys cash needs
Squeeze working capital
Minimise capex
y Try to keep equity contribution as low as possible

y Try to use sponsor expertise


Management
y Strategic orientation beyond sponsor exit

y Draw covenants to protect their money, i. e.


Requirement of minimum equity level
Definition of max. debt the target can bear (coverage
Debt Provider
ratios, debt participation ceilings, etc.)
y Require certain debt repayment before sponsor exit
y Monitor principal repayments
y Do not want to take companys risk by holding its
Suppliers / Payables
Counterparties Any other form of credit

Low Moderate High

11 Concept of Leveraged Buyouts


Summary of Practical Implications

Is the company a good LBO candidate?


Stable cash flows, defensive industry, available collateral, low EBITDA multiples, moderate leverage

Is capital readily available? At what terms?


Narrowing credit spreads, favourable interest rates, low LBO backlog, high risk appetite

What capital structure will be feasible?


Optimise capital structure though a large bank loan / high-yield tranche and low equity stake

Can I pay interest and principal over 8-10 years?


Stable operating cash flows, sufficient for capital expenditures and principal payment

Can I exit in 3-7 years? At what multiple?


Good refinancing prospects, value added though improved strategy and management

What is my IRR / cash multiple / equity ticket?


Equity investors would like to see a minimum of 25% -30% IRR on their participation and a cash multiple of 2.0x

12 Concept of Leveraged Buyouts


3. Leveraged Buyouts in Practice
LBO Market Development
Since 2002, the US and the European Market for LBOs have seen doubled digit growth rates.

LBO Volume Development Comments


350 y USA and Europe are the major markets for Leveraged Buyouts
321 worldwide

300 y Together they account for about 87% of total volume


279
y Since 2002, both key LBO markets increased significantly
.1%
: 22
250 -05 .3% y These strong growth rates of Leveraged Buyouts are in
99 : 24
GR 9-0
5
particular related to a favourable micro and macro economic
CA
LBO Volumes (US$bn)

: 9
GR environment
200 C A
182
y Significant capital inflow from outside the USA and Europe
159 (Petro-Dollars)
150
123 y Restructuring of conglomerates in Europe focus on core
competencies
97 102
94
100 89
76
84
77 y Recovery in the equity markets since 2002
65
54
50

0
1999 2000 2001 2002 2003 2004 2005

USA Europe
Source: SDC.
Note: Target as well as acquiring companies are included in regional split.
13 Leveraged Buyouts in Practice
LBO Market Development (contd)
Established 25 years ago, Leveraged Buyouts started as a niche product and developed to a mainstream instrument.

LBO Contribution to Global M&A Volume


22.3%
19.1% 651.1
700 25%

% of Global Volume
600 522.6
Volume (US$bn)

15.7% 20%
500 13.4%
12.2% 15%
400 4.9%
4.6% 6.5% 292.6
300 10%
167.3 108.9 185.2
200 151.1 147.2
5%
100
0 0%
1999 2000 2001 2002 2003 2004 2005 2006YTD
Source: SDC. LBO Volumes in % of Global M&A Volume

Comments
y LBOs contributed about 26% of global M&A volume in 3Q 2006, lifting its share of 2006YTD volume to an all-time high of c.22%
y Sponsor-related deals in 2006 spanned a wide range of sectors, but in particular Healthcare, Technology, Consumer, Industrials
y Recently, sponsors have been targeting companies outside the U.S. and Europe in greater frequency

Market Trends
y In the 1980s, Leveraged Buyouts were based on acquiring undervalued, undercapitalised and stable companies
y In the early 1990s, sponsors started to actively encourage or intervene to achieve improved operative performance
y In the late 1990s, sponsors are more and more looking for growth stories
y And today?

14 Leveraged Buyouts in Practice


Growth in LBO Size
Mega LBOs are the recent phenomenon.(1)

# of LBOs > US$5bn in USA # of LBOs > US$5bn in Europe


7 6 5
4
# LBO Transactions

# LBO Transactions
6
4
5 3 3
4 3
3 3 2
3 2 2
2 No Mega LBOs No Mega LBOs 1 1
1 1

0 0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
YTD YTD
>$5bn, <$10bn >$10bn >$5bn, <$10bn >$10bn

Top 10 US LBO Deals 2006 YTD Top 10 Europe LBO Deals 2006 YTD
Value Value
Acquirer / Target Industry (US$bn) Acquirer / Target Industry (US$bn)
Bain, KKR, ML Global Equity / HCA Healthcare 32.1 Ferrovial, GCI, Caisse de Depot / BAA Transportation 30.1
Mgmt, GS, AIG, Carlyle, Riverstone / Kinder Morgan Power 27.5 KKR, Blackstone, TH Lee, Carlyle / VNU Media 11.6
Apollo, TPG / Harrahs Entertainment Recreation 25.6 Osprey Acquistions / AWG Utility 10.4
Blackstone, Carlyle, Permira, TPG / Freescale Technology 17.5 KKR, Silverlake, AlpInvest, Bain, / Philips Semi Technology 9.5
SuperValu, CVS, Cerberus / Albertsons Consumer 17.4 GS, Borealis / Associated British Port Holdings Industrial 6.1
Saban, Madison, Providence, TPG, TH Lee / Media 13.4 Nordic Capital / Altana Pharma Unit Healthcare 5.8
Univision
KKR, GS Capital Partners / Kion Industrials 5.1
Mgmt, JPM, Warburg, TH Lee, GS / ARAMARK Consumer 8.2
Cerberus / GMAC Fin. Institutions 7.9 EQT, Investor AB / Gambro Healthcare 4.6
Bain, Blackstone / Michaels Stores Consumer 6.0 Babcock & Brown Capital / Eircom Telecom 4.6
Blackstone / CarrAmerica Realty Real Estate 4.8 Henderson Fund Mgmt Plc / John Laing Industrials 4.0

Source: SDC.
(1) The US$31bn RJR/Nabisco transaction, completed in 1989, is the exception.
15 Leveraged Buyouts in Practice
Factors Driving Larger LBO Transactions
Developments on the equity and the debt capital markets in the last three to four years led to favourable environment
for larger Leveraged Buyouts.

Underperforming Large Caps ... more Equity Available


160% 57.7% 350 300
55.2%
140% 300

Volume (US$bn)
238
250
120% 20.6%
200
100% 150 130
93 92
80% 100
50
60% 0
Jan-02 Oct-02 Aug-03 May-04 Mar-05 Dec-05 Oct-06
2002 2003 2004 2005 2006E
S&P 400 MidCap Russel 2000 Dow Jones Industrials Total Funds Raised

less Equity Required ... and more Debt as well as Lower Cost of Debt
# LBOs 68 80 117 158 86

Average Pro Forma Adjusted


40% 39% 37% 5.5x
% of LBO Total Source

36% 6.0x 5.2x


34% 32%
4.4x 4.6x
4.2x

Credit Statistics
30%
4.0x 3.2x 3.5x 3.5x
32% 3.1x 3.0x
20% 34% 33%
33% 31%
2.0x
10%
7% 3% 3% 1% 2%
0% 0.0x
2002 2003 2004 2005 1H 2006 2002 2003 2004 2005 1H 2006

Contributed Equity Retained Earnings / Vendor Financing Debt / EBITDA EBITDA / Cash Interest

Source: Datastream, S&P, Venture Economics, Private Equity Interactive.


16 Leveraged Buyouts in Practice
LBOs Offer Incredible Profits
making the sponsors involved filthy rich ...

Selected Transactions
[] BC Partners has bought industrial and specialty chemicals distributor Brenntag from Bain Capital for an undisclosed sum []. A source
close to the matter said the deal was worth slightly more than 3 billion euros. [] It is a quick turnaround for Bain, which bought Brenntag
from Deutsche Bahn in 2004, funding the buyout with 1.2 billion euros of debt. Since then, Brenntag has been a regular visitor to the debt
markets, first with a deal to fund a 200 million euro dividend payment in November 2004, then with a 1.89 billion euro recapitalisation [].
That recapitalisation allowed for a further dividend payment to the owners of about 450 million euros.
Reuters, 25 July 2006

Doughty [Hanson & Co.] buys Moeller from Advent [] on a secondary buyout that values the company at 1.1 billion [].
Advent bought the company with a 50 million investment and got the 19 creditor banks to roll over existing debt. It injected a further $50
million equity [...] Strategic disposals generated an additional 100 million of cash.
The Deal.com, 21 July 2005

Blackstone has already earned back the $650 million it invested in Celanese in 2004, when it took the company, [], private in a $4.0
billion leveraged buyout. [].
All told, Blackstone has raked in about $2.3 billion, or about 3.5 times its original money. Including its remaining unrealised stake, the
investment has in increased in value fivefold. The Deal.com, 11 May 2006

Blackstone macht RAG-Kohle zu Gold


Wie in dreieinhalb Monaten von $200 Mill. mehr als $650 Mill. werden [] Das Unternehmen ging fr knapp $1 Mrd. an ein Konsortium aus
Blackstone (42%), First Reserve (42%), [] Das Wichtigste: Die 1-Mrd.-Dollar-Offerte speiste sich nur zu $200 Mill. aus Eigenkapital. Kaum
vier Monate spter kommt das Unternehmen an die Brse. Die Kapitalerhhung splt zwar netto min. $400 Mill. in die Kasse. Via
Sonderdividende werden aber $350 Mill. direkt an die Alteigentmer zurckgeleitet. [...] der Anteil am Grundkapital reprsentiert bei $18
Emissionspreis weitere $307 Mill. [...]. Brsen-Zeitung, 23 November 2004

Source: Factiva.
17 Leveraged Buyouts in Practice
Strong Management Incentives in LBOs
as well as the management of the target companies

Significant Equity Incentives in Post-LBO Companies Comments


y Sponsors have a keen interests to align management interests
300 with their own strategy
As a % of Deal Value

y Participation of the management in the equity of the target


246 SunGuard 2.3%
250 company are considered to be crucial
Select Medical 2.7%
y In addition, sponsors incentivise through high payouts
AMC 2.5%
200 y Due to sensitivity of information, details on management
103 Transdigm 4.2%
incentives are not often disclosed
PanAmSat 0.5%
in US$m

150 y Public available information of payouts and participations


however show strong monetary incentives

y Ways for monetary incentivising include:


100

62 Stock options
142 56
49
50 Restricted stocks / stock units
37 29 18 22
Company plan bonus
25 26 31 12
11
0 Retention / success fee
SunGuard Select AMC Transdigm PanAmSat
Medical Entertainment

CEO Other Top 5 Executives

Source: SEC Filings & Citigroup.


18 Leveraged Buyouts in Practice
Post LBO Performance
and create value for the companies.

Quartely Sales (US$m) EBITDA margin (%)


1,100 25.0%
Quaterly Sales (US$m)

1,003

EBITDA Margin (%)


1,000 20.4%
20.0%
900 847
16.7%
781 779 15.6% 15.2% 15.6%
800 735 745 14.7% 14.4%
721 15.0%
700

600 10.0%
-4Q -3Q -2Q -1Q +1Q +2Q +3Q -4Q -3Q -2Q -1Q +1Q +2Q +3Q

Quartely Relative to LBO Quartely Relative to LBO

Total Debt / EBITDA (LTM) Capex / Sales (%)

6.0x 5.6x 10.0%


4.9x 4.9x
Total Debt / EBITDA

Capex / Sales (%)


8.0%
4.5x
5.7%
6.0%
3.0x 4.4% 4.1%
3.7% 3.9% 3.8%
2.0x 4.0% 3.3%
1.6x 1.6x
1.5x 0.9x
2.0%

0.0x 0.0%
-4Q -3Q -2Q -1Q +1Q +2Q +3Q -4Q -3Q -2Q -1Q +1Q +2Q +3Q

Quartely Relative to LBO Quartely Relative to LBO


Source: SEC Filings; Citigroup Financial Strategy Group publication (Nov. 2006).
19 Leveraged Buyouts in Practice
Outlook
Leveraged Buyouts are expected to play an even more important role in the global M&A market in the coming years.

Increasing importance in the M&A market LBO Contribution to the M&A Market
y Private equity accounts for c.23% of global M&A volume (in 3Q 30%

LBO in % of Global M&A


2006, LBO contribution increased to 26%)
2006YTD
25%
22.3%
Mega-Fundraising
19.1%
y More and large private equity funds 20%
15.7%
y 2006 funds raised $600bn in equity; total firepower of $1,700bn 15% 13.4%
12.2%
y Shift of international reserves into private equity investment
10%
Giant-LBOs 2002 2003 2004 2005 2006E 2007E

y 2005 was marked as The Year of the Giant LBO, with 2006
already exceeding 2005 level Mega-Fundraising
y In 2007, buyouts of around $40bn - $50bn are expected 22 20.0

2006 Fund Size ($bn)


Syndicates (Club deals) 18 16.5
15.0 14.5
y Sponsors form consortiums of three to seven firms 14.1
14
y Top consortium deals contributed more than $14bn in equity 10.1 10.0 10.0 10.0 10.0
10
Favourable DCM Environment
y Substantial extension of the Fixed Income markets 6
(1) (1) (1) (1) (1)
BS KKR Carlyle TPG Permira AM GS Provid. Silver Bain
y Corporate defaults are considered to remain below the average
Fund Size
Source: SDC, Citigroup, Factiva.
(1) Funds are still in the market and therefore, sizes are estimated.
20 Leveraged Buyouts in Practice
4. The Analysts Role in a Leveraged Buyout
The Analysts Role in a LBO Buy-side
A LBO buy-side will confront you with a variety of demanding tasks within in a very dynamic project environment.

Timeline
Outside-in
1st Round Bid Due Diligence 2nd Round Bid Closing
Valuation

Research
y Industry analysis
y Peer group analysis
y Press / news searches

Valuation / Modelling
y Comparable companies y Leveraged Buyout y Fundamental valuation
y Comparable transactions y Discounted cash flow adjustments
y Analyse market research y Sum-of-the-parts
y Operational benchmarking
Work Flow Management
y Communication with Leverage Finance y Organise internal / client meetings y Tombstones
department y Organise internal / client y Closing diner
y Communication with relevant industry conference calls
group y Internal administration

Processing
y Presentation building y Due diligence y Presentation building
y Timetable y Dataroom analysis y Client meetings
y Client meetings y Site visits
y Expert meetings
21 The Analysts Role in a Leveraged Buyout
5. Career at Citigroup
Citigroup Application Process
Every year we advise on the biggest mergers & acquisitions globally. Do you want to be a part of it?

What about 2006 / 07 Opportunities (Corporate Finance / M&A)?

Investment Banking Full-time Applications for Frankfurt / London

y Citigroup is inviting applications for our analyst programme within the Investment Banking Division in Frankfurt
and London

y We are looking for highly motivated individuals with a very good academic performance, strong communication
and interpersonal abilities as well as outstanding quantitative skills

y Key attributes of a qualified candidate are the ability to work independently and in a team, strong organisational
skills, a high degree of self-motivation and initiative, with leadership potential

Investment Banking Internship Applications for Frankfurt / London

y Our internship programme is an integral part of our graduate recruitment drive

y We devote considerable time and resources as we regard it as an invaluable way to get to know you

y It also gives you the chance to explore whether you would enjoy a career in Investment Banking and particularly
with Citigroup

22 Career at Citigroup
Citigroup Application Process (contd)
We currently offer opportunities for both full-time positions and internships.

Deadlines for Full-time Positions and Internships

Full-time Position Application

y Frankfurt: Throughout the whole year however early applications are recommended

y London: November 2006

Internship Application

y Frankfurt: Throughout the whole year

y London: 31st January 2007

Recruiting Contacts

y In Frankfurt: Myriam Tantz; +49 (0)69 1366 5081; myriam.tantz@citigroup.com

y In London: Anna Collins; +44 (0)20 7508 7075; anna.collins@citigroup.com

All applications must be submitted online via the website www.citigroup.com. Please follow the careers link.

23 Career at Citigroup
Business Contacts
For any questions, please do not hesitate to contact us.

Robert Witte Alexander Becker Christopher Tubeileh


Vice President Associate Analyst
German Investment Banking German Investment Banking German Investment Banking

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robert.witte@citigroup.com alexander.becker@citigroup.com christopher.tubeileh@citigroup.com

24 Career at Citigroup
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