(1)Thesis MSc BA Corporate Finance: Management Buyout effects on a firm’s performance, within The Netherlands

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Thesis MSc BA Corporate Finance: Management Buyout effects on a firm’s performance, within The Netherlands.

Varvara S. Maslova Page 78 of 88 December 2007

Appendices

1. Characteristics of Mazars Berenschot Corporate Finance 2. Sign test

3. The letter 4. The survey

5. Fisher Exact Probability Test

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Appendix 1. Characterization of Mazars Berenschot Corporate Finance

Mazars Berenschot Corporate Finance is established in 1999, it is formed as joint venture between the management consultancy group Berenschot and the accountancy and tax firm Mazars.

Mazars Berenschot Corporate Finance supports middle market companies in Corporate Finance issues such as:

The sector focus of Mazars Berenschot Corporate Finance is on industry, business services, ICT, health care, construction and real estate.

Transactions

! Divestiture

! Acquisition

! Buy-out

! Merger

Funding & Financing

! Acquisition financing

! Growth financing

! Refinancing

! Seed capital

! Valuation

! Fairness Opinion

Mazars

! Financial/Tax/ Legal

! Structuring

! Feasibility study

Berenschot

! Commercial/HRM/ Operational MBCF Transaction Support Services

(Vendor) Due Diligence

! Valuation

Mazars

! Structuring

Berenschot

! Valuation

Mazars

! Structuring

Berenschot

Endemol N.V.

Fairness opinion

2007

Endemol N.V.

Fairness opinion

2006 2007

Nolan, Norton & Co.

Management buy-out uit Atos Origin N.V.

2006

Nolan, Norton & Co.

Management buy-out uit Atos Origin N.V.

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Appendix 2. Sign test

The sign test can be used to test the null hypothesis that the population median of the differences is 0. Sign (+) indicate a positive difference and sign (-) indicate a negative difference. If the null hypothesis was true, the sequence of + and – differences could be regarded as a random sample from a population in which the probabilities for + and – were each 0.5. The observations would constitute a random sample from a binomial population in which the probability of + was 0.5. According to Newbold (2003) the sign test is based on the fact that the number of positive observations S in the sample has a binomial distribution

(! =0.5) .

The sign test is used to test:

H0: ! =0.5 There are no differences in economic performance between management buyout firms and the medians of their industry peers.

H1: ! "0.5 There are differences in economic performance between the management buyout firms and the medians of their industry peers.

Normal approximation

As a consequence of the central limit theorem, the normal distribution can be used to approximate the binomial distribution if the sample size is large. Newbold et al (2003) suggest that the normal approximation is acceptable if the sample size exceeds 20.

The test statistic is :

n n S

Z S

5 . 0

*

* #

# =

= $

µ

µ =n!

n n

n (1# )= 0.25 =0.5

= ! !

$

S* is corrected for continuity:

S*=S+0.5, if S < µ^or S*= S- 0.5, if S> µ

S*= number of positive differences n= the number of nonzero differences

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Appendix 5. Fisher Exact Probability Test

Methodology

The Fisher Exact Probability Test uses a 2x2 contingency table to compute the p- value (Mehta and Patel, 1983). The null hypothesis can be rejected at 5%

significance level. According to Bruining (1992) the rejection of the null hypothesis can be understand as an evidence of associated relationship between the management measures and improvement of economic performance.

Yes No

Performance A+B Yes

C+D No

A+C B+D N Management measures

The formula: p-value = (A+B)! (C+D)! (A+C)! (B+D)! / N!A!B!C!D!

(Contingency table, Bruining, 1992)

In this study the associated relationship is examined between company’s strategy, financial changes, management motivation, and company’s performance (question3.2). To construct the contingency tables, this study uses the survey questions of appendix 3 and 4.

Question 3.2: If you compare the situation before and after the management buyout, would you agree that the company’s performance (net profit in percentage of sales) is increased?

0= yes 1= no

In the survey the questions regarding management measures include five-point scales and respondents were asked to indicate to what extent the statements are valid for them (1=not applicable, 5= totally applicable). To calculate the contingency tables, it is assumed here that scale 4 and 5 indicate yes, scale 1 and 2 indicate no and scale 3 is exclude here.

H0: There is no association between the chosen factors and improvement of economic performance.

A B

C D

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H1: There is an association between the chosen factors and improvement of economic performance.

Hypothesis H0 is rejected if p-value %.05

Results Contingency Tables

Value creation measures

Survey part 2: Financial measures III 1-7

Question 1-7: Yes No

Performance Yes No

Value creation measurers p-value 0.05 Question III 1:

Yes No

Performance Yes

No

Inventory control p-value 0.41 Question III 2:

Yes No

Receivables period p-value 0.15 Question III 3:

Yes No

Payables period p-value 0.30 Question III 4:

Yes No

Efficient use of capital assets p-value 0.13 5

1 3

5 4

1 2

7 1

1 2

3 4

3 1

8 1

1 2

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Question III 5:

Yes No

Focus on cash flow p-value 0.21 Question III 6:

Yes No

Sale of surplus assets p-value 0.71 Question III 7:

Yes No

Personnel expense p-value 0.42

Strategic redirection

Survey part 2: Investments IIa 1-4

Question IIa 1-4:

Yes No

Combination of different investments p-value 0.20

Question IIa 1:

Yes No

Education p-value 0.58 Question IIa 2:

Yes No

Capital assets p-value 0.53 11

2 1

1 9

4

4 3

1 2

6 3

1 3

5 2

2

5 3

1 1

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Question IIa 3:

Yes No

Marketing and sales department p-value 0.22 Question IIa 4:

Yes No

New business locations p-value 0.37

Survey part 2: Product and market developments IIb 6-9

Question IIb 6-9:

Yes No

Combination of product developments p-value 0.04 Question IIb 6:

Yes No

Introduction of new products/services p-value 0.17 Question IIb 7:

Yes No

Refinements of products/services p-value 0.25 Question IIb 8:

Yes No

Expansion in new markets p-value 0.8 Question IIb 9:

Yes No

Expansion of existing business locations p-value 0.18 7

1 1

5 6

1 3

9 1

1 3

10

1 1

6

1 1

7 2

1

4 5

4

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Question II b10:

Yes No

Focus on the preferences of the customers p-value 0.44

Question II b11:

Yes No

Focus on strengthening of the market position p-value 0.42

Survey part 2: Marketing devices IIc 13 -16

Question IIc 13-16:

Yes No

Combination of marketing instruments p-value 0.36 Question IIc 13:

Yes No

Pricing policy p-value 0.27 Question IIc 14:

Yes No

Promotion policy p-value 0.27 Question IIc 15:

Yes No

Sales system p-value 0.22 Question IIc 16:

Yes No

Distribution system p-value 0.54

7 1

2 1

10 1

3 1

7 3

2 2

5 4

2

8

2 1

7

1 1

5 4

1 1

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Survey part 2: Business relation IId 18 - 20 Question IId 18:

Yes No

Business relation with suppliers p-value 0.02 Question IId 19:

Yes No

Business relation with customers p-value 0.11 Question IId 20:

Yes No

Company’s reputation p-value 0.23

Survey part 2: Market orientation IIb 10/11 – 11d 18/19

Question IIb 10/11–IId 18/19:

Yes No

Market orientation p-value 0.29

Survey part 2: Acquisition/merger/ joint venture IIe 22-24

Question IIe 22-23:

Yes No

M&A prospects p-value 0.35 Question IIe 22:

Yes No

Acquisition prospects p-value 0.35 9

2

8

1

10

2 1

10

3 1

4 4

3 1

4 4

3 1

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Question IIe 23:

Yes No

Merger prospects p-value 0.45

Question IIe 24:

Yes No

Joint ventures prospects p-value 0.43

Motivation

Survey part 2: Motivation Ia - Ib Question Ia:

Yes No

Motivation management p-value 0.49

Fisher Exact Probability test motivation - incentives

Question Ib 1-2:

Yes No

Motivation Yes No

Incentives combination p-value 0.004

Question Ib 1:

Yes No

Financial incentives p-value 1 Question IIb 1:

Yes No

Debt burden p-value 0.58

3 4

2 2

4 2

2 2

8 2

4

6 4

1

8

5 6

1

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Employment

Survey part 3: Employment 1 Question 1:

Yes No

Employment p-value 0.03

10 1

1 3