Danaher Case Study

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Serial Acquirer Case Study: Danaher Corporation

August 2010

New York One Penn Plaza, 36th Floor New York, NY 10119
Preliminary and subject to further review and change. See final page for important information about this document. Copyright 2010 Fortuna Advisors LLC. All Rights Reserved.

Overview
• 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 Copyright 2010 Fortuna Advisors LLC. All Rights Reserved.

2

Danaher’s M&A Strategy Emphasizes Returns
Danaher's Fundamental Performance $1,600 16%

$1,200

12%

• Even during the downturn in 2008 and 2009 Danaher delivered Cash Flow in excess of the required return on all capital • This strategy creates value for shareholders and demonstrates the benefits of continuously redeploying capital into positive returns

$800

8%

$400

4%

$0

0%

1997

1999

2001

2002

2003

2004

2006

2008

1996

1998

2000

2005

2007

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

Copyright 2010 Fortuna Advisors LLC. All Rights Reserved.

3

2009

Danaher Creates Value Through Superior Returns and Growth
Residual Cash Margin
25% 20%
15% Residual Cash Margin Acquistion Residual Cash Margin

10% 5%
0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 60% 40% 20%

• Danaher’s M&A strategy relies on being able to operate the target company in a more efficient way • The Company’s Residual Cash Margin (with and without intangibles) has been consistently positive and relatively stable • When a business is run this efficiently, growth is tremendously valuable

Revenue Growth

0% -20% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1,400% 1,200% 1,000% 800% 600% 400% 200% 0% -200%

Danaher S&P 500 S&P 500 Machinery
American Precision Fluke Hach

Tektronix ChemTreat Sybron Dental

MDS Analytical Technologies

Maconi Data Systems
Kavo Dental Radiometer

Kollmorgen

Molecular Devices

Applied Biosystems

Pacific Scientific

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

Copyright 2010 Fortuna Advisors LLC. All Rights Reserved.

4

The Danaher Business System (DBS) Focuses Management on the Relentless Pursuit of Efficiency Gross Business Return
70% 60% 50% 40% 30% 20% 10% 0%

Gross Business Return

Acquisition Gross Business Return

Required Return

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

30% 25% 20% 15% 10% 5% 0%

EBITDAR Margins

• DBS is a culture where every employee from CEO to the shop floor is responsible for findings ways to improve the way work gets done • Danaher has held margins stable despite the recent downturn • More remarkable is the Company’s ability to maintain low levels of Asset Intensity

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

0.8x 0.6x 0.4x 0.2x

Asset Intensity

0.0x 1996 1997 1998 1999 2000 2001 2002 2003 2004...
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