Proprietary and Confidential

CFO M&A Strategies and ExperiencesDecember 2, 2010

Alan Stewart

Why do acquisitions? The lay of the land.

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•Why do acquisitions?•How did ICF source deal opportunities?•What type of reliance they had on internal & external experts?•How did ICF perform due diligence?•Negotiate to closing of the transaction•Post closing integration

ICF Transaction History

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•June 1999 leveraged buyout with CM Equity from ICF Kaiser (a billion dollar public company heading into bankruptcy-12/99 debt to ebitda leverage at 7-1.•April 2002 first acquisition was completed, asset purchase of two units of the Arthur D. Little consulting practice in bankruptcy auction, with equity infusion by CM Equity.

•Subsequent Transactions:•January 2005 Synergy, Inc.•October 2005 Caliber Associates•January 2007 EE&A & APCG•June 2007 Ztech•December 2007SH&E•February 2008 Jones & Stokes•March 2009 Macro International•December 2010Jacob & Sunstrand

How did ICF source deal opportunities?

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As a private company before we had capacity to acquire companies:• Hired buyside investment bankers in 2004 for a one year engagement• Reviewed potential targets and arranged CEO meetings• Participated in numerous auctions to understand process and

playersAs we deleveraged and had capacity for acquisitions:• Pursued and closed Synergy and Caliber acquisitions• Hired full time M&A staff person• Expanded contacts for CEO to pursue deals• Expanded reach to investment banking community for deals and participate in more limited auctions

What type of reliance they had on internal & external experts

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•Necessary to have a mix of external and internal resources and used:•External accounting firms to audit quality of earnings, backlog and rate structure as well as revenue recognition practices and tax issues.•Outside counsel for legal corporate review and government contracts review•We often had an independent survey of major customers completed.•HR experts to review plans, 401k issues, conversion issues.•Internal staff to review government contracts, backlog, pipeline and proposals, rate structure, accounting systems and processes, internal IT systems, HR benefits, facilities, etc.

•Upon acceptance of a expression of interest (versus letter of intent), we obtained limited exclusivity with the target.•Provided our due diligence request list and plan for due diligence.•If sensitive of disclosure, we would send in an accounting firm to provide a business review of the target and expand work as needed.•We would request an electronic data room where possible.•Prepared documents which incorporated the due diligence reports from our external and internal experts, with our integration plan and financial model combining the companies. These reports were used for our Board of Directors and commercial bank approval. We used debt to acquire all but our first acquisition.•We started the integration planning process during the due diligence process.

How did ICF perform due diligence

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Negotiate to closing of the transaction

•Get major terms on expression of interest or letter of intent•Obtain limited exclusivity for 30 to 60 days•Often negotiated two step agreement (signing with conditions to close)•Work directly through company executives and not investment bankers where possible.•Map out benefits strategy and prepare all employee presentation•We required a significant portion of billable employees to sign ICF standard agreements as a condition to close (intellectual property, code of ethics, nonsolicitation of clients or employees for one year after termination of employment). Also, we required all Key employees sign contracts as a condition to close.•Ensure that the senior and next one or two levels of management are sold on the deal, understand their new reporting, and their compensation arrangements prior to closing, and preferably signing if possible.•Work out refined financial model after signing if possible.

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Post closing integration

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•Identify internal integration team•Involve integration team in due diligence as early as possible•Have weekly joint meetings on integration to identify all issues and develop plan and responsibility for actions•Cultural implications and communications are critical•Get into the details as quickly as possible•Be open, honest and upfront during the integration process•Consider retention bonuses for corporate staff, historical knowledge is important•Evaluate corporate staff for keepers as early as possible•Update post performance on financial, employee, customer results and review

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Acquisition Integration Overview Presentation

There are Four Basic Messages for Successful Acquisition Integration

Speed OverPerfection

Speed OverPerfectionFollow the MoneyFollow the Money

Run the CoreBusiness

Aggressively

Run the CoreBusiness

Aggressively

• Start before the close of the transaction

• Make decisions quickly• Make most of the

decisions in the first 100 days

• Minimize the productivity dip

• Maximize enthusiasm by minimizing uncertainty

• Keep it 80/20• Focus the work where

the bulk of the shareholder value is created

• Remember that 10 to 20 of the hundreds of possible initiatives drive the majority of the value

• Use small teams to manage the integration

• Preclude people running the core business from getting side tracked

Culture MattersCulture Matters

• Pay particular attention to the business systems and practices that comprise how the businesses are run

• Decide as early as possible

− The practices that are non-negotiable and will be imposed

− The areas of business practice that will be the combination of best practices from both companies

− The practices that will be needed to drive the value (in the VDA and price of the deal)

Value Driver Analysis Is an Iterative ProcessVDA Refines Due Diligence; Due Diligence Informs VDA

Eliminate

Due Diligence Data Analysis

Accept/Adjust

Preliminary Value Driver Assessment

Value Driver Operating

HypothesisDue Diligence Requests and Prioritization

Value Driver Analysis and Due Diligence Process Flow

Milestones

StageFormulation of StrategicObjectives

Formulation of StrategicObjectives

TransactionImplementationImplementation EvaluationEvaluation

Transition

Acquisition Candidate Confirmed

LOI Definitive Agreement &

Announcement

Close Close + 100 Days

Integration Process Incorporates Significant Integration Planning in Transition Stage

Also Communication, Culture and Employee Transition WorkstreamsAcquisition Integration Process

Transition and Implementation

Workstreams

Culture Assessment and Integration

Communication Plan Development and Execution

Employee Transition Planning & Implementation

Functional Area Planning & ImplementationFoundational

Integration Process

Workstreams

Overall Acquisition Integration Project Management

Team Formation

Knowledge Capture & Capability Building

Value Driver Analysis

Transaction Workstreams

Due Diligence

Regulatory Approval

Negotiation

Milestones

StageFormulation of StrategicObjectives

Formulation of StrategicObjectives

TransactionImplementationImplementation EvaluationEvaluation

Transition

Acquisition Candidate Confirmed

LOI Definitive Agreement &

Announcement

Close Close + 100 Days

Integration Process Incorporates Significant Integration Planning in Transition Stage

Also Communication, Culture and Employee Transition Workstreams

Acquisition Integration Process

Integration Leader to Oversee Value Creation and Continuity from VDA to Implementation

Traditional Approach Includes Only Deal Leader

Steering Committee

Value Driver Analysis

Deal(Leader)

Traditional Acquisition Approach

Integration (Leader)

Due Diligence(Teams)

Transition(Teams)

Implementation(Teams)

Functional Area Team Continuity

Conceptual Acquisition Integration Organizational Structure

A Balanced Scorecard Will Be Used to Monitor the Success of an IntegrationAppropriate Metrics Can Be Measured Real-Time

Sample Metrics for an AI Balanced Scorecard

FinancialInnovation and

Learning Customer InternalHR/Company

Culture

• Net Income %• ROE• Sales Growth

$/Units• EVA• Cash Flow

• Revenue from New Products

• Product Development Cycle Time

• Patents Issued• # New Products

in Pipeline• # R&D

Employees

• Customer Complaints

• On-time Delivery• % New Sales to

Existing Customers

• Customer Retention/ Attrition

• Market Share Growth

• Product Defects• Revenue/

Employee• Inventory

Turnover• Asset Turnover• Utilization Rate

(employee machine, etc.)

• Employee Satisfaction Rating

• Key Employee Retention %

• OSHA/Safety Record

• Absenteeism• Cross-Company

Teams

Source: Borghese, Robert J. and Borgese, Paul F.: “M&A from Planning to Integration”, pg. 122