Brookfield Asset Management Inc. A GLOBAL ASSET MANAGEMENT COMPANY Focused on Property, Renewable Power and Infrastructure Assets PRIVATE EQUITY SYMPOSIUM| April 2012
Transaction Financing Availability and amount of debt financing continues to be situation and industry specific • • Senior debt available at reasonable leverage levels – 3.75 x EBITDA in Canada • Mezzanine debt still available – albeit from fewer players today than the past – additional 1x EBITDA in Canada • Investor appetite and emergence of the Canadian high yield market provides another alternative – albeit limited use today due to transaction size U.S. high yield market open for transactions of size – spreads continue tightening after moving higher • in late 2011 Leverage multiples higher for U.S. buyouts • | Brookfield Asset Management Inc. 1
Leverage Multiples Increasing 10x 9.5 ‐ EBITDA Purchase Multiples US Buyouts ‐ 9.1 9.0 8.8 9x 8.2 1.2 7.6 8x 7.3 2.8 3.1 6.9 6.5 7x 5.0 3.2 2.3 5.9 6x 2.7 2.9 5x 3.2 2.1 4x 7.6 6.2 3x 5.9 5.3 5.0 4.6 4.4 2x 4.0 3.8 3.3 1x 0x 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Debt / EBITDA Equity / EBITDA Total Deal Size / EBITDA Source: PitchBook | Brookfield Asset Management Inc. 2
Equity Contributions Increasing For Deals <$1 B ‐ % of Debt used in US Buyouts ‐ 75% 71% 70% 67% 67% 63% 65% 62% 61% 61% 59% 60% 57% 55% 57% 55% 57% 56% 56% 56% 52% 50% 52% 51% 49% 45% 46% 40% 35% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Deals Under $1B Deals Above $1B Source: PitchBook | Brookfield Asset Management Inc. 3
Achieving Returns Absent Strong Financing Markets Operational Focus Continuing importance of focusing on improving financial performance and cash flows rather than high financial leverage to generate returns Surface Hidden Assets Opportunities to generate capital and excess returns from hidden assets Active Management Economic conditions may provide growth opportunities through acquisition as competitors may be struggling Capital Preservation Lower levels of financial leverage reduces risk and may result in better risk adjusted returns Conservative Leverage Improving earnings before incurring leverage can (1) reduce the cost of debt capital; and (2) result in the ability to get more leverage | Brookfield Asset Management Inc. 4
Case Study: Longview Fibre In 2007, Brookfield acquired Longview, an integrated packaging • company based in Washington State Established a working capital facility supported current assets • • Commenced operational turnaround and focus on higher margin products • EBITDA improved from $40 million at acquisition to in excess of $100 million • In 2010, using cash generated by the business made a distribution of 1x our equity capital • In 2011, accessed the high yield market and made a distribution equivalent to 4x our equity capital • Brookfield owns 100% of the Company – and we have earned a multiple of capital of close to 5x for our investors Balance sheet remains strong with positive cash balances and • undrawn revolver capacity to support working capital needs | Brookfield Asset Management Inc. 5
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