Current M&A Cycle Continues to Create Shareholder Value and Medium-Sized Deals Outperform Megadeals, Finds Towers Perrin and Cass Business School Analysis.

STAMFORD, Conn. -- After years of disappointing results, merger and acquisition deals (M&A) are now delivering shareholder value, according to a recent study conducted by Towers Perrin and London's Cass Business School. What's more, medium-sized deals deliver better results than larger deals over time.

The research, done in two phases, compared financial results of deals completed in 2005 and 2004 with prior waves of M&A activity in 1998 and 1988. The first phase focused on medium-sized global deals closed in 2004 with an inflation-adjusted value of between US$400 million and US$1.5 billion and analyzed company share price (among other financial

performance factors) for the first six months after deal close. The analysis showed that deals occurring in 2004 outperformed the global Morgan Stanley Capital International (MSCI) index by 7%. By comparison, deals in 1998 underperformed by 3% over a similar time frame, while deals that occurred in 1988 saw a 6% drop-off over six months.

The second phase of Towers Perrin and Cass research reviewed the performance of 2004 deals (both medium and larger -- those over $1.5 billion) over an 18-month period after close, as well as the performance of 2005 deals over a six-month period after close.

Like 2004 deals, those in 2005 continued to outperform the market, unlike deals in the prior waves in 1998 and 1988. More importantly, while medium-sized deals appeared to consistently deliver value, the same did not hold true for the often-celebrated "mega-deals." While these deals initially outperformed the market by nearly 14%, this figure dropped dramatically to 1% after 18 months.

"This phase of our study confirms that M&As are now delivering value well beyond the initial six-month period," said Marco Boschetti, principal and a leader of Towers Perrin's M&A consulting practice. "While the M&A community may assume that big is beautiful, our findings suggest that the benefits of large transactions may be short-lived. The megadeals seem to lose their appeal somewhere between the six and 18 months following the deal's consummation.

"We believe there are a number of reasons for this phenomenon. Because the megadeals tend to get a lot of media attention, they can take on an artificial luster that captures the imagination -- and money -- of investors, driving share price up in the first few months. But large deals have significant implementation challenges, including the integration of different cultures, and employee retention and engagement.

"In our consulting experience, failure to adequately prepare for and address people and culture issues is a key reason deals don't deliver anticipated value. Mission-critical people leave. Duplication of processes and activities creates confusion and slows things down. Promised efficiencies and innovations don't materialize. However, to remain productive and deliver sustained shareholder value, companies need to understand the people costs going in: the cost to retain talent, the long-term effects on workforce demographics, and how the merged entity will align labor-cost projections and have a plan to manage cultural differences and effectively integrate people programs and practices," Boschetti said.

About Cass Business School

Cass Business School, City University, delivers innovative, relevant and forward-looking education, training, consultancy and research, and is located in London. The school's M.B.A., specialist masters and undergraduate programs have a reputation for excellence in professional education. The executive M.B.A. is ranked 15th in the world by the Financial Times.

The school undertakes research of national and international significance and supports almost 100 Ph.D students. Cass has the largest finance faculty and the largest actuarial science and statistics faculty in Europe. Its finance research is rankedsecond in Europe andfourth in the world outside the U.S. by Financial Management magazine, and its insurance and risk research is rankedsecond in the world by the Journal of Risk and Insurance.

About Towers Perrin

Towers Perrin is a global professional services firm that helps organizations improve their performance through effective people, risk and financial management. The firm provides innovative solutions to client issues in three areas: Human Resource Services, which provides human resource consulting; Reinsurance, which provides reinsurance intermediary services; and Tillinghast, which provides management and actuarial consulting to the financial services industry. Together these businesses have offices and business partner locations in the United States, Canada, Europe, Asia, Latin America, South Africa, Australia and New Zealand. More information about Towers Perrin is available at www.towersperrin.com.