{ "docId": "019dd923-622c-750b-8b99-65deaf51fc65", "docSlug": "41aa7e476e91", "documentTitle": "Xylem Inc. (XYL)", "authorId": "54_Spruce_Point_Capital", "authorName": "Spruce Point Capital Management", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2023-08-09 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 44, "pageCount": 82, "prevPage": 43, "nextPage": 45, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "dense", "nDataPoints": 4, "notes": "Uses a table format to contrast background context with specific critical interview responses.", "elementsJson": [ "headline_text", "paragraph", "comparison_table", "footnote" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b99-65deaf51fc65/44", "deckHref": "/decks/019dd923-622c-750b-8b99-65deaf51fc65", "deckJsonHref": "/decks/019dd923-622c-750b-8b99-65deaf51fc65.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b99-65deaf51fc65#slide-44", "components": [ { "bbox": null, "kind": "callout", "text": "Both executives agreed that Xylem overpaid and one believed Xylem needed even more cost synergies to make the deal work and that revenue synergies were not going to happen.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd952-fb96-7553-b1cb-2c479eb6005d", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.09, "w": 0.91, "x": 0.05, "y": 0.16 }, "kind": "paragraph", "text": "The merger background illustrates that Xylem wanted to acquire Evoqua since 2017. We interviewed two former senior executives with executive management and Board insights for their opinions. Both executives agreed that Xylem overpaid and one believed Xylem needed even more cost synergies to make the deal work and that revenue synergies were not going to happen.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "24c7e716-a068-47f1-a84a-2aaffccc6719", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "27x EBITDA, 22x on an adjusted basis, and 17x with $140m of synergies, that is crazy expensive and that actually surprised me. We prided ourselves on being disciplined. If you looked across water deals, that's a stand-out. In a league of its own. It's all stock, dilutive, and won't be accretive for at least a year and half. There's a scarcity and ESG argument for it. — Fmr. Xylem Executive (1); I have mixed feelings. They certainly overpaid, but that's what it took to get it done. Patrick needed something transformational. He's not operational. He wants to take big swings and this was the only sizeable asset. My challenge with the deal that this is not a revenue synergy deal. This is a roll-up your sleeves and rip out costs, mess with channels. They have to get $200m of costs out in my opinion, or I would be disappointed as a shareholder. Its hard work to pull out $200m. I really think they need to do $200m not $140m. The revenue synergies aren't going to happen. Mark them at zero, there's a little, not much. — Fmr. Xylem Executive (2)", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd952-fb96-7553-b1cb-33c853551de2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.3, "x": 0.05, "y": 0.97 }, "kind": "source-note", "text": "Source: Proxy Statement and Spruce Point interviews", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "5d829d51-bb34-4b4a-94bc-5fc82c4eac63", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.63, "w": 0.91, "x": 0.05, "y": 0.3 }, "kind": "table", "text": "Background To The Merger From Proxy; Spruce Point Question; Fmr. Xylem Executive Response (1); Fmr. Xylem Executive Response (2)", "attrs": null, "subkind": "data", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "89aa2394-b261-42ed-93da-fd80f88c85b6", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.65, "x": 0.31, "y": 0.03 }, "kind": "title", "text": "Two Former Xylem Executives Reacted Negatively To The Deal When Interviewed", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "cc0c7407-fdeb-4e07-b348-177e294ee119", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Table data", "slug": "table-data", "agent": null, "layer": "slide", "matchId": "cea5e350-1bb7-423c-bf66-614966c79876", "evidence": "table/data: Background To The Merger From Proxy; Spruce Point Question; Fmr. Xylem Executive Response (1); Fmr. 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