WBS -Private Equity talk - Bharat Shah - 14 November 2011

  • 1,371 views
Uploaded on

Seminar on Private Equity: …

Seminar on Private Equity:
Is private equity good or bad?

Is the private equity business model sustainable?

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
1,371
On Slideshare
0
From Embeds
0
Number of Embeds
1

Actions

Shares
Downloads
20
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. The Ins and Outs of Private Equity Transactions Warwick Business School Alumni 14 th November 2011 Bharat Shah
  • 2. Introduction of Bharat Shah
    • Current portfolio includes:
      • Chairman, Nijjar Holdings (T/A Freshways)
      • Deputy Chairman, Audit Commission
      • Chairman, West Bromwich Building Society Staff Retirement Scheme
      • NED, The Places for People Group
      • Trustee, Paul Strickland Scanner Centre
      • CEO, ABS Business Consultants (Business Mentoring & Consultancy)
  • 3. Introduction of Bharat Shah (Cont.)
    • Previous roles include:
      • Chairman, Picdar Group (a 3i backed business)
      • Chairman, Sure Group (a Graphite Capital backed business)
      • NED, West Bromwich Building Society
      • Trustee, 21 st Century Legacy
      • Independent member of the Rem Com, ACCA
      • VP EAMER & Asia, SVP (a Kohlberg & Co backed business)
      • VP Eastman Kodak & CEO EAMER, Kodak Consumer Imaging
  • 4. Agenda
    • Overall objectives of a transaction
    • Uniqueness of Private Equity Deals
    • Forms of Private Equity Participation
    • Key Steps for Private Equity Transactions
    • Management Terms: The Future Equity Package
    • Funding and distribution of sale proceeds
    • Current state of market
    • Discussion plus Q&As
  • 5. Overall Objectives of a Transaction
    • Winning the deal
    • Minimising price
    • Maximising vendor’s ongoing liabilities
    • Being certain about what you are buying
    • Prompt execution
    • Negotiating the best deal for management
  • 6. Uniqueness of PE Deals
    • High leverage
    • Alignment of stakeholder interest
    • Ability to ‘wash dirty linen in private’
    • Take a longer term view
    • Prepare for exit from day 1
  • 7. Forms of PE Participation
    • Management Buy Out (MBO)
    • Management Buy In (MBI)
    • Buy In of Management Buy Out (BIMBO)
  • 8. Key Steps for PE Transactions
    • Identifying & Sourcing Transaction
      • Auction (Information Memorandum)
      • Off market
    • Preparing a Business Case
      • Background & description of the opportunity
      • Your strategy
      • Management team credentials
      • Financial outcomes (P&L, B/Sheet, C/Flows)
      • Potential exit routes
  • 9. Key Steps for PE Transactions (Cont.)
    • Choosing & Securing Funding (incl. terms)
      • Private Equity
      • Bank
      • Mezzanine Finance, if appropriate
    • Initial Due Diligence
      • Data room
    • First Round Offers & Conditions
    • Further Due Diligence
      • Vendor Due Diligence ( Financial , Commercial, Legal)
      • Chaperoned Management presentations & visits
  • 10. Key Steps for PE Transactions (Cont.)
    • Second Round Offers – usually with SPA mark-up and outline offers of financing
    • Exclusivity or possibly a contract race
    • Detail/Final Due Diligence
      • Commercial
      • Financial
      • Legal
      • Management
      • HS & E
      • Confirmatory
    • Negotiating & Signing
  • 11. Management Terms: The Future Equity Package
    • Revised service agreement
    • Shareholder agreement
    • Leaver provisions
    • Dividends
    • Minority protections
    • Transfer of shares
    • Drag along rights
    • Tag along rights
    • Restrictive covenants
    • Obligations on exit
  • 12. PE Deal Funding Requirement £ Millions Enterprise Value (EBITDA £12M x Multiple of 6) 72.0 Transaction Cost 5.0 Total Funding Required 77.0
  • 13. PE Deal Source of Funding £ Millions Senior Debt 45.0 Mezzanine Finance 0.0 Private Equity – Loan stock 29.0 Private Equity – Equity (90%) 2.7 Total Private Equity 31.7 Management Team Equity (10%) 0.3 Total Source of Funding 77.0
  • 14. Net Sale Proceeds on Exit £ Millions Enterprise Value (EBITDA £16M x Earnings Multiple of 7) 112.0 Transaction Cost (6.0) Net Sale Proceeds 106.0
  • 15. Distribution of Net Sale Proceeds on Exit Original £ Millions Distribution £ Millions Senior Debt 45.0 45.0 Private Equity – Loan stock 29.0 29.0 Private Equity – Equity (90%) 2.7 28.8 Total Private Equity 31.7 57.8 Management Equity (10%) 0.3 3.2 Total Source of Funding 77.0 106.0
  • 16. Current State of Market
    • Extremely difficult market due to:
      • Depressed/volatile equity market
      • Lack of availability of debt due to Credit Crunch
      • Higher cost/premium for borrowing
      • Uncertain economic outlook
  • 17. Discussion plus Q&As