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Hamir mahajan case work (nx power lite)

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  • 1. FUTURE PLANNING & DISCOVERY PROCESS FOR TOPNOTCH TECHNOLOGIES PREPARED BY FINAL FOUR ADVISORS, LLC. Hamir Jake Mike Manoj
  • 2. TABLE OF CONTENTS
    • INTRODUCTION
    • EXECUTIVE SUMMARY
    • BACKGROUND INFORMATION
    • FINANCIALS
    • MANAGEMENT STRUCTURE
    • COMPENSATION STRUCTURE
    • SYNERGIES
    • EXHIBITS
    • 3
    • 4
    • 5
    • 7
    • 15
    • 19
    • 21
    • 24
  • 3. INTRODUCTION
    • HAMIR MAHAJAN
    • M.B.A. - Xavier University
    • UBS – Sr. Investment Analyst
    • Final Four Advisors - Partner
  • 4. EXECUTIVE SUMMARY
    • Valuation
      • DCF: 165 MN
      • M&A: 199 MN
      • Control premium: 198 MN
    • Change in Management Structure
      • Add ESOP
      • Internal promotions
      • New positions
    • Synergies
      • Increased market share
    • EXECUTIVE SUMMARY
  • 5. BACKGROUND INFORMATION
    • Selection Criteria
    • Similarity in Product lines
      • Topnotch Technologies – information assurance, computer network defense, systems engineering, managed enterprise-wide IT services and solutions
    • Clients
      • Topnotch Technologies – Primarily Government
      • Client groups – Commercial, Government, or International
    • CRITERIA FOR SELECTING COMPARABLE COMPANIES
  • 6. BACKGROUND INFORMATION
    • COMPARABLE COMPANIES
    Primary Clients Products Usage Topnotch Technologies Government IT Security and Enterprise Technology - information assurance, computer network defense, systems engineering, managed enterprise-wide IT services and solutions Baseline ICF International Inc. Commercial/ Government/ International IT Solutions - management, technology, and policy consulting and implementation services TT Valuation The KEYW Holding Corp. Government Development & Integration - SW/HW/engineering development, integration services, IT security TT Valuation ManTech International Corp. Commercial/ Government/ International IT Security technologies and solutions TT Valuation SAIC, Inc. Select Commercial/ Government/ International IT/Technology Services – security, outsourcing, management, R&D, space, science Merged Firm Valuation
  • 7. FINANCIALS
    • VALUATION METHODS
  • 8. FINANCIALS
    • Growth Rate: 3%
    • WACC: 13%
    • Levered Beta: 1.14
    • Cost of Debt: 1.2%
    • Cost of Equity: 11.8%
    • Total Present Value: $165 MN
    • DISCOUNTED CASH FLOWS
  • 9. FINANCIALS
    • EBITDA : 9.99x Adjusted EBITDA
    • Comparable transactions
    • Potential cost savings
    • M & A METHOD
    Avg. Times EBITDA 9.99 Adjusted EBITDA 19.94 Enterprise Value $199
  • 10. FINANCIALS
    • CONTROL PREMIUM
    • Average control premium paid : 20 %
    • $ 33 MN OVER THE VALUATION
    Aerospace, Defense, and Government Companies 2009 22.60% 2 2008 27.10% 10 2007 9.30% 8
  • 11. FINANCIALS
    • CURRENT OFFER
  • 12. FINANCIALS
    • TRUE VALUE OF OFFER
  • 13. FINANCIALS
    • COUNTER OFFER
  • 14. FINANCIALS
    • TRUE VALUE OF COUNTER OFFER
  • 15. MANAGEMENT STRUCTURE
    • HUMAN CAPITAL
    • Robert King, Led Topnotch to 23.6% revenue growth
    • VP’s integral part of Topnotch’s growth
    • KNOWLEDGE
    • Government Services experts
    • R&D and evaluation service experts
    • RELATIONSHIPS
    • DoD
    • NASA
    • SSA
    • FAA
    • TOPNOTCH “SOFT” RESOURCES
  • 16. MANAGEMENT STRUCTURE
    • PRE-ACQUISITION ORGANIZATION CHART
    MICHAEL BROWN CEO BOARD OF DIRECTORS VP Operations VP Finance VP Technology VP Technology Topnotch Technologies ROBERT KING CEO VP Operations VP Finance BOARD OF DIRECTORS Bluesky International
  • 17. MANAGEMENT STRUCTURE
    • POST-ACQUISITION ORGANIZATION CHART
    Senior Vice President IS SBU CFO VP Operations VP Finance VP Technology MICHAEL BROWN CEO Bluesky Int. Bluesky International - COO Senior Vice President VP Operations VP Technology BOARD OF DIRECTORS (Bluesky & Topnotch Technologies) NEW POSITION INTERNAL PROMOTION ROBERT KING Retired SYNERGY REALIZED
  • 18. MANAGEMENT STRUCTURE
    • TALENT RETENTION
    • Topnotch’s “Soft” resources CRITICAL to performance & value
    • Goal: Retain ALL current management
    • Tools needed
      • Retention bonus
      • Relocation bonus
      • ESOP
      • Control Stock
    • Realize Synergies to offset cost
  • 19. COMPENSATION STRUCTURE
    • PRE-ACQUISITION ORGANIZATION CHART
    MICAHEL BROWN CEO BOARD OF DIRECTORS VP Operations VP Finance VP Technology VP Technology 11.67% Ownership Topnotch Technologies ROBERT KING CEO – 65% Ownership VP Operations 11.67% Ownership VP Finance 11.67% Ownership BOARD OF DIRECTORS Bluesky International
  • 20. COMPENSATION STRUCTURE
    • POST-ACQUISITION ORGANIZATION CHART
    Senior Vice President ESOP (5%) CFO ESOP (5%) VP Operations ESOP (5%) VP Finance ESOP (5%) VP Technology ESOP (5%) MICHAEL BROWN CEO Bluesky Int. Bluesky International COO ESOP (5%) Senior Vice President ESOP (5%) VP Operations VP Technology ESOP (5%) BOARD OF DIRECTORS (Bluesky & Topnotch Technologies) NEW POSITION ESOP & Control Shares ROBERT KING Retired SYNERGY REALIZED
  • 21. SYNERGIES
    • SYNERGY CREATION
    • Integration of existing services and solutions
    • Enhanced relationships with customers due to:
      • Larger number of offerings
      • Single provider
      • Becoming a top-tier provider for additional services
      • More connections in customer organizations (BI contacts + TT contacts)
    • Increased concentration of resources near clients
      • TT resources to Silver Spring, MD
        • DoD
        • SSA
        • FAA
      • BI resources to Irving, MD
        • NASA – aircraft system engineering, space launch and operations support
      • Not all resources need to move , IT resources can work remotely
  • 22. SYNERGIES
    • MARKET SYNERGIES
    Current Business Activities Future Business Opportunities   Offerings DoD NASA SSA FAA Public Companies Topnotch Technologies Information Assurance X X X X X Computer Network Defense X X X X X Systems Engineering X     X X Managed Enterprise-wide IT services and solutions X X X X X Cyber-security X X X X X Bluesky International Research, Development, and Evaluation Services X X   X X Program Management X X X X X Aircraft Systems Engineering X X   X X Space Launch and Operations Support   X       Equipment Maintenance Management X X   X X
  • 23. SYNERGIES
    • POTENTIAL CHALLENGES TO BE ADDRESSED
    • Loss of human assets due to:
      • Relocation
      • Dislike of new organization
        • Business direction
        • New management
        • Change of priority within the organization (most favored group no longer favored, etc.)
    • Loss of relationships
      • Contacts within the company leaving
    • Loss of knowledge
      • Human assets leaving without sufficient knowledge transfer
  • 24. QUESTIONS
  • 25. EXHIBITS
  • 26. EXHIBITS
    • Exhibit 1-Various Information
  • 27. EXHIBITS
    • Exhibit 2-Topnotch Technologies Income Statement
  • 28. EXHIBITS
    • Exhibit 3- Topnotch Technologies Balance Sheet
  • 29. EXHIBITS
    • Exhibit 4- Comparable Companies
  • 30. EXHIBITS
    • Exhibit 4 (Cont.)
  • 31. EXHIBITS
    • Exhibit 6- WACC
  • 32. EXHIBITS
    • Exhibit 7- DCF
  • 33. EXHIBITS
    • Exhibit 8- M&A
  • 34. EXHIBITS
    • Exhibit 9- Earnout
    Senstivity Analysis @ 0% Growth Rate Year 2011 Year 2012 EBITDA $30.5 70