Middle Market M&A Platform Business Pitch

Middle Market M&A and Investing Platform I ti Pl tf Business Pitch Prepared by: Pete Chatziplis New York, June 2009

The Proposition Th P iti Create a platform to facilitate M&As, and investment in middle market, non publicly traded companies Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 1

Contents C t t The Concept Th C t Market Size and Potential Competition C titi The Operating Model Critical Success F t C iti l S Factors Organizational Structure To-Do Li t T D List Funding Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 2

Some Common Th S C Themes Market for PE, Middle Market deals inefficient PE and illiquid: Buyers/PE managers/advisors: “can’t find good pipeline”; “good targets are on play”; “don’t know this market/seller/buyer, no reference points; I’d rather pass” f i t th ” “this opportunity is not of interest, doesn’t meet our criteria” “If you want a deal, then here’s what we offer” o ant deal he e’s hat e offe ” Sellers: “ can’t find buyers, can’t get their attention” “I believe I can get more” Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 3

Market Si M k t Size $300 -550 + bn value of middle market deals in US and Europe only (depending on market conditions and on how middle market is defined) $ $3-5+ bn advisory fees y 3-5% of fees could be transaction related ($200-300mn) ($200 300mn) And that’s only 10-20% of overall existing reported M&A market in US and Europe only… & k i S d l Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 4

Global M&As Gl b l M&A (2008) M&A Value Ranges - Europe M&A V l R Value Ranges - N th A North Anerica i $15m-$100m, $5m-$14m, $ $ 67.6, 7% 12.7, 1% $15m-$100m, $5m-$14m, 41.9, 5% 3.95, 0% $101m- $250m, 74.6, 7% $101m- $250m, 53.3, $251m- 6% $500m, 81.5, >$501m, $251m- 8% 784.7, 784 7 77% Europe $500m, 59.4, >$501m, 7% 680.9, 82% North America Middle East Asia/Pacific Global M&A Value 4,000 $3,700m 50% $3,590m 3,500 $440m 12% $180 5% 45% $431 12% 40% Latin 3,000 $410m 11% $2,460m 35% Rest of World America 2,500 $1,400 $153 6% 30% Asia-Pacific 2,000 $1,400m Africa $396 16% 25% Europe 38% 39% NorthAmerica 1,500 20% $1,076 15% 1,000 44% $ , $1,450m $1,580 10% 500 39% 44% $839 5% 34% 0 0% 2006 2007 2008 Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, JuneCalculations based on Mergermarket figures Source: 2009 5

M&A/PE M k t Potential Market P t ti l middle market deals may increase as: availability of capital/investors increases (1/10 of ideas picked by VC, PEs) large deals ( g (80% of market) offer limited returns, ) , reached saturation, cannot secure debt financing untapped potential outside US, Europe (in growing emerging economies deals are mainly middle market) more PE investments may come to secondary market due to IPO slowdown increased activity due to economic crisis (spin- offs, restructurings) g growth in PE funds, allocations to alternative , assets Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 6

Concept Description C tD i ti Traditional Model Online Pool Target sourcing: Target sourcing: •physical •online (“targets in play”) •uncompetitive fee •competitive fee Sell to: Sell to: •existing contacts (limited) •large global pool •search for counterparties •prescreened contacts (contacts/credentials) Frustration: Ease of use: •wasted time on logistics •better price-shopping •limited leads •less frustration from logistics •inefficiencies •efficiency (time/resources) Lack of interest: Availability of options: •limited room for negotiation •focus on deal/add value •large discount •less time in office, more at client •low price •better price $$ •low execution low fees $$$$ •more work done higher fees Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 7

Competition C titi Private Equity Investments-Middle Market M&A Investments Middle Franchises-Small Business Many other small scale/startup endeavors.. Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 8

Trading l tf T di platform- A Arguments in f t i favor middle market plagued by adverse selection: − small and large deals require similar amount of advisory work but do not pay the same; − streamlining the process will reduce costs (business development, processing) and quoted fees, hence increase activity and revenues (process “industrialization”) ti it d ( “i d t i li ti ”) move towards electronic trading can appeal to a larger user group (as retail investors become familiar they could also participate) price discovery (price information for similar deals) opportunity for advisors to identify cross- selling/follow up selling/follow-up work opportunities (more room to add value in middle market) many try develop trading platforms; competition will help develop the market facilitate exchange of investments Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 9

The Operating Model Th O ti M d l Inputs •Proprietary research & sourcing •Third party referrals Deal sourcing Deal structuring l i & execution No Deal Deal Platform proceeds: Platform proceeds: • user fee • ##% on deal (scalable) • float on escrows • user fee (depending on frequency/usage rights) Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 10

System Advantages S t Ad t Price anonymity both for seller and buyer y y y avoid “bait and switch” avoid price discovery avoid putting target on play keep confidentiality of intentions pay to talk Member verification/scoring monitor financial strength, character penalties for not following code of conduct Ease of use entry standardization (input fields) securities grouping/flagging (by industry, country etc) industry template bank (legal forms etc) Price Transparency attract buyer/seller attention y / data for comparative valuations Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 11

In I search of liquidity.. h f li idit M&A boutiques Private Equity, Venture Capital CIQ, Onesource, •existing database •turned-down leads Sources Dun & Bradstreet Feeder users Phone/Mail Links & Interfaces Banks Corporations •private bankers •loan officers strategic investors g (CFOs/BDOs) Data/News Online security providers brokers (Bloomberg, Reuters, WSJ etc) (Scottrade etc) Consultants Market Electronic Trading •trade professionals •credit scoring agencies platforms Research, News (Liquidnet, ITG, etc) •Credit scoring Cos •“Yellow pages” 3rd Party Lawyers databases platforms Business •Newspapers/media (trading/networking platforms) Brokers Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 12

Seeking Liquidity S ki Li idit Link to other platforms (Bloomberg, Reuters, CIQ) Consider partners (PEs/advisors/brokers) Offer incentives for references to: Sell side (PE development managers advisors) managers, Buy side (PE partners, strategic investors) Research staff Stimulate i t Sti l t interest f t from: Sufficient price data availability (past transactions, PE portfolios) Research in “hot M&A” industries/targets “Matchmaking” alerts Newsletters It’s all about the 3Ls: Liquidity, Liquidity, Liquidity Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 13

Additional applications Additi l li ti Data i i D t mining (discounts, premiums, d l volumes) (di t i deal l ) News services (M&A updates) Legal/Tax info p country g / per y PE portfolio tracking (if in database): PE evaluation Fair Value tracking and volatility reporting Interim management/consultant database/placement services Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 14

Possible P t P ibl Partners Brokers, IB PE, Brokers IB, PE IT application providers Strengths/Desired qualities: Liquidity − number of users (i.e. equity traders, corporate b f (i it t d t finance professionals) − target pipeline (PE portfolios and leads) − global reach Background − established brand − market knowledge/experience − financial resources − capacity (leverage operational resources) − IT infrastructure/competence − impartiality Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 15

Benefits to Partners B fit t P t higher p g penetration or breaking into new customer a o o b a g o u o groups customer retention (more services offered, higher switching costs) g increased web traffic/ad income access to/enrich inflow of market data staff development/remuneration incentives enhance brand visibility cross-selling (news, CF/consulting advisory) sell research (soft dollar type premium membership services) Even if product don’t sell on its own … p it can add value somewhere else Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 16

Organizational St t O i ti l Structure Flexible/Scalable Organizational Structure: Initially US only; can add overseas offices later Research staff (5-10 scalable; can be outsourced or p procured on a p j project basis) ) Business Development/Sales (5-6) Flexible administrative support (initially): part-time CFO outsourced admin/IT support Advisory Board (TBA): Pete Ch P Chatziplis, CFA FCCA i li CFA, FCCA: 10+ years experience in Corporate Finance/Consulting specialization in financial services international experience Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 17

To-Do List T D Li t Procedures (member approval/rating/monitoring approval/rating/monitoring, terms of usage/code of conduct) Legal documents (service agreement etc) Technical Infrastructure (platform features, system integrity, mobile applications, training manuals) Pricing structure (success fee, subscription) Cross-selling/follow up p g p products and services Trial periods/incentives User polling (desired features, user satisfaction) Marketing Plan Budgeting, target/milestone setting Regulatory issues (SEC, FINRA) Corporate governance Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 18

Required I R i d Investment t t Some positive points: Investment is scalable (range of services, firms, regions covered) Investment depends on competencies contributed by equity and business partners it db i t Possibility of flexible staffing (project based/freelance research) Low IT infrastructure requirements ( q (low complexity/outsourcing) 5 year investment horizon/2 year development phase 5-10 people for 3-6 months launch phase (IT platform, research collateral, procedures) 10-15 people development team (depending on full-time or part-time) for 2-5 years Let s Let’s talk numbers Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 19

Exit E it Exit horizon: 5 years E it h i Exit strategy: Strategic Investor (synergies) IPO Potential Revenues in 5 years: $20-50mn for base case Further revenues from additional services Additional revenues from exchange of investments (turnover) Returns to exceed hurdle rate More info available upon request o e o a a ab e upo equest Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 20

Pete Chatziplis, Middle Market M&A and Investing Platform Business Pitch, New York, June 2009 21

Middle Market M&A Platform Business Pitch

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