Greci

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Greci

  1. 1. Financial World <ul><li>Financial Framework </li></ul><ul><li>Execution of Capital Structure Plan </li></ul><ul><li>Funding Start Ups </li></ul>
  2. 2. Financial Framework <ul><li>Financial Institutions </li></ul><ul><li>Regulatory Framework </li></ul><ul><li>Profile of Investment Bank </li></ul>
  3. 3. Financial Institutions <ul><li>Commercial Banks </li></ul><ul><li>Investment Banks </li></ul><ul><li>Private Equity Firms </li></ul><ul><li>Institutional Investors </li></ul><ul><ul><ul><li>Mutual Funds </li></ul></ul></ul><ul><ul><ul><li>Insurance Companies </li></ul></ul></ul><ul><ul><ul><li>Units of Banks </li></ul></ul></ul><ul><ul><ul><li>Pension Funds </li></ul></ul></ul><ul><li>Credit Agencies </li></ul><ul><li>Financial Relations Firms </li></ul>
  4. 4. Large Investment Banks <ul><li>Credit Suisse First Boston </li></ul><ul><li>Solomon Smith Barney </li></ul><ul><li>Goldman Sachs </li></ul><ul><li>Morgan Stanley </li></ul><ul><li>Bank of America </li></ul><ul><li>JP Morgan Chase </li></ul><ul><li>Deutsche Bank </li></ul><ul><li>Merrill Lynch </li></ul><ul><li>Lehman Brothers </li></ul><ul><li>UBS Warburg </li></ul>
  5. 5. Regulatory Framework <ul><li>Securities and Exchange Commission </li></ul><ul><li>Federal Reserve </li></ul><ul><li>Treasury Department </li></ul><ul><li>Federal Trade Commission </li></ul><ul><li>Financial Accounting Standards Board </li></ul>
  6. 6. Profile of Investment Bank <ul><li>Senior Management </li></ul><ul><li>Specific Industry Groups </li></ul><ul><ul><ul><li>Corporate Finance—US/Europe/Asia </li></ul></ul></ul><ul><ul><ul><li>Mergers and Acquisitions </li></ul></ul></ul><ul><li>Leveraged Finance </li></ul><ul><li>Senior Debt Capital Markets </li></ul><ul><li>Public Debt Capital Markets </li></ul><ul><ul><ul><li>High Yield </li></ul></ul></ul><ul><ul><ul><li>Investment Grade </li></ul></ul></ul><ul><li>Equity Capital Markets </li></ul><ul><li>Specific Industry </li></ul><ul><ul><ul><li>Equity Research </li></ul></ul></ul><ul><ul><ul><li>Debt Research </li></ul></ul></ul><ul><li>Rating Advisory Group </li></ul>
  7. 7. Capital Structure Plan <ul><li>Selection of Investment Bank </li></ul><ul><li>Acquisition </li></ul><ul><li>Funding of Acquisition </li></ul><ul><li>Refinancing of Debt </li></ul><ul><li>Toward Future Equity Financing </li></ul>
  8. 8. Capital Structure Plan Selection of Investment Bank <ul><li>Initial Group Selected for Interview </li></ul><ul><li>Investment Bank Presentation/Interview </li></ul><ul><li>Criteria for Selection </li></ul><ul><li>Engagement Letter </li></ul>
  9. 9. Capital Structure Plan Investment Bank Presentation <ul><li>Investment Bank Attendees </li></ul><ul><li>Presentation – Why They Are Best Suited </li></ul><ul><ul><ul><li>Organization </li></ul></ul></ul><ul><ul><ul><li>Rankings/Awards </li></ul></ul></ul><ul><ul><ul><li>Experience in Industry – Situational Analysis </li></ul></ul></ul><ul><ul><ul><li>Analysis of Company </li></ul></ul></ul><ul><ul><ul><li>Mergers – Acquisition Expertise </li></ul></ul></ul><ul><ul><ul><li>Financing Alternatives </li></ul></ul></ul><ul><ul><ul><ul><li>• Overview </li></ul></ul></ul></ul><ul><ul><ul><ul><li>• Recommendation </li></ul></ul></ul></ul><ul><li>Company Attendees </li></ul>
  10. 10. Capital Structure Plan Criteria For Selection <ul><li>Chemistry </li></ul><ul><li>Knowledge of Company and its Markets </li></ul><ul><li>Well Thought Out Strategy </li></ul><ul><li>Specific Deals within Industry </li></ul><ul><li>Global Strength </li></ul><ul><li>Statistics </li></ul><ul><ul><ul><li># Transactions – Debt/M & A </li></ul></ul></ul><ul><ul><ul><li>Total Underwriting – Global Equity/Debt Issues </li></ul></ul></ul><ul><ul><ul><li>Ranking of Research Analysts </li></ul></ul></ul><ul><li>Commercial Bank In House </li></ul><ul><li>Strength/Reach of Sales Force </li></ul><ul><li>Cost </li></ul>
  11. 11. Acquisition Steps <ul><li>Initial Contact </li></ul><ul><li>Preliminary Information </li></ul><ul><li>Letter of Intent </li></ul><ul><li>Hart-Scott-Rodino Filing </li></ul><ul><li>Due Diligence </li></ul><ul><li>Subsequent Negotiations </li></ul><ul><li>Finalize Deal Structure/Purchase Agreement </li></ul><ul><li>Develop Organization Structure </li></ul><ul><ul><ul><li>Legal </li></ul></ul></ul><ul><ul><ul><li>Operational </li></ul></ul></ul><ul><li>Develop/Execute Strategic Plan </li></ul><ul><li>Develop/Execute Integration Plan </li></ul><ul><li>Public Announcements/SEC Filings </li></ul><ul><li>Other Government Filings </li></ul><ul><li>Communicate/Communicate/Communicate </li></ul><ul><li>Evaluation of Process </li></ul>
  12. 12. Acquisition Due Diligence <ul><li>Corporate/Legal/Compliance </li></ul><ul><li>Financial </li></ul><ul><ul><ul><li>Historical/Projected Statement </li></ul></ul></ul><ul><ul><ul><li>Testing of Accounts/Physical Assets </li></ul></ul></ul><ul><ul><ul><li>Financial Commitments </li></ul></ul></ul><ul><ul><ul><li>Sales/Customer Data </li></ul></ul></ul><ul><li>Contractual Arrangements </li></ul><ul><li>Organization/Personnel </li></ul><ul><li>Employee Benefits </li></ul><ul><li>Environmental Issues </li></ul><ul><li>Taxes </li></ul><ul><li>Systems/Procedures </li></ul><ul><li>Acquisition Data Base </li></ul>
  13. 13. Acquisition Importance of Due Diligence <ul><li>Adjustments to Purchase Price </li></ul><ul><li>Discovery of Unstated Liabilities </li></ul><ul><li>Discovery of Compliance Issues </li></ul><ul><li>Confirmation of Financial Statements </li></ul><ul><li>Assists in Establishing Representations and Warranties </li></ul><ul><li>Helpful in Evaluation of Personnel </li></ul><ul><li>Establish Responsibility for Employee Benefits </li></ul><ul><li>Essential for Integration Plan </li></ul><ul><li>Essential for Establishing Legal/Organizational Structure </li></ul><ul><li>Essential for Determining Synergies </li></ul><ul><li>Financial Data Needed for Financing Documents/Statements </li></ul>
  14. 14. Acquisition Deal Structure/Purchase Agreements <ul><li>Representations and Warranties </li></ul><ul><li>Purchase Price </li></ul><ul><li>Identification of Business/Assets in Deal </li></ul><ul><li>Liabilities/Responsibilities </li></ul><ul><li>Resolution of Contested Matters – Remedies </li></ul>
  15. 15. Acquisition Integration Plan <ul><li>Communicate/Communicate/Communicate </li></ul><ul><li>Act Quickly </li></ul><ul><li>Establish Integrated Team Prior Completion of Acquisition </li></ul><ul><li>Establish New Operating Organization Prior to Acquisition Completion </li></ul><ul><li>Clearly Define Synergy Opportunities and Establish Detail Plans </li></ul><ul><li>Establish Detailed Timetable of Events/Responsibilities </li></ul><ul><li>All Necessary Filings Ready to go at Closing </li></ul><ul><li>Insurance, Benefits and Other Programs in Place at Closing </li></ul><ul><li>Establish System for Timely/Accurate Financial Reporting </li></ul><ul><li>DON’T DISRUPT CUSTOMERS!! </li></ul>
  16. 16. Acquisition Investment Bank <ul><li>Lead Negotiator – Buffer </li></ul><ul><li>Aids in Due Diligence and Interviews </li></ul><ul><li>Migrates Due Diligence Data to Offering Memorandum </li></ul><ul><li>Helps Arrange Schedule of Interaction Between Buyer and Seller </li></ul><ul><li>Recommends Purchase Price </li></ul><ul><li>Helps Frame Deal Structure </li></ul>
  17. 17. Funding of Acquisition Overview of Process <ul><li>Commitment Letter/Terms/Fees </li></ul><ul><li>Preparation of Credit Facility </li></ul><ul><li>Preparation of Offering Memorandum </li></ul><ul><li>Preparation of Presentation to Credit Agencies </li></ul><ul><li>Meetings with Credit Agencies </li></ul><ul><li>Meetings with Core Banks </li></ul><ul><li>Negotiations with Core Banks—Bank Commitments </li></ul><ul><li>Meeting with Banks/Institutional Investors </li></ul><ul><li>Syndication Process </li></ul><ul><li>Finalize Credit Facility </li></ul>
  18. 18. Funding of Acquisition Initial Documents <ul><li>Commitment Letter </li></ul><ul><ul><ul><li>Lead Arranger/Syndication Agent </li></ul></ul></ul><ul><ul><ul><li>Underwrite Credit Facility </li></ul></ul></ul><ul><ul><ul><li>Various Terms/Conditions of Process </li></ul></ul></ul><ul><li>Summary of Terms and Conditions </li></ul><ul><ul><ul><li>Credit Facility </li></ul></ul></ul><ul><ul><ul><li>Guarantors </li></ul></ul></ul><ul><ul><ul><li>Security—Conditions of Fall Off (Credit Rating) </li></ul></ul></ul><ul><ul><ul><li>Maturity/Amortization </li></ul></ul></ul><ul><ul><ul><li>Affirmative Covenants </li></ul></ul></ul><ul><ul><ul><li>Negative Covenants (Maintenance Covenants) </li></ul></ul></ul><ul><ul><ul><li>Use of Proceeds </li></ul></ul></ul><ul><li>Fee Letter </li></ul><ul><ul><ul><li>Fee </li></ul></ul></ul><ul><ul><ul><li>Fee Sharing </li></ul></ul></ul>
  19. 19. Funding of Acquisition Summary of Debt <ul><li>Revolving Credit Facility (Banks) </li></ul><ul><ul><ul><li>Multiple Currency </li></ul></ul></ul><ul><ul><ul><li>Swing Line Facility for Short Term Borrowing </li></ul></ul></ul><ul><ul><ul><li>Letters of Credit </li></ul></ul></ul><ul><li>Term Loans </li></ul><ul><ul><ul><li>Dollar Term A – Five Year Maturity (Banks) </li></ul></ul></ul><ul><ul><ul><li>Euro Term A – Five Year Maturity (Banks) </li></ul></ul></ul><ul><ul><ul><li>Term Loan B – Seven Year Maturity (Institutional Investors) </li></ul></ul></ul><ul><li>Interest Rates </li></ul><ul><ul><ul><li>LIBOR + (50 bps higher for Term Loan B) </li></ul></ul></ul><ul><ul><ul><li>Decreases as Leverage Ratio Decreases </li></ul></ul></ul>
  20. 20. Funding of Acquisition Financial Maintenance Covenants <ul><li>Interest Coverage </li></ul><ul><li>Fixed Charge Coverage </li></ul><ul><li>Leverage Ratio </li></ul><ul><li>Net Worth </li></ul>
  21. 21. Funding of Acquisition Key Components of Offering Memorandum <ul><li>Summary – Business/Terms </li></ul><ul><li>Risk Factors </li></ul><ul><li>Capitalization </li></ul><ul><li>Management’s Discussion and Analysis of Operating Results/Financial Condition </li></ul><ul><li>Business in Detail </li></ul><ul><li>Description of the Notes </li></ul><ul><li>Exchange Offer/Registration Rights </li></ul><ul><li>Financial Statements </li></ul>
  22. 22. Funding of Acquisition Credit Agencies <ul><li>Agencies </li></ul><ul><ul><ul><li>Moody’s </li></ul></ul></ul><ul><ul><ul><li>Standard & Poors </li></ul></ul></ul><ul><ul><ul><li>Fitch </li></ul></ul></ul><ul><li>Issuer Rating </li></ul><ul><ul><ul><li>Moody’s – B1 </li></ul></ul></ul><ul><ul><ul><li>Standard & Poors – BB – </li></ul></ul></ul><ul><ul><ul><li>Outlook – Positive </li></ul></ul></ul><ul><li>Importance of Rating </li></ul><ul><ul><ul><li>Impact on Execution and Price </li></ul></ul></ul><ul><ul><ul><li>Security Fallaway Provision </li></ul></ul></ul><ul><ul><ul><li>Equity Crossover </li></ul></ul></ul>
  23. 23. Funding of Acquisition Credit Agencies <ul><li>Key Drivers of Credit Ratings </li></ul><ul><li>Size – Assets/Sales/Market Capitalization </li></ul><ul><li>Leverage Ratio – Total Debt/EBITDA </li></ul><ul><li>Coverage Ratio – EBITDA/Interest </li></ul><ul><li>Profitability </li></ul><ul><ul><ul><li>Free Cash Flow </li></ul></ul></ul><ul><ul><ul><li>Operating Cash Flow </li></ul></ul></ul><ul><ul><ul><li>Return on Assets </li></ul></ul></ul><ul><li>Stability </li></ul><ul><ul><ul><li>Company </li></ul></ul></ul><ul><ul><ul><li>Industry </li></ul></ul></ul>
  24. 24. Funding of Acquisition Key Factors – Moody’s <ul><li>Positive </li></ul><ul><ul><ul><li>Global Leader in Industry </li></ul></ul></ul><ul><ul><ul><li>Purchasing Leverage </li></ul></ul></ul><ul><ul><ul><li>Diversified Product Mix </li></ul></ul></ul><ul><ul><ul><li>Potential Synergies/Cost Savings </li></ul></ul></ul><ul><ul><ul><li>Fortune 500 Customer Base </li></ul></ul></ul><ul><ul><ul><li>Geographic Diversity </li></ul></ul></ul><ul><ul><ul><li>Cost Efficient Operations </li></ul></ul></ul><ul><ul><ul><li>Moderate Balance Sheet </li></ul></ul></ul><ul><li>Negative </li></ul><ul><ul><ul><li>Integration Challenges </li></ul></ul></ul><ul><ul><ul><li>Moderate Leverage </li></ul></ul></ul><ul><ul><ul><li>Challenges of Operating with Leverage </li></ul></ul></ul><ul><ul><ul><li>Future Acquisitions </li></ul></ul></ul>
  25. 25. Funding of Acquisition Factors for Credit Upgrade <ul><li>Successful Completion of Integration </li></ul><ul><li>Management’s Ability and Willingness to De-leverage </li></ul><ul><li>Competitive Activity </li></ul><ul><li>Strength and Experience of Management Team </li></ul><ul><li>Financial Performance/Balance Sheet </li></ul><ul><li>Execute Growth Strategy without Impairing Credit Profile </li></ul><ul><li>Rating Agencies’ View of the Industry </li></ul>
  26. 26. Refinancing of Debt Overview of Process <ul><li>Activity Time Required </li></ul><ul><li>Offering Memorandum 3 – 4 Weeks </li></ul><ul><li>Description of Debt 2 – 3 Weeks </li></ul><ul><li>Due Diligence (Business and Legal) 1 – 2 Weeks </li></ul><ul><li>Sales Force Presentation 1 Week </li></ul><ul><li>Road Show Presentation 1 – 2 Weeks </li></ul><ul><li>Rating Agency Presentation 1 – 2 Weeks </li></ul><ul><li>Rating Agency Meeting 1 Day </li></ul><ul><li>Road Show 1 – 2 Weeks </li></ul><ul><li>Pricing/Closing </li></ul><ul><li>Completion – 8 to 12 Weeks </li></ul>
  27. 27. Refinancing of Debt Benefits from issuing Public Debt <ul><li>Operating/Financial Flexibility </li></ul><ul><li>Less Scheduled Debt Amortization </li></ul><ul><li>Amend Credit Facility for more Operating Flexibility </li></ul><ul><li>Creates Loan Capacity for Future Strategic Initiatives </li></ul><ul><li>Ability to Raise Capital Quickly and Easily </li></ul><ul><li>Broaden Investor Base (Debt and Equity) </li></ul><ul><li>Potential Benefit on Future Equity Value </li></ul><ul><li>Debt Research Coverage </li></ul><ul><li>Positive Future Ramifications on Credit Rating </li></ul>
  28. 28. Refinancing of Debt Market Conditions <ul><li>Technical Factors </li></ul><ul><ul><ul><li>Cash Positions of Investors </li></ul></ul></ul><ul><ul><ul><li>Default Rates </li></ul></ul></ul><ul><ul><ul><li>Anticipation – Economic Cycle </li></ul></ul></ul><ul><li>Favorable Outlook </li></ul><ul><ul><ul><li>Manageable Supply </li></ul></ul></ul><ul><ul><ul><li>Investors Looking for Yield </li></ul></ul></ul><ul><ul><ul><li>Benign Interest Rate Environment </li></ul></ul></ul><ul><li>Assessment of Future Risks </li></ul><ul><ul><ul><li>Rising Interest Rates </li></ul></ul></ul><ul><ul><ul><li>New Supply </li></ul></ul></ul><ul><li>Interest in Higher Rated, Higher Quality Deals </li></ul><ul><li>Federal Fund Rate </li></ul><ul><li>Performance of Industry to General Market </li></ul>
  29. 29. Refinancing of Debt Senior Subordinated Notes <ul><li>Size </li></ul><ul><li>Maturity – Ten Years </li></ul><ul><li>Call Protection – Non Call 5 Years/Declining Premium Thereafter </li></ul><ul><li>Use of Proceeds – Repay Senior Secured Debt </li></ul><ul><li>Security – None </li></ul><ul><li>Mandatory Redemption – None </li></ul><ul><li>Change of Control – Investor Put at 101% </li></ul><ul><li>Equity Claw back – 35% at Par Plus Coupon </li></ul><ul><li>Covenants – Standard High Yield Incurrence Based Covenants with Limitations </li></ul><ul><li>Distribution – Rule 144A with Registration Rights </li></ul><ul><li>Indicative Coupon – 8.250% to 8.500% </li></ul><ul><li>Covenants Fall Away If Investment Grade Rating Attained </li></ul>
  30. 30. Refinancing of Debt Incurred Base Covenants <ul><li>Additional Indebtedness </li></ul><ul><li>Restricted Payments </li></ul><ul><li>Liens </li></ul><ul><li>Asset Sales </li></ul><ul><li>Subsidiary Incumbrances </li></ul><ul><li>Transactions with Affiliates </li></ul><ul><li>Mergers and Consolidation </li></ul>
  31. 31. Refinancing of Debt Amendments to Existing Credit Agreement <ul><li>Interest </li></ul><ul><li>Limitation on Indebtedness </li></ul><ul><li>Fixed Charge Coverage Ratio </li></ul><ul><li>Total Leverage Ratio </li></ul><ul><li>Loans and Investments </li></ul>
  32. 32. Toward Future Equity Financing <ul><li>Refinancing of Debt </li></ul><ul><li>Successful Integration </li></ul><ul><li>Financial Performance </li></ul><ul><li>External Communication Program </li></ul><ul><li>Financial Coverage </li></ul><ul><li>Proper Stock Exchange </li></ul>
  33. 33. Stock Exchange NYSE vs NASDAQ <ul><li>NYSE NASDAQ </li></ul><ul><li>Market Structure Order Driven Quote Driven </li></ul><ul><li>Central Order Flow Dealers </li></ul><ul><li>Specialists vs Dealers Long Term Relationship Discretionary </li></ul><ul><li>Obligated to Commit Capital No Obligation </li></ul><ul><li>Evaluated No Evaluation </li></ul><ul><li>Short Sale Governance Little Governance </li></ul><ul><li>Market Open Single Opening Price No Single Opening Price </li></ul>
  34. 34. Stock Exchange Measurements for Efficiency <ul><li>Price Continuity – Price Change From Trade to Trade </li></ul><ul><li>Market Depth – Price Change Over 3K, 5K and 10K Trading Sequences </li></ul><ul><li>Volatility – Average of (Daily High – Daily Low)/Daily High </li></ul>
  35. 35. Stock Exchange Market Quality Transfer From NASDAQ to NYSE <ul><li>Pre Listing Post Listing </li></ul><ul><li>Price Continuity $0.05 $0.03 </li></ul><ul><li>Volatility 4.6% 3.2% </li></ul><ul><li>Market Depth </li></ul><ul><li> • 3,000 Share Sequences $0.11 $0.08 </li></ul><ul><li> • 5,000 Share Sequences $0.13 $0.10 </li></ul><ul><li> • 10,000 Share Sequences $0.17 $0.15 </li></ul>
  36. 36. Stock Exchange Trading Costs <ul><li>SEC Research concludes that NYSE has the lowest Execution Costs. </li></ul><ul><li>Plexus Group Study concludes that on an average, Institutional Trading Costs are 34% lower on the NYSE </li></ul><ul><li>Institutional Investor States NYSE has lowest cost Trading Venue in US and one of the lowest in the World </li></ul>
  37. 37. Funding Start Ups Early Stage <ul><li>Activities </li></ul><ul><ul><ul><li>Proof of Principle/Concept </li></ul></ul></ul><ul><ul><ul><li>Identify Market </li></ul></ul></ul><ul><ul><ul><li>Initial Business Plan </li></ul></ul></ul><ul><ul><ul><li>Begin Product Development </li></ul></ul></ul><ul><ul><ul><li>Filing Patent </li></ul></ul></ul><ul><ul><ul><li>Meet with Investors </li></ul></ul></ul><ul><li>Funded By </li></ul><ul><ul><ul><li>Family & Friends </li></ul></ul></ul><ul><ul><ul><li>State/Federal Grants </li></ul></ul></ul><ul><ul><ul><li>Angels </li></ul></ul></ul>
  38. 38. Funding Start Ups Midcourse <ul><li>Activities </li></ul><ul><ul><ul><li>Continue Product Development </li></ul></ul></ul><ul><ul><ul><li>CEO/Management </li></ul></ul></ul><ul><ul><ul><li>Substantive Business Plan </li></ul></ul></ul><ul><ul><ul><li>Seek Strategic Partner </li></ul></ul></ul><ul><ul><ul><li>Regulatory Filing if Required </li></ul></ul></ul><ul><ul><ul><li>Meet With Investors </li></ul></ul></ul><ul><ul><ul><li>Administrative Systems in Place </li></ul></ul></ul><ul><li>Funded By </li></ul><ul><ul><ul><li>Angels </li></ul></ul></ul><ul><ul><ul><li>State/Federal Funds </li></ul></ul></ul><ul><ul><ul><li>Venture Capital </li></ul></ul></ul><ul><ul><ul><li>Strategic Partner </li></ul></ul></ul><ul><ul><ul><li>Private Equity </li></ul></ul></ul>
  39. 39. Funding Start Ups To Market <ul><li>Activities </li></ul><ul><ul><ul><li>Complete Organization Staffing </li></ul></ul></ul><ul><ul><ul><li>Space for Business </li></ul></ul></ul><ul><ul><ul><li>Initiate Market/Sales Plan </li></ul></ul></ul><ul><li>Funding </li></ul><ul><ul><ul><li>Venture Capital </li></ul></ul></ul><ul><ul><ul><li>Strategic Partner </li></ul></ul></ul><ul><ul><ul><li>Private Equity </li></ul></ul></ul><ul><ul><ul><li>Specialized Bank </li></ul></ul></ul>
  40. 40. Funding Start Ups Exit <ul><li>Initial Public Offering </li></ul><ul><li>Strategic Partner </li></ul><ul><li>Acquired by Third Party </li></ul>

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