The Real World of M&A – What it Takes to Get a Deal Done Philip Ellis, Director, Optima Corporate Finance

1. Recruitment Leaders Connect – Autumn Innovation
19 October 2017
The Real World of M&A
What it Takes to Get a Deal Done

2. Corporate Finance Boutique working exclusively in the recruitment sector
Optima Corporate Finance
The Real World of M&A – What it Takes to Get a Deal Done
• Philip Ellis qualified as a Chartered Accountant in 1990 and holds
Corporate Finance Qualification
• First recruitment deal in 1996
• 2001 - Founded and floated Staffing Ventures on AIM
• 2006 - Exited Staffing Ventures (Supporta) with market cap of £56m
Recent Highlights:
• 2015 - Completed 2 UK sales to US listed businesses
• 2016 - Represented listed Japanese business to make UK acquisition
• 2017 - Sold Private Equity owned UK & Asia business to US acquirer
- Sold £50m turnover UK Engineering & IT business to Nasdaq-listed company

3. • Key Areas of Negotiation
• Tactics
• What Buyers Look For
• How to Deal with Debt
• Overarching Requirements for Completing a Deal
Content
The Real World of M&A – What it Takes to Get a Deal Done

4. • Valuation
o Adjusted EBITDA
o Multiple
o Cash, Debt, Working Capital
• Deal Structure
o Share Sale vs. Asset Sale
o Tax considerations
o Reduced warranties
o Implications on client contracts
Key Areas of Negotiation
The Real World of M&A – What it Takes to Get a Deal Done

5. • Initial Consideration vs. Earnout
o Risk allocation
o Upside & Downside
o Integration vs. Ring Fencing
• Earnout protections
o Shared clients / new clients
o Growing the team
o Increased costs
• Management Incentives
Key Areas of Negotiation (cont.)
The Real World of M&A – What it Takes to Get a Deal Done

6. • Decide on priorities early
• Be prepared to compromise in certain areas
• When to disclose any skeletons or problems
• Don’t let trading performance slip
• Know what your deal breakers are – if any
• Let advisors do the dirty work
Tactics
The Real World of M&A – What it Takes to Get a Deal Done

7. • It varies
• Financial vs. strategic purchaser
• Some key value drivers:
o Second tier management
o Profit trends
o Quality of margins
o Brand strength / specialisation
o Depth of client relationships
What Buyers Look For
The Real World of M&A – What it Takes to Get a Deal Done

8. Category of Acquirer Treatment of Invoice Discounting
UK Private Equity Debt
UK private trade buyer Debt, working capital / combination
UK listed buyer Usually working capital
US listed buyer Debt or working capital
Other international buyers Often working capital
Adjusted EBITDA x Multiple = Enterprise Value (EV)
Enterprise Value + Cash – Debt – Working Capital Requirements = Equity Value
Equity Value is the amount sellers will receive when selling their shares
Debt: Inclusion of Invoice Discounting or Factoring borrowings?
How to Deal With Debt
The Real World of M&A – What it Takes to Get a Deal Done

9. • Preparation
• Intelligent approach to valuation
• Sharing of risk
• Stamina
• Understanding of the acquirer’s motivation
• Professional advisors
Overarching Requirements for Completing a Deal
The Real World of M&A – What it Takes to Get a Deal Done

10. 100 Juxon House, St Paul’s Churchyard
London EC4M 8BU
www.optimacf.com
Telephone: 020 7164 6664
Email: philip@optimacf.com
Any Questions?
Q&A
The Real World of M&A – What it Takes to Get a Deal Done