This document summarizes a webinar about choosing an M&A advisor. The webinar featured Nat Burgess of TechStrat, an M&A advisory firm, and was hosted by SecureDocs, a virtual data room provider. Burgess discussed important criteria for selecting an advisor such as experience in a company's market and deal size range. He also covered evaluating an advisor's process, network, and ability to see a transaction through. The webinar provided questions for companies to ask advisor candidates to assess their approach, deal experience, and ability to achieve a successful outcome.

1. Choosing an M&A Advisor
A Guide for Investors, Boards, and Management
Featured Presenter: Nat Burgess, Founder - TechStrat
Wednesday, November, 15, 2017 | 11AM PDT
Hosted by:

2. About SecureDocs
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3. About TechStrat
An M&A and strategic advisory firm.
• 20+ years of experience facilitating over 100 transactions
• Technology focused firm
• Works with clients to open new chapters and create new
opportunities
• Goal is for every client to look back on our achievements
together and say “I’m glad I did that”

4. Presenter
Nat Burgess, TechStrat Founder
• Sell-side specialist with 20+ years experience advising
technology companies on M&A, Investment, and growth
strategies
• Managed transactions with Microsoft, Google, Intel,
Symantec, and many other global organizations
• Raised Capital from Vista Equity Partners, Intel Capital,
Carlyle Group, Marlin Equity, and other leading private equity
firms
• Involved with startups that have sold to Google, Microsoft,
and others
• Frequent guest on CNBC and a nationally recognized
speaker at industry conferences
• B.A. Japanese literature from Yale
• J.D. from UCLA School of Law

5. Choosing an M&A Advisor
A Guide for Investors, Boards, and Management

6. ● You are being marketed to by very smart people
● You will be locked up with a firm for a long time
● You could be locked up in jail for a long time if you really screw up the M&A process
● You are balancing the competing interests of multiple constituents
● You are under pressure to make the right decision in a short time
In the next hour you will learn how to hire
the best M&A firm for the job
You spent years building your business. . .

7. Selling your company takes a process
Hiring the right firm takes a process, too

8. Lots of people want the job. . .

9. Want to buy a watch? I mean, Company?

10. Sure, we’ll call everyone. Check back in 6 months. . .

11. We’ll take it from here

12. Our Perspective
● We work with privately held tech companies with enterprise values between $10 and
$150 mln
● We frequently run parallel processes including strategic buyers and financial sponsors
● We don't get involved in IPO, debt, early-stage capital raise
However, the guidelines outlined here are applicable outside our context, including
● Selection Criteria
● Establishing Relationships
● Checking References
● Decision to Engage
● Questions to ask
● Board considerations

13. Agenda
● Identify the right category of advisor
● Winding road to closing
● Divergent goals - management, board,
shareholders
● Selection criteria
● Establishing dialog
● Ability to engage and sell
● Gauging the effectiveness of their process
● How good is their network?
● Do they have endurance?
● Is broker-dealer registration required?
● Preemptive decision or bake-off?
● Running a successful bake-off
● Questions to ask the candidates
● What could possibly go wrong?
● Resources

14. EXAMPLES
Categories of Advisor
CATEGORY
Bulge Bracket firm
Mid-Market
Full Service Firm
Specialist Boutique
Generalist Business
Broker
Consultant
TechStrat
IPO Candidate
IPO/Mezz Debt/Series C+
M&A/Growth Equity;
aligned market niche
Small business
Small business, or experienced
client filling specific gap
Business broker
Retired Executive
CLIENT

15. The Right Partner to meet Your Objectives
OBJECTIVE ADVISOR CATEGORIES
IPO
Mezzanine Debt
Sale of the Company to a Strategic Acquirer
Majority Recap with a Financial Sponsor
Minority Recap with a Financial Sponsor
Growth Equity
Merger with a publicly traded shell company
VC
Seed
Bulge Bracket (regulatory mandate)
Full service firm (or direct transaction with underwriter)
Boutique to Bulge Bracket
(depending on scale and pursued options)
Boutique to Bulge Bracket
Boutique to Bulge Bracket
Boutique or direct transaction with investor
Are you sure you want to do this?
Direct or Boutique
Direct

16. Winding Road to Closing
IPO
CAPITAL
RAISE
STRATEGIC
M&A
STRATEGIC
M&A
STRATEGIC
M&A
PE RECAP
BULGE BRACKET
BOUTIQUE TO BULGE
BRACKET
BOUTIQUE TO BULGE
BRACKET
INITIAL
OBJECTIVES
ACTUAL OUTCOME ADVISOR CATEGORY

17. Motivations and Requirements
BOARD MANAGEMENT SHAREHOLDERS
Maximum value to
Shareholders
Avoid liability
(fiduciary duties)
Avoid having to jump
in and manage
External influences
(favors owed)
Collaborator, partner
"Do-er",
not "assigner"
Efficient, respects
management time
Effective, successful
Maximum value
Minimum risk,
structure matters a
lot

18. Role of Board Members in Selecting an
Advisor
The board governs (management manages)
● Decision to sell the company
● Liability for not meeting “Revlon” standard of care
● Protected by business judgment rule
● No protection if self-dealing, putting personal interests ahead of company
interests
● No obligation to hire advisors, but hiring appropriate advisors helps meet
Revlon, reduces potential for real and perceived conflicts, and protects the
interests of the shareholders
● Oversee process through an M&A committee (to monitor, not micro-
manage)

19. Ice Breakers - Opening the Dialog
"Your time is
valuable.
How frequently
should we consult
you regarding
market trends, and
strategic corporate
decision?"
● Should the board prioritize growth or profitability?
● What are the implications of recent acquisitions in my
space?
● Pursue an expensive SaaS pivot, or maximize
EBITDA?
● What are our most critical hires?
● Market Timing; prerequisites for going to market
● Audit? Shift year end? Change in corporate
structure? Major licensing deal?

20. Selection Criteria
Experience
● In your market
● In your target EV range
● In the Geo of your partner candidates
● With your likely partner candidates
● With companies at your stage of growth

21. Selection Criteria
Individual Advisor
● Deal maker? Tuned in to WII.FM?
● Familiar with legal, financial and strategic
nuances?
● Personal experience in your market?
● Personal relationships with your partner
candidates?
● Leader? CEO of the process?
Beware the bait
and switch

22. Ability to engage and Sell
● Persistence, cadence of interaction as
they try to win your mandate?
● Is their approach academic? (they
learned the script)
● or active? (they wrote the script)
● Are they persuasive, compelling and accurate in their interactions
with you?
● How do you feel after each encounter? "Right"? "Lingering
Doubts"?

23. ● Positioning
● Crisp, compelling, data-driven CIM
● Alignment of board, shareholders,
management on process steps and
valuation
● Appropriate contacts
● Thoughtful and appropriate
partner candidate last
● Realistic schedule
● Data room
● Rehearsals, anticipating FAQs
How effective is their process?

24. How effective is their process?
Launch
Meeting
Management
Presentation
Financial
Model
Valuation
Data Room
Independent
Strategics
Financial
Sponsors Networking
- Bankers
Deep
Synergy
Analysis
Bus. Dev.
Outreach
GTM Trigger
Market Check
Auction
Process
IOI
LOI
Due
Diligence
Information
Requests
Networking -
Sponsors
S&A/APA
Readiness Quotient PCL Outreach
Transaction
Execution
Preparation Outreach Diligence CloseNegotiationResearch

25. How good is their network?
The Great Equalizer.. . .

26. Or is it?

27. Corp Dev is a “honeypot”
The dealmakers are
hiding. . .
Real relationships really
do matter. .

28. Will they stay with you for as long as it takes?

29. Is Broker-Dealer Registration Required?
No, unless:
a) client is a public company
b) client is private, with revenue or EBITDA over $250 million, or
c) (arguably) advisor's duties include establishing custody over third party funds
A brief history of the broker-dealer registration rules:
1985: US Supreme Court rules that acting as an intermediary in a transaction involving a sale of target
company's stock requires registration. Many firms register, but are highly selective in which transactions
they run through their BD license (simple asset deals were often not reported).
2014: SEC No-Action Letter: BD reg not required for intermediary in a stock deal unless taking custody of
funds, providing financing, or organizing groups of buyers.
2017: Financial Choice Act (HOR): Broad exemption from BD registration for intermediaries working with
privately held clients under $250 million in revenue or EBITDA. The Act has moved on to the Senate.

30. Now that you have created your short list. . .
● Comfortable with how the firm built the relationship over time
● Impressed with their relevant deal experience and understanding of market
● Comfortable with the person who will lead the charge
(and inoculated from bait and switch)
● Confident the firm will stay with me
through the entire transaction

31. Reaching a decision
PREEMPTIVE SELECTION
Limited calibration of options
Lose the benefit of access to intelligence
from multiple presentations
Risk of a runaway train
(process takes on life of its own)
Time consuming
Broad disclosure
Formal setting, scripted presentation
BAKE-OFF
Access to multiple perspectives
Head to head (to head) comparison
Sometimes easier to create alignment
High confidentiality
Mutual commitment
Flexible timeline

32. A successful bake-off
● Limit to 2 or 3 advisors
● Check (random) references first
● 90 minute window
● Provide guidelines and questions to participants on your side
● Understand and address the differing agendas of management,
board and shareholders
● Same agenda to all

33. Motivations Revisited
BOARD MANAGEMENT SHAREHOLDERS
Maximum value to
Shareholders
Avoid liability
(fiduciary duties)
Avoid having to jump
in and manage
External influences
(favors owed)
Collaborator, partner
"Do-er",
not "assigner"
Efficient, respects
management time
Effective, successful
Maximum value
Minimum risk,
structure matters a
lot

34. What you should learn from the bake-off presentation
● Overview of the firm
● How they would position you?
● Who should buy you, and why?
● What valuation range do you anticipate, and why?
● Who will lead the transaction?

35. What do we learn from the Pitch Book?
If the pitchbook consists of boilerplate, high-level, generic
comments on the M&A process: This firm will deliver generic,
high-level, undifferentiated messaging to your buyers. PASS.
If the pitchbook includes new insights on how best to position
your company, research on specific buyers, and detailed
valuation work: This firm will present you thoughtfully and
impactfully to buyers.

36. Questions: Approach, Relationship with Clients
● Have you ever sued or threatened to sue a client, buyer or investor for
a fee?
● What portion of your firm's revenues come from sell-side
engagements vs. buy-side engagements or capital raising services?
● What percentage of your efforts go into marketing your own services,
vs. marketing your clients?
● How do you manage conflicts between buy side and sell side
engagements?
● What is your unique differentiator that will give us an advantage over
other alternatives by going with you?

37. Questions: Approach, Relationship with Clients
● Are you aware of any roll-ups going on in our segment?
● Tell us about your most recent cross-border deal
● What percentage of your sell side engagements sell in the within 12
months of engagement?
● Give us an example of a successful transaction, and how your unique
approach made success possible
● Describe an engagement where you failed to sell the company, or the
price fell way short

38. Questions: Process
● What is your target valuation? How do you support it?
● Describe your process, and overall project plan
● What is the proposed timeline for the engagement?
● How do you manage confidentiality internally and externally?
● How and when do you propose contacting direct competitors?

39. Questions: M&A / Investment Market
● How is the market for companies like ours?
● What are the trends driving deals (name any interesting transactions
that are relevant to us)?
● How are buyers determining the valuation of companies like ours?
● What is your outlook for M&A over the next two years?
● Should we be in a hurry, or will the market improve?
● What is our company's key differentiator?
● How will you make us relevant to buyers?

40. Questions: "Market" Terms
● What level of personal indemnifications are being requested of CEOs
in today's market?
● Are buyers demanding escrows or holdbacks? Which? What percent,
how long, typically?
● Are buyers paying cash or stock? Are you seeing a valuation
difference?
● Are you seeing a valuation difference between Asset and Stock
purchases?
● What is a likely deal structure for our firm? Structure, earnouts,
holdbacks, etc.?

41. Questions: Deal Team
● Who will lead the engagement?
● Highlight recent engagements similar to ours
● Have you done buy side work for any of the potential buyers of our
company?
● What other deals will the team be working on during our engagement?
● What percent of their time will be dedicated to us?
● Who do you predict will be the top 5 bidders?

42. Questions: Deal Team
● Who will draft the CIM?
● Who on the management team do they need access to?
● What VDR do you use? If it isn't Securedocs, pack your bags and fly
home to loserville
● How frequently do you provide updates to your clients?
● Describe the required time commitment by the CEO over the course of
the engagement

43. Questions: Compensation
● Explain your fee structure, including success fees, work fees,
expenses. Do you have minimums?
● What is your tail period?
● Are your fees paid 100% at closing, or as escrows are released
● Do you render fairness opinions? If so at what cost? If not, who do
you recommend?

44. Polling Question 3

45. Dear John. . .
● “Thank you for your hard work and thoughtful insights. Based on
their selection criteria, our board has retained another advisor. . .”
● “We have retained an advisor with recent deal experience in our
segment.”
● “We have decided not to run a process” (not recommended)

46. ● Alignment and clarity on milestones and responsibilities
● Clear and impactful positioning; clear understanding of buyer synergies
● Regular, comprehensive communications
○ (task status, feedback, calibration, questions from buyers/investors,
objections, opportunities, follow-up)
● Pragmatic, open-minded assessment of market feedback, aggressive
course-correction when necessary
Ensuring Success

47. Closing Thoughts
Things end badly when:
● Advisor goals are aspirational or naive
● M&A or fresh capital are a lifeline, not an accelerator
● Management is thrown into presentations with insufficient preparation
● Company and advisor simply broadcast the existing corporate message, rather than
transforming the message to create relevance to buyers

49. Thank you, questions?
Nat Burgess
nat@techstrat.com
206.920.4922

50. Get in Touch
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