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Firm Overview – Q3/2011
Madison Street Capital Overview Transaction Process Overview Contact Information Table of Contents
Madison Street Capital Overview Madison Street Capital (“MSC”) is an international investment banking firm providing financial advisory services, merger and acquisition expertise, financial opinions, and valuation services to publicly and privately held businesses. MSC and it’s broker dealer, MSC-BD, LLC , a registered broker-dealer and a Financial Industry Regulatory Authority (“FINRA”) member, are committed to the highest levels of professional standards.  The firm has industry sectors around the world on engagements ranging from: M&A transactions, Private Placements, Capital Raising, Fairness & Solvency Opinions, Valuation, and ESOP Advisory. MSC’s professionals have represented a broad universe of Public and Private Companies,  as well as their Boards, Special Committees, and shareholders. Current in-house deal count of more than 100 deals under exclusive contract.
Madison Street Capital Expertise MSC professionals have specialized expertise in partnering with middle-market firms across multiple industry verticals and niche markets to achieve the optimal results. We analyze each client’s unique needs to obtain the best match between buyers and sellers, arrange appropriate financing, and create capitalization structures that optimize the client’s potential. Investment Banking Mergers & Acquisitions Capital Raising Private Placements Corporate Finance Advisory Financial Restructuring ESOP Advisory Independent Valuation Services Fairness and Solvency Opinions Financial Reporting Tax Compliance Portfolio Valuation Litigation Support Professional Depth Unparalleled Leadership Decades of Experience National Footprint Highest level of Professional Standards Extensive Network Diverse range of contacts on both financial and strategic fronts Connections with high level decision-makers  Comprehensive Resources
Unique Appreciation for the Middle Market Management is a more crucial variable More room for creativity with growth opportunities (“storytelling”) More granular due diligence requirements Wider range of potential valuation outcomes Larger number of potential participants in process Business is often not a “must have” for any single investor Transaction agreements are highly customized Process can be taxing on limited management resources Must make room in the process for investors to get to know management, sometimes even before submission of first round bids More time invested in pre-launch phase of process Requires anticipation of potential issues to avoid slippage in timetable and unwinding of competitive tension Process Matters Requires experience to narrow the field and to interpret first round bids Need to walk a fine line between drawing investors into the process and conveying strength at the same time Contract negotiations cannot be divorced from the rest of the process Advisor must be prepared to carry a significant load GREATER SCOPE FOR ADVISOR TO ADD VALUE.  NEED FOR SPECIALIZED SKILLS.
Sound Strategic Advice MSC differentiates itself by leveraging our experience to provide sound strategic advice at each of the critical junctures in the Transaction process. Dedication to Middle Market M&A / Cap Raise Superior Senior –Level Attention at Each Stage of the Process Unparalleled Attention to Detail Outstanding Negotiation Skills Institutional Knowledge of Strategic and Financial Buyers Critical Junctures in the “Front-End” Marketing Process Identifying timing to initiate a process Crafting the appropriate sale process Identifying potential strategic and financial partners Conveying the “story” and opportunities Deciphering initial indications Assembling a competitive group of investors Showcasing the Company and management to investors Critical Junctures in the “Back-End” Process Fully understanding all final proposals to develop a “true” comparison between bids Establishing the right next steps Determining the most advantageous time to negotiate with potential investors Developing counter proposal(s) and the best script with which to deliver them Craft a process to maintain leverage through closing
Comprehensive Resources Private equity, hedge funds, venture capital and growth capital investor database Heavily relied on by most bulge bracket banks; detailed information on companies and transactions Provides real-time pricing, data, history, news, analytics and research for global financial markets Markets covered include government and corporate bonds, mortgage, money-market, indices, currency, commodities and equities Exhaustive database complete with information about industries, companies, and key decision makers Leading provider of M&A deal information, including transaction value, deal terms and multiples M&A intelligence service reporting forward-looking origination and deal flow opportunities integrated with a comprehensive deals Comprehensive source of business information including research, statistics, industry reports and forecasts
Madison Street Capital Overview Transaction Process Overview Contact Information Table of Contents
Ways an Advisor Adds Value Serves as an intermediary in negotiations Insulates the owners and management from the need to make immediate decisions Ability to act as the ‘bad cop’ and not sour the buyer on the transaction or the owners and management team Provides the owner the ability to maintain an appropriate distance from the sales process Leverages industry and financing experience Prepares a company for the transaction process and can provide suggestions on how to enhance value in the eyes of bidders Utilizes industry contacts and pre-existing relationships to target investors most likely to meet shareholder objectives Understands the implications of different deal terms and how to guard clients against disadvantageous conditions Allows the management team to concentrate on the day-to-day issues of running the business Avoid neglecting customers, vendors, and employees It is critical that the business continues to perform well during the transaction process Heightens the sophistication level of the transaction and maximizes potential value Investors assume they can acquire stakes in companies that lack representation at bargain prices Representation translates directly into more advantageous transaction terms
Unrealistic pricing expectations Historical results or projections do not support valuation Negative surprises uncovered during due diligence Issues uncovered regarding sales, profits, customers, employees, environmental Inability of parties to agree on representations and warranties/indemnification language in purchase contract Inability of buyer to finance the purchase Seller often has to be willing to offer some type of financing or earn-out arrangement Deterioration of financial performance during the marketing process Common Reasons Deals Fail Critical Issues: MSC Solutions: Comprehensive analysis of financials to determine potential synergistic benefits for strategic buyers & financial buyers Thoroughly discuss expectations with management as it relates to “market standard” deal terms, and gain an in-depth understanding of shareholder objectives Perform in-depth seller due diligence to identify problematic trends/issues, and present rationale or strategy for favorable resolution of issue Require potential buyers to document proposed sources and uses well in advance of the purchase agreement, and compare to current availability in the credit markets
Valuation Methodologies In order to provide a more accurate estimate of the enterprise value for a company, multiple valuation methodologies are employed Comparable Companies (Public Comps) Comparable Transactions (M&A Comps) Discounted  Cash Flow (DCF) Leveraged  Buyout Analysis (LBO) Description:  Identify the key publicly-traded comparable companies for the company and calculate and apply multiples of Revenues, EBITDA, and EBIT. Comment:  A widely accepted valuation technique that provides current, market-based valuation information.  Multiples are adjusted to reflect a premium for control and discounted for liquidity and size. Description:  Identify key comparable transactions for the company, and where possible, calculate and apply multiples of Revenues, EBITDA and EBIT. Comment:  A popular valuation technique for measuring market valuations on a control basis.  Precedent multiples are dependent on market conditions at the time of the transaction. Description:  Model the free cash flows resulting from the company’s financial projections and discount using an appropriate cost of capital. Comment:  Arguably the most sophisticated valuation technique, providing real insight into divisional valuation drivers.  Highly sensitive to numerous key assumptions. Description: Using the same projections as the DCF, apply a suitable leveraged capital structure and solve the valuation using a 20 – 40% target equity rate of return. Comment:  A useful alternative perspective since it implies a valuation level at which a private equity investor would typically be prepared to bid for the company.
Comparison of Buyer Types The two primary types of acquirers are strategic and financial buyers Each set of buyers typically evaluates an acquisition based on different criteria and goals FINANCIAL BUYERS (Private Equity Groups) STRATEGIC BUYERS Typically public or private corporations currently involved in similar or complementary business line  Places a greater emphasis on identifying and realizing potential revenue and cost synergies Rationale for acquisition more strategic in nature (i.e. reducing competition, enter new geographic markets, etc.) Typically concerned with generating long-term value from acquisition and effectively integrating the target into the buyer’s existing operations Higher valuation could be supported by the realization of synergies Does not have a similar business in existing investment portfolio Seeks entry into an attractive market with potential for growth and definable exit strategy Acquisition can serve to diversify investment portfolio and create a platform for future acquisitions in the same space Identification of opportunities to create value through a strategic partnership Has a similar or complementary business in existing portfolio of investments Acquisition drivers are typically similar to those of strategic buyers, but additionally driven by the need to put raised capital to work and grow investments before fund life expires Often an ideal buyer as they have financial resources of private equity backing and strategic rationale to support a favorable purchase price Raises capital in funds from various sources to invest in businesses with the expectation of exiting within a relatively short time period (typically five to seven years) to achieve a targeted rate of return for investors (generally 20% to 25%) ADD-ON PLATFORM
Characteristics of a Successful Partner/Investor Successful transactions are the result of pairing the right partner with the client; MSC’s experience lends to the following characteristics of the right partner: SUCCESSFUL TRANSACTIONS Confidence of Customer Financing Capability Transaction Sophistication Transaction Motivation
Assessing Deal Structure and Options Number of transactions completed Integration success of previous transactions Integration planning effort Marketing Financing relationships Credit approval process of financing source Financing structure of current operations Equity available Returns to equity participants Deal with the decision makers who can allocate capital Strong strategic fit – core business: Strategic logic: component, module, system Geographic reach; low cost sourcing opportunity Capacity needs Capable of identifying and implementing process improvements Capable of bringing engineering and design improvements Focused purchasing effort could generate material cost reduction Customer diversification
Madison Street Capital Overview Transaction Process Overview Contact Information Table of Contents
About Madison Street Capital MADISON STREET CAPITAL , is an international investment banking firm committed to the highest standards of integrity and service in providing corporate financial advisory services, merger and acquisition expertise, financial opinions, and valuation services to publicly and privately held businesses. We have offices in North America, Asia, and Africa.  We have specialized expertise in partnering with middle-market firms in hundreds of industry verticals and niche markets to achieve the best possible outcome through a variety of transactions. We analyze each client’s unique needs to obtain the best match between buyers and sellers, arrange appropriate financing, and create capitalization structures that optimize the client’s potential. Madison Street Capital is your trusted partner and leading provider of financial advisory services, M&A assistance, and valuations.  Please visit our website at  www.madisonstreetcapital.com  and follow us on the following external websites:  www.twitter.com/@MadStCap  www.linkedin.com/company/madison-street-capital-llc en.wikipedia.org/wiki/List_of_investment_banks#Largest_full-service_investment_banks
Tuesday, December 12 th , 2006 DISCUSSION ON EQUITY CAPITAL MARKETS For more information please contact : Karl D’Cunha, CA Senior Managing Director 105 W. Madison Street, Suite 1200 Chicago, IL, 60602 (312) 529-7000 [email_address]

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Madison Street Capital Firm Overview 2011

  • 2. Madison Street Capital Overview Transaction Process Overview Contact Information Table of Contents
  • 3. Madison Street Capital Overview Madison Street Capital (“MSC”) is an international investment banking firm providing financial advisory services, merger and acquisition expertise, financial opinions, and valuation services to publicly and privately held businesses. MSC and it’s broker dealer, MSC-BD, LLC , a registered broker-dealer and a Financial Industry Regulatory Authority (“FINRA”) member, are committed to the highest levels of professional standards. The firm has industry sectors around the world on engagements ranging from: M&A transactions, Private Placements, Capital Raising, Fairness & Solvency Opinions, Valuation, and ESOP Advisory. MSC’s professionals have represented a broad universe of Public and Private Companies, as well as their Boards, Special Committees, and shareholders. Current in-house deal count of more than 100 deals under exclusive contract.
  • 4. Madison Street Capital Expertise MSC professionals have specialized expertise in partnering with middle-market firms across multiple industry verticals and niche markets to achieve the optimal results. We analyze each client’s unique needs to obtain the best match between buyers and sellers, arrange appropriate financing, and create capitalization structures that optimize the client’s potential. Investment Banking Mergers & Acquisitions Capital Raising Private Placements Corporate Finance Advisory Financial Restructuring ESOP Advisory Independent Valuation Services Fairness and Solvency Opinions Financial Reporting Tax Compliance Portfolio Valuation Litigation Support Professional Depth Unparalleled Leadership Decades of Experience National Footprint Highest level of Professional Standards Extensive Network Diverse range of contacts on both financial and strategic fronts Connections with high level decision-makers Comprehensive Resources
  • 5. Unique Appreciation for the Middle Market Management is a more crucial variable More room for creativity with growth opportunities (“storytelling”) More granular due diligence requirements Wider range of potential valuation outcomes Larger number of potential participants in process Business is often not a “must have” for any single investor Transaction agreements are highly customized Process can be taxing on limited management resources Must make room in the process for investors to get to know management, sometimes even before submission of first round bids More time invested in pre-launch phase of process Requires anticipation of potential issues to avoid slippage in timetable and unwinding of competitive tension Process Matters Requires experience to narrow the field and to interpret first round bids Need to walk a fine line between drawing investors into the process and conveying strength at the same time Contract negotiations cannot be divorced from the rest of the process Advisor must be prepared to carry a significant load GREATER SCOPE FOR ADVISOR TO ADD VALUE. NEED FOR SPECIALIZED SKILLS.
  • 6. Sound Strategic Advice MSC differentiates itself by leveraging our experience to provide sound strategic advice at each of the critical junctures in the Transaction process. Dedication to Middle Market M&A / Cap Raise Superior Senior –Level Attention at Each Stage of the Process Unparalleled Attention to Detail Outstanding Negotiation Skills Institutional Knowledge of Strategic and Financial Buyers Critical Junctures in the “Front-End” Marketing Process Identifying timing to initiate a process Crafting the appropriate sale process Identifying potential strategic and financial partners Conveying the “story” and opportunities Deciphering initial indications Assembling a competitive group of investors Showcasing the Company and management to investors Critical Junctures in the “Back-End” Process Fully understanding all final proposals to develop a “true” comparison between bids Establishing the right next steps Determining the most advantageous time to negotiate with potential investors Developing counter proposal(s) and the best script with which to deliver them Craft a process to maintain leverage through closing
  • 7. Comprehensive Resources Private equity, hedge funds, venture capital and growth capital investor database Heavily relied on by most bulge bracket banks; detailed information on companies and transactions Provides real-time pricing, data, history, news, analytics and research for global financial markets Markets covered include government and corporate bonds, mortgage, money-market, indices, currency, commodities and equities Exhaustive database complete with information about industries, companies, and key decision makers Leading provider of M&A deal information, including transaction value, deal terms and multiples M&A intelligence service reporting forward-looking origination and deal flow opportunities integrated with a comprehensive deals Comprehensive source of business information including research, statistics, industry reports and forecasts
  • 8. Madison Street Capital Overview Transaction Process Overview Contact Information Table of Contents
  • 9. Ways an Advisor Adds Value Serves as an intermediary in negotiations Insulates the owners and management from the need to make immediate decisions Ability to act as the ‘bad cop’ and not sour the buyer on the transaction or the owners and management team Provides the owner the ability to maintain an appropriate distance from the sales process Leverages industry and financing experience Prepares a company for the transaction process and can provide suggestions on how to enhance value in the eyes of bidders Utilizes industry contacts and pre-existing relationships to target investors most likely to meet shareholder objectives Understands the implications of different deal terms and how to guard clients against disadvantageous conditions Allows the management team to concentrate on the day-to-day issues of running the business Avoid neglecting customers, vendors, and employees It is critical that the business continues to perform well during the transaction process Heightens the sophistication level of the transaction and maximizes potential value Investors assume they can acquire stakes in companies that lack representation at bargain prices Representation translates directly into more advantageous transaction terms
  • 10. Unrealistic pricing expectations Historical results or projections do not support valuation Negative surprises uncovered during due diligence Issues uncovered regarding sales, profits, customers, employees, environmental Inability of parties to agree on representations and warranties/indemnification language in purchase contract Inability of buyer to finance the purchase Seller often has to be willing to offer some type of financing or earn-out arrangement Deterioration of financial performance during the marketing process Common Reasons Deals Fail Critical Issues: MSC Solutions: Comprehensive analysis of financials to determine potential synergistic benefits for strategic buyers & financial buyers Thoroughly discuss expectations with management as it relates to “market standard” deal terms, and gain an in-depth understanding of shareholder objectives Perform in-depth seller due diligence to identify problematic trends/issues, and present rationale or strategy for favorable resolution of issue Require potential buyers to document proposed sources and uses well in advance of the purchase agreement, and compare to current availability in the credit markets
  • 11. Valuation Methodologies In order to provide a more accurate estimate of the enterprise value for a company, multiple valuation methodologies are employed Comparable Companies (Public Comps) Comparable Transactions (M&A Comps) Discounted Cash Flow (DCF) Leveraged Buyout Analysis (LBO) Description: Identify the key publicly-traded comparable companies for the company and calculate and apply multiples of Revenues, EBITDA, and EBIT. Comment: A widely accepted valuation technique that provides current, market-based valuation information. Multiples are adjusted to reflect a premium for control and discounted for liquidity and size. Description: Identify key comparable transactions for the company, and where possible, calculate and apply multiples of Revenues, EBITDA and EBIT. Comment: A popular valuation technique for measuring market valuations on a control basis. Precedent multiples are dependent on market conditions at the time of the transaction. Description: Model the free cash flows resulting from the company’s financial projections and discount using an appropriate cost of capital. Comment: Arguably the most sophisticated valuation technique, providing real insight into divisional valuation drivers. Highly sensitive to numerous key assumptions. Description: Using the same projections as the DCF, apply a suitable leveraged capital structure and solve the valuation using a 20 – 40% target equity rate of return. Comment: A useful alternative perspective since it implies a valuation level at which a private equity investor would typically be prepared to bid for the company.
  • 12. Comparison of Buyer Types The two primary types of acquirers are strategic and financial buyers Each set of buyers typically evaluates an acquisition based on different criteria and goals FINANCIAL BUYERS (Private Equity Groups) STRATEGIC BUYERS Typically public or private corporations currently involved in similar or complementary business line Places a greater emphasis on identifying and realizing potential revenue and cost synergies Rationale for acquisition more strategic in nature (i.e. reducing competition, enter new geographic markets, etc.) Typically concerned with generating long-term value from acquisition and effectively integrating the target into the buyer’s existing operations Higher valuation could be supported by the realization of synergies Does not have a similar business in existing investment portfolio Seeks entry into an attractive market with potential for growth and definable exit strategy Acquisition can serve to diversify investment portfolio and create a platform for future acquisitions in the same space Identification of opportunities to create value through a strategic partnership Has a similar or complementary business in existing portfolio of investments Acquisition drivers are typically similar to those of strategic buyers, but additionally driven by the need to put raised capital to work and grow investments before fund life expires Often an ideal buyer as they have financial resources of private equity backing and strategic rationale to support a favorable purchase price Raises capital in funds from various sources to invest in businesses with the expectation of exiting within a relatively short time period (typically five to seven years) to achieve a targeted rate of return for investors (generally 20% to 25%) ADD-ON PLATFORM
  • 13. Characteristics of a Successful Partner/Investor Successful transactions are the result of pairing the right partner with the client; MSC’s experience lends to the following characteristics of the right partner: SUCCESSFUL TRANSACTIONS Confidence of Customer Financing Capability Transaction Sophistication Transaction Motivation
  • 14. Assessing Deal Structure and Options Number of transactions completed Integration success of previous transactions Integration planning effort Marketing Financing relationships Credit approval process of financing source Financing structure of current operations Equity available Returns to equity participants Deal with the decision makers who can allocate capital Strong strategic fit – core business: Strategic logic: component, module, system Geographic reach; low cost sourcing opportunity Capacity needs Capable of identifying and implementing process improvements Capable of bringing engineering and design improvements Focused purchasing effort could generate material cost reduction Customer diversification
  • 15. Madison Street Capital Overview Transaction Process Overview Contact Information Table of Contents
  • 16. About Madison Street Capital MADISON STREET CAPITAL , is an international investment banking firm committed to the highest standards of integrity and service in providing corporate financial advisory services, merger and acquisition expertise, financial opinions, and valuation services to publicly and privately held businesses. We have offices in North America, Asia, and Africa. We have specialized expertise in partnering with middle-market firms in hundreds of industry verticals and niche markets to achieve the best possible outcome through a variety of transactions. We analyze each client’s unique needs to obtain the best match between buyers and sellers, arrange appropriate financing, and create capitalization structures that optimize the client’s potential. Madison Street Capital is your trusted partner and leading provider of financial advisory services, M&A assistance, and valuations. Please visit our website at www.madisonstreetcapital.com and follow us on the following external websites: www.twitter.com/@MadStCap www.linkedin.com/company/madison-street-capital-llc en.wikipedia.org/wiki/List_of_investment_banks#Largest_full-service_investment_banks
  • 17. Tuesday, December 12 th , 2006 DISCUSSION ON EQUITY CAPITAL MARKETS For more information please contact : Karl D’Cunha, CA Senior Managing Director 105 W. Madison Street, Suite 1200 Chicago, IL, 60602 (312) 529-7000 [email_address]