Greg Wright, MAppFin Director, Mergers & Acquisitions Grant Thornton Corporate Finance Inc. T +1 604 443 2166 E Gr

1. Generating liquidity-Transaction options for mid-market companies faced with succession challengesGreg Williamson, CA, CBVPartner, Corporate FinanceGrant Thornton LLPT +1 604 443 2103E Greg.Williamson@ca.gt.com Greg Wright, MAppFinDirector, Mergers & AcquisitionsGrant Thornton Corporate Finance Inc. T +1 604 443 2166E Greg.Wright@ca.gt.com

2. Introduction Our topic – generating liquidity When business owners conclude that succession within the family is not their best course, what are their options and how do they go about examining them? Is the goal generating maximum value, retaining control, implementing a growth strategy, protecting their employees or preserving the corporate legacy? Generating shareholder liquidity can be about the sale of the business, but there are other options available. Shareholders, and the management teams that support them, should understand how these options can converge with both shareholder and corporate objectives. Greg Williamson CA, CBV and Greg Wright, MAppFin discuss the transaction options available, their pros and cons, and some of the valuation and capital structure considerations that accompany them.

3. Introduction Our perspective • Grant Thornton Corporate Finance • National practice • Grant Thornton's international network • Focus • Mid-market • Private company • Manufacturing & Distribution • Full corporate finance capability (i.e. M&A, valuations, due diligence) in Vancouver

4. Agenda What are your transaction options? Planning – corporate and shareholder goals Understanding the corporate sale process Local perspective Questions and discussion

5. Exit - your options explained What are our options? Issues: • Succession planning • Agreeing a fair value • Funding the transfer • Optimizing value • Finding the right partner / purchaser • Loss of control • Costs and risks • Timing • Outcomes vs. objectives • IPO • Leveraged recapitalization • Private equity • Trade sale including merger Pass to the next generation Sale to employees Management buy in/out

6. Exit – your options explained MBO and its variations • The sale of shares to the existing management team. This sale is usually financed via a combination of vendor take-back, private equity, and/or debt. There are different variations including: leveraged buy-out (LBO), buyer/vendor initiated management buy-out (BIMBO/VIMBO), or the management buy-in (MBI)

7. Exit – your options explained Initial public offering (IPO) • IPO is not a viable option for most mid-market private businesses unless they are high growth (e.g. tech, pharma, resources) and need equity capital to execute The first sale and issuance of shares in a private company on a public stock exchange

8. Exit – your options explained Leveraged recapitalization (aka the equity strip) • The leverage recap is generally accomplished by borrowing a combination of senior and sub or mezzanine debt and declaring a dividend for shareholders A change of the capital structure of a company, to substitute debt for equity

9. Exit – your options explained Private equity • Private equity route is ideal for a business initiating a growth period as it gives shareholders the ability to generate liquidity and participate in future upside The sale and/or issuance of shares to a financial investor, usually a company managing an institutional pool of capital

10. Exit – your options explained Trade sale (aka strategic sale) including merger • The strategic sale is ideal for shareholders looking to generate a clean exit and the highest possible value The sale and/or issuance of shares to a strategic investor, usually a company already operating in the target company's sector

11. Planning What makes a company attractive to investors? Profitability Management Growth story Product/service differentiation Industry position (defensible barriers to entry) Comprehensive business plan and a track record of implementation Strategic/synergistic benefits

12. Planning Company perspective • What are the corporate objectives? • Is the succession of ownership affecting commercial negotiations with customers or suppliers? • Where are we in the business' growth cycle (i.e. growing or sustaining?) • Is there a need for expansion or sustaining capital along with the need to generate liquidity for exiting shareholders? • Where are the succession gaps in our management team?

13. Planning Shareholder perspective • What are the shareholder's personal objectives? • Are the interests of all shareholders aligned? • Is the goal continued ownership or a planned exit? • Is looking after employees a priority? • Is the goal to take some money off the table or fully fund retirement? • Is the diversification of risk away from the business important? • Are there shareholders playing a role in management? Who's going to take on that role post-transaction? • Is the capital needed personally? Along what timeline? • How will the capital be invested outside of the business? • What are the personal tax implications and how could a transaction be best structured to be tax efficient?

14. Planning CAPEX – this is important for M&D businesses • How do we time major expenditures with our corporate and shareholder objectives? • Is it growth or sustaining CAPEX? • What is the payback timeline? • How does this fit in with our exit timeline? • Will lit improve revenue or profitability in time for the exit? • How does the related financing affect equity value for our shareholders?

15. The corporate sales process Brief overview

16. The corporate sales process Brief overview – a legible version • Phase I – Preparation • Information gathering • Preparing the confidential information memorandum (CIM) • Preparing the information summary (teaser) • Establishing the tax strategies • Phase II – Identification of purchasers and initial approach • Establish long list of prospective purchasers/investors • Select short list of target purchasers • Preliminary contact with short list (teaser)

17. The corporate sales process Brief overview – a legible version (cont'd) • Phase III – Solicitation of non-binding indicative offers • Prepare confidentiality agreements (CAs) with selected parties • Issue CIM to selected parties • Prepare electronic data room • Issue instructions and guidance on non-binding indicative offer • Review offers received • Phase IV – Short list • Agree on short list • Issue instructions and guidance on binding letter of intent • Exploratory due diligence (Q&A and data room) • Management presentation

18. The corporate sales process Brief overview – a legible version (cont'd) • Phase V– Solicitation of binding LOIs and selection of buyer • Receive binding LOI • Assess and negotiate binding LOI • Select and confirm exclusivity • Phase V – Closing the transaction • Prepare and negotiate draft purchase agreement and other transaction documentation • Confirmatory due diligence • Regulatory and other third party approvals • Finalize purchase agreement and supporting documentation • Close transaction

19. Local perspective Business cases • Recent closed transactions • Five sell-side transactions close in Vancouver last year • Distressed sale of resort business completed recently (close pending) • Five active divestitures presently at different stages • Active due diligence practice conducting independent assessments for acquisitive buyers • The slant towards divestiture work in M&A is driven by the aging population • Both private equity and strategic buyers are active and paying premiums for good businesses with scale

20. Questions and discussion Thank-you!