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Increasing Client Value… Through Specialized M&A Services A Presentation for M&A Today

Increasing Client Value… Through Specialized M&A Services A Presentation for M&A Today February 12, 2004. What We Do. Make both client growth and exit deals happen Specialize in data, software, info/publishing, BPO vendors for 100+ man years

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Increasing Client Value… Through Specialized M&A Services A Presentation for M&A Today

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  1. Increasing Client Value… Through Specialized M&A Services A Presentation for M&A Today February 12, 2004

  2. What We Do • Make both client growth and exit deals happen • Specialize in data, software, info/publishing, BPO vendors for 100+ man years • Sub-specialize in VC/LBO platform and add-on acquisitions • The point? Speed profitable consolidation or distill to “core” focus

  3. Who: Transactions + Ops • Six professionals who together have closed deals valued at $5B+ • Amalgamated CV • senior operating positions: Yankee Group, Reid Systems, ADP (2) , DRI (2), Telemed, TASC, Execucom, Baxter Travenol, Hollister, Primark • senior staff/consulting positions: McKinsey, McGraw-Hill, Ameritech • equity investing: Primark, Weeden Capital, Applied Technology Partners, ADP, Ameritech, Travelers/Diebold, ISSS Ventures, GTCR • other: Trinity (Hartford) BA; Wharton BS; Notre Dame BBA; U of Kentucky BA; HBS (2); IBM’s Sands Point; U of PA and U of WI graduate work in econometrics/finance/ economics; instructor of finance, Wharton

  4. Portfolio Company Clients Cohesive Tech Solutions, MedE America, Global Knowledge Network, Control Data Integration, CES Stand-alone Corporate Clients Safeguard, SBC (Ameritech), Primark, Mercator, Energy East, KEMA, Xenergy, Primedia, ESI, Reed-Elsevier, Sony, Kimball, Heritage, Arbinet, CT Energy, Welch Carson Some Clients

  5. Typical Sell-Side Campaign Steps • Confirm, perhaps refine, client’s growth strategy… • Explore short-term operational improvements… • Set deal value and structure targets… • All this to reach consensus on target search criteria • Compose “book” • Search and screen candidates: “tanks and roses” • Determine combination synergies (deal premium potential) • Conduct preliminary due diligence on key respondents • Facilitate deal team and target interaction to close • Sometimes support post-deal integration

  6. Sell-Side Campaign Funnel StepsProspectsMonths • Assess and Value Opportunity • Produce Book • Survey/Contact Market 300+/- 2 • Distribute Book 30 1 • Host Data Room 8 1 • Solicit and Value Bids 5 1.5 • Negotiate Terms of Sale 1-2 1.5 7.0

  7. Stray Bullets from the Front • VC’s and many buyout shops sell entries, not exits • Absent a strategic premium, today software vendors are valued like mfg. companies • IP value sweet-spot: midway between niched and generic. Specialized enough to be protected; big enough potential to scale • If you’re in tech services, find a niche or find an offshore partner

  8. Bullets Cont. • Campaign objectives and conditions: • simultaneous offers • management commitment, strong control systems • buyers qualified early • flush out insufficient resources • boot the tire-kickers • also early consensus on value expectations and investors’ “bottom line” • strong “book” quality • professional appearance • speeds due diligence

  9. Bullets Cont. • Investors may be sellers, but managers are always buyers • For deals, time is the enemy • The longer things take, the more they screw up • Today we often have two “clients” – the buyer and seller • handholding through caution: clients still recovering from Year 2000 “shock and awe” • more complex financial structures: cash, debt, equity • longer time to close : 7-8+ months • Serendipity happens, and prospecting creativity and “pitch” evolve thru market feedback.

  10. Bullets Cont. • The challenge for many IT/consulting shops lies in finding a compatible cultural environment while maxing value, sometimes an owner v. employee balancing act • The good news is, we usually know whether the market for a seller or buyer is attractive in a few months • In the early stages, our job is to “clear the market”. But in the later stages, we become pre-nup counselors

  11. Inquiring Clients Want to Know: Why Do We… • Charge a monthly retainer? • Set a contingency fee percent that declines with deal size? • Cover in our agreement even prospects with whom you already established contact? • Energetically discourage direct client-target contact? • Take so long?

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