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

• Sub-specialize in VC/LBO platform and add-on acquisitions

• The point? Speed profitable consolidation or distill to “core” focus

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

Some Clients

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

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

Sell-Side Campaign Funnel

Steps ProspectsMonths

• 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

Stray Bullets from the Front

• VC’s and many buyout shopssell 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

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

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.

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

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?