madison street capital investment banking overview 2016

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Madison Street Capital: Overview of Investment Banking Services

Confidential

Firm Overview

I. Madison Street Capital Overview

• The attached presentation sets forth a summary of the terms pursuant to which Madison Street Capital, LLC (“MSC”) will seek to identify possible financing opportunities to the recipient hereof, including debt refinancing, mezzanine and term loans, revolving credit facilities, secured lending facilities, syndicated loans and other types of commercial credit facilities or operational lending. MSC will act as a financial arranger in connection with such financing transactions. If MSC is successful in identifying a source of financing, it will be entitled to receive a fee in connection therewith. However, there can be no assurance that MSC will be successful in identifying a satisfactory financing source, and MSC makes no guarantee of financing.

• Please note that MSC is not a bank or commercial lender and will not act as the lender with respect to any financing arranged pursuant to this arrangement, and MSC bears no responsibility for the performance of the lender(s) with respect to any such financing. The terms of any financing identified by MSC hereunder will be subject to the independent negotiation and agreement of the parties to such financing, and MSC accepts no responsibility for the negotiation or content of such terms. MSC makes no representation that the terms on which financing may be obtained represent the best terms available, or that such terms are representative of the market for comparable financing arrangements.

Disclaimer

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Confidential

Firm Overview


II. MSC Global Investment Banking Services Overview

III. Capital Raising Process

IV. Mergers & Acquisitions Process

V. Capital Markets Credentials

VI. Senior Transaction Professionals

VII. Contact Information

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Firm Overview

Madison Street Capital Overview

Madison Street Capital (“MSC”) is a global 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 Debt Placements, Capital Raising, Fairness & Solvency Opinions, Valuation, Restructuring 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.

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Firm Overview

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.

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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

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Firm Overview

Our Clients

MSC’s Global Investment Banking services:

Small to middle market businesses in United States (and Canada);

Established and successful businesses seeking growth with a commercial presence in the United States;

International companies expanding into the United States; and

International companies seeking United States based capital providers.

Our client’s profile include:

– Companies with $10 to $500 million in revenue (USD);

– Companies with an EBITDA of $1 to $50 million (USD); and

– Companies with growth potential – above 10% in yearly sales.

US Industry Sectors Aviation

Business Services

Construction

Consumer Goods and Services

Financial Services

Food & Beverage

Healthcare

Information Technology

Manufacturing

Media

Real Estate

Wholesale and Retail Trade

International Industry Sectors

Consumer Goods

Education

Energy

Financial Services

Healthcare

Infrastructure

Irrigation and Drainage

Sanitation

Telecommunications

Transportation

Water

Agribusiness

Textiles

Business Services

Construction

Food & Beverage

Manufacturing

Media

Real Estate

Renewable Energy

Retail

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Firm Overview

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.

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Firm Overview

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

Network 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

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Firm Overview

MSC Capital Raising Process

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Description of Services:

MSC Global Investment Banking acts in several capacities on capital raising projects such as

financial advisor and arranger of senior/mezzanine debt and equity for capital requirements. Our

capital raising services include:

On-going enterprises seeking growth capital

Revenues track record above $10 million (USD)

EBITDA profit levels above $1 million (USD)

Quantifiable track record of growth

Companies interested in capital raising towards M&A activities: buy or sell roles

Certain Real Estate Projects across different stages of Development

Furthermore, MSC has a world-class network of financial sponsors that are mandated to lend to

middle market opportunities both domestic and internationally based. These include specialty

finance companies, hedge funds, certain US and global commercial banks and other alternative

lending sources.

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Firm Overview

MSC’s Capital Raising

Distinctive Approach:

– MSC negotiates ideal deal terms based on agreed upon strategic objectives. Key elements of

MSC’s negotiation methodologies include valuation considerations and risk mitigation

strategies

– Selection of our capital partners in our engagement execution

strong relationships with lending groups interested in the middle market segment;

strong partnerships with government agencies (like SBA) supporting middle market initiatives; and

negotiations capabilities to reach the best terms to our clients

– We conduct an in-depth pre-marketing phase leveraging MSC’s extensive network with

institutional investors to:

understand the market’s appetite for the deal;

identify potential sources of funds (SOFs); and

validate and/or improve our clients business plan

– Our deal execution team processes and negotiates our deals from start to finish including

coordinating due-diligence and the communication process with prospective investors

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Firm Overview

MSC Professionals Add Value

MSC 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

MSC professionals leverage 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

MSC process allows management 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

MSC raises 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

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Firm Overview

Mergers & Acquisitions Services

Description of Services:

MSC identifies, assesses and values strategic acquisition targets for our clients and provides

capital raising support to finance growth strategies. MSC also assists our clients with the design

and implementation of successful ‘exit strategies’ in connection with sell-side mandates

Distinctive Approach:

MSC conducts a detailed diagnosis of our clients’ strategic considerations and competitive

landscape in order to formulate and execute accretive transactions

For buy-side engagements, MSC identifies target companies through our extensive middle-

market network and well-developed institutional relationships as well as proprietary and

industry focused databases

From a sell-side perspective, MSC assists our clients in the identification of value maximizing

strategies and strategic planning. MSC serves as an integral partner throughout businesses

divestitures whereby we coordinate the communication and negotiation with strategic and

corporate investors

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Firm Overview

Buyers & Sellers - Bridging the Gap with Structure

Proper deal structure can narrow the gap between expectations

M&A transactions can be complex at times. Given that there has to be

agreement between both the buyer & seller that is predicated with the

highest degree of trust – it can be difficult to protect against every scenario

through a contract. It is important to balance incentives across all

constituents and create a structure that retains this alignment as best as

possible post-transaction. For a buyer, they will need to ensure interest

remains sufficiently aligned with any selling equity holders who remains key

to managing the business and/or crucial to investment function.

As with most successful deals, a true partnership exists at the senior-most

level of each business. Below are key deal elements that should be

considered, and in some cases, need to be carefully designed in order to

achieve success:

Earn outs

Staged sales/ Delayed or contingent payment of purchase price

Employment contracts/ Multi-year commitments post-transaction

Retention payments

Compensation plans

Put &Call Options

Equity grants

Separate treatment of management and incentive fee streams

Amount of retained equity in business by seller

Reinvestment of after-tax proceeds in the business

Consideration about day-to-day management /control of business

* Given the complexity of these type of deals, it is wise to have proper

representation with regards to investment banker, attorneys, accountants

and other professionals.

MSC

Client

Tax & Estate

Planning

Law Firm

Employees

Madison

Street

Capital

Acquirer

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Confidential

Firm Overview

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

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

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Firm Overview

Assessing Deal Structure and Options

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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

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Firm Overview

Assessing Deal Structure and Options

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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

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Firm Overview

Capital Markets Credentials

• Madison Street Capital provides investment banking services to corporations and institutions

throughout the United States and around the world. Our model provides clients with new sources

of demand by effectively penetrating 2nd and 3rd tier investors that are typically overlooked by

large firms as well as large tier 1 accounts with a goal of creating a diverse investor base

• Our Competitive Advantage:

– Distribution capabilities to place a significant volume of securities with institutional investors

– Diverse investor base that includes: Financial Institutions, Corporations, Money Managers,

Mutual Funds, Pension Funds, State and Local Governments, Unions, Endowments and

Foundations

– Access to deep pools of capital based on relationship with pension funds

– Reputable team exceptionally qualified to lead-manage or co-manage significant transactions

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Recent Transactions

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Recent Transactions (cont’d)

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Firm Overview

Senior Professionals

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Karl D'Cunha, CPA, CA is a Senior Managing Director at Madison Street Capital. The range

of services include M&A Advisory, Capital raising, Portfolio Valuation, Restructuring and

Financial Sponsor advisory services. Mr. D’Cunha specializes in the Middle Market including

over 18 years’ experience in the capital markets working with some of the largest investors in

the world.

Mr. D’Cunha has been actively raising capital for companies in different stages of

development and has established a global network of contacts at private equity, venture

capital, hedge funds, RIA’s, public and private pensions, family offices and other entities. Mr.

D'Cunha was previously an audit manager at Ernst & Young, LLP and

PricewaterhouseCoopers, LLP with 8 years’ experience in their respective Asset

Management industry groups.

Mr. D'Cunha holds a B.A. in Finance and Economics from University of Western Ontario and

a Graduate Diploma in Accounting from McGill University. Mr. D'Cunha is a Chartered

Accountant, a level III candidate in the Chartered Financial Analyst program, and is registered

with FINRA as a General Securities Representative (Series 7) and an Investment Banking

Representative (Series 79). Mr. D’Cunha is a member of the following organizations: New

York Hedge Fund Roundtable, Canadian Institute of Chartered Accountants, CFA Society of

Chicago, CFA Institute, and American MENSA, Ltd.

Business Experience

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Business Experience

Jay Rodgers is a Managing Director at Madison Street Capital. His primary responsibilities

in the Capital Markets Group are focused on merger and acquisition advisory and corporate

finance engagements. Mr. Rodgers has strong experience in the industrial sector, including

manufacturing, agriculture and construction segments. Prior to joining MSC, Mr. Rodgers

worked for a nationally recognized management consulting firm as Director of Transactions

for Mergers/Acquisitions and Corporate Finance. In the publicly-traded market place, Mr.

Rodgers spent twenty years with Hornblower & Weeks-Hemphill, Noyes Inc., Drexel Burnham

Lambert, and Lehman Brothers.

Mr. Rodgers served as an officer in the United States Army for two years active duty and four

years of reserves following graduation with a Bachelor of Science in Business from Florida

State University.

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Business Experience

Barry Petersen is a Senior Managing Director at Madison Street Capital. His investment

banking experience is diverse, covering M&A advisory, corporate finance, institutional debt

and equity placements including all hybrids, and significant out-of-court and in-court

restructuring transactions. His significant depth of experience includes oil and gas sectors,

alternative energy, manufacturing, financial services, and business services.

Previously, Mr. Petersen served as Managing Director at Madison Street Capital, and as Vice

President with Dresner Partners. He began work completing acquisitions for the Loews

Corporation in the financial services sector for CNA Insurance.

Mr. Petersen also has significant capital markets trading experience including managing an

institutional derivatives desk, and as principal of a debt futures arbitrage desk. He has

international trade experience as well, having worked in management for the U.S. subsidiary

of the oldest Japanese trading company, Okaya, where he was involved directly in their

investment in U.S. based manufacturing assets as well as cross-border trade and investment.

Mr. Petersen received a B.A. in history from Knox College and an M.B.A. from Northwestern

University's J.L. Kellogg Graduate School of Management. He holds Series 7, 66, 79 and

Series 24 Principal securities licenses.

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Business Experience

Reginald McGaugh is a Managing Director at Madison Street Capital. Mr. McGaugh leads

the Global Healthcare Markets Group for the firm. Mr. McGaugh has extensive experience

and relationships in the healthcare sector including biotechnology firms, pharmaceutical firms,

Tele-medicine firms, diagnostic imaging firms, healthcare medical device firms, Healthcare

REITs and direct professional experience with both healthcare providers and managed care

companies. Prior to joining Madison Street Capital, Mr. McGaugh served as a senior

executive with a Merchant Banking firm that was involved in an $83 Million acquisition of a

specialty hospital where he served as interim Chief Operating Officer for the hospital and the

associated ancillary facilities. His experience includes the development and project

management of specialty hospitals and big box ambulatory care centers specializing on

hospital/physician joint venture structures.

Mr. McGaugh’s experience also includes the energy, telecommunications and transportation

sectors. Mr. McGaugh has served as an analyst/consultant with Harley Davidson Financial

Services, MidAmerican Energy Holdings (A Berkshire Hathaway Company), Peoples Energy,

University of Nebraska Medical Center, Nebraska Orthopedic Hospital, Ryder Logistics and

WestLB Mellon Private Equity. Along with his focus on healthcare, Mr. McGaugh will also

focus his efforts on the advisory side of deals structured in compliance with Islamic Law

(Sharia) principles as the firm expands in Africa and the Middle East.

Mr. McGaugh holds a Bachelor of Science in Finance degree from the University of Nebraska

– Lincoln and a MBA in Finance from the Florida A&M University School of Business &

Industry. He completed a 2 year formal credit training program at Wells Fargo Bank.

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Confidential

Tuesday, December 12th, 2006

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 protected]