Realizing Maximum Business Value November 17 th , 2017 Agenda nda - - PowerPoint PPT Presentation

November 17th, 2017

Realizing Maximum Business Value

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Agenda nda

Our Value- Add Realizing Premium Value Transition Options The Succession Challenge Intro

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Your ur Present esenter ers

Pa Paris Ad Aden Pa Partner er paris. s.ade aden@ n@val alit itascapital ascapital.com

• m

Geoff f Benne nett tt Pa Partner er geoff. f.ben enne nett@ tt@val alita tascap capit ital al.com com

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▪ Our team has completed some of the largest, most complex M&A transactions in Canadian history

• Almost 200 transactions
• Worth in excess of $180 billion

M&A Experience with Leading Global Firms

Valitas itas Team am Expe peri rien ence ce

65 65 105 24 24

Transacti saction

• n Types

es

Corporate Sale Acquisition Financing 16 16 53 53 24 24 27 27 74 74

Transacti saction

• n Size

e Breakdo kdown wn

Less than $25 million $25 million to $250 million $250 million to $1 billion $1 billion or more Not Disclosed

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Value Creation & Exit Timing Expertise Bespoke Solutions Rigorous Execution

Our r Key Di Differentiat rentiator

• rs

s

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We re respect ect our r client nts s and re recogn gnize ize the legacy cy they have e built. t.

1

We conduct duct oursel elves es with courage rage and integr grit ity in everyt ythin ing g we do.

2

We take e pri ride in our r problem em-solvi solving ng cre reativ tivit ity y and pra racti tical cal insights. ghts.

3

We set et the industr stry stand ndar ard for prot

• tecti

cting ng client ent confide identi ntiality ality.

4

We collab abor

• rat

ate e to deliver er the best st results ts for our client nts. s.

5

We attract act, devel elop

• p and ret

etain n the best st talen ent. t.

6

Ours is a relati tionship nship busi sine ness ss, built ilt on trust. t.

7

Our r Value ues

Page 6 Page 6 2,054 1,944 2,519 2,694 2,506 2,151 2,393 2,229 2,143 318 304 356 263 268 279 273 236 248 2,372 2,248 2,875 2,957 2,774 2,430 2,666 2,465 2,391 2008 2009 2010 2011 2012 2013 2014 2015 2016 Public Private

Annual Canadian Deal Count

Source: Capital IQ as of October 18th, 2017

US$2 Trillion in Corporate Cash Balances US$2 Trillion in Private Equity Purchasing Power

Un Unprece precede dent nted ed Liqui uidity dity Dr Driving ing M&A Activi vity

2,694 1,944 2,163 10-Year High 10-Year Low LTM

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▪ Half of business owners plan to transition ownership in the next 10 years(1)

14% 17% 22% 2007 2017 2027E

% of Canadian Population Aged 65+

(1) CIBC

Busin iness ss Owner ners s Are Aging ng

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Baby Boomers Represent Vast Majority of Canadian Business Ownership

196,000 440,000 684,000 2010 2015 2020 2025

65+ Baby Boomer Business Owners (1,2) 1,100,000 880,000 Baby Boomer Owned Canadian Businesses

Sources: Geneva Canada Inc., Government of Canada

Busin iness ss Owner ners s Are Aging ng (continued)

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None of us are Getting out of Here Alive…

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(60%)

Revenue

(20%)

Survival Rates

Impact of Owner’s Death

Sources: Business News Daily, Forbes

2 Years Later 4 Years Later

Page 11 Page 11 25 50 75 100 5 10 15 20 Survival Rate (%) Number of Years

Sources: Achieving Longevity

15% after 1 Year 50% after 5 Years 75% after 15 Years

Company Failure Rates

Busin inesses sses Are Mortal tal Too

The Dow has changed its component firms 53 times over its 128 year history

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The e Succession ccession Challe llenge nge

Owners Are Unprepared

Source: Newswire

Leadership Transition Ownership Transition

10% 33% 45% 3% 8% 20% 29% 29% 8% 15% No, and don't plan to create one No, but plan to create one Yes, but informal Yes, formal plan made on my own Yes, formal plan made with advisors Owners Aged 60+ All Owners

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Source: PwC

Start thinking about the future leaders of your business!

43% 21% 18% 16% No plan in place Yes, small number of senior executives Yes, most senior executives Yes, all senior executives

Have You Done Any Planning?

Ha Haphazar phazard Leade adership ship Trans ansition ition

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Source: Newswire

65% 65% 30% 30% 12% 12% Businesses passed on to descendants Survives second generation Survives third generation

Stagge aggeri ring ng Inter ergene generat rationa ional l Failur lure Rates es

13% 22% 27% 38% Other Sell Ownership Only Management and Ownership Transition to Descendants

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Some Advice…

When planning for family business generational transition

identify every conceivable problem that might arise.

Do that early and ongoing Don't wait until one or more of those problems bites you in the wrong place, leaving you to conclude that you and others have spent ten or more years in what turns out to be

frustrating generational transition failure

Ian Campbell, Business Transition & Valuation expert, quoting the best generational business transition advice he’s ever received

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Exit Options Hold Orderly Transition To Descendants Leave To Estate Third Party Sale Management (No Backing) Management (With Backing) Sale To Financial Buyer (Management Roll) Sale To Strategic Buyer

Your ur Exit it Options tions

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Family y Member MBOs Privat ate Equ quity ty Stra rateg egic Pros ▪ Reduce third party involvement ▪ Maintain control ▪ Limited due diligence ▪ Rewards management ▪ Fast-moving and sophisticated ▪ Discreet ▪ “Strategic valuations” ▪ Often realize synergies Cons ▪ Potential family conflict ▪ May lack leadership talent ▪ Management usually lacks capital ▪ IOUs vs. cash ▪ Failed purchase can affect morale ▪ Management equity “roll” ▪ “Gaming” the process ▪ Often slow and unsophisticated ▪ Risk of leaks

Owne nersh ship ip Trans ansiti ition n Options tions

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Assessment & Plan Value Acceleration Well-Timed Exit Acquisitions Growth Opportunities

Value ue Creation eation Road ad Map

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Fina nanci ncial Chara ract cteristi eristics cs ▪ Recurring revenue ▪ Growth ▪ High margins ▪ High ROI ▪ Opportunity-rich, capital constrained Comp mpeti etitive Charact cterist ristics cs ▪ Strong competitive position – “moat” ▪ Why do you win? ▪ Structural strategic advantages ▪ Unique know-how, engineering or IP Indus ustr try y Charact cterist ristics cs ▪ Recession resistant (non-cyclical) ▪ Many acquisitive, synergistic buyers

• Global sales force
• Complementary channels,

products

Posit sitioning ioning Your ur Compan any y for r Premium emium Value lue

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(1) Newswire

Shift In Owner’s Focus

25% 35% 13% 13% 38% 48% 52% 30% 33% 57% 61% 61% 41% 46% 66% Number of employees Number of products and services Volume of exports Focus on international growth Focus on innovation Aged 25-39 Aged 40-59 Aged 60+

Don’t slow down before your exit, speed up for premium value

Aged ed Owne ners s Slow w Do Down n Value lue Creation eation

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8 to 12 Months

▪ Prepare data room ▪ Prepare management presentations 2nd

nd Stage Preparat

aration ▪ Data room access ▪ Management presentations Purchase hase Due Diligenc ence ▪ Negotiate transaction agreements ▪ Execute agreement Negoti

• tiati

tion ▪ Buyer’s List ▪ Prepare CIM ▪ Teasers/NDA Pre-Launch unch Preparati ration Mark rketi eting/1 ng/1st Round nd Bids ds ▪ Distribute teasers/CIMs ▪ Deliver process letters ▪ Evaluate EOIs ▪ Distribute second round process letters ▪ Provide definitive documents 2nd

nd Stage Bids

ds

A Pr Proven en Proce cess ss for r Realiz alizin ing g Value ue

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Island and He Heari ring ng Case se Study udy

The Situation

Approached 37 Targets Closed 10 Acquisitions Created a pipeline of 18 additional targets EBITDA: increased 150%+ Valuation: > 2.5x higher Result ult

▪ Wanted to sell immediately ▪ Delayed the process by 12 months instead ▪ Acquired smaller clinics to unleash value

Valuation: 8-10x EBITDA Pre-str strat ategi gic readi dine ness ss

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Valuation

Multiple Expansion Growth Base Value

Island and He Heari ring ng Case se Study udy (continued)

The Result

18 months later… the business sold for more than 2.5x initial valuation including an earn-out, 98% of which was paid within 3 years of closing…

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Valitas itas Core re Servi vices ces

▪ Industry-leading advisory services: Value Creation, Rigourous Execution, Bespoke Solutions Sellsid side e M&A Advisor isory Buysi side de M&A Ad Advisor isory Debt t and Equ quit ity Financi ncing ng Ad Advisor isory Strategic egic Readines iness and Exit t Posit itioning ioning

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Valitas itas Targ rget t Mark rket

Target Deal Size ($ millions)

Situational Specialists Industr ustry Agnostic

• stic

Compa panie ies s 2-5 Years s From Sale Sale $15+ Debt t Finan anci cing ng $10+ Equity quity Raise se $5+

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Q&A

Valitas Capital Partners is a boutique advisory firm that collaborates with passionate business owners to unleash value over time and realize that value through a well-timed exit. Our work is bespoke, tailored to the unique priorities and circumstances of each client, recognizing the legacy they have built through years of dedication and sacrifice. Valitas delivers global firm capability from an agile, entrepreneurial

• platform. Our value creation excellence is rooted in best practices

developed by leading global investment banks and private equity firms. We have completed almost 200 M&A and financing transactions with an aggregate value exceeding $180 billion, including some of the most notable and complex M&A transactions in Canadian history. Valitas' clients trust our thought leadership, experience, and privileged access to global networks to identify, evaluate and execute on their strategic

• pportunities.

E x p e r i e n c e . R i g o u r . A c c e s s .

Toronto | Ontario

4 King Street West, Suite 402 M5H 1B6

Offices:

E x p e r i e n c e . R i g o u r . A c c e s s .

Offices:

Vernon | British Columbia

Box 1326, Vernon, V1T 6N6