Finding value in mergers & acquisitionsPresented by Nicholas Metzgen

Session speaker NICHOLAS METZGEN IS AN ASSOCIATE DIRECTOR IN THE PRIVATE EQUITY DEAL ADVISORY GROUP AT KPMG.

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He launched a new team across the Mergers & Acquisitions advisory service line using data analytics to provide stronger and faster key value driver analysis to his clients who are actively buying and selling companies. By utilising Alteryx and KPMG propriety code he helps clients find hidden value at deal speed.

AgendaIntroductionCompany overviewBusiness challengeFinding solutions with Alteryx BenefitsWhat next?

#inspireeurope16

KPMG UK LLPKPMG IS ONE OF THE WORLD’S LEADING PROFESSIONAL SERVICES FIRMS.

174,000 employees worldwide 12,000 in the UK

1,400 in Deal Advisory (UK)

Over 700 offices in 156 Countries worldwide

One of the top 100 employers to work for(Fortune magazine 2016)

KPMG provides services to 75% of the Forbes Global 1000

Clients include business corporations, governments and public sector agencies and not-for-profit organisations

KPMG UK LLP — our services

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AdvisoryTaxAudit

KPMG

Risk ConsultingManagement Consulting Deal Advisory Strategy

Deal advisory“WE HELP OUR CLIENTS ANALYSE AND EXECUTE SIGNIFICANT CORPORATE TRANSACTIONS.”

A well-used comparison is that of the estate agent (Corporate Finance) to the surveyor (Transaction Services) in buying or selling a house.

THE SURVEYOR: considers the property in detail, as an independent expert. Their report may be used by the mortgage provider, lawyers and other parties

with an interest in the deal. They will identify risks with the property, as well as report on strengths.

WHAT WE BRING TO OUR CLIENTS: Our teams of specialists combine a global mindset and local experience

with deep sector knowledge and superior analytic tools to help navigate a complex, fragmented process.

WE HELP CLIENTS WITH 3 KEY M&A ACTIVITIES: We help clients BUY businesses We help clients SELL businesses We help clients FINANCE businesses or transactions

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BUY SELL FINANCE

VALUE PROPOSITION

ADVICE AND COMMUNICATION

The ChallengePresented by Nicholas Metzgen

Deal Advisory

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AnalyticsTHE CONVENTIONAL MODELA resurgent M&A marketplace.With economic growth and low interest rates we’re seeing new growth in M&A activity. But there’s one big difference:The rise of Big Data. With the migration of many aspects of business online and with the rise in EPOS and data capture technology, data matters more today than ever. BUT… Conventional analytics are no longer fit for purpose. Databases are often vast, unstructured and mismatched. This means that analysts are forced to spend the bulk of their time on the least valuable parts of the task.

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Analysis

Reporting

Data integration

10%

30%

Percentage of analyst time

60%

Highest business

value

Lowest business

value

Sample conventional process

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1 Management accounts collected from company 2 Processing and

reconciliation of data 3 Findings accumulated and summarised

Final output provides limited insights into the data

Where the data becomes complexMULTIPLE ACCOUNTING SYSTEMS

Multiple country/currencies Growth through acquisitions Mergers/Divestments Customer database versus product database Product categories/rationalisation Management reports focus on standard KPIs

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The SolutionPresented by Nicholas Metzgen

The same data. Seen differently.

Strategic Profitability Insights A new approach to data analytics

The same data. Seen differently.

kpmg.com

July 2016

The SPI modelTURNING THE CONVENTIONAL MODEL ON ITS HEADSimple to deploy

We work with a company’s IT staff to request data extracts in database form, with no constraints on file size.

Fast integration Our proprietary database structure quickly integrates

extracted data, enables fast automated reporting and empowers custom analysis through an analytical services database.

Increased analysis time Once integrated, our team is able to execute customized

derivative analysis without reliance on the client or target management.

Robust and reliable output — As the analysis is built from a transaction level, there is

greater data integrity and analytical flexibility

Analysis

Reporting

Data integration

Percentage of analyst time

Highest business

value

Lowest business

value10%

30%

60%

Deal AdvisorySPI’S PROPRIETARY PROCESS AND INTEGRATED APPROACH Work together to produce uniquely powerful insights

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Hardware Team Software External data

Creation ofdatabases

Generation of proprietary

queries

Findings/proprietary

insights

Company'stransaction level data

Market Data

Multiple systems

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Data enrichment

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Complex & repeatable

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SPI’s proprietary process and integrated approach work together to produce uniquely powerful insights

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FinancialsWhich component is most

significant in driving profitability?

VendorsHow much is vendor consolidation

impacting profitability?

LocationsAre new locations driving

growth?

ProductsHow are product velocities shifting?

CustomersHow much growth can be gained from the existing customer base?

External market driversHow are competitors’ growth

affecting performance?

Traditional FDD often stops at summary revenue analysis. It will identify your Top 20 customers, for example

SPI’s granular outputsSPI allows you to drill down at the transactional level into the customer base. It will identify which of your top customers are new, which are lost and which are existing

Going deeper it will allow you to look at the products those customers are buying – and to see any change in the mix over time

You can then explore individual product performance at transactional level and analyse the relationship between price and volume

-3 -2 -1 0 1 2 3 4 5 6

Price

Volume

05

10152025

Yr1 Yr2 Yr3

Top 20 customers

Other

0

5

10

15

Existing New Lost

Yr2

Yr3

02468

1012

Existing New Lost

Yr2 Yr3

SPI goes deeper

WHY STOP HERE … What are the growth rates for each customer segment?

How is our product portfolio being consumed by our customer base?

Does the business have a wide range of product margins?

– Which customers within channel segments are driving income and margins?

– Are the fastest growing customer segments purchasing the higher margin products?

– How many customers have we lost?

– Why are they declining?

– How much of our customer base must we replace each year?

– What percent of the product base is sustainable?

– How fast is it growing or declining?

– Is our product portfolio attracting new customers?

– Do new customers go on to buy additional products from our portfolio?

– How much of the business is shifting from lower to higher margin products, and vice versa?

– How do funding cost changes affect margins?

…when SPI can take you deeper

The benefitsPresented by Nicholas Metzgen

SPI can help at every stage of the deal process

DEAL LIFE CYCLE

Data Analytics technology team is continuously developing new offerings to better serve clients throughout the deal cycles

Pre-sale TransactionPost

AcquisitionPortfolio Review

Benefits to the client

— Data mining allows team members to drill down until buried trend is uncovered, transaction level data allow us to view data from multiple perspectives

— Do not need to bother management with additional data requests

— Quick access for team members— Easy to layer in trading updates— Quick to cut additional schedules

LESS TIME ASKING QUESTIONS MORE TIME TO FIND VALUE-ADDED INSIGHTS

EASE OF USE FOR ALL TEAM MEMBERS

CASE STUDYBACKGROUNDThis was a sell side engagement where the SPI team worked hand in hand with the Target as well as the investment bankers to assist in illustrating the Target’s growth story.Initially, the Target planned to tell the story based on a consolidated retention rate, but after discussions with the SPI team they realized it was a much more compelling story to split the churn based on the different segments of their business (their 2 core categories with steady retention, their growth category that was rapidly increasing, and the segment the Target was exiting over the next 16 months). This split not only told a much more compelling story, but also gave more comfort and increased buy-in to potential buyers as they could see where the growth was coming from. Finding these insights early was key in this process as it allowed the bankers to adjust their valuation model.

How SPI helped [Principal]

OUR VISION BECAME MUCH CLEARER WITH THE SUPPORT

AND IN-DEPTH ANALYSIS FROM THE SPI TEAM.

Customer retention

£ FY 2014 FY 2015 LTM Mar-16

Combined retention 69.0% 72.0% 72.0%

By product category

Category A 84.1% 86.0% 86.3%

Category B 73.5% 75.8% 81.7%

Category G – growth initiative 87.9% 88.6% 87.4%

Category X – divesting 64.8% 64.0% 61.8%

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What is nextPresented by Nicholas Metzgen

Using such a small part of Alteryx

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MACROS GEO LOCATION PREDICTIVE

QUESTIONSNICHOLAS METZGEN +44 (0) 207 311 8906 | NICHOLAS.METZGEN@KPMG.CO.UK