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Credit Suisse Private EquityDiscussion Materials October 23, 2015 Paragon Financial Group
OUR TEAM
Kelley School of Business, 2017 Majors: Finance & Accounting Investment Banking Workshop ’17
Kelley School of Business, 2017 Majors: Finance & Accounting Investment Banking Workshop ‘17
Kelley School of Business, 2018 Majors: Finance & Accounting Investment Banking Workshop ‘18
Kelley School of Business, 2017 Majors: Finance & Accounting Investment Banking Workshop ‘17
Flat Organizationa
l StructureWorld-wide Firm with
International Reach
Diverse Senior Banker Background
Committed to Maximizing Your Value
Coverage in Numerous Industry Verticals
Unbiased, Pure Advisory
Focus
Jamey Dorman Mitchell Morris
Neil Davé Jon Tripp
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY……………………………………………………….......II. STRATEGIC RECOMMENDATION…………………………………….………...III. ABM COMPANY OVERVIEW……………………………………….…………….IV. INVESTMENT THESIS………………………………………………….…………..
i. DIVERSE INDUSTRY EXPOSURE..………………………….………………..
ii. 2020 VISION: A SUSTAINABLE MODEL FOR GROWTH….…………..........
iii. ORGANIC GROWTH WILL BE DRIVEN BY MARGIN EXPANSION………iv. BOLT-ON STRATEGY WILL DEVELOP A MORE DIVERSE COMPANY…..v. STRONG MANAGEMENT TEAM…..………………………………………..vi. EXIT OPPORTUNITIES ……………………………………………………….
V. VALUATION METRICS…………………………………………………………….VI. APPENDIX…………………………………………………………………………...
456789101113141520
Overview Credit Suisse is seeking an anchor investment to begin its private equity fund Objective: Select a company to act as a foundation for the fund to build upon through a bolt-
on strategy Create a plan to maximize value of current company with operational improvements Evaluate potential candidates for a post-purchase bolt-on strategy
Recommendation Paragon Financial Group recommends purchasing ABM Industries as a bolt-on platform
company
Industry Analysis The facility services industry is extremely fragmented with over 80,000 companies with only
2% of those companies having more than 10 employees Revenue trends have consistently exceeded expectations and outpaced the overall market Total US revenue for other administrative and support services rose 7.7% in Q2 of 2015 Spending on commercial construction has increased year over year driving sales of facility
maintenance services and providing growth prospects for well positioned companies in the industry
Company Assessment ABM Industries leads the market in janitorial services, holding a 5% market share ABM has completed numerous acquisitions with intentions of expanding into new markets,
optimizing margins and growing its current market share The new CEO is implementing a 2020 plan which will eliminate less profitable areas of the
business as well as create a new strategic alignment plan
Bolt-on Strategy After evaluating the company’s current acquisition plan we believe there are 13 companies
that should be considered for future bolt-on acquisitions
EXECUTIVE SUMMARY
4Executive Summary │
2006 2007 2008 2009 20100
1020304050
TTEC BID ABM
Range of mature to new industries and companies
Two highly cyclical companies with ABM proving to be more recession stable
• Revenue: $5,207.2• LTM EBITDA: 194.6• Debt: 305.1
• Revenue: $933• LTM EBITDA: 247 • Debt: 512.1
• Revenue: $1,280• LTM EBITDA: 168• Debt: 115
ABM is a facility maintenance provider Holds a 5% market share in the Janitorial
Industry, largest in industry ABM is a service provider for more than
half of the Fortune 500 companies Sotheby’s is a high-end auction house
specializing in art, wine and diamonds World’s largest art business Very cyclical company with most revenue
occurring during October TeleTech is a global business process
outsourcing company TeleTech’s top 5 customers account for
36% of their revenue
Stock Performance 2006 – 2010
5
STRATEGIC RECOMENDATION
18.6433.21
51.29
Volatility
Recommendation │
Middle-market company focused on steady growth through acquisition
Strategic transformation initiative that will create 40-50M in run-rate EBITDA
6
ABM COMPANY OVERVIEW
FY15 Financial Highlights FY15 Revenue: $5,032.8 Consistent dividend repayment ($35m) Adjusted LTM EBITDA of $194.60 Revenue growth of roughly 8% average
over the last 5 years Building & Energy Solutions grew over 14% Healthcare Support Services grew 24%
Strategic Realignment
Company Highlights Headquarters: New York, New York Five segments: Janitorial, Parking, Facility
Services, Security and Building & Energy Largest player in the Janitorial Services
Industry with roughly 5% market share Consistent growth seen through targeted
acquisitions in a wide breadth of industries and geographical locations
Diverse customer base with less than 2% dependency on any customer
Cross Selling at an all-time high due to Solve One More initiative aimed at creating collaboration between ABM service lines
Recent change in leadership with an Executive Vice President, Scott Salmirs, taking over as CEO
Salmirs proposed extensive operational changes and set comprehensive goals for the year 2020
Business model will be centered around end-market clients
Share repurchase program Adopting best practices in account
and labor management Cost optimization and internal
development Continued emphasis on cross-selling across
industry verticals
Recent Activity 5/5/15: Acquisition of CTS Services, LLC 10/2/14: Acquisition of GBM Support Services 8/7/14: Acquisition of Airco Commercial
Services 3/6/14: Acquisition of Alpha Mechanical, Inc.
52%
12%
12%
8%
9%7%
Product Segment Breakdown
JantiorialFacilityParkingSecurityBuilding & EnergyOther
Company Overview │
ABM’s diverse service offering creates stability
and minimizes shareholder risk
2020 vision aims to transition ABM into a
period of both organic and inorganic growth
Wide variety of industry verticals puts ABM in a
unique position to make acquisitions
Strong management with a proven M&A track record
and several recent acquisitions
Below average EBITDA margins provide multiple
avenues for internal growth
The company competes in stable industries that have withstood multiple periods
of cyclicality
7
INVESTMENT THESIS
Investment Thesis │
8
Facility/Janitorial Services
High competition and globalization Top 3 players control 25% market
share Revenue growth expected to be
consistent with US economy High cost of technological
advancements will drive consolidation
Security Services
Revenue trends continue to exceed expectations
Minimal M&A activity leaving industry unconsolidated
ABM leads the market with ~5% market share, next largest has 1.2% market share
Parking Services Increasing number of vehicles
registered worldwide creating a need for the industry
Diverse product offering including transportation, parking solutions, managing services, etc.
Industry growth CAGR of 12.1% expected
Jani-King International IncOther
Companies 92.1%
ABM Industries Inc.4.9%
1.2%DTZ
<1.0%
ServiceMaster<1.0%
Building & Energy Solutions Services intended to reduce energy consumption
and minimize carbon footprint Increasing energy costs, changing
legislature/regulations, environmental pressures and aging buildings/facilities causing an increase in demand for energy management
Data driven analytics to push eco-friendly best practices
Janitorial Services Market Share
Spending on Nonresidential Construction Increasing YoY
JanFeb
Mar
Apr
May
JunJul
Aug
Sep
Oct
Nov
Dec 50020112012201320142015r
($ in billions)
Exposure to a wide range of industries
Opportunity to grow and shrink in certain more favorable industries
DIVERSE INDUSTRY EXPOSURE
Investment Thesis │
Streamlined company operations will drive profit margins higher
Diverse end market provides sufficient growth opportunities Av
iation
Commerc
ialEd
ucati
onGov
ernmen
tHea
lthca
reInd
ustria
lSp
orts &
En
tertai
nmen
t
9
Strategic realignment Focus on end-markets to improve
client satisfaction Emphasize high growth verticals
Aviation, Healthcare, Tech Optimize account and labor
management in order to realize long term cost savings
Costs, Benefits, and Initiatives $45-60M pre-tax outlay expected to be
fully incurred by Q3 2016 Generation of $40-50M run-rate
EBITDA by second half of F2017 Authorization of $200M share
repurchase
Phase I2015 - 2016
Phase II2016- 2017
Phase III2017- 2020+
Key
Initi
ativ
esGo
als
Realign Organization
Leverage Shared services and procurement
Pursue strategic alternatives for Security
Invest in key capabilities
Develop vertical acceleration plans
Develop account planning and labor management programs
Vertical business plans well underway
Higher penetration of high margin technical services across the enterprise
Position company for focused growth
Create foundation for a more efficient organization
Provide management with best in class tools
Improve margin profile
Achieve vertical growth trajectory
Accelerate margin growth
Janitorial
Security
Parking
Building & Energy
2020 VISION: A SUSTAINABLE MODEL FOR GROWTH
Investment Thesis │
With a lower than average operating margin there is more growth opportunities
Evaluation of current operating segments to determine which should garner more focus
10
Operating Margin by Segment
Janitorial Facility Services Parking Security
Building & Energy Solution
sOther
4.9% 4.1% 4.8% 3.0% 5.4% 4.0%
Current operating margins are among the lowest in the industry providing margin expansion opportunities
Minimize unprofitable segments and focus growth on higher margin segments
Invest in technology to enhance product offerings and manage operational expenses
Parking and Building & Energy Solutions are heavily reliant on technological advancements
Continual alignment of infrastructure between segments to increase margins and realize increased synergies from future acquisitions
Move towards a focus on industry verticals to provide the opportunity of cross-selling products
Sell-off low margin segments to a bigger player to allow for more cash flow and focus on ABM’s successful pieces
ServiceMaster Hldgs.Rollins Inc.
CBRE Group, Inc.SP Plus Corporation
AramarkMITIE Group
Healthcare Services GroupEMCOR Group
ABM Industries
0.0% 10.0% 20.0%
Operating Margins
EBIT EBITDA
ORGANIC GROWTH WILL BE DRIVEN BY MARGIN EXPANSION
Investment Thesis │
Janitorial Facility Parking Healthcare
11
B & E
BOLT-ON STRATEGY WILL DEVELOP A MORE DIVERSE COMPANY
Investment Thesis │
12
Tier 1
Tier 2
Healthcare Services Group is an American based company focused on primary care for hospitals and senior living facilities. In the senior living facilities they provide facility management, housekeeping & laundry services as well as dining & nutrition services. In hospitals HSG focuses on the environmental services and dining & nutrition services. Healthcare, one of the targeted growth segments for ABM’s 2020 plan, would help to expand a key segment for ABM.
Coverall provides both janitorial and service maintenance to a variety of verticals. They focus specifically on office facilities, healthcare, fitness centers and gyms, retail and restaurant and more. The growth potential with Coverall and ABM is going to be in the verticals that ABM is has not yet penetrated. Both fitness centers and retail/restaurants are gigantic markets that ABM does not currently cover. Expanding into these markets with ABM’s current service offering may provide extreme revenue growth.
SP+ Corporation provides professional parking, ground transportation, facility maintenance, security, and event logistics to a wide range of markets. It is rated among the highest in quality of business in their industry, and their management team is rated above average in relation to their industry. The current focus of the management team is reaching into underpenetrated markets with an expectation of 5-7% growth in gross profit. This business will provide an increase in ABM’s existing operating margins.
Ameresco, Inc. provides comprehensive energy efficiency and renewable energy solutions for facilities throughout North America and the UK. Its $301 million market cap makes the acquisition feasible for ABM, and its core competency aligns well with ABM’s recent initiatives in the Building & Energy sector. Amersco’s founder, a visionary, built a product-neutral business model that goes beyond conservation and tackles the entire energy stream for its clients.
ABM has voiced interest in focusing growth efforts on Aviation, Healthcare, and Tech sectors
These suggested acquisitions will help achieve higher overall operating margins
BOLT-ON STRATEGY WILL DEVELOP A MORE DIVERSE COMPANY
Investment Thesis │
13
Experienced management team with an acquisition heavy background
Management team has experience working with merger and acquisitions
Board of Directors & C-Suite
Maryellen C. Herringer Non-Executive Chairman of
the Board, ABM Industries Incorporated
Linda Chavez President, Becoming
American Institute
J. Philip Ferguson Former Vice Chairman,
University of Texas Investment Management Company
Anthony G. Fernandes Former Chairman, Chief
Executive Office and President of Philip Services Company
Luke S. Helms Managing Director, Sonata
Capital Group
Sudhakar Kesvan Chairman and Chief Executive
Officer, ICF International
Scott Salmirs President and CEO, ABM
Industries Incorporated
William W. Steele Former President and Chief
Executive Officer, ABM Industries
ABM MANAGEMENT TEAM
Wendy M. Webb Chief Executive Officer,
Kestrel Corporate Advisors
Investment Thesis │
14
There are many large strategic buyers that are growing into the facility management space.
With facility management being a very consistent cash flow company there are many funds with similar companies in their portfolio.
Strategic Buyers
Financial Buyers
TPG Capital is an American private equity firm that focuses on larger deal sizes in C&R, Industrials, technology and health care. In 2014 TPG bought DTZ a facility company for 1.142 billion at a 10.7x and have since bought Cushman & Wakefield to roll up the two companies.
Apollo Global Management is an American based private equity firm that has made a name for itself doing premier transactions. In early 2015 Apollo bought protection 1, Inc. A facility company for 1.5 billion as well as ASG Security to use as a roll up.
Revenue: $14,731 MEBITDA: $1,170 M
Revenue: $39,409 MEBITDA: $3,354 M
Aramark is an American based food service company focusing on facility care as well as healthcare service provisions. Aramark has had a strong history of acquisitions, most recently purchasing Lotus Facilities Management for additional market share.
Johnson Controls is a Fortune 500 diversified conglomerate. Its products include automobile interior design, car seats, batteries, climate control or facility management. Recently news has circulated for a potential acquisition of EnerSys, Inc.
Total Assets under Management: $163 B
Total Assets Under Management: $74.3 B
EXIT OPPORTUNITIES
Investment Thesis │
Leveraged Buyout
Precedent Transactions
Comparable Companies
Discounted Cash Flow
$24.00 $26.00 $28.00 $30.00 $32.00 $34.00 $36.00 $38.00 $40.00
($ in millions)
15
EBITDA: Adjusted LTM EBITDA $194.60
We are suggesting a price range of $28.50 - $31.00 per share
VALUATION BREAKDOWN
Valuation │
DCF Comps Precedents LBO Recommended Valuation Range$33.06 - $38.23 $29.43 - $32.81 $31.46 - $34.84 $29.43 - $32.81 $31.00 - $33.50
Implied Share Price
Discounted Cash Flow:Implied EV/EBITDA of 11.0x – 12.5x
Precedent Transactions:Implied EV/EBITDA of 10.6x – 11.6x
Leveraged BuyoutImplied EV/EBITDA of 10.0x – 11.0x
Comparable Companies:Implied EV/EBITDA of 10.0x - 11.0x
16
DISCOUNTED CASH FLOWS
2013A 2014A LTM 2016E 2017E 2018E 2019E 2020E CAGR:Revenues 4,809.28$ 5,032.80$ 5,207.20$ 5,472.77$ 5,746.41$ 6,033.73$ 6,305.24$ 6,588.98$ 4.82% % Growth 4.4% 4.8% 5.1% 5.0% 5.0% 4.5% 4.5%Cost of Goods Sold 4,281.59 4,483.00 4,625.70 4,854.34 5,091.32 5,345.88 5,583.29 5,831.25 % Margin 89.0% 89.1% 88.8% 88.7% 88.6% 88.6% 88.6% 88.5%Gross Profit 527.69 549.80 581.50 618.42 655.09 687.84 721.95 757.73 % Margin 11.0% 10.9% 11.2% 11.3% 11.4% 11.4% 11.5% 11.5%Selling, General & Administrative 342.17 359.30 386.90 400.93 420.98 442.02 461.91 482.70 % Margin 7.1% 7.1% 7.4% 7.3% 7.3% 7.3% 7.3% 7.3%EBITDA 185.52 190.50 194.60 217.49 234.12 245.82 260.04 275.03 % Margin 3.9% 3.8% 3.7% 4.0% 4.1% 4.1% 4.1% 4.2%
Less: Depreciation & Amortization (60.39) (57.30) (58.00) (59.11) (60.34) (60.34) (61.79) (64.57) EBIT 125.13 133.20 136.60 158.39 173.78 185.48 198.24 210.46 % Margin 2.6% 2.6% 2.6% 2.9% 3.0% 3.1% 3.1% 3.2%Less: Taxes (43.79) (46.62) (47.81) (55.44) (60.82) (64.92) (69.39) (73.66) Tax Rate 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0%EBIAT 81.33 86.58 88.79 102.95 112.96 120.56 128.86 136.80 % Margin 1.7% 1.7% 1.7% 1.9% 2.0% 2.0% 2.0% 2.1%
plus: Depreciation & Amortization 60.39 57.30 58.00 59.11 60.34 60.34 61.79 64.57 less: Capital Expenditures (32.59) (37.40) (30.00) (41.59) (43.67) (45.86) (47.92) (50.08) less: (inc)/ dec. in net working capital (65.11) (42.49) (27.10) (16.85) (16.40) (19.19) (20.05) (20.96) Unlevered Free Cash Flow 44.02$ 63.99$ 89.69$ 103.61$ 113.22$ 115.85$ 122.68$ 130.34$ Present Value 95.14$ 97.10$ 92.80$ 91.78$ 91.08$ Sum PV of FCFs 467.90$ Enterprise Value 2,293.70$ Implied Equity Value 2,039.80$
Actual FYE December 31st Projected LTM December 31st
Valuation │
17
COMPARABLE COMPANIES ANALYSIS
($ in millions)
Company TickerClosing Price
% of 52-week High
LTM P/E
Market Cap.
Enterprise Value LTM 2014A 2015E LTM 2014A 2015E LTM 2014A 2015E EBITDA EBIT
Aramark ARMK $30.72 90.9% 34.3x $8,158 $13,668 0.9x 0.8x 0.9x - 10.6x 10.3x - 5.0x 4.5x - -EMCOR Group EME 45.68 93.4% 17.5x 2,838 2,800 0.4x 0.4x 0.4x 7.8x 7.4x 7.6x 0.9x 0.9x 0.9x 5.5% 4.4%ServiceMaster Global Hldg. SERV 33.03 84.9% 34.5x 4,564 7,018 2.8x 2.5x 2.7x 15.0x 15.5x 11.4x 6.1x 7.6x 4.6x 18.5% 14.6%SP Plus SP 24.48 89.3% 22.6x 549 785 0.5x 0.5x 0.9x 9.9x 10.7x 9.1x 3.3x 3.4x 3.0x 5.1% 3.0%Comfort Systems USA FIX 30.49 98.7% 30.1x 1,101 1,098 0.7x 0.5x 0.7x 12.4x 11.5x 11.4x 0.2x 0.6x 0.2x 5.9% 4.3%MITIE Group MTO 4.97 - - 1,125 1,312 0.6x 0.5x 0.6x 15.2x 13.9x 8.5x 3.3x 3.3x 1.8x 3.8% 2.3%Spotless Group SPO 2.10 83.5% 17.1x 1,772 2,205 1.0x 1.0x 0.9x 9.6x 9.1x 8.5x 2.1x 2.1x 1.9x 10.9% 8.2%Programmed Main. Services PRG 2.56 - 11.6x 455 460 0.2x 0.2x 0.2x 5.8x 5.6x 4.6x 1.0x 1.0x 0.8x 3.7% 2.9%
ABM Industries ABM $28.56 84.0% 25.1x $1,602 $1,856 0.4x 0.4x 0.4x 12.9x 9.8x 8.8x 2.1x 1.7x 1.5x 2.8% 1.6%
High $45.68 98.7% 34.5x $8,158 $13,668 2.8x 2.5x 2.7x 15.2x 15.5x 11.4x 6.1x 7.6x 4.6x 18.5% 14.6%Low 2.10 83.5% 11.6x 455 460 0.2x 0.2x 0.2x 5.8x 5.6x 4.6x 0.2x 0.6x 0.2x 3.7% 2.3%Mean 21.75 90.1% 24.0x 2,570 3,668 0.9x 0.8x 0.9x 10.8x 10.5x 8.9x 2.4x 3.0x 2.2x 7.6% 5.7%Median 27.49 90.1% 22.6x 1,448 1,758 0.7x 0.5x 0.8x 9.9x 10.7x 8.8x 2.1x 2.7x 1.9x 5.5% 4.3%
EBITDA MetricNet Debt
LTM Adjusted $194.60 10.0x - 11.0x $1,946 - $2,141 $254 $1,692 - $1,887 $29.43 - $32.812014A $190.50 10.5x - 11.0x 2,000 - 2,096 254 1,746 - 1,842 30.37 - 32.032015E $200.00 9.0x - 10.0x 1,800 - 2,000 254 1,546 - 1,746 26.89 - 30.37
57.557.557.5
EV/Sales EV/EBITDA Total Debt / EBITDA Margin (LTM)
Multiple Range Implied Enterprise Value Implied Equity ValueShares
Oustanding Implied Share Price
Valuation │
18
PRECEDENT TRANSACTIONS ANALYSIS
($ in millions) Enterprise Value/Date
Announced Acquirer Target ConsiderationEnterprise
ValueLTM Sales
LTM EBITDA
Jun-15 Wendel Group AlliedBarton Security Cash & Stock 1,670.00 0.8x 11.3xMay-15 DTZ Cushman & Wakefield Not Disclosed 2,000.00 1.0x 11.6xMar-15 CBRE Group Global WorkPlace Solutions Cash 1,475.00 0.4x 11.7xJun-14 DTZ PTG Capital Cash 1,142.20 0.6x 10.7xAug-13 Standard Register Company WorkflowOne LLC 339.10 0.7x 9.3xNov-12 ABM Industries Air Serv Corporation Cash 162.90 0.5x 13.1xNov-11 Birch Hill Equity Partners Management Distinction Group, Inc. Cash 150.00 0.5x 8.8xOct-11 Sealed Air Corporation Diversey Holdings, Inc. 4,576.30 1.4x 12.1x
High 1.4x 13.1xLow 0.4x 8.8x
Median 0.6x 11.5xMean 0.6x 11.1x
LTM EBITDA Multiple Range Implied Enterprise Value Net Debt Shares $194.60 10.6x - 11.6x $2,063 - $2,257 $254.00 $1,808.76 - $2,003.36 57.5 $31.46 - $34.84
Implied Equity Value Implied Share Price
Valuation │
19
LEVERAGED BUYOUT ANALYSIS
Valuation │
9.5x 10.0x 10.5x 11.0x 11.5x9.5x 20% 21% 23% 25% 26%
10.0x 18% 19% 21% 23% 24%
10.5x 16% 17% 19% 21% 22%
11.0x 14% 15% 17% 19% 20%
11.5x 12% 13% 15% 17% 18%
Exit Multiple
Entra
nce M
ultip
leIRR Sensitivity AnalysisLTM EBITDA Adjusted
194.60$
10.0x - 11.0x
1,946.00$ - 2,140.60$ Implied Equity Value
1,692.10$ - 1,886.70$ Share Price
29.43$ - 32.81$
Valuation Range
Entry Multiple Range
Implied Enterprise Value
Purchase PriceEnterprise Value 2,043.30$ Less: Existing Net Debt 305.10 Plus: Cash and Cash Equivalents 51.20 Equity Purchase Value 1,789.40$
Return AnalysisExit Year 2020Entry Multiple 10.5xExit Multiple 10.5xIRR 19%Cash Return 2.4x
Sources of Funds Amount % of Total SourcesRevolving Credit Facility - 0.0%Term Loan B 584.42 27.5%Senior Notes 639.47 30.1%Equity Contribution 850.06 40.0%Cash on Hand 51.20 2.4%Total Sources 2,125.15$ 100.0%
Uses of Funds Amount % of Total SourcesEquity Purchase Price 1,789.40 84.2%Repay Existing Bank Debt 305.10 14.4%Fees and Expenses 30.65 1.4%Total Uses 2,125.15$ 100.0%
20
APPENDIX
High office vacancy rates could diminish need or desire for facility management and janitorial services
Decreases in office rent which could harm ABM profit margins
Execution of 2020 restructuring plan is integral to the growth of ABM and poor implementation could hurt margins
Integration of latest acquisitions may impede 2020 plan progress or disrupt realization of synergies
21
POTENTIAL RISKS
2020 Plan allows for reduced risk with optimistic projections
ABM is directly influenced by both the rent and vacancy of office spaces
Mitigated Risk Lowered but apparent risk of
bankruptcy if levered too high without sustainable cash flow plan
High debt servicing costs if over-levered
Diminished but apparent risk of economic downturn affecting 2020 plan implementation
Cost-Reduction Risk
Potential for security divestiture removing significant revenue stream from core businesses
Operational/Market Risk
Vacancy Rates – By Largest Metropolitan City
2020 Plan Key Priorities
ManhattanSan JoseHouston
Washington D.C.Orange County
BostonPortland
BaltimoreNew Jersey
ChicagoPhiladelphia
Miami
0 2 4 6 8 10 12 14 16 18 20
Vacancy by %
Profitable Growth
Organizational Realignment
Cost Optimization
Capital Allocation
Focus
Direct focus on industries and solutions where ABM can distinguish itself
Organize around target industries by moving to an integrated end-market vertical focus
Leverage scale to manage costs and allow for increase margins
Efficiently return capital to shareholders and bolster investor confidence
Appendix │
Facility/Janitorial Services Dominant market position Established industry presence and strong brand reputation Contracts within key markets, strong supplier relationships Ability to expand both organically and inorganically Access to niche markets Experienced management team
Revenue trends continue to exceed expectations with over 85% of companies beating their projections
Revenue from existing accounts continue to hold very steady M&A trends continue to stay minimal with little consolidation
over the past 4 years
Key Factors of Success
Industry Trends
Revenue: $31 billion ABM Revenue: $383 million (1.2%
share) Top 3 Players control 25% market
share Average Operating Margins – 4.5% High competition and globalization
Security Services Requirement-focused, customized solutions Competitive edge from cost leadership strategy Sophisticated electronic systems Comprehensive service offering
Entry/exit protection, background checks and investigation, crowd control, ushering, patrol, etc.
Revenue growth expected to keep pace with US Economy Rapid incorporation of technology in security systems
High cost of technology will sustain trend in consolidation
Competition from high-tech systems is putting pressure on labor-intensive security systems to grow and adapt
Reduced reliance on manned guards will drive down wage costs
Key Factors of Success
Industry Trends
Clean 1+ billion square feet of buildings daily across multiple industries
More than 50% of the Fortune 500 are ABM clients
ABM offers environmentally friendly cleaning services to LEED Certified buildings
Maintain government facilities in 30 countries and over 20 military medical facilities worldwide
10.4% stock growth 6/30/14 - 6/30/15
22
Middle-market company focused on steady growth and expansion
Highly developed supplier and dealer networks, and strong brand recognition
INDUSTRY OVERVIEW
Appendix │
ABM Healthcare Support Services is a fully integrated service provider
ABM provides parking services for many of our different product groups allowing for cross selling
ABM Healthcare Support Services works to provide everything from gurney transportation to dietary plans for hospitals across the country
ABM Healthcare has seen a 24% sales increase in 2014 making it the fastest growing portion of ABM
ABM Healthcare is focused around the acquisition they made in 2012 of HHA Services for $33.7 million
ABM currently services over 300 hospitals as well as over 700 medical facilities
Healthcare Services Ability to provide a full suite of products allowing the
hospital to use the company as a one stop shop Strong reputation and market brand Continued development of new products Highly rated customer satisfaction as many of the
services have direct client interaction and reflect on the hospital.
Key connections with the hospital management teams With the APA healthcare act the number of patients at
hospitals has been steadily rising increasing hospital spending
Hospitals have been looking for ways to cut costs after the APA act increased operational expenses for many companies
M&A trends in Healthcare have been steadily increasing
Key Factors of Success
Industry Trends
Parking Services Key Factors of Success
Industry Trends
Three types of arrangements for parking services: managed locations, leased locations and allowance locations
Provide valet/shuttle services, revenue generating parking solutions and electronic vehicle charging stations
Largest competitors: LAZ Parking LLC and SP Plus Corporation
Companies compete at local, regional and national levels
Current Revenue: $616 million Park 22.8+ million cars annually at
hospitals across the country
Increase in strategic use of technology: mobile parking app Efficiency for parking lot users – especially stadiums/arenas Honored by JFK, EWR and LGA airports for best performance Most revenue coming from managed locations which is the
most profitable type of service
CAGR between 2013 and 2018 of 12.1% High growth rate in number of vehicles registered worldwide –
causing higher demand for parking management systems Smart City trends causing demand for more efficient parking
arrangements
23
INDUSTRY OVERVIEW (Cont.)
Appendix │
WACC sensitized 6%-8%
Exit Multiple sensitized 8.5x to 10.5x
24
DISCOUNTED CASH FLOWS (Cont.)
2,294 8.5x 9.0x 9.5x 10.0x 10.5x6.0% $2,204.91 $2,306.19 $2,407.46 $2,508.73 $2,610.016.5% $2,155.59 $2,254.40 $2,353.20 $2,452.00 $2,550.807.1% $2,101.99 $2,198.11 $2,294.23 $2,390.35 $2,486.477.5% $2,061.05 $2,155.12 $2,249.19 $2,343.26 $2,437.338.0% $2,015.73 $2,107.54 $2,199.35 $2,291.16 $2,382.96
2,039.8001398694 8.5x 9.0x 9.5x 10.0x 10.5x6.0% $1,951.01 $2,052.29 $2,153.56 $2,254.83 $2,356.116.5% $1,901.69 $2,000.50 $2,099.30 $2,198.10 $2,296.907.1% $1,848.09 $1,944.21 $2,040.33 $2,136.45 $2,232.577.5% $1,807.15 $1,901.22 $1,995.29 $2,089.36 $2,183.438.0% $1,761.83 $1,853.64 $1,945.45 $2,037.26 $2,129.06
12 8.5x 9.0x 9.5x 10.0x 10.5x6.0% 11.3x 11.9x 12.4x 12.9x 13.4x6.5% 11.1x 11.6x 12.1x 12.6x 13.1x7.1% 10.8x 11.3x 11.8x 12.3x 12.8x7.5% 10.6x 11.1x 11.6x 12.0x 12.5x8.0% 10.4x 10.8x 11.3x 11.8x 12.2x
Enterprise Value
Exit Multiple
Exit Multiple
Implied Equity Value
Implied EBITDA Multiple
Exit Multiple
WAC
CW
ACC
WAC
CW
ACC
Final year EBITDA 275Exit Multiple 9.5xTerminal Value 2,613Discount Rate 7.07%Present Value 1,826Enterprise Value 2,293.70$
Exit Multiple MethodTerminal Value
Final year FCF 130Growth Rate 2.5%Discount Rate 7.07%Terminal Value 2,926Present Value 2,080Enterprise Value 2,548.09$
Perpetuity Growth Method
Enterprise Value 2,294Less: Debt (305)Less: Minority Interest 0Less: Preferred Equity 0Plus: Cash & Equivalents 51.2Implied Equity Value 2,039.80$
Implied Equity Value
Appendix │
25
LBO DEBT SCHEDULE & CASH FLOW STATEMENT
Appendix │
Revolving Credit FacilityTerms:Size -$ Spread 2.50%LIBOR Floor 1.00%Term 6 RenewableCommitment Fee on Unused 0.50%
Beginning Balance -$ -$ -$ -$ -$ Drawdown/ (Repayment) - - - - - Ending Balance -$ -$ -$ -$ -$
Interest Rate 3.50% 3.50% 3.50% 4.16% 3.86%Interest Expense -$ -$ -$ -$ -$ Commitment Fee -$ -$ -$ -$ -$
Available Excess Cash 52.00$ 62.54$ 69.38$ 79.14$ 90.56$
Term Loan BTerms:Size 584.42$ Spread 4.25%LIBOR Floor 1.00%Term 6 YearsRepayment Schedule 0.00%
Beginning Balance 584.42$ 532.42$ 469.88$ 400.50$ 321.36$ Mandatory Repayments - - - - - Optional Repayments 52.00 62.54 69.38 79.14 90.56 Ending Balance 532.42$ 469.88$ 400.50$ 321.36$ 230.80$
Interest Rate 5.25% 5.25% 5.25% 5.91% 5.61%Interest Expense 29.32$ 26.31$ 22.85$ 21.31$ 15.49$
Available Excess Cash -$ -$ -$ -$ -$
Senior NotesTerms:Size 639.47$ Coupon 7.00%Term 8
Beginning Balance 639.47$ 639.47$ 639.47$ 639.47$ 639.47$ Repayment - - - - - Ending Balance 639.47$ 639.47$ 639.47$ 639.47$ 639.47$
Interest Expense 44.76$ 44.76$ 44.76$ 44.76$ 44.76$
($ in millions)Statement of Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5
2016 2017 2018 2019 2020Operating ActivitiesNet Income 54.80$ 66.76$ 76.62$ 85.91$ 97.64$ Plus: Depreciation and Amortization 59.11 60.34 60.34 61.79 64.57
Changes In Working Capital(Inc.)/ Dec. in Accounts Receivable (39.94) (41.16) (43.22) (40.84) (42.68) (Inc.)/ Dec. in Prepaids & Other Current Assets (8.43) (8.68) (9.12) (8.61) (9.00)
Inc./ (Dec.) in Accounts Payable 8.25 8.56 9.19 8.57 8.95 Inc./ (Dec.) in Income Tax Payable - - - - - Inc./ (Dec.) in Accrued Liabilities 6.77 6.97 7.32 6.92 7.23 Inc./ (Dec.) in Other Current Liabilities 13.03 13.43 14.10 13.32 13.92
(Inc.)/ Dec. in Net Working Capital (20.32) (20.88) (21.72) (20.64) (21.57) Cash Flow From Operating Activities 93.59$ 106.21$ 115.23$ 127.06$ 140.64$ Investing ActivitiesCapital Expenditures (41.59)$ (43.67)$ (45.86)$ (47.92)$ (50.08)$ Cash Flow from Investing Activities (41.59)$ (43.67)$ (45.86)$ (47.92)$ (50.08)$
Cash For Financing Activities 52.00$ 62.54$ 69.38$ 79.14$ 90.56$
Financing Activities Revolving Credit Facility - - - - - Term Loan A - - - - - Term Loan B 52.00 62.54 69.38 79.14 90.56 Senior Notes - - - - - Senior Subordinated Notes - - - - - Cash Flow from Financing Activities (52.00)$ (62.54)$ (69.38)$ (79.14)$ (90.56)$ Beginning Cash Balance 0.00$ 0.00$ 0.00$ 0.00$ Net Change 0.00 0.00 0.00 0.00 0.00 Ending Cash Balance 0.00$ 0.00$ 0.00$ 0.00$ 0.00$ AssumptionsCapital Expenditures (% of Sales) 0.76% 0.76% 0.76% 0.76% 0.76%