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MEMBER FINRA, SIPC
Maximizing Business Value
Providing Investment Banking Services to the Middle Market
Sell‐Side AdvisoryBuy‐Side AdvisoryCapital SourcingFairness OpinionsBusiness Valuation
2017
TRUSTED. EXPERIENCED. CONNECTED.
MEMBER FINRA, SIPC
A Unique Brand of Investment Bankingfor the Middle Market
We blend the discipline of accounting, the knowledge of taxation, the experience of due diligence, the art and science of valuation, and our leadership in advising owners of hundreds of companies across a large variety of industries to create –
A unique brand of investment banking for the middle market.
$17 billion in transactions over 40 years – a life time of experience.
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MEMBER FINRA, SIPC
We are Trusted; We are Experienced; We are Connected
In the following presentation we will discuss the mechanics of the sell‐side advisory process, the basics of business valuation, the size and scope of Decosimo Corporate Finance, LLC – and the GulfTel and Medical Device case studies.
We hope you will appreciate why we offer a unique brand of investment banking to the middle market.
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MEMBER FINRA, SIPC
Deal with a Licensed Investment Banker
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• A member firm of the Financial Industry Regulatory Authority (FINRA) and Securities Investor Protection Corporation (SIPC) must adhere to stringent regulations designed to protect participants in transactions.
• Most experienced transaction attorneys will not work with unlicensedadvisors.
• DCF is a member FINRA/SIPC and our advisors hold at a minimum theseries 79 Investment Banking Representative QualificationExamination license and have the Series 63 Uniform Securities AgentState Law Examination license.
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• Primary Role: Create a competitive marketplace
• Other important roles:
– Provide insight and experience
– Maximize value
– Negotiate the deal
– Manage the deal team
– Mitigate risks
– Minimize distraction
– Maintain confidentiality
• Use of an investment banker vs. “going alone”
The Role of an Investment Banker
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MEMBER FINRA, SIPC
Timing a Sale to Maximize Value
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Qualified InvestmentBanker
Business Readiness
Market Readiness
Owner Readiness
Maximum Value
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MEMBER FINRA, SIPC
Business Readiness
• Growing revenue and cash flows• Recurring revenue• Consistency of earnings• Strong, loyal and diverse
customer base• Intellectual property• Differentiation
• Clean financial statements• Audited financial statements• Management ability and depth• Knowledgeable and reliable
human capital• Solid systems and procedures• Contracts and legal agreements
in order
TRUSTED. EXPERIENCED. CONNECTED.
MEMBER FINRA, SIPC
Sell‐Side Advisory Process
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Assessment
Preparation
Marketing
Deal Making
Due Diligence
Closing +
TRUSTED. EXPERIENCED. CONNECTED.
MEMBER FINRA, SIPC
Sell‐Side Advisory Process
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Assessment
Preparation
Marketing
Deal Making
Due Diligence
Closing +
• Engage advisors and assemble team• Determine goals and objectives• Review alternatives• Preliminary market research• Benchmarking• Estimate preliminary valuation range• Identify value drivers/detractors• Discuss due diligence readiness• Obtain buy‐in for overall process and strategy
TRUSTED. EXPERIENCED. CONNECTED.
MEMBER FINRA, SIPC
Sell‐Side Advisory Process
4
Assessment
Preparation
Marketing
Deal Making
Due Diligence
Closing +
• Determine value proposition• Identify potential tax and acct issues• Perform internal due diligence• Identify and correct potential problems• Prepare acquisition profile (teaser)• Prepare information memorandum• Prepare online data room• Identify potential buyers• Determine marketing strategy• Prepare preliminary target list
TRUSTED. EXPERIENCED. CONNECTED.
MEMBER FINRA, SIPC
Sell‐Side Advisory Process
4
Assessment
Preparation
Marketing
Deal Making
Due Diligence
Closing +
• Initiate contact with potential buyers• Communicate bidding process• Distribute acquisition profile• Obtain non‐disclosure agreements• Distribute offering memorandum• Respond to questions• Coordinate initial information requests• Conduct management meetings• Receive indications of interest
TRUSTED. EXPERIENCED. CONNECTED.
MEMBER FINRA, SIPC
Sell‐Side Advisory Process
4
Assessment
Preparation
Marketing
Deal Making
Due Diligence
Closing +
• Receive initial letters‐of‐intent (LOI’s)• Establish precise deal terms:
• Transaction type/what’s included• Purchase price and payment terms• Balance sheet targets• Escrows/holdbacks• Earnouts or future equity participation• Employment/consulting/lease agreements• Non‐compete agreements• Contingencies and timing
• Analyze and negotiate simultaneously• Select winning offer
TRUSTED. EXPERIENCED. CONNECTED.
MEMBER FINRA, SIPC
Sell‐Side Advisory Process
4
Assessment
Preparation
Marketing
Deal Making
Due Diligence
Closing +
• Coordinate due diligence:• Legal and organizational• Financial reporting and Q of E• Tax matters (income, sales, etc.)• Assets and liabilities• Indebtedness and commitments• Customers and contracts• Facilities and operations• HR and employee matters• Regulatory matters
• Address issues that arise• Negotiate deal impact
TRUSTED. EXPERIENCED. CONNECTED.
MEMBER FINRA, SIPC
Sell‐Side Advisory Process
4
Assessment
Preparation
Marketing
Deal Making
Due Diligence
Closing +
• Assist (negotiate) definitive agreements• Precise business terms• Reps and warranties• Indemnifications ‐ baskets and caps• Rights and remedies for default• Disclosure schedules and exhibits
• The closing table• Post‐closing assistance
• True‐ups• Targets• Collection of amounts due
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• Understanding the value of the Company is the foundation ofinvestment banking
• Value does not equal price
• Market process and participants determine price
• Deal structure is critical
• Understand industry multiples
• Use caution when applying rules of thumb
• There are things you can do to enhance value
Some Thoughts on Valuation
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MEMBER FINRA, SIPC
DCF’s Investment Banking TeamKey Facts (including B/D team)
• Licensed professionals
• Hundreds of transactions
• Sophisticated software
• Extensive network
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Transaction Requirement
DecosimoCorporateFinance
TraditionalInvestment
Bank
Preparation
Marketing
Deal making
Due diligence
Tax implications
Post closing
What we Bring to the Table
• Experienced team
• Accounting firm values
• Systems and processes
• Expertise beyond investment banking
Investment Banking Services• Sell‐Side M&A
• Buy‐Side M&A
• Capital Raising
• Restructuring/Recaps
• Valuation Services
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MEMBER FINRA, SIPC
Decosimo Corporate Finance, LLC
Sell‐Side Advisory | Buy‐Side AdvisoryCapital Sourcing | Fairness Opinions
Business Valuation
2017
TRUSTED. EXPERIENCED. CONNECTED.
MEMBER FINRA, SIPC
More than $17 billion in middle‐market transactions
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MEMBER FINRA, SIPC
DCF Engagement Team
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Charlie Gerber, Director• Specializes in buy and sell‐side advisory, debt and equity financing• Experience in several industries including financial services and manufacturing• University of North Carolina at Chapel Hill, Bachelor of Arts in Journalism; Vanderbilt University, Master
of Business Administration
Paul E. Cheney, CPA∙ABV, Managing Principal• 35 years’ experience in investment banking and corporate finance, hundreds of transactions• Industries include manufacturing, food processing, floor covering, consumer products, broadcasting,
telecom, industrial distribution and transportation services, textiles, health care• Lead advisor in acquisition and financing of over 100 Coca‐Cola bottlers, several 7Up bottlers, five Major
League Baseball teams, an NHL team, UK and European‐based manufacturers, the home products division of Union Carbide an other transactions
• University of Tennessee, BS Accounting; Georgia State, Masters of Professional Accountancy
J. Thomas Decosimo, CPA∙ABV, ASA, Managing Principal• 35 years experience in investment banking and corporate finance, hundreds of transactions• Industries include medical devices, healthcare, industrial manufacturing, textiles, floor covering,
consumer products, broadcasting, marine (oil) transportation, and distribution• $400 million in transactions in the past four years• University of Tennessee, BS Accounting
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MEMBER FINRA, SIPC
Decosimo Corporate Finance, LLCLocal Expertise, National Footprint
• Offices in Chattanooga, Nashville, Cincinnati and Dallas
• Affiliates in Houston, Detroit, and New York
• Corporate finance focus and expertise: sell side advisory, valuations, acquisitions, fairness opinions, equity financing, recapitalizations
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MEMBER FINRA, SIPC
Sell‐Side Results
Disciplined Process.Proven Results.
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MEMBER FINRA, SIPC
GulfTel Transaction
• Alabama‐based telecommunications company• Owners desired liquidity• Advisors desired diversification
• Hired a nationally renowned NY‐based investment bank to sell the company• NY investment bank found a buyer willing to pay $155 million• A fairness opinion by a leading business valuation firm confirmed this price• A shareholder engaged DCF for a second opinion of the company’s value
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MEMBER FINRA, SIPC
GulfTel Transaction
• DCF investigated and valued the company at $225 million based on untapped value in the company’s dark fiber optic lines
• The owners of GulfTel asked DCF to “prove it”• DCF performed sell‐side advisory, developed 13 interested parties, ultimately sold
the company to Madison River Communications for $328 million
“No one really knew what we would get for GulfTel, and frankly we were pleased with theinitial appraisal’s value. However, the professionals of DCF saw far more value inGulfTel. They seized upon the hidden assets buried in the Company’s underground fiberoptics lines. DCF advised us that the value was closer to $225 million. Then, DCF found abuyer that would pay $328 million, more than double our original expectations.
Mort SwaimAttorney for GulfTel Shareholders
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MEMBER FINRA, SIPC
Med Device Co. Case Study• Contract manufacturer of highly engineered orthopedic devices• Two years prior to beginning the sales process, President approached DCF about
discussing his goals and exit strategy– Referred by previous clients of DCF in the medical device industry
• After analyzing owner’s goals, a value range, and exit options, DCF recommended that the Company prepare for a possible transaction.– The Company prepared for the transaction over the next two years
• June: DCF hired to get liquidity for the owner and find the Company a growth partner
• The owner originally expected the Company was worth a certain amount, our business review revealed a price about 50% above that expectation
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MEMBER FINRA, SIPC
• Our process allowed management to concentrate on growing value while we sold it
• December 31: A Private Equity Group made a majority investment in the Company for a high transaction price on very favorable terms for our client, nearly 2.5 times his original expectations
• This transaction allowed our client to realize goals while continuing to manage the company the owner had spent his life building
“There is simply no substitute for the experience and expertise the DCF team provided. DCF turneda typically overwhelming process into a smooth and efficient one. DCF truly maximized ourvalue by exceeding our expectations and finding an excellent partner that will provide mybusiness with the maximum growth potential moving forward.”
Owner, Med Device Co.
Med Device Co. Case Study
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MEMBER FINRA, SIPC
Decosimo Corporate Finance, LLC
www.DCF‐LLC.comPhone: (423) 266‐4000
tomdecosimo@dcf‐llc.compaulcheney@dcf‐llc.om
charliegerber@dcf‐llc.com
