Presentation on Private Equity Exit Considerations April 2012

<strong>Presentation</strong> on Private Equity Exit Considerations
April 2012

Exits: Key Considerations for Private Equity
Exits by Year
$140
$120
$100
$80
$60
$40
$20
$0
Exit Capital ($B) # of Exits
449 510
434 420
350
207
$121 $120 $80 $40 $106 $104
2006 2007 2008 2009 2010 2011
600
500
400
300
200
100
0
ECONOMY
VALUE
TAX
Median Exit EBITDA Multiple
10.0x
9.9x
9.3x
MORALE
TIMING
9.0x
8.0x
7.4x
8.7x 8.5x
8.0x
8.0x
8.6x
FINANCING
7.0x
6.6x
6.9x
6.0x
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Pitchbook & Grant Thornton, 2011.
1

EBITDA ($MM)
Plan Your Exit
• Know How to Get Out Before You get In
• Abundance of natural buyers?
• Strategic acquiror?
• Financial buyer?
• IPO candidate?
• Confidentiality issues?
• Vendors, competitors, customers
• Micro Analysis – Is Your Company
Ready?
• If NO – nothing else matters
• Execution of the investment thesis is key
• Capex, acquisitions, asset sales, HR
• Tangible success? ROI?
• Opportunity cost – time / money /
outlook
120
100
80
60
40
20
0
ONEX – Sky Chefs EBITDA (1987-2000)
25.6
46.0
CAGR: 8.7%
107.0
CAGR: 15.1%
1987 1994 2000
IRR: 29.7%
Multiple of Capital: 16.5x
2

Exit Paths – IPO
• Rarely a “mid-market” option
• Typical market cap: $1 billion
• The most “macro sensitive” option
• IPO market can be shut (mid-late 2008)
• Confidentiality is lowest
• Profit margin disclosure
• Hard to “exit” 100%
• Exit in stages over time
70
60
50
40
30
20
10
-
1400
1200
Number of PE-Backed IPOs
66
51
40
30
24
14
2006 2007 2008 2009 2010 2011
Average IPO Market Cap ($MM) 1
1,315
1,267
1,200
1,099
1000
800
772
827
700
600
400
200
-
2006 2007 2008 2009 2010 2011 2012
1.
Source: S&P Capital IQ. average value of sponsor backed offerings of at least 5% of shares offered with gross proceeds over $50 mm.
3

Exit Paths – Auction vs. Targeted Sale
Auction
• The most common mid-market exit
• Story needs broad appeal
• Consumes time and management
• Confidentiality “contained”
Targeted Sale
• Effective for “natural fit”
• Often involves unsolicited approach
• Value not compromised
• Confidentiality maximized
Case Study – ONCAP/WIS International
Case Study Case – Study ONCAP/WIS – ONCAP/CSI International
Date: January 2007
Calls Made: 18 Strategic / 52 Private Equity
Buyer Interest: 7 Strategic / 36 Private Equity
Preliminary Bids:
12 Private Equity
Result:
8.1x ROI / 73.7% IRR
Date: November 2010
Buyer:
Rationale:
Result:
Moody’s Corp.
Complimented global effort in
regulation, risk management
and education tools
5.8x ROI / 57.2% IRR
4

Financing Considerations
6.0x
Strong Debt Multiples = Strong PE Interest…
60.0%
…And High Equity Contributions Will Drive
Values Higher
5.5x
5.6x
50.0%
50.8%
5.0x
4.8x
4.7x
4.7x 4.7x
40.0%
37.8%
39.5%
4.5x
4.0x
4.1x
4.0x
3.9x
3.8x
4.2x
4.5x
4.3x
4.2x
30.0%
20.0%
20.7%
26.2%
30.0%
33.6%
3.5x
3.4x
3.3x
10.0%
7.0%
3.0x
'97 '99 '01 '03 '05 '07 '09 '11
0.0%
'87 '90 '93 '96 '99 '02 '05 '08 '11
Debt/EBITDA
Equity Contribution to LBOs
Source: Lcdcomps.com
5

Number of Exits (2010)
Number of PE-Backed Companies
Other Exit Considerations
Tax Considerations – Tax Number of Exits (2010)
Fundraising – Inventory of PE-owned Companies
180
160
140
120
100
80
60
40
83
104
84
163
7,000
6,000
5,000
4,000
3,000
2,000
2,223
2,894
3,678
4,549
5,164
5,435
5,745
5,968
20
1,000
-
Q1 Q2 Q3 Q4
-
'04 '05 '06 '07 '08 '09 '10 '11
• Tax rate fears drove activity in late
2010
• LP’s like to see realizations
• 40% of PE-owned companies have
been held more than 5 years
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