Creighton team acg cup 2015 final round v final 2

Daniela Morales, Sergio Gutierrez, Edgar Lopez, Zhangde Lin

Impact Capital Partners

2015 ACG Cup Competi ti on

Recommendation Company Industry QuantitativeIntro → AppendixSummary Alternatives


Index

Objective

Recommendation

Qualitative Analysis− Company Analysis− Industry Analysis

Quantitative Analysis− Purchase Price Analysis− IRR Analysis

Summary Conclusion

Alternative options

Appendix

2 | CONFIDENTIAL – ACG Cup 2015

Intro →



Objective

Conduct a qualitative and quantitative analysis to

advise Impact Capital Partners on:

− Interest in buying ParentCo

− Purchase price of ParentCo

− Capital structure and alternative options

− Exit opportunities


Recommendation

ValuationsIntro → AppendixSummary AlternativesIntro →



Impact Capital Partners should:

− Make an offer to purchase ParentCo

− Make an offer to purchase FashionCo based on 2016 performance

− Pursue a 2020 exit strategy to maximize IRR

− Break up the ParentCo by industry

Recommendation


Recommendation


Company Analysis

Daniela Morales



SWOT Analysis


StrengthsParentCo Long , established company On track to meet (or beat) projected

earnings Strong management team

FashionCo High growth projections for 2016

WeaknessesParentCo Decline in stock price of 9.72% in the

last year

FashionCo Performance uncertainty

Opportunities

ParentCo Undervalued Increase value through acquisition Profit after exit

FashionCo Synergies through acquisition Profit after exit

Threats

ParentCo Low industry future expected growth

FashionCo Not meeting projected performance Skepticism from ParentCo’s CFO

Inte

rnal

Ext

ern

al

Positive Negative

Company


Industry Analysis

Sergio Gutierrez



Porter’s Five Forces: Media Industry


• High customer loyalty• Low price sensitivity• Medium switching

costs• Recurring purchases

Buyer Power

MED

• Scattered suppliers • Low cost of inputs• Low switching costs

Supplier Power

LOW

• Abundance of substitute media

• High quality substitute media

Threats of Substitution

HIGH

• Economies of scale• Capital requirements• low growth• Internet

Threat of New Entrants

LOW

• Wide and diverse competitors

• Long, established competitors

• Exit barriers

Rivalry

MED

Industry



Porter’s Five Forces: Fashion Industry


• Men, women, and children

• High price sensitivity• High customer

acquisition price

Buyer Power

HIGH

• Low switching costs• Economies of scale• Low product

differentiation

Supplier Power

HIGH

• Abundance of substitute products

• Low switching costs• High buyer

propensity to substitute

Threats of Substitution

HIGH

• Economies of scale• High branding costs• High capital

requirements

Threat of New Entrants

LOW

• Competitors are big• Low long-term

growth rates• Low product

differentiation

Rivalry

HIGH

Industry


Quantitative Analysis

Edgar Lopez



Capitalization Table


(figures in millions except per share amount)

As of Round 1 As of Round 2 Internal EstimateShare Price Mkt. Value Share Price Mkt. Value

Masterson Family

Harvey Masterson 4.7 15.5% $18.3 $85.1 $16.5 $76.9William Masterson 0.9 3.0% 18.3 16.5 16.5 14.9Rebecca Masterson 1.7 5.5% 18.3 30.2 16.5 27.3

Total 7.2 24.0% $18.3 $131.8 $16.5 $119.0

Investors

Activist Capital 1.2 3.9% $18.3 $21.4 $16.5 $19.3Other Institutional Investors 6.8 22.8% 18.3 125.1 16.5 112.9

Total 8.0 26.7% $18.3 $146.5 $16.5 $132.2

Public 14.8 49.3% $18.3 $271.0 $16.5 $244.6

Total 30.0 100.0% $18.3 $549.3 $16.5 $495.9

Fully Diluted Shares

%Shareholders

Quantitative



Purchase Price Analysis


EBITDA Purchase Multiple 6.1x 6.6x 7.1x 7.6x 8.1x2015E EBITDA $80.8 $80.8 $80.8 $80.8 $80.8Implied Total Enterprise Value $489.5 $529.89 $570.3 $610.7 $651.1

Plus: Net Debt $2.8 $2.8 $2.8 $2.8 $2.8Implied Equity Value $492.3 $532.7 $573.1 $613.5 $653.9

Sale Price As of Round 1 As of Round 2

Market Capitalization $549.3 $495.9Control Premium (15%) 82.4 74.4Debt 70.1 70.1Cash (67.2) (67.2)

Implied Total Equity Value $634.5 $573.1

As of Round 2 by Entity MediaCo ApparelCoNet Income % 66.3% 33.7%

Market Capitalization $329.0 $166.9Control Premium (15%) 49.3 25.0Debt 70.1 0.0Cash (55.9) (11.3)

Implied Total Equity Value $392.4 $180.7

Quantitative



Purchase Price

$392.4 ($mm)

Multiples 2014A 2015E

Sales 0.7x 0.7xEBITDA 6.1x 6.7x

2014A Sales

2014A EBITDA

2015E Sales

2015E EBITDA

2014A Sales

2014A EBITDA

2015E Sales

2015E EBITDA

Perp. Method

Multiple Method

$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000

$265.7

$195.0

$262.1

$178.6

$560.8

$441.7

$553.1

$404.6

$419.2

$269.7

$819.4

$573.4

$808.2

$525.2

$736.3

$603.7

$726.2

$553.0

$656.3

$528.5

Implied Total Enterprise Value ($ in millions)

Relevant MultiplePrecedent Transac-

tions

3.0x-8.9x

0.5x-1.5x

0.5x-1.5x

3.0x-8.9x

Multiple Method:3.0x-8.9x exit multiple

8.8-10.8% discount rate

Perp. Method:1.0-3.0% growth rate

8.8-10.8% discount rateDCF Analysis

6.9x-9.4x

6.9x-9.4x

1.0x-1.4x

1.0x-1.5x

Public Compara-bles

$392.4

Precedent Transactions

Fit

Transaction 3

Transaction 6

Transaction 7

Transaction 9

Public Comparables

Fit

NYT CompanyTime Inc.

MediaCoFinancial Data ($mm)

2014A 2015E

Sales $535.1 $527.8

EBITDA $64.1 $58.7

Illustrative Valuation Analysis: MediaCo


Source: ACG Cup 2015 Case

Quantitative



Purchase Price

$180.7 ($mm)



2014A Sales

2014A EBITDA

2015E Sales

2015E EBITDA

2014A Sales

2014A EBITDA

2015E Sales

2015E EBITDA

Perp. Method

Multiple Method

$0 $100 $200 $300 $400 $500 $600 $700 $800

$113.6

$106.4

$122.4

$114.2

$74.5

$92.7

$80.3

$99.5

$208.3

$143.3

$336.6

$270.0

$362.8

$290.0

$244.0

$246.1

$263.0

$264.2

$693.9

$316.4



tions

5.2x-13.2x

0.4x-1.3x

0.4x-1.3x

5.2x-13.2x





4.5x-12.0x

4.5x-12.0x

0.3x-0.9x

0.3x-0.9x

Public Compara-bles

$180.7

ApparelCoFinancial Data ($mm)

2014A 2015E

Sales $258.1 $278.2

EBITDA $20.5 $22.1


Fit

Transaction 6

Transaction 8

Transaction 13

Transaction 15

Transaction 17

Transaction 20

Public Comparables

Fit

Ever-Glory International Group, Inc.G-III Apparel Group, Ltd.

Illustrative Valuation Analysis: ApparelCo



Quantitative



Base Case: Assumptions & Summary of Operating Results


SUMMARY OF OPERATING RESULTS Pro Forma 1 2 3 4 5Fiscal year ended December 31, 2013 2014 2015 2016 2017 2018 2019 2020Total revenues $790.5 $793.2 $806.0 $824.1 $848.3 $877.5 $911.6 $954.7

% growth 0.3% 1.6% 2.2% 2.9% 3.4% 3.9% 4.7%

Gross Profit $267.2 $267.9 $265.5 $265.8 $276.2 $281.9 $289.1 $299.4% margin 33.8% 33.8% 32.9% 32.3% 32.6% 32.1% 31.7% 31.4%

EBITDA $89.2 $84.7 $80.8 $76.9 $85.3 $89.1 $92.2 $96.6% margin 11.3% 10.7% 10.0% 9.3% 10.1% 10.2% 10.1% 10.1%

Other Financial DataCash interest expense $41.0 $40.0 $38.9 $37.7 $36.2Total interest expense 45.1 44.2 43.2 42.0 40.6(Increase) decrease in net working capital 0.7 (2.3) (2.4) (2.4) (2.2)Capital expenditures 9.7 9.1 9.5 9.9 10.5

Sources & Uses of Funds% of Mult. of Cumulative

Sources of Funds ($mm) Total Cap. 2015 EBITDA Multiple Uses of Funds ($mm)Revolver $0.0 0.0% 0.0x 0.0x Purchase equity $570.3Term Loan 282.8 48.6% 3.5x 3.5x Repay bank debt 70.1Subordinated notes 0.0 0.0% 0.0x 3.5x Financing Fees 6.4Mezzanine Debt 202.0 34.7% 2.5x 6.0x Other Fees & Expenses 2.0Impact Capital Partners Equity 96.7 16.6% 1.2x 7.2x Cash on balance sheet (67.2) Total Sources of Funds $581.5 100.0% 7.2x 7.2x Total Uses of Funds $581.5

Quantitative



Base Case: Capital Structure & Credit Statistics


Pro Forma

CAPITALIZATION 2015 2016 2017 2018 2019 2020Cash $0.0 $0.0 $0.0 $0.0 $0.0 $0.0

Revolver $0.0 $0.0 $0.0 $0.0 $0.0 $0.0Term Loan 282.8 259.9 234.3 205.9 174.8 140.2 Total Bank Debt $282.8 $259.9 $234.3 $205.9 $174.8 $140.2

Senior notes 0.0 0.0 0.0 0.0 0.0 0.0 Total Senior Debt $282.8 $259.9 $234.3 $205.9 $174.8 $140.2

Mezzanine Debt 202.0 206.0 210.2 214.4 218.7 223.1Existing debt 0.0 0.0 0.0 0.0 0.0 0.0 Total Debt $484.8 $465.9 $444.5 $420.3 $393.6 $363.3

Shareholders' equity 94.7 100.9 115.0 132.0 151.5 174.4 Total Capitalization $579.46 $566.9 $559.5 $552.3 $545.1 $537.7

Cash available for debt service $22.9 $25.5 $28.5 $31.0 $34.7Cumulative cash available for debt service 22.9 48.4 76.9 107.9 142.6% of bank debt outstanding 91.9% 82.9% 72.8% 61.8% 49.6%

CREDIT STATISTICSEBITDA / Cash interest expense 1.9x 2.1x 2.3x 2.4x 2.7x(EBITDA-Cap Ex) / Cash interest expense 1.6x 1.9x 2.0x 2.2x 2.4x

EBITDA / Total interest expense 1.7x 1.9x 2.1x 2.2x 2.4x(EBITDA-Cap Ex) / Total interest expense 1.5x 1.7x 1.8x 2.0x 2.1x

Bank debt / EBITDA 3.4x 2.7x 2.3x 1.9x 1.5xMezzanine debt / EBITDA 2.7x 2.5x 2.4x 2.4x 2.3xTotal debt / EBITDA 6.1x 5.2x 4.7x 4.3x 3.8x

Quantitative



Downside Case: Assumptions & Summary of Operating Results


SUMMARY OF OPERATING RESULTS Pro Forma 1 2 3 4 5Fiscal year ended December 31, 2013 2014 2015 2016 2017 2018 2019 2020Total revenues $790.5 $793.2 $806.0 $824.1 $848.3 $877.5 $911.6 $954.7

% growth 0.3% 1.6% 2.2% 2.9% 3.4% 3.9% 4.7%


EBITDA $89.2 $84.7 $80.8 $76.9 $84.6 $88.5 $91.5 $95.8% margin 11.3% 10.7% 10.0% 9.3% 10.0% 10.1% 10.0% 10.0%

Other Financial DataCash interest expense $41.0 $40.1 $39.0 $37.7 $36.3Total interest expense 45.1 44.2 43.2 42.0 40.7(Increase) decrease in net working capital 0.7 (2.3) (2.4) (2.4) (2.2)Capital expenditures 9.7 9.1 9.5 9.9 10.5



Quantitative



Downside Case: Capitalization & Credit Statistics





Pro Forma







Quantitative



Upside Case: Assumptions & Summary of Operating Results


SUMMARY OF OPERATING RESULTS Pro Forma 1 2 3 4 5Fiscal year ended December 31, 2013 2014 2015 2016 2017 2018 2019 2020Total revenues $790.5 $793.2 $806.0 $824.1 $1,107.6 $1,160.5 $1,219.1 $1,289.0

% growth 0.3% 1.6% 2.2% 34.4% 4.8% 5.1% 5.7%


EBITDA $89.2 $84.7 $80.8 $76.9 $76.6 $114.2 $119.4 $126.0% margin 11.3% 10.7% 10.0% 9.3% 6.9% 9.8% 9.8% 9.8%

Other Financial DataCash interest expense $41.0 $39.6 $38.5 $37.5 $35.5Total interest expense 45.1 43.8 42.7 41.8 39.9(Increase) decrease in net working capital 0.7 4.7 (37.2) (5.0) (5.2)Capital expenditures 9.7 13.7 13.8 14.2 16.2



Quantitative






Upside Case: Capitalization & Credit Statistics


Pro Forma







Quantitative



Impact Capital Partners Equity 2015 2016 2017 2018 2019 2020

Initial Investment ($94.7)Equity Participation 0.0 0.0 0.0 0.0 413.2

($94.7) $0.0 $0.0 $0.0 $0.0 $413.2

Exit ValuationExit Year 2020Exit Multiple 8.1xExit Year EBITDA $96.6 Exit Valuation (Total Firm Value) $778.5

Revolver $0.0Term Loan 140.2Mezzanine Debt 223.1Existing debt 0.0Transaction Fees 2.0 Total Debt 365.3Less: Accumulated Cash 0.0 Net Debt $365.3

Allocation Proceeds (Equity Value) $413.2

Base Case: IRR Analysis


Equity Allocation EquityInvestment Ownership

FashionCo Seller Equity 0.0 0.0%Impact Capital Partners Equity 94.7 100.0% Total $94.7 100.0%

Sponsor IRR

33.7%Sponsor IRR

34.3%

Quantitative



Downside Case: IRR Analysis


Exit ValuationExit Year 2020Exit Multiple 8.1xExit Year EBITDA $95.8 Exit Valuation (Total Firm Value) $772.1







($94.7) $0.0 $0.0 $0.0 $0.0 $404.8

Sponsor IRR

33.7%

Quantitative





($94.7) $0.0 $0.0 $0.0 $0.0 $512.6



Exit ValuationExit Year 2020Exit Multiple 8.1xExit Year EBITDA $126.0 Exit Valuation (Total Firm Value) $1,015.5



Sponsor IRR

40.2%

Upside Case: IRR Analysis


Quantitative



IRR Summary


Downside Base Upside0.0%

10.0%

20.0%

30.0%

40.0%

33.7% 34.3%

40.2%

Total IRRAdditional IRRMinimum IRR

Quantitative


Summary Recommendation

Zhangde Lin



Leverage Buyout

CompanyCriteria ParentCo FashionCo

Mature industry and/or company

√ √

Clean balance sheet with low leverage

√ √

Strong management team and potential synergies

√ √

Steady cash flows √ √

Low future capital expenditure and working

capital requirements√ √

Possible sale of underperforming/non-core

assets√ √

Feasible exit options √ √


Summary



Conclusion

Impact Capital Partners should:− Make an offer to purchase ParentCo – $573.1 million

− Capital Structure:

− Make an offer to purchase FashionCo if they meet their 2016 projections

− Pursue a 2020 exit strategy to maximize IRR:

− Break up the ParentCo by industry


Downside Case Base Case Upside Case

33.7% 34.3% 40.2%

Sources & Uses of FundsMult. of

Sources of Funds ($mm) 2015 EBITDA Uses of Funds ($mm)Revolver $0.0 0.0x Purchase equity $570.3Term Loan 282.8 3.5x Repay bank debt 70.1Subordinated notes 0.0 0.0x Financing Fees 6.4Mezzanine Debt 202.0 2.5x Other Fees & Expenses 2.0Impact Capital Partners Equity 96.7 1.2x Cash on balance sheet (67.2) Total Sources of Funds $581.5 7.2x Total Uses of Funds $581.5

Summary


Alternative Options

Zhangde Lin



Alternative Options

− Roll over the non-public existing shareholder equity

− Public share repurchase

− Seek other private equity partners

− Raise capital from private investors


Alternatives


Appendix



Appendix Index


Appendix

Company Background: ParentCo 32

Company Background: fashionCo 33

SWOT Analysis 34

Valuation Analysis: MediaCo 35

Valuation Analysis: ApparelCo 37

Valuation Analysis: FashionCo 39

Comparable Company Transactions 41

Comparable Public Companies 43

WACC Analysis 45

Control Premium Analysis 47

Assumptions and Financial Models 48



Company Background: ParentCo


Founded approximately 40 years ago by Harvey Masterson Comprised on two entities: MediaCo and ApparelCo

− Few synergies due to differences in industries

MediaCo Publishing of daily, weekly and

monthly periodicals focused on consumer product reviews− Account for over 90% of revenues− Niche market of 45 to 65 year olds

Consumer product reviews website Small television production company

− Not very profitable. However, enhances marketing reach

Considerations:− Limited opportunities for organic growth

in the coming years, except for attracting a younger audience

ApparelCo Funded 10 years ago by William Masterson Design, development, sourcing, marketing,

and distribution of apparel for men and women

High quality and fashionable products Target audience between the age 18 and

35 years old Lower margins due to higher SG&A

expenses

Considerations:− Management believes that by achieving a

greater scale and streamlining operations they can reduce SG&A expenses by 2% of revenue

Appendix



Company Background: FashionCo


Founded 40 years ago Privately held by a small group of passive investors Engages in design, sourcing, marketing, and distribution of

apparel and accessories for men, women and children− Products known for their affordability

Products are carried by major apparel retailers throughout the country

Retail and outlet stores sales account for less than 10% of total sales

Open for sale after 2016− Open to alternative structures such as stock rollover or earn-out

Considerations: − Synergies between ApparelCo and FashionCo could reduce SG&A

expenses by 3.5% per year

Appendix



SWOT Analysis by Company


StrengthsMediaCo Long, established companyApparelCo High quality and fashionable apparel Young target audience Revenue growth in line with comp.

companiesFashionCo Ample distribution channels Affordable products

WeaknessesMediaCo Non-diversified revenue stream Low profits in Production portionApparelCo Few synergies with MediaCo Lower profit marginsFashionCo Lack of owners interest in industry Untrendy products

Opportunities

MediaCo Capturing new market segment Strengthening brands ApparelCo Faster future growth than MediaCo Economies of scaleFashionCo Increase sales percentage in brick

and mortar stores

Threats

MediaCo Low industry future expected growthApparelCo Possible request for a seat in the

board of directors from activist hedge funds

FashionCo Lack of customer interest Economic downturn can impact

demand

Inte

rnal

Ext

ern

al

Positive Negative

Appendix



Purchase Price

$392.4 ($mm)



2014A Sales

2014A EBITDA

2015E Sales

2015E EBITDA

2014A Sales

2014A EBITDA

2015E Sales

2015E EBITDA

Perp. Method

Multiple Method

$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000

$265.7

$195.0

$262.1

$178.6

$560.8

$441.7

$553.1

$404.6

$419.2

$269.7

$819.4

$573.4

$808.2

$525.2

$736.3

$603.7

$726.2

$553.0

$656.3

$528.5


Relevant MulitplePrecedent Transac-

tions

3.0x-8.9x

0.5x-1.5x

0.5x-1.5x

3.0x-8.9x





6.9x-9.4x

6.9x-9.4x

1.0x-1.4x

1.0x-1.5x

Public Compara-bles

$392.4


Fit

Transaction 3

Transaction 6

Transaction 7

Transaction 9

Public Comparables

Fit

NYT CompanyTime Inc.

MediaCoFinancial Data ($mm)

2014A 2015E

Sales $535.1 $527.8

EBITDA $64.1 $58.7

Illustrative Valuation Analysis: MediaCo



Appendix



Preliminary Discounted Cash Flow and Sensitivity Analysis: MediaCo


$ in millions

Cash Flow 2016E 2017E 2018E 2019E 2020ENet Sales $522.3 $522.9 $524.5 $528.5 $539.1

% growth -1.0% 0.1% 0.3% 0.8% 2.0% Perp growth rate / multiple 2.0% 6.0x

PF EBITDA 56.0 62.0 62.2 62.7 63.9 PV of UFCF $153.2 $153.2

% margin 10.7% 11.9% 11.9% 11.9% 11.9% Discount rate 9.8% 9.8%

Depreciation & Amortization 16.0 14.2 14.2 14.4 14.6 Terminal value $563.3 $382.9

PF EBIT 40.0 47.8 47.9 48.3 49.3 PV of terminal value $353.5 $240.2

% margin 7.7% 9.1% 9.1% 9.1% 9.1% TEV $506.7 $393.4Taxes @ 35% 14.0 16.7 16.8 16.9 17.2 Net debt $14.1 $14.1 Unlevered Net Income $26.0 $31.1 $31.2 $31.4 $32.0 Equity value $492.5 $379.3

+ Depreciation & Amortization 16.0 14.2 14.2 14.4 14.6 Implied EBITDA multiple 8.6x 6.7x

- Capital expenditures 4.9 4.7 4.7 4.8 4.9 - Changes in working capital 0.5 0.1 (0.2) (0.4) (1.1) Implied Sales multiple 1.0x 0.7x

Unlevered free cash flow $36.6 $40.5 $40.8 $41.4 $42.9

DCFPerpetuity

methodMultiples method

Perpetuity Method Multiples MethodGrowth Rate Exit Multiple

$507 1.0% 2.0% 3.0% $393 3.0x 6.0x 8.9x7.8% $593.6 $675.0 $790.6 7.8% $286.9 $416.6 $546.38.8% $519.6 $577.9 $656.3 8.8% $280.8 $404.7 $528.59.8% $463.3 $506.7 $562.8 9.8% $275.1 $393.4 $511.710.8% $419.2 $452.5 $494.3 10.8% $269.7 $382.8 $495.911.8% $383.9 $410.0 $442.1 11.8% $264.6 $372.7 $480.8

DiscountRate

DiscountRate

Sensativity Analysis

Appendix



Purchase Price

$180.7 ($mm)



2014A Sales

2014A EBITDA

2015E Sales

2015E EBITDA

2014A Sales

2014A EBITDA

2015E Sales

2015E EBITDA

Perp. Method

Multiple Method

$0 $100 $200 $300 $400 $500 $600 $700 $800

$113.6

$106.4

$122.4

$114.2

$74.5

$92.7

$80.3

$99.5

$208.3

$143.3

$336.6

$270.0

$362.8

$290.0

$244.0

$246.1

$263.0

$264.2

$693.9

$316.4



tions

5.2x-13.2x

0.4x-1.3x

0.4x-1.3x

5.2x-13.2x





4.5x-12.0x

4.5x-12.0x

0.3x-0.9x

0.3x-0.9x

Public Compara-bles

$180.7

ApparelCoFinancial Data ($mm)

2014A 2015E

Sales $258.1 $278.2

EBITDA $20.5 $22.1


Fit

Transaction 6

Transaction 8

Transaction 13

Transaction 15

Transaction 17

Transaction 20

Public Comparables

Fit


Illustrative Valuation Analysis: ApparelCo



Appendix



Preliminary Discounted Cash Flow and Sensitivity Analysis: ApparelCo


Cash Flow 2016E 2017E 2018E 2019E 2020ENet Sales $301.8 $325.4 $353.1 $383.1 $415.6

% growth 8.5% 7.8% 8.5% 8.5% 8.5% Perp growth rate / multiple 8.5% 9.2x

PF EBITDA 23.7 27.2 29.5 32.0 34.7 PV of UFCF $45.9 $45.9

% margin 7.9% 8.4% 8.4% 8.4% 8.4% Discount rate 12.0% 12.0%

Depreciation & Amortization 4.3 3.3 3.6 3.9 4.2 Terminal value $473.4 $318.4

PF EBIT 19.5 23.9 25.9 28.1 30.5 PV of terminal value $268.0 $180.3

% margin 6.4% 7.3% 7.3% 7.3% 7.3% TEV $313.9 $226.1Taxes @ 35% 6.8 8.4 9.1 9.8 10.7 Net debt ($11.3) ($11.3)Unlevered Net Income $12.6 $15.5 $16.8 $18.3 $19.8 Equity value $325.2 $237.4

+ Depreciation & Amortization 4.3 3.3 3.6 3.9 4.2 Implied EBITDA multiple 14.2x 10.3x

- Capital expenditures 4.8 4.4 4.8 5.2 5.6 - Changes in working capital 2.2 2.1 2.5 2.7 3.0 Implied Sales multiple 1.1x 0.8x

Unlevered free cash flow $9.9 $12.4 $13.2 $14.3 $15.5

Perpetuity method

Multiples method

DCF


$314 8.00% 8.5% 9.0% $226 5.2x 9.2x 13.2x10.0% $551.5 $717.7 $1,042.4 10.0% $157.4 $243.1 $328.911.0% $370.6 $436.1 $533.6 11.0% $152.4 $234.4 $316.412.0% $279.7 $313.9 $359.3 12.0% $147.8 $226.1 $304.513.0% $225.3 $245.9 $271.6 13.0% $143.3 $218.3 $293.314.0% $189.1 $202.8 $219.1 14.0% $139.1 $210.9 $282.6

DiscountRate

DiscountRate


$ in millions

Appendix



2014A Sales

2014A EBITDA

2015E Sales

2015E EBITDA

2014A Sales

2014A EBITDA

2015E Sales

2015E EBITDA

Perp. Method

Multiple Method

$0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500

$85.6

$79.7

$91.7

$93.5

$56.1

$69.4

$60.2

$81.4

$99.1

$76.7

$196.3

$201.8

$210.4

$236.8

$183.8

$184.3

$197.0

$216.3

$231.3

$181.2


Relevant MulitplePrecedent Transac-

tions

8.0x-10.0x

0.5x-2.0x

0.5x-2.0x

8.0x-10.0x





6.0x-9.0x

8.0x-10.0x

0.5x-2.0x

0.5x-2.0x

Public Compara-bles

$132.0

FashionCoFinancial Data ($mm)

2014A 2015E

Sales $194.5 $208.5

EBITDA $15.4 $18.1

Starting Valuation

$132.0 ($mm)




Fit

Transaction 8

Transaction 13

Transaction 15

Transaction 17

Transaction 20

Public Comparables

Fit


Illustrative Valuation Analysis: FashionCo



Appendix




$137 6.3% 7.3% 8.3% $127 5.2x 9.2x 13.2x10.0% $176.0 $235.1 $361.1 10.0% $85.2 $137.0 $188.811.0% $139.5 $173.2 $231.3 11.0% $82.2 $131.7 $181.212.0% $115.7 $137.4 $170.5 12.0% $79.4 $126.7 $174.113.0% $99.1 $114.0 $135.3 13.0% $76.7 $122.0 $167.314.0% $86.8 $97.7 $112.4 14.0% $74.1 $117.5 $160.8

DiscountRate

DiscountRate


Perp growth rate / multiple 7.3% 9.2x

PV of UFCF $17.8 $17.8

Discount rate 12.0% 12.0%

Terminal value $168.2 $192.3

PV of terminal value $119.6 $108.9

TEV $137.4 $126.7Net debt $3.0 $3.0 Equity value $134.4 $123.7

Implied EBITDA multiple 7.6x 7.0x

Implied Sales multiple 0.7x 0.6x

DCFPerpetuity

methodMultiples method

Cash Flow 2015E 2016E 2017ENet Sales $208.5 $224.0 $240.1

% growth 7.5% 7.2%PF EBITDA 18.1 20.9 21.0

% margin 8.7% 9.3% 8.7%Depreciation & Amortization 2.9 2.3 3.3PF EBIT 15.1 18.6 17.7

% margin 7.3% 8.3% 7.4%Taxes @ 40% 6.1 7.4 7.1Unlevered Net Income $9.1 $11.2 $10.6

+ Depreciation & Amortization 2.9 2.3 3.3

- Capital expenditures 2.1 2.9 4.3 - Changes in working capital 4.7 2.1 2.1

Unlevered free cash flow $5.3 $8.6 $7.5

Preliminary Discounted Cash Flow and Sensitivity Analysis: FashionCo



Appendix



Comparable Company Analysis – Comparable Transactions: Media


($ in millions)

Announced Target EV / EV / EBITDATransaction Date Enterprise Value Revenue EBITDA Revenue EBITDA Margin Transaction 1 2014 $972 NA 11.7x NA $83 NA

Transaction 2 2014 690 NA NA NA NA NA

Transaction 3 2014 511 1.5x 8.9x $334 58 17.2%


Transaction 5 2014 25 0.2x 6.9x 139 4 2.6%

Transaction 6 2014 6 0.5x 3.5x 13 2 14.2%

Transaction 7 2013 105 0.8x 8.9x 140 12 8.4%

Transaction 8 2013 76 1.9x NA 41 NA NA

Transaction 9 2013 82 0.5x 3.0x 162 27 16.7%



Transaction 12 2013 829 2.1x 8.0x 386 103 26.7%


Transaction 14 2013 355 2.1x 11.3x 171 31 18.4%

Transaction 15 2013 108 NA 17.0x NA 6 NA


Transaction 17 2012 13 0.3x 8.7x 42 1 3.5%

Transaction 18 2012 86 1.0x 5.2x 85 16 19.5%

Transaction 19 2012 15 0.4x 8.6x 41 2 4.3%

Min $3 0.2x 3.0x

Max 972 2.7x 17.0x

Median 108 0.9x 8.6x

Mean 258 1.1x 8.5x

Appendix



Comparable Company Analysis – Comparable Transactions: Apparel and Fashion


($ in millions)

Announced Target EV / EV / EBITDATransaction Date Enterprise Value Revenue EBITDA Revenue EBITDA Margin Transaction 1 2014 $359 0.6x NA $633 NA NA

Transaction 2 2014 189 NA 13.0x NA $15 NA

Transaction 3 2013 2,201 0.6x 9.8x 3,848 226 5.9%

Transaction 4 2013 1,486 1.4x 11.1x 1,031 134 13.0%

Transaction 5 2013 615 2.2x 9.6x 285 64 22.5%

Transaction 6 2013 253 1.3x 13.2x 194 19 9.9%

Transaction 7 2013 2,274 0.9x 8.0x 2,503 285 11.4%

Transaction 8 2013 567 1.0x 13.1x 562 43 7.7%

Transaction 9 2013 143 1.9x 13.5x 74 11 14.3%

Transaction 10 2013 1,000 1.1x 9.8x 921 102 11.0%

Transaction 11 2013 628 1.3x 7.2x 481 87 18.1%

Transaction 12 2013 18 0.4x 9.8x 46 2 4.0%

Transaction 13 2013 548 0.7x 8.7x 742 63 8.5%

Transaction 14 2012 2,847 1.2x 9.9x 2,406 288 12.0%

Transaction 15 2012 88 0.4x 5.2x 200 17 8.5%

Transaction 16 2012 852 0.4x 10.2x 1,969 84 4.3%

Transaction 17 2012 1,809 0.5x 8.4x 3,505 216 6.2%

Transaction 18 2012 246 0.5x 10.6x 478 23 4.9%

Transaction 19 2012 553 4.4x 10.9x 125 51 40.5%

Transaction 20 2012 58 0.4x 5.5x 139 11 7.6%

Transaction 21 2011 60 0.6x 10.6x 103 6 5.5%

Transaction 22 2011 60 0.6x 10.6x 103 6 5.5%

Transaction 23 2011 357 0.3x NA 1,144 NA NA

Min $18 0.3x 5.2x

Max 2,847 4.4x 13.5x

Median 548 0.7x 9.9x

Mean 748 1.0x 9.9x

Appendix



Comparable Public Companies: Media Industry


(figures in millions except per share amount) Shares LTM LTM LTM LTM EBITDA Sales EBITDACompany Ticker Stock Price Outstanding Debt Cash Sales EBITDA EBIT Earnings TEV Margin Multiple Multiple Gannett Co., Inc. GCI 31.50 225.6 4,112.6 1,374.5 5,675.2 1,254.7 1,023.9 476.9 9,846.0 22.1% 1.7x 7.8x

Lee Enterprises, Incorporated LEE 3.73 53.7 815.0 17.8 657.1 160.2 112.9 (85.1) 997.6 24.4% 1.5x 6.2x

The McClatchy Company MNI 3.56 86.7 1,560.3 225.1 1,215.2 248.9 144.6 83.9 1,644.1 20.5% 1.4x 6.6xThe New York Times Company NYT 12.84 150.3 669.4 414.6 1,587.7 232.1 152.8 64.1 2,184.6 14.6% 1.4x 9.4xTime Inc. TIME 22.59 109.0 1,376.0 325.0 3,352.0 510.0 352.0 8.0 3,512.6 15.2% 1.0x 6.9x Min $997.6 1.0x 6.2x Max $9,846.0 1.7x 9.4x Median $2,184.6 1.4x 6.9x Mean $3,637.0 1.4x 7.4x

Appendix



Comparable Public Companies: Apparel and Fashion


(figures in millions except per share amount) Shares LTM LTM LTM LTM EBITDA Sales EBITDACompany Ticker Stock Price Outstanding Debt Cash Sales EBITDA EBIT Earnings TEV Margin Multiple Multiple Ever-Glory International Group, Inc. EVK 6.19 14.8 55.4 25.0 422.3 27.0 20.8 12.8 121.9 6.4% 0.3x 4.5xG-III Apparel Group, Ltd. GIII 79.35 22.4 71.2 21.5 1,931.7 152.4 135.9 80.2 1,825.9 7.9% 0.9x 12.0x

Oxford Industries Inc. OXM 61.25 16.5 108.5 6.4 951.8 121.9 85.3 45.9 1,110.8 12.8% 1.2x 9.1xPerry Ellis International Inc. PERY 20.45 15.7 172.5 49.2 899.0 34.7 21.3 (25.1) 444.9 3.9% 0.5x 12.8xPVH Corp. PVH 114.35 82.4 3,907.4 461.1 8,250.7 1,202.2 948.9 321.0 12,867.9 14.6% 1.6x 10.7xV.F. Corporation VFC 67.68 431.1 2,083.5 496.5 11,993.4 2,047.8 1,775.2 1,293.1 30,763.9 17.1% 2.6x 15.0x

Min $121.9 0.3x 4.5x Max $30,763.9 2.6x 15.0x Median $1,468.3 1.1x 11.3x Mean $7,855.9 1.2x 10.7x

Appendix



WACC Analysis: Media


Cost of DebtDebt

Market Value of Equity

Total Capitalizatio

nDebt to Equity

Debt to Total Capitalization

Gannett Co., Inc. $4,112.6 $7,107.9 $11,220.5 57.9% 36.7% 4.2%Lee Enterprises, Incorporated 815.0 200.4 1,015.4 406.8% 80.3% 4.5%The McClatchy Company 1,560.3 308.8 1,869.1 505.3% 83.5% 5.5%The New York Times Company 669.4 1,929.9 2,599.2 34.7% 25.8% 3.9%Time Inc. 1,376.0 2,461.6 3,837.6 55.9% 35.9% 4.3%

Min 669.4 200.4 1,015.4 34.7% 25.8% 3.9%Max 4,112.6 7,107.9 11,220.5 505.3% 83.5% 5.5%Median $1,376.0 $1,929.9 $2,599.2 57.9% 36.7% 4.3%Mean 1,706.7 2,401.7 4,108.4 212.1% 52.4% 4.5%

Appendix



WACC Analysis: Apparel


Debt

Market Value of Equity

Total Capitalization

Debt to Equity

Debt to Total CapitalizationCost Of Debt

Ever-Glory International Group, Inc. $55.4 $91.6 $146.9 60.5% 37.7% 2.6%G-III Apparel Group, Ltd. 71.2 1,776.2 1,847.4 4.0% 3.9% 4.5%Oxford Industries Inc. 108.5 1,008.7 1,117.2 10.8% 9.7% 5.5%Perry Ellis International Inc. 172.5 321.6 494.1 53.6% 34.9% 4.3%PVH Corp. 3,907.4 9,421.6 13,329.0 41.5% 29.3% 4.3%V.F. Corporation 2,083.5 29,176.9 31,260.4 7.1% 6.7% 4.3%

Min 55.4 91.6 146.9 4.0% 3.9% 2.6%Max 3,907.4 29,176.9 31,260.4 60.5% 37.7% 5.5%Median $140.5 $1,392.5 $1,482.3 26.1% 19.5% 4.3%Mean 1,066.4 6,966.1 8,032.5 29.6% 20.4% 4.3%

Appendix



Control Premium Analysis


Control Premium % Paid in Recent Transactions

MedianControl Number of

Premium TransactionsAll Transactions

2014 26.2% 7642013 20.7% 7772012 20.6% 565

Manufacturing - Apparel2014 34.9% 82013 11.0% 42012 32.8% 5

Printing, Publishing and Allied Industries2014 15.2% 112013 12.1% 142012 18.2% 8

Appendix



Refer to Assumptions and Financial Models Supplement


Assumptions and Financial Models

Appendix

Creighton team acg cup 2015 final round v final 2

Business

Transcript of Creighton team acg cup 2015 final round v final 2