Outsourced Corporate Development Services for the Middle Market

Intelligence, Diligence, Integrity 1

Corporate Development Services

for the Middle Market


Corporate Development Program

• Focus– Middle market size

businesses– North America– B to B – Manufacturing &

Distribution, Services

• Client Profile– Small/Mid Cap Corporations

and privately held companies

– International companies looking to expand in NA

– Divisional business units

Corporate Development

Acquisition Divestiture

Fit & Value

Pre-determined Value

Marketing Value

Transaction

Strategic Assessment

Due Diligence

Research

Candidate

Development


Value Proposition


Acquisition

Many acquisitions become emotional rather than strategic buys. We help keep things in perspective…– Analyze strategic

position and alternatives– Market Intelligence– Research and develop

candidate list– Solicit candidates– Facilitate due diligence

Process– Coordinate purchase

agreement process



Fit & Value


Marketing Value

Transaction


Due Diligence

Research

Candidate

Development



• Strategic position – Market Attractiveness– Competitive position– Vertical and horizontal

synergy opportunities

• Analytical tools– 4- Block Benchmarking– SWOT Analysis– Channel To Market

Metrics – ROI Modeling

Product OfferingNarrow Broad

Mar

ket

Gro

wth

Low

Hig

h

Future Value

Synergy ValueShare Value

Niche Value

Strength Opportunities

Weakness Threats


Research & Candidate Development

• Rate each potential acquisition candidate using a ten question quantifiable technique.

• Determine the availability of the acquisition candidate, (including valuation)

• Networking avenues to candidates

• Introductory communications

• Targeted mailing campaign


The Deal

Getting to the deal stage can take 18+ months. Success is dependent upon– Emphasis on strategic

value vs. opportunistic price

– Effective due diligence is critical • Team selection• Project management• Synergy & market value

validation

– Negotiations• Reps & warranties• Transition services• Management retention


Divestiture

Businesses need to prune in order to grow. We provide the “sheers” or processes needed to maximize results– Testing Fit & Value– Pre-determined Value– Marketing Value– Transition Value



Fit & Value


Marketing Value

Transaction


Due Diligence

Research

Candidate

Development

“Most Companies wait too long to divest. They

should sell off businesses long before

they become a burden.”

McKinsey Quarterly- Divesting Proactively

“Corporations that take a disciplined

approach to divestiture not only

sharpen their strategic focus on their core but also

create nearly twice as much value for shareholders “

How the Best Divest -Harvard Business Review


Defining a Divest-Business

• Business unit within a larger division or

group. – Sales : $10 to $100

million– 10 to 250 employees

• No strategic value to the parent company

• Under-resourced and over-burdened with corporate mandates and initiatives

• Little attention given to

business’ markets

Corporate

Division A Division B Division C

Core Business

D-Business

Core Business

D-Business

Core Business

D-Business


Test For Fit and Value

• Fit– Keeping them isn’t

essential to positioning your company for long-term growth and profitability

• Value– They’d be worth

more in any other company’s portfolio than in yours

Long-term fundamentals are

sound

Grow unit’s intrinsic value

by 15%+

Revenues meet

corporate threshold

Textron Three Tests of Value


Valuing The Business For the Middle Market

• Focus on key value drivers

• Value considerations– Organization strength– Corporate dependence– Asset utilization– Market position– Customer Mix – Liabilities

• Take a buyers perspective

• Pre-determined Value (PDV) minimizes valuation debate going forward in the process.

Strategic

Synergy

Performance*3-5X

*4-6X

*5-7X

Financial

Com

petitor

Market

Expansion

* EBITDA Multiple


Marketing Value To The Middle Market

• Prepare business documents for Offering Letters & Brochures

• Develop profile of ideal buyer

• Outline desired terms and conditions

• Data gathering process– Data Room

Documents– Legal review– Reps & warranties

FinancialPerformance

OrganizationBusiness Dynamics

Assets&

Liabilities


Marketing Package


Buyer Screening Process

• BizMartSM

– Eight thousand Buyers

• Marketing & Research – Mailings – 400 thousand Contacts– Utilize Outside databases– Buyer criteria updates– Industry surveys

• Operation Standards– Contract Forms – Confidentiality Agreements– Offering Brochures & Letters– Buyer screening methods

Operating Companies,

70%

Private Equity, 30%

Private Investors,

10%

BizMartSM Buyer Mix


Commission Program

• Commission– Sold within 12 months

• Value up to $10 million : 4.5%

• Value over $10 million: 1.0%

– Sold after 12 months• Value up to $10

million: 3.0%• Value over $10

million: 1.0%– Minimum $200 thousand

• Retainer fee – Based on scope - TBD– Applied towards

commission at closing

Effective Commission Rate

0.75%

1.25%

1.75%

2.25%

2.75%

3.25%

3.75%

4.25%

4.75%

Transaction ValueC

omm

issi

on %

Sold after 12 months Sold w ithin 12 months


Who is Chapman Associates?

• Served middle market clients since 1954.

• Represent companies worth between $3 million and $100 million.

• Over 2,300 successful transactions to our credit.

• Team averaging over 25+ years of experience - CPAs’, Attorneys, Corporate Executives, Entrepreneurs

Offices Nationwide

Outsourced Corporate Development Services for the Middle Market

Documents

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