Pegasus CaseTeam 417: Monarch Group

Agenda• Introduction•Size-up and Strategic Fit•Value created by the acquisition•Main challenges•First 90 days•Then 100 days•Organization Structure•Risks •Strategy of new Pegasus•Conclusion

The Situation

Profit Revenue

8

122

19

74

Revenue/Profits ($Millions)

Call Up Pegasus

• Pegasus: a strong provider of specialized call center services

• Call-up: a rival in financial trouble

• The opportunity: an opportunity to fully absorb a large competitor

Introduction

Search and Screen (on-going)

Define strategic fit

and financing

intent

Evaluate and

negotiate

Develop integratio

n planIntegrat

e

Operate and

capture value

Due Diligence

Size up & Strategic FitPegasus

Strengths:

• Provider of reliable first-rate service

• Lean & standardized operations while highly profitable

• Strong & highly employee-engaged management team

• Culture of teamwork and learning

Weaknesses:

• Solely focused on the Tech market

• Lack of physical capacity for expansion

Call -Up

Strengths:

• Presence in various markets including High-Tech/Manufacturing/Hotel-Chains

• Supply of talented technical employees

• Large number of clients

Weaknesses:

• Low levels of customer commitment especially toward existing customers

• VP’s adopted “Empire Building”• Excessive employee turnover• Committed to too many low

margin clients

CREAT

E VA

LUE

How will Call-Up’s acquisition and absorption create value for Pegasus?

• Enhance market share as well as break into new markets

• Achieve cost synergies (lower unit costs)

• Addition of talent management & highly skilled employees

• Elimination of a competitor• Attain additional

infrastructure (call centres)

Highly successful

& lean operations

Integration

knowledge &

experience

Opportunity driven culture

Evaluation and size-

up competenc

e

Identification expertise

Potential Challenges Speed of integration Culture change Raise Call-Up’s operations to Pegasus’

standards Immediate cost savings Retain key call-up employees Avoid loss of key customers

Mike Pat

ACQUIRED

Develop stakeholder communications:

Employee & Customers

Development of Strategic,

Integration and Operational Plans

Hire an outside Consultant and set

up “Go Team”“Due Diligence”

Executive Decisions

Substantive Actions

Main Enablers and Resistance Sources

HR Decisions: Executive and Staff; Incentive packages for key employees

Create shared sense of vision

Identification of human flywheels

Identification of sources of resistance

First 90 Days prior to complete takeover

Increase bandwidth of supervisors of Call-Up

Address Regional VP concern

Homogenized compensation

package

Loyalty transfers of key employees

to Pegasus

Operations

Finances

HR Changes

Focus on current customers

Rationalization of service lines and

resources

First 100 Days after complete takeover

Lower Overhead cost

Decrease unprofitable

accounts

Reduce accounts receivable policy

at Call-Up

Focus on key clients in Call-up

Massey’s advisory role

Realignment of leadership

Organizational structure

President and CEO

Allan Small

Vice PresidentSales and

Marketing – Technology

Anwar Mahdi

Vice President Sales and

Marketing – General

Sheila Hancock

Vice President

HR

Lloyd James

Vice President IT

Charles Wong

Vice President Finance

James Salter

Vice President

Operations

Mary Pratt

Vice President

Projects and Acquisitions

Michel Lemaire

Regional ManagerMarkham

Colin Bower

Regional Manager

Newmarket

(to be announced)

Regional ManagerHamilton

Kent Jones

Regional ManagerMoncton Centre

Corinne May

Regional ManagerMoncton

North

(to be announced)

Regional ManagerHalifax Centre

Joe Richards

Regional Manager

Dartmouth

Ernie Gallo

Advisor

Lionel Massey

Advisor

Paula Massey

Pegasus Operations

Call-Up Operations

Risk Mitigating Action

• Drop in overall employee morale and erosion of positive working culture

• Develop cultural assessment test and specific policies

• Initiate communication with Call-Up’s employees

• Exploitation of transition phase by Call-Up’s rivals

• Reassure key clients• Initiate operational

improvements

• Loss of business momentum at Pegasus

• Hire outside consultant to support integration

• Decrease in profitability in the longer term

• Early transfer of best practices from Pegasus to Call-Up

Maintain current

Premium Price strategy

focussing on high-margin

clients

Continue to position as the

highest customer

service level provider in the

industry

Expand customer base (technology,

manufacturing – plumbing and

automotive, hotel chains

web support)

Strategy for the

new Pegasus

“Our mission is to expand our customer base through continued

excellent customer service and through a pricing strategy that maximizes our profit margins.”

Questions?

Forecast Financial impact

Group Profits($million)* - forecast 2004 2005* 2006*

Revenues 74 208 225Cost of Operations 35 119 125

Sales and Marketing 10 28 30General and adminstrative 10 35 37

Depreciation & amortization 5 13 15Special Items 6 5

Profit after taxes 6 7 13Working Capital 15 30 32Long-term debt 2 6 3

Shareholdes' Equity 16 24 25