PricewaterhouseCoopers LLP Page 1 Canadian Association of MoversDecember 2007 Selling Your Business...

PricewaterhouseCoopers LLP

Canadian Association of Movers December 2007

Selling Your Business

Eric CastonguayManaging Director

PricewaterhouseCoopersCorporate Finance Inc.


Agenda

I. Overview of a “Typical” Sale Process

II. Preparing for Sale

III. Finding the Right Buyer

IV. Getting the Deal Done

V. Case Studies


Overview of a “Typical” Sale

Process


Finalize the go-to market strategyFinalize the go-to market strategy

Prepare a Confidential Information Memorandum

Prepare a Confidential Information Memorandum

Consider the unique positioning of your Company for each potential purchaser.

Consider the unique positioning of your Company for each potential purchaser.

Contact PotentialPurchasers withConfidentiality Agreements

Contact PotentialPurchasers withConfidentiality Agreements

Create competitiveenvironment andrespond to queries

Create competitiveenvironment andrespond to queries

Coordinate Management Presentations.

Coordinate Management Presentations.

Solicit and assess expressions of interest.

Solicit and assess expressions of interest.

Provide preliminary due diligence.

Provide preliminary due diligence.

Negotiate letters of intent.Negotiate letters of intent.

Select final purchasers.Select final purchasers.

Advise on structure:Tax & accounting ramifications

Advise on structure:Tax & accounting ramifications

Engage in FinalNegotiations.Engage in FinalNegotiations.

Final DetailedDue DiligenceFinal DetailedDue Diligence

Market Strategy

Preparing

for the

Sale

Marketing

the

Company

Selecting

the

Purchaser

Closing

the

Transaction

Ensure all closing matters are dealt with promptly.

Ensure all closing matters are dealt with promptly.

Define Shareholder Objectives:• Price• Structure• Timing

Define Shareholder Objectives:• Price• Structure• Timing

Initial Value Analysis.Initial Value Analysis.

Develop list ofpotential purchasers.

Develop list ofpotential purchasers.

Prepare “teaser” document that summarizes acquisition opportunity.

Prepare “teaser” document that summarizes acquisition opportunity.

Phase Two – Executing the StrategyPhase One – Setting the Strategy

A sale process should have two distinct “phases” - setting & executing the strategy.The critical steps of this process will be discussed in our presentation today.

The Sale Process


Preparing for Sale

“Getting your house in order”


A successful sale process requires a disciplined approach:- Address management succession issues- Tax planning and structuring- Develop value expectations- Real estate appraisals- Updating business documents

• Board of Director minutes• Compliance filings• Website material• Key contracts• Business plans and procedure/quality manuals

- Engage advisors- Vendor due diligence

Preparing for SaleGetting your house in order


A successful sale process requires a disciplined approach:- Develop marketing strategy and prepare marketing materials

• ‘No-names’ information teaser• Confidentiality agreement• Confidential Information Memorandum (“CIM”)• Management presentation

Preparing for SaleGetting your house in order


Finding the Right Buyer

“How to focus the sale process”


Finding the Right BuyerPossible Acquirers

• Target potential acquirers based on your objectives:- Strategic Acquirers- Financial Acquirers (Private Equity)- Management Buyout

• Creating and validating the potential acquirer list:- Financing capabilities- Acquisitiveness- Cultural fit- Strategic and competitive risk


Strategic Rationale- Complementary product or service- Access to new customer base- Purchasing synergies- SG&A synergies- Ability to rationalize locations and unlock real estate value- Access to new geographic markets- Vertical integration- Leveraging brand name and reputation

Finding the Right BuyerStrategic Acquirers


• Private equity investment continues at record levels- Private equity has accounted for 24% of overall transaction

volume for the first nine months of 2007• Funds are getting larger and more numerous

- Blackstone Group recently closed a US$21.7 billion fund- The number of private equity funds in North America has

more than doubled in the past five years• Due to the large amounts of capital invested in private equity,

these funds have become a significant factor in mid-market M&A

Finding the Right BuyerFinancial Acquirers


Typical Acquisition Criteria• $5 million of EBITDA with sweet spot of $10 million or more

–Smaller funds and individuals focus on companies with less than $5 million of EBITDA

• 20-30% IRR threshold• Clearly defined exit strategy• Strong management team• Growth potential to meet return expectations• 3 to 7 year hold period• Typically prefer control investments



Other Considerations- Typically not involved in day-to-day operations- Attractive opportunities for management through equity

incentives- Provide flexibility for retained equity stake- Provides access for growth capital or industry

consolidation strategy- Generally less concern sharing sensitive information with

financial acquirers



• Viable alternative where high comfort levels exists between management and ownership

• Eliminates risks associated with sharing confidential information with competitors

• Can be staged over time or combined with a recapitalization to increase cash proceeds to the selling shareholder

• May require VTB financing due to limited management financial resources

• Owners can be placed in a difficult situation negotiating against management if advisor is not used

• Can have a negative impact on the business if deal is not completed

Finding the Right BuyerManagement Buyout


Getting the Deal Done

“Don’t bring a knife to a gun

fight…”


• Selling your business will likely be the most significant financial transaction of your career

• Most often the acquirer will have significantly more deal-making experience than the seller

• A poorly planned or unsuccessful sale attempt can have a lasting negative impact on your business

• Creating competitive tension and preserving options for the shareholders throughout the sale process is fundamental to achieving a superior result

Getting the Deal DoneThe Importance of Planning


• Expert and independent advice

• Market credibility to process

• Maximize value through structured process

• Allows management to focus on the business

• Provides a “buffer” between management/shareholders and investors

• Established contacts with strategic and financial buyers

• Global reach

• Integrated tax, accounting and corporate finance advice

Getting the Deal DoneWhy use an advisor?


Confidentiality. • Rifle vs shotgun• Staged approach• Confidentiality agreements• Controlled information dissemination

Getting the right people to the table.

• Identify financial wherewithal, acquisitiveness and potential strategic fit prior to contact.

• Use of PwC network to identify international buyers.

• Use of PwC relationships to introduce opportunity to appropriate level of management.

• Ensure seller’s value expectations are reasonable up front.

• Create Confidential Information Memorandum and sales strategy that plays to acquirer’s strategic rationale.

• Maintain competitive tension and options for shareholders.

Sell Side Issue

Maximizing value.

Sell Side Approach

Getting the Deal DoneApproach to Common Deal Issues


Losing focus on the business. • PwC leads process and acts as information conduit.

• Meetings and due diligence review held offsite where possible.

• Leverage PwC knowledge if existing client.

Last minute “surprises”. • PwC pre-sale due diligence to identify and mitigate possible deal issues before the sale process commences.

• Assumption of a buyer’s perspective.

Sell Side Issue

Anticipating the buyer’s next step is a key to successful negotiations.

Sell Side Approach

Getting the Deal DoneApproach to Common Deal Issues


Getting the Deal DoneManaging Deal and Business Risks

CompetitiveTension

Opportunities / Threats

Sta

keh

old

er

valu

e

PwC CF’s role is to maximise value through

focus on positive issues

…and to minimise impact of

potential risks

Demonstrating the potential ofthe business

will be key to value

+

_

CurrentBusiness

Proforma EBITDA

Strong Market Position

Customer Relationships

Service Lines

Overhead Elimination

Cross-selling

Labour Cost Increases

Competition Threat

Foreign Exchange Sensitivity

Management Succession

= Buyer specific

ExperiencedManagement

Consolidation Opportunities

Customer Concentration


Case Studies

“Creating Value by Targeting the

Right Buyer”


Case StudiesNon-expedited Transportation Company

Company Overview• Non-expedited parcel delivery company focused on business

to business deliveries with sales of approximately $145 million• PwC Corporate Finance acted as lead advisor in the sale of

the Company to a large, publicly traded trucking company

Acquirer Rationale• Stable, consistent cash flow• Strong management team• Cross selling opportunities• Momentum for Income Trust Conversion


Case StudiesBeverage Company

Company Overview• Manufacturer of private label and branded fruit juices and

drinks with sales of approximately $65 million• PwC Corporate Finance acted as lead advisor in the sale of

the Company to a leading, publicly traded beverage company

Acquirer Rationale• Facility rationalization• Access to new brands• Increased presence in the Ontario institutional market• Increased PET packaging capabilities


Case StudiesPrecision Manufacturing Company

Company Overview• Manufacturer of precision molded plastic components with

sales of approximately $30 million• PwC Corporate Finance acted as lead advisor in the sale of

the Company to a private equity fund

Acquirer Rationale• Strong management team• Highly profitable with attractive growth opportunities• Consistent cash flow• Consolidation platform


Case StudiesAutomotive Parts Manufacturer

Company Overview• Manufacturer of highly engineered automotive components with sales of

$80 million• PwC Corporate Finance acted as lead advisor in structuring and

financing a Management Buyout of the Company

Transaction Rationale• Met shareholder’s desire to provide management with an opportunity to

acquire the business• Refinancing met shareholder’s short-term cash requirements• Provided structured income stream for shareholder while maintaining

appropriate safeguards• Avoided disclosure of sensitive information to competitors

Thank you.

Eric CastonguayManaging DirectorPricewaterhouseCoopers Corporate Finance Inc.

(416) [email protected]

© 2007 PricewaterhouseCoopers LLP, Canada. “PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, Canada, an Ontario limited liability partnership, or, as the context requires, the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP.

PricewaterhouseCoopers LLP Page 1 Canadian Association of MoversDecember 2007 Selling Your Business...

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