Sources of Equity

John Bowe – Mazars Corporate Finance

Contents

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1. Sources of Equity in Irish Market

2. What equity providers want to see in a proposal

3. Case study of equity lead transaction

Sources of Equity

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Different types and sources of equity

Sources ofEquity

High Net

worth

Venture Capital

Private equity

Friends / Family

BusinessAngels

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Business Angels

Business Angels / High Net Worth Individuals / early fund

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• Sector Interest

• Can contribute skills and knowledge

• Likely to want a meaningful interest

Venture Capital

Venture Capital

• Provide long term equity finance for start up or early stagecompanies

•Typically minority investments

• Added benefits – contacts, commercial and strategicexpertise

•On-going reporting requirements to consider

•Control issues to consider

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Venture Capital

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Employment Incentive Investment Scheme (EIIS)

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• Tax Relief incentive scheme

• Company needs to be < 7 years old

• Funds

• – BDO Davy

• – Blake Hughes Goodbody

Private Equity

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WHY NO HISTORY OF PRIVATE EQUITY?

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• Culture

• Excessive Banking market which was

effectively taking Equity risk

• Education of benefits of PE

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Growth Capital Deleverage

Shareholder Organisation Acquisitions

Roll-over

from key management

Private Equity Type Solutions

What do private equity want

• Growth potential

• Strong team

• Good management information

• Ability to create Value

• Expanding into new markets, new products, increase capacity, acquisitions

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Advantages of Private Equity

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• Flexible form of finance

• Help with business strategy

• Will challenge the team

• Access to new markets – open doors

• Allow business owners to de-risk

Disadvantages

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• You are giving up equity

• They will want to board seat

• More financial information

• They want their money back!

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Private Equity – Irish Operators

• Funds above have €700m + of equity

• Pick partner which is a fit for you and can add value not just cash

Private Equity – Irish Operators – Sample Deals

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WHAT EQUITY PROVIDERS WANT TO SEE IN A PROPOSAL

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WHAT EQUITY PROVIDERS WANT?

• Strong management – experienced make-up and balance

• Strong competitive position within your sector

• Cash generation

• Clear plan for use of funds

• Ability to realise an “Exit”

PREPARATION KEY

• Business Plan / IM setting out details of:-

• History - description of business and its development

• Services - emphasis on significant and distinctive competitive differentiators

• Market Analysis – description, size, trends, growth rates, competitors and competitive positioning

• Operations – description of nature and extent

• Profiles - of Management team & experience

• Growth Strategy – how are we going to grow the business

• Financial – historic and forecast, Cashflow

• IM should address potential concerns and highlight use of funds

Case Study – XXX Company

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FINDING THE RIGHT PARTNER

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Background

• Our client – Irish courier company

• Use of PE funds – Shareholder reorganisation which effectively was an MBO

• Right partner for Management team and delivering right value for exiting founders

Approach

Phase 1 – Preparation

•Preparation of Information Memorandum

•Preparation of Financial Model

•Prepare a list of suitable potential funders

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Approach

Phase 2

•Formal approach to prospective funders

•Ensure all potential prospective funders are contacted Information Memorandum

•Obtain offer letter

•Evaluate terms with client

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Approach

Phase 3

• Choose short list of preferred partners

• Organize management presentations

• Receive second round offers

• Choose preferred purchaser, awarding exclusivity period

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Approach

Phase 4

•Co-ordinate conclusion of due diligence by preferred funder

•Negotiation of terms

•Completion of relevant legal documentation

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Areas of focus for PE during process

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Pipeline sales & customers

Forecasts / assumptions / cashflow

Management team plans for business / experience

Growth potential / acquisitions

PE Due diligence Focus

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Commercial

Financial

Legal

Why above? ……. Comfort • Around risks, • Around numbers, • Around quality of team

Outcome of process

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Exit shareholders received cash out

Management received some cash and also rollover

Management majority shareholders

Private Equity Partner on board for next phase of growth

Conclusion

Many different types and sources of fundingavailable

When looking at equity – right partner is key

Consult and explore – Advisor will help

Be Prepared – have business plan

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John Bowe

Mazars Ireland

Harcourt Centre Block 3, Harcourt Road

Dublin 2, Ireland

Tel: +353 (01) 4496440

Email: jbowe@mazars.ie

Appendix

Introduction to Mazars Corporation Finance

31

Mazars Corporate Finance Global Network

31

Irish team leverages Global Reach for client benefit

33

Full Service Corporate Advisory Business

1

2

3

4

5 Management BuyOut

Disposal & Mergers

Acquisitions

Debt Advisory / Capital Restructuring

Fundraisings – Private & Public Equity

Valuations6

We focus on client needs

Our Credentials – a selection of our recently closed transactions

MBO out of UK parent

Capital Raising for

€10m

Finance Dublin Deal of

the year

April 2016 Closed

Trade Sale of

Strategic Advisor

March 2016 Closed

Undisclosed

Capital Raising for

Fund Raising for a new

SME Lending Vehicle

Sale

Capital Raising for a

National Retail Business

Undisclosed

Project Treaty

Strategic Advisor

Closed March 2017

MBO of ECC Timber Ltd

Undisclosed

Strategic Advisor

July 2016 Closed

Sale

Undisclosed

Advisor Shareholders

September 2017 Closed

Undisclosed

Strategic Advisor

December 2016

closed

€25m

Project Beech

Private Placement Agent

December 2016 Closed

Undisclosed

Advisor to MBO team

Closed June 2017

Undisclosed

Advisor Shareholders

April 2017 Closed

Capital Raising for

Strategic Advisor

October 2016 Closed

Undisclosed

Buy=Side & Debt

Advisory

Undisclosed

Advisor Shareholders

September 2017 Closed

Valuation

Company Valuation

February 2016

Mazars is present in 5 continents.

CONTACT DETAILS

John Bowe

Mazars Ireland

Harcourt Centre Block 3, Harcourt Road

Dublin 2, Ireland

Tel: +353 (01) 4496440

Email: jbowe@mazars.ie