Automotive Investment Banking

and Advisory Services

David M RobertsManaging Director Focus Advisors LLC(510) 444-1173David.Roberts@FocusBankers.comNACE 2015

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The ABCs of Financing

MSO Alternatives:

Disclaimer

This presentation was prepared by FOCUS Investment Banking LLC exclusively for the benefit and internal use of the Company, as herein defined, in order to discuss, on a preliminary basis, the feasibility of a possible transaction or transactions. This presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by FOCUS. The presentation is proprietary to FOCUS and may not be disclosed to any third party, other than the Company’s advisors, or used for any other purpose without the prior written consent of FOCUS.

The information in this presentation is based upon management forecasts and reflects prevailing conditions and our views as of this date, which are accordingly subject to change. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us. In addition, our analyses are not and do not purport to be appraisals of the assets, stock or business of the Company. Even when this presentation contains a kind of appraisal, it should be considered preliminary, suitable only for the purpose described herein and not be disclosed or otherwise used without the prior written consent of FOCUS.

Securities transactions conducted by FOCUS Securities, LLC, an affiliated company, registered Broker Dealer and member FINRA/SIPC.

About FOCUS Investment Banking and David Roberts

• FOCUS is headquartered in Washington DC with 24 investment bankers, 25 senior advisors and dedicated research staff

• Middle market specialist focused on firms from $10 mm to $300 mm

• David Roberts - Co-founder with Matthew Ohrnstein of Caliber Collision in 1995

• Joined FOCUS in 2003 after leaving Caliber• Lead a team of six focused on Automotive Services,

leading with collision repairers but also mechanical providers, quick-lube, equipment and allied firms.

Collision Repair Experience

• Represent MSO sellers, paint jobbers, ancillary vendors and dealers

• Recently represented Keenan Auto Body in sale to ABRA

• 22 years in industry• Raised $120 million in equity and debt for Caliber• Built original Caliber acquisition model• Acquired $135 million in 17 separate transactions

Decisions

• Grow and thrive• Sell – now or later• Milk the cow, wait and see

Why MSOs Choose to Grow Now• Love the business and the challenge• Thriving in competition with consolidators• Owners and managers organized and

ready for growth• Targets available at right price• Expect better long term results

Requirements to Grow• Strategy with a written and quantitative plan of

execution• Systems and management ready to support growth• Experienced operations and financial managers above

shop level• Understand markets and multiple targets identified• Due diligence process in place• Acquisition and integration team identified and committed• Capital to support growth• Time!!!

Understanding the Acquisition Growth Process

• Preparation• Capital raising• Acquisition• Integration

Why MSOs Choose to Sell• Sell when buyers are buying• Opportunity for liquidity• Consolidators are accelerating their

acquisitions• More and larger transactions • Capital available to purchase larger and larger

MSOs• Rewards outweigh the Risks

Understanding the Sale Process

• Finding the Buyer– Auction– Preemptive offer – Negotiated deal

• LOI• Due diligence• Team• Costs, time

Buyers

• Four Consolidators• Regional MSOs• Canadian MSOs• US Private Equity• Offshore Private Equity

Trends in Value

• Consolidators• Platforms• Bolt-ons, tuck-ins• Single shops• Tertiary markets• Brownfields• Greenfields

Trends in Deal Structure

• Asset Purchases• Stock Deals• Equity in Acquirer• Real Estate

Financing Continuum

• Balance Sheet Basics• Sources of Capital• Cost of Capital• Capital Raising Process• Lessons Learned

Balance Sheet Basics

Balance Sheet

AssetsLiabilities

Equity

Financial Risk

Right Side of Balance Sheet

Liabilities

Equity

Financial Risk

Leverage

Risk

Financing Sources

Number and Variety of Financing Sources

EnterpriseValue

Sources of Capital

Suppliers Rebates “Prebates” or Rebates

“Prebates” or Rebates

Senior Debt Local Bank / SBA

Regional Bank

National Bank

Subordinated Debt Sellers

Sellers / Mezzanine

Lenders

Mezzanine Lenders

Equity Friends and Family

Private Equity

Private Equity

Enterprise Value Small Medium Large

Costs of Capital

• Debt– Interest and principal payments– Personal guarantees

• Equity– Future value

• Burden– Distraction– Reporting – Covenants / inter-creditor issues

Capital Raising Process

• The Story– Industry– Business– Owner

• The Financials: Historical and Projected– High Level– Supporting Detail

– Location, Region, Corporate– Monthly with adjustments

– Income Statement, Balance Sheet and Statement of Cash Flows

Lessons Learned

• Be persistent• Partnership equals relationship

– Choose wisely– If performance goes “pear shaped,” relationships can change

• Financial risk compounds business risk– Design the balance sheet accordingly

• Keep yours eyes on the road– Delivering budgeted performance is vital

About Peninsula Capital Partners, LLC

• PCP is based in Detroit, MI. • Founded in 1996, PCP has made over 140 investments

representing more than $1.1B in invested capital in five different funds.

• Seven investment professionals along with a four-person support staff.

• Joined in 1996 after nearly 10 years as a senior lender with Citibank and Societe Generale.

• Currently investing The Peninsula Fund V, L.P., a fund with $389MM in committed capital.

About Peninsula Capital Partners, LLC

• Focused on lower middle market companies based in the US and Canada with at least $10MM in revenues and $2MM in EBITDA.

• Minimum investment size $5MM structured as mezzanine debt, preferred stock, and/or common equity.

• Unique strategy targeting non-sponsored transactions including recaps, strategic acquisition financing, partner buyouts, MBO, growth financings and majority/minority equity sales.

Peninsula Capital Partners MSO Experience

• Whitewater Brands – Caldwell, ID– Two operating subsidiaries; IDEA and Collision Services. – Companies serve as a one-stop shop for all printed products (e.g.

hang tags, floor mats, etc.) and tools and equipment used in collision repair shops.

– Backed independent sponsor to purchase company from investor/owners.

– Provided a mix of mezzanine debt and preferred stock to acquire a majority stake in the company.

• Herbers Autobody Repair Ltd. – Edmonton, Alberta– A five-location MSO – Backed independent sponsor to purchase company from the son of

the founder– Provided a mix of mezzanine debt and preferred stock to acquire a

majority stake in the company.

Strategy Options

• Cash Flow Maximization – – “Milk the Cow,” improve operations, organic growth in

existing locations

• Growth – – Organic growth with existing and new locations and

acquisitions of competitors (existing and new markets)

• Partner – – Minority or majority sale to strategic or financial buyer

• Sell – – Large majority or total sale to strategic buyer or financial

buyer

Capital Sources for Each Strategy

• Cash Flow –– Banks (ABL-oriented) to fund growth or dividend– Mezzanine – leveraged dividend

• Growth – – Banks – ABL situations– Finance Companies – cash flow situations– Sellers – strategic acquisitions– Mezzanine – Higher leverage situations, larger acquisitions

• Partner –– Mezzanine– Private Equity

• Sell – – Private Equity– Competitors

Pros and Cons of Financing Sources - Banks

• Low cost• Easy to access/multiple providers• Local• Low risk tolerance• Limited structures/terms

• Guarantees?

Finance Companies

• Flexible terms• Generally better risk tolerance/leverage• Less willing to work through issues• Higher costs/more onerous terms

Seller Financing

• Flexible terms• Patient lender• Limited rights• Challenges in documentation

Mezzanine Financing

• Flexible structure• Pricing options• Higher risk tolerance/leverage• Share equity risk• Higher cost of capital (including equity)• Shareholder rights• Fewer sources of capital/Sourcing

challenges• Sophisticated

Private Equity

• Custom solutions• Partner in transaction• Brings entire balance sheet • Control• Sophisticated• More accepting of risk

Caliber Collision

• A breakdown of our 301 locations across 13 states includes:•  • •       110 California locations• •       72 Texas locations• •       24 Virginia locations• •       19 Florida locations• •       17 Colorado locations• •       14 South Carolina locations• •       9 Georgia locations• •       9 Maryland locations• •       7 Arizona locations• •       7 Nevada locations• •       7 North Carolina locations• •       3 Oklahoma locations• •       2 New Mexico locations• •       1 District of Columbia location

I was one of you!

• Owned and Operated 4 Store MSO in Houston, TX– – Grew through Acquisition & Brownfield Development– Approaching 20M in annual revenues– Year over year double digit growth– Financed growth through traditional financing and SBA

Loans– Invested in OEM certifications and employee training– Multiple DRP relationships– Multiple Exclusive Franchise Dealer Accounts– Recognized brand and high percentage of repeat customers– SOP’s throughout organization– Sold to Caliber in 2013

Things to Consider:

• What makes your business attractive to MSO’s – Complimentary footprint in existing market– Platform in new market– Employees – Training and Equipment– Condition of Facilities and Location– Culture– Mix of business and transition risk– Financial Reporting– Certifications – How are your structured as a company

– LLC, LP, S Corp, C Corp, Sole Proprietorship, etc.

Overview of Sale Process

• Confidentiality Agreement• Initial Due Diligence• Facilities visit • Letter of Intent (LOI)• Asset Purchase Agreement (APA)• Lease Assignment/Lease for Facilities• Employee Meetings• Carrier & Key account Meetings• Close