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Managing Liquidity and Financing Relations Med Tech Strategies for Perilous Times Lee Steele, Partner, Tatum LLC MassMEDIC Meeting March 5, 2009

Managing Liquidity and Financing Relations Med Tech Strategies for Perilous Times

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Managing Liquidity and Financing Relations Med Tech Strategies for Perilous Times Lee Steele, Partner, Tatum LLC MassMEDIC Meeting March 5, 2009. Who Is Tatum?. - PowerPoint PPT Presentation

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Page 1: Managing Liquidity and Financing Relations Med Tech Strategies for Perilous Times

Managing Liquidity and Financing RelationsMed Tech Strategies for Perilous Times

Lee Steele, Partner, Tatum LLC MassMEDIC Meeting

March 5, 2009

Page 2: Managing Liquidity and Financing Relations Med Tech Strategies for Perilous Times

Who Is Tatum?

“Tatum, LLC is the largest and only Executive Services firm in the U.S. with a singular focus on leveraging the “Office of the CFO” to solve problems,

accelerate business performance and create more value™. We work with companies of all sizes who need decisive leadership, talent,

capacity, and execution on an urgent basis. Tatum understands the urgency of NOW and responds quickly to deliver the right executive and a highly flexible team of resources to address the client’s most pressing

financial and operating problems.”

37 Offices 1,000+ professionals 6,000+ clients

Executive Leadership, Consulting, and SearchStrategic, Finance, IT, and Execution Expertise

“Velocity, Objectivity, and Focus”Maximize the “Office of the CFO”

Page 3: Managing Liquidity and Financing Relations Med Tech Strategies for Perilous Times

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How distressed is the economy?Chicago Fed National Activity Index

•Measures the economy based on 85 indicators•Has accurately predicted the past six recessions

Page 4: Managing Liquidity and Financing Relations Med Tech Strategies for Perilous Times

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What’s it like out there?Financing Market is Tighter Than We’ve Ever Seen…

>> BUT <<

Access to credit depends, in part, on size of dealMid to large middle market (deals $25 million to $250 million): there is a market, but still difficultLower middle market (deals $5 million to $25): some are getting doneAND – only the most creditworthy need apply

New Venture Financing Rounds?Highly relationship-driven; still takes foreverReserved for only the most promising, quickest time-to-money venturesAggressive pricing; “take it or leave it;” prepare for down round

M&A Market?Don’t count on it unless already in the partner’s deal pipeline

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Ten questions to ask your CFOExplain our bank covenants. How close are we to default?

Show me your rolling 13-week and 4-quarter cash projections, plus your prospective covenant tests.

If we can’t raise another dime, how long can we make our cash last?

Fully explain the implications of a loan default. Could this threaten the company's existence? What discussions have you had with our bank and investors re: our current credit relationship?

Can the bank call our loan?

What would be the covenant forbearance fee? $100,000 or more?What are the terms of a loan reset? Could they raise our interest cost by +2 – 5%?

How invasively would we be monitored? Would our line be reduced? Would our VCs be asked for guarantees?

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Ten questions to ask your CFO (cont’d)

What reports and forecasts are we showing our bank? The same we’re showing to our Board? To our investors?

Is our current spending budget reality-based? Do you have a downside scenario? Would THIS trip our covenants?

What products make us money? How do you know?

How involved are you in pricing and customer credit decisions?

What metrics do you use to make such decisions?

What’s the basis for these?

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Ten questions to ask your CFO (cont’d)

How much cash is tied up in working capital? What would it take to cut that by 25%? By 50%?

Give me a list of everything not mission-critical we could sell, shut down, mothball, defer, slow down or whatever. How much would each save us?

Has your team ever been through this before? Are you keeping other members of management fully informed and holding them accountable? Do you feel it’s your job to worry these issues for the company?

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Conclusion: Plan for the Worst and Good Things Might Happen

Take charge of the situation – LEAD! Get out aheadDon’t let events overtake you

Survival doesn’t happen by accidentHope is not a strategy!

Now more than ever, cash is king

Focus obsessively on your core businessEliminate all distractions from the main mission

Use this time to get stronger and be better positioned for the (eventual) recovery

Surround yourself with the best:Best team; Best suppliers; Best customers; Best advisors; Best investors