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Preparing For A Transaction ………………… 5
Understanding The Process ………............... xx
Choosing An Advisor……………………..... xx
About Cross Keys Capital………………....... xx
About Levenfeld Pearlstein…………………..xx
Speakers Roger SchoenfeldManaging Director, Cross Keys Capital Midwest Roger Schoenfeld oversees Cross Keys Capital's Chicago Office and is primarily focused on working with privately-held companies located in the Midwest and the Great Lakes area.
With over 30 years of legal, financial and business operating experience in transnational settings, Roger brings to clients a unique combination of skills and perspectives. He represents private business owners seeking to sell, merge or recapitalize their business and actively consults with business owners preparing for a future transaction. Roger also works with business owners looking to grow their business through acquisitions.
He obtained his Jurist Doctor (JD) degree from Georgetown University and graduated summa cum laude with a Bachelor of Science Degree in Accounting from Indiana University. He passed the Certified Public Accountant (CPA) exam after college on his first attempt.
Speakers Steven WeissPartner, Levenfeld Pearlstein Steven Weiss is a partner in Levenfeld Pearlstein’s Corporate & Securities Group. With a comprehensive business approach, Steven represents a wide range of clients, including closely held businesses, sophisticated private investors, family offices, financial sponsors, entrepreneurs, start-ups and emerging companies. His industry experience includes, among others: manufacturing, insurance, scrap metal, multi-family housing, real estate development and technology.
Steven takes a big-picture approach when negotiating and structuring strategic alliances, joint ventures, mergers and acquisitions, acquisitions of distressed businesses, financings, venture capital transactions and private placements, among other areas of service.
Steven graduated from the University of Texas with a B.A. in History and obtained his J.D. from Chicago-Kent College of Law.
Preparing For A TransactionEssential Elements
Timing
Identifying Potential Suitors
Your Management Team
Customers and Revenues
Financial Information/Data and Metrics
Corporate and Legal Matters/Documentation (IP)
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Preparing For A TransactionTiming, Timing, Timing
Positive (Stable) Trends & Growth Opportunities
Lifestyle/Personal Goals
Post-Transaction Commitments
Financial Considerations/Retirement
6
Preparing For A TransactionIdentifying Potential Suitors &Types
Strategic Suitor Attributes
Customers/Distribution/People/Products/Technology
Financial Suitor Attributes
Cash Flows/Growth/Management/Risks/Transition
Industry Relationships & Associations7
Preparing For A TransactionYour Management Team
Depth/Experience/Customer Relationships
Non-Compete/Non-Solicitation/Employment Agreements (See Legal section later)
Transaction Compensation (Bonus/Equity)
Strategic Suitor vs Financial Suitor Transactions
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Preparing For A TransactionCustomers and Revenues
Customer Relationships
Customer & Revenue Diversification
Revenue Growth Foundations/Opportunities
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Preparing For A TransactionFinancial Information / Data & Metrics
CPA Prepared (Reviewed or Audited)
Consistent Presentation
Data/Metrics (Costs, Customers, Inventory, Margins, Products, Staff, Etc)
Balance Sheet Considerations
Trends
Quality of Earnings
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Preparing For A TransactionCorporate and Legal Matters / IP
Entity Good Standing/Corporate Resolutions/Minutes
Shareholder(s) Decision Making & Authority
Transaction Structure (Liability & Tax Considerations)
Intellectual Property (Documentation/Status)
Contracts & Licenses (Transferability/Consents) 11
Preparing For A TransactionChecklist [Y/N]
Is the timing right (positive trends, growth opportunities, post-closing commitments, retirement funding)? If not now, when?Have you considered suitor types that may be most appropriate?Do you have a management team to facilitate a transaction?Do you have written employment/non-compete agreements and
incentive plans?Are customer relationships transferable? Are revenues and customers diversified? Are foundations set to grow both customers and revenues?Does your company have CPA prepared financial statements?Do you produce key data/metrics about your key business? Are key contracts transferable? If not, can consents be obtained?Is a decision making mechanism among shareholders established for a transaction?If you have critical IP, do you have proper documentation and is the IP adequately protected?
[____][____][____]
[____][____][____][____][____][____]
[___/___]
[____]
[____]
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Currently, there are a number of strategic alternatives available to prospective sellers:
Understand The M&A ProcessAvailable Alternatives
Financial Recapitalization
Status Quo
Buy-Out
STATUS QUO: Continue with growth of customer base and hope
for strong economic improvements Investigate new vertical / horizontal integration
opportunities via organic or inorganic growth maneuvers
Implement sale preparation initiatives to streamline operations, reduce costs, improve financial transparency and increase Enterprise Value
FINANCIAL RECAPITALIZATION WITH A PRIVATE EQUITY FIRM: Partner with the best “fit” private equity firm
and focus on growth, operational efficiency, and profit-maximizing strategies
“Cash out” up to 80% of equity in Company Executive management retains positions with
Company Undergo 2nd “cash-out” (a.k.a. 2nd bite of the
apple) in 3 to 7 years at substantially higher enterprise valuation
ONE-TIME ASSET SALE/100% EQUITY SALE: 100% divestiture of Company – Full cash-out Potential for ancillary transaction consideration
via performance-based “earn-out” arrangements 2-3 year employment contracts for key
management Typical multi-year non-compete agreement
Owner
Business
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Understanding The M&A ProcessTransaction Approach
Broad Approach
PROS• Focus on suitor who has already expressed interestand demonstrated good fit
• Potential to close relatively quickly• Minimal disruption to business
CONS• May not effectively test the market• Suitor may gain realization of anti-competitive process and try to use it to its advantage
• Interest may not develop
Exclusive Approach
PROS• More competitive process• Most effective market test• Greatest possibility of attaining “outlier” bid
CONS• Potentially longer process• Broadly disseminates company information• More difficult to keep timing on track and to maintain confidentiality
PROS• Focus on suitors with a strong “fit”• Gives logical suitors first look• Retains competitive environment• Competition through prospect of broader marketing effort
CONS• May miss an “outlier” bid• Timing difficult for one at whim of certain key prospects
• Slightly more work for client in terms of meetings / time
Targeted Approach: A Controlled “Mini-Auction”
Three common approaches to conducting M&A sell-side transactions are described below. CKC prefers the Targeted Approach in most situations
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Data
Collection / CIM Creatio
n
*Data collecti
on process
*CIM Preparation
*Identify
Suitors
Tactical Marketing
* Contact Pre-
Approved
Suitors
*Leverage
strong industr
y relationships
*Management Meetin
gs
Letter(s) of Intent
* Advisor aides in the
negotiations to secure favorab
le seller terms
DueDiligence
*Advisor
assists with due
diligence
process
Closing
*Documentation and
closing
Understanding The M&A ProcessDuration
Sell-Side Investment Banking – Typical Process Summary
S t r i c t C o n fi d e n t i a l i t y M a i n t a i n e d T h r o u g h o u t T h e E n t i r e P r o c e s s
2-3 Months 2-3 Months
Clien
t
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Choosing Advisors
Experience representing privately held business owners
Market focus with similarly sized businesses
Trusted and respected advisor reputation
Professional organization with depth
Financial and marketing expertise
Confidentiality 16
About Cross Keys CapitalLower Middle Market Focus
Cross Keys works exclusively with businesses in the Lower Middle Market.
Our clients typically have: Revenue of $10 – $100 million EBITDA (Adjusted) of $1 – $10 million Total Enterprise Value of $5 – $50 million
Preference is given to established companies with long histories of success and:
Defensible market position Diverse and stable customer base Quality of management Growth opportunities
Cross Keys provides its clients with superior buy-side and sell-side M&A advisory services in efforts to help clients reach their personal, financial, and business objectives.
We cover a broad range of basic industries; however, we have significant expertise selling profitable, privately-held companies that operate in the following industries:
Information Technology Infrastructure Metals Processing Energy Services Specialty Contractors Staffing / Outsourcing Trucking & Logistics
Aerospace & Defense Building Products Distribution Product Line Manufacturing Environmental Services Food and Beverage Products Healthcare Products and Services
DIVESTITURES
RECAPITALIZATIONS
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About Cross Keys CapitalOffices and Expertise
NATIONWIDE PRESENCE:
Corporate HeadquartersFort Lauderdale, FL
Midwest OfficeHighland Park, IL
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2 Offices4 Managing
Directors10 Staff
Since September 2011, Cross Keys Capital has successfully acted as the exclusive financial advisor and assisted in negotiations for the following transactions:
About Cross Keys CapitalRecent Transactions
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About Levenfeld Pearlstein, LLCMergers & Acquisitions
Levenfeld Pearlstein’s Corporate Group focuses on results, working to get the deal done without ever losing focus on your goals. We pride ourselves in providing practical advice, innovative solutions, unparalleled commitment and years of experience that ensure transactions are completed on your schedule and terms.
We Represent
Related to
Our transaction experience crosses multiple industries and jurisdictions ranging in size• From $10 million to $100 million
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• Closely-Held Companies
• Private Equity Funds• Hedge Funds• Family Offices
• High Net Worth Individuals• Unfunded Sponsors• Portfolio Companies• Sophisticated Private Investors
• Mergers & Acquisitions
• Leveraged Buyouts• Management
Buyouts• Equity & Debt
Financings
• Fund Formations• Recapitalizations• Restructurings
About Levenfeld Pearlstein, LLCOffices and Contact Information
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CHICAGO
2 N. LaSalle St., Suite 1300Chicago, Illinois 60602
TEL 312.346.8380FAX 312.346.8434
NORTHBROOK
400 Skokie Blvd, Suite 700Northbrook, Illinois 60062
TEL 312.346.8380FAX 312.346.8434
About Levenfeld Pearlstein, LLC
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Recognized by The National Law Journal as one of the nation's most innovative mid-sized law firms, Chicago-based Levenfeld Pearlstein, LLC provides legal and business counsel to sophisticated clients across a broad range of corporate, real estate and litigation matters.
The firm possesses the resources and depth to manage the most complex matters, ensuring that the needs of all clients are met in the most efficient and cost-effective manner possible.
Levenfeld Pearlstein's world-class attorneys work with clients to understand the full impact of the law on their business and proactively address their legal issues so that they can quickly return to doing what they do best.
