InvestmentManagement

How to Present your Company to Acquire

an Outside Investor,Özyeğin University – Istanbul, 19 July 2012

1

Why do you want

an outside investor?

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Why does an outside investor

want to invest?

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? $ ?

Returns need to be in balance with Risk

Investors prefer high returns and low risk

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TURNOVER

Year -3 Year -2 Year -1 Year 0 Year 1 Year 2 Year 3 CAGR (-3,0) CAGR (0,3)

Company 1 100 200 300 400 450 500 550 59% 11%

Company 2 10 50 75 200 500 1000 2500 171% 132%

Company 3 0 100000 105000 110000 N/A +++%

Company 4 200 500 800 10000 9000 12000 12500 268% 8%

NET CASH FLOW

Year -3 Year -2 Year -1 Year 0 Year 1 Year 2 Year 3 CAGR (-3,0) CAGR (0,3)

Company 1 -20 -50 0 100 20 50 100 -271% 0%

Company 2 0 0 20 100 130 150 150 N/A 14%

Company 3 -50 -50 -100 -150 N/A 44%

Company 4 10 20 25 40 60 100 125 59% 46%

Which company would you invest in?

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Profitable

&

Scalable

&

Sellable

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Is your Company PSS?

7

Financial

Summary

€ ‘000 2010 2011 2012

YTD

2012

(exp)

2013

(est.)

2014

(est.)

2015

(est.)

Profit

&

Loss

Net

Revenue

% growth

Gross

Margin

% growth

EBITDA

% growth

Net

Income

% growth

Business

Specific

Profit & Loss: Past,Present and Future

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8

‘Profit is an Opinion,

Cash is King’

9

Cash

Flow

Work Cap

Change

(+/-)

Tax

CAPEX

Mainten.

CAPEX

Investm.

Interest

Balance

Sheet

Total

Assets

- Fixed

- Cash

Equity

Liabilities

- Bank

Debt

Financial

Summary

€ ‘000 2010 2011 2012

YTD

2012

(exp)

2013

(est.)

2014

(est.)

2015

(est.)

CF-Statement, BS equally important

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Company

• Business lines, position in the market

• Value proposition and business model (how does the company (plan to) earn its money?)

• Key success factors

• Accomplishments (e.g. brand awareness, page ranking, patents)

Industry

• Industry size, growth, trends, segmentation

• Description of main competitors, marketshares

• Threat of substitutes, barriers to entry, easiness to copy

• International perspective

• Was it proven elsewhere?

Company

Industry

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Management and Shareholder structure

• Ownership structure and legal structure

• Concise biography on each individual of the entrepreneur team

• Management Team and indication of their compensation

• Involvement in other businesses

• Potential conflicts of interest

Investment Thesis

• Reasons to invest in order of importance; each reason further clarified

• What are the drivers of value growth, the explanations

Risks

• All risks that can be identified, each risk further expanded on,

• Risk mitigators to be indicated and clarified

Management and Shareholders Structure

Investment Thesis

Risks

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Let’s talk about Risk

Country Risk

Industry Risk

Company Risk

- Business risk

- Financial risk

- Legal risk

The Entrepreneurs

Has it been done before?

How can each risk

be mitigated?

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Story and Use of Funds

• Business plan (!)

• Explanation of growthdrivers in topline/bottom line and EBITDA

• In case of capital injection use of funds description

• What will be done once invested, what actions to be taken

• What is the story aimed at for successul exit after what time span

Transaction Value and

• Description of proposed transaction

• Proposed valuation backed by a DCF-model

• Multiples research (transaction and publicly listed multiples)

Story and Use of Funds

Investment Transaction

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Return Assumptions

• Key assumptions for exit

• Different scenarios based on different growth rates and EBITDA targets

– Negative scenario

– Realistic scenario

– Positive scenario

– Sensitivity Analysis

• Potential trade buyers to which the financial investor would exit

• Down side protection

Return Assumptions

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Required Returns - Professional Investors

15

Bank Debt €,$ (solvable company with equity)

Bank Debt TL (solvable company with equity)

Infrastructure Investment Fund €,$

Mezannine (Convertible Loan) €, $

Private Equity (company w/ track record) €,$

Venture Capital €,$

7-8%

16-18%

15-20%

20%

25-35%

50%

Type of

Financing

Ingoing Estimated

Annual Minimum

Returns - July 2012

Note: returns are indicatiive, averages, per investor these numbers may be different

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If you can do it alone, why take an investor in?

Relevant Topics other than Valuation

Grow faster, accomplish critical mass first

Business specific added value of the Investors

- Other invested companies

- Expertise

- Experience

- Network

Access to further forms of financing

-Financial investor brings standing for bank credit

Chemistry / Trust with the investment team

Corporate governance improvement

Defensive move

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17

THANK YOU